Canada West Foundation identifies 44 trade items that are under ‘high threat’ from the U.S., including pork and beef
A bilateral trade agreement between the United States and Japan “is not good news” for Canada’s pork and beef sectors, according to a new report from the Canada West Foundation.
“Canada needs to step up its export promotion game, above and beyond the considerable work already being done,” states the report.
Canada had a huge competitive advantage over the U.S. through the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
But that advantage lasted a mere 13 months, coming to an abrupt end when a partial U.S.-Japan pact came into effect on Jan. 1, 2020, covering 90 percent of food and agricultural products.
The Canada West Foundation calculated that tariff reductions under the CPTPP would have resulted in US$1.3 billion in potential gains for Western Canada’s pork and beef sectors.
But that was before the U.S. signed a deal with Japan giving it the same or better tariff reductions as Canada.
The foundation has identified 44 agriculture and other trade items that are under “high threat” from the U.S., including pork and beef products.
“These will be the sectors that will face the most threat but that shouldn’t deter us,” said report author Sharon Sun.
The problem is that the U.S. has economies of scale working in its favour on pork and beef.
The U.S. exports 1.6 times the fresh or chilled pork that Canada does to Japan and 3.4 times the frozen pork. It ships out nine times the frozen beef and 40 times the amount of fresh or chilled boneless beef to Japan.
“The sheer size and capacity of the U.S. in these sectors along with having the same tariff reduction benefits as Canada means that Canadian businesses will need to work harder on the branding and market strategy for Japan,” stated the foundation in the report.
Gary Stordy, director of government and corporate affairs with the Canada Pork Council, isn’t overly concerned about the U.S. threat.
“We have been sharing and competing in that market for some time,” he said.
Stordy said Canada enjoyed a brief competitive advantage over the U.S. through the CPTPP.
“We’re back to competing on the same playing field,” he said.
But he agreed with the foundation’s assertion that Canada needs to step up its promotion game.
“We do have a strong presence in Japan but at the same time, we do see other countries’ efforts and their government support is incredibly extensive compared to what is available to Canadian exporters,” he said.
The Canadian pork sector is hamstrung by Canada’s cost-sharing approach to market development. The sector has limited funds to devote to promotion.
Other countries like the U.S., Australia and Denmark have far more robust market promotion programs in Asia.
The foundation believes some market promotion dollars should be directed toward less heavily traded products where Japan has agreed to reduce tariffs for CPTPP countries but has no similar agreement in place with the U.S.
Those products include pulses and specialty meat products. Sales of these less-traded products are expected to grow by $458 million as tariffs are reduced.
Sun says Canada needs to pounce on promoting those products in Japan and solidify trade relationships in a hurry.
“We need to do this now before the U.S.-Japan has an extensive, full agreement,” she said.
Western Canadian exporters could potentially increase pea shipments to Japan by $64 million, frozen beef offal by $19 million, frozen bone-in ham by $10 million, frozen beef tongues by $7 million, natural honey by $7 million and canola oil by $2 million.
Under the North American Free Trade Agreement, products in the less-traded category grew to 30 percent of total trade between Canada and Mexico in the first 10 years of the agreement, up from 10 percent of trade.
“That growth, however, was slow and haphazard,” stated the foundation in the report.
“If these products under agreements like the CPTPP can be identified early on, their growth can be accelerated.”