Canadian farm groups are singing the praises of a free trade agreement that came into force with Colombia on Aug. 15.
The pact immediately eliminates tariffs on most agricultural products and reduces them over time on others.
Colombia is a major importer of Canadian crops. It purchased $156 million of wheat and barley in 2010. Tariffs on both of those products, which have been as high as 15 percent, are gone.
“We will now be on a level playing field with Argentina into the fast-growing Colombian market,” said Canadian Wheat Board president Ian White.
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Pulses are Canada’s second largest food export to Colombia following cereals. Sales of pulses and special crops were $82 million in 2010, making Colombia Canada’s eighth largest market for those crops.
The deal eliminates tariffs on peas, lentils and chickpeas and removes the 60 percent tariff on beans for the first 4,000 tonnes shipped there.
“The Canadian pulse industry has been a long-time advocate for a Canada-Colombia FTA. Today’s announcement by the prime minister demonstrates the government’s recognition of the important role that bilateral agreements can play in keeping Canada competitive,” said Gordon Bacon, chief executive officer of Pulse Canada.
The Canadian Cattlemen’s Association also praised the federal government for its efforts. Colombia lifted its BSE-related barriers to Canadian beef and breeding cattle in 2010 but an 80 percent import duty kept product out.
The new pact gives Canada duty-free access for up to 5,250 tonnes per year of Canadian beef and offal, with the remaining tariffs eliminated over 12 years.
“With the FTA in place, the potential for Canadian beef exports to Colombia annually could exceed $20 million,” said CCA president Travis Toews, who accompanied prime minister Stephen Harper to Bogota to mark the launch of the agreement.
“I wish to thank the prime minister for the importance he places on opening markets for Canadian beef and I encourage him to keep up the good work on behalf of Canada’s beef ranchers.”
The United States signed a free trade agreement with Colombia on Nov. 22, 2006, two years before the Canada-Colombia pact was signed, but the U.S. Congress hasn’t ratified the deal due to concerns over environmental and labour issues.
“This is one of the very few cases in the world where we’re actually ahead of the United States,” said Richard Phillips, executive director of the Grain Growers of Canada.
On July 29, a coalition of more than 120 U.S. agricultural associations sent a letter to president Barack Obama and members of Congress urging them to take immediate action on pending free trade agreements with Colombia, Panama and South Korea.
The letter stated that the U.S. share of Colombia’s corn, wheat and soybean markets has fallen to 28 percent from 78 percent over the past three years. The market share has been lost to Argentina and Brazil, countries that already have free trade deals with Colombia.
“On Aug. 15, Canada’s FTA with Colombia will take effect and our exports to Colombia of wheat and other agricultural products will take another hit,” said the groups in their letter.
“It is difficult to watch years of market development evaporate in a matter of months because we are not able to compete on the basis of price, making the United States a residual supplier where it was once the main supplier.”
Canadian exporters have already made great strides in Colombia. Sales of wheat, barley and pulses were $228 million in 2010, up 39 percent from 2008 levels, when the pact was first signed.
“You start to get inquiries that might not have been there otherwise. A free trade agreement simply raises awareness sometimes,” said Phillips.
He expects the pace of exports to pick up even more now.
“We have a real head start on the Americans here,” said Phillips.
U.S. farm groups are urging their politicians to take action on the Colombia deal once Congress returns from recess in September.
Even if Congress immediately ratifies the agreement it could be awhile before it is in place. Previous U.S. free trade agreements have taken anywhere from six months to more than one year to implement. U.S. Wheat Associates remains optimistic that an agreement could be in force by Jan. 1, 2012.
Phillips said once Canadian exporters gain a better foothold in the Colombian market by building relationships and trust with importers it will be hard for the U.S. to take away that business.
The opposite scenario is occurring in Morocco where the U.S. has had a free trade agreement since Jan. 1, 2006. Canada didn’t start negotiations with Morocco until earlier this year.
Phillips is worried about the preferential tariff treatment the U.S. has in Morocco with respect to durum exports.
“We’re going to get squeezed really hard until such time as we get that deal signed with Morocco and get in the game too,” he said.
