PENTICTON, B.C. – The entire Canadian beef industry could collapse if Canada lost its hoofhold in the export market.
“If we lost our export trade totally, Canadians would get to consume 384 million more kilograms (of beef),” said economic analyst Larry Martin of the George Morris Centre.
In 1998, Canada produced 1,073 million kg of beef and exported more than 380 million kg, mostly to the United States.
Domestic consumption accounts for 689 million kg and Canada cannot eat much more.
Such a reversal would be calamitous for major packers that are now killing as many as 20,000 animals a week because they would be forced to scale back operations or shut down.
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Farmgate cash receipts once garnering 20 percent of income from live cattle sales now credit beef with 53 percent of the cash. That too, would dive.
Martin provided this industry analysis for the Canadian Cattlemen’s Association during its recent convention in Penticton.
Canada’s star first started to rise with the signing of the North American Free Trade Agreement, said Martin. Beef and live cattle exports leapt by a factor of three from $600 million to $2.7 billion. In fact, most agricultural commodities enjoyed improved exports after the agreement was inked.
“Canada is way too reliant on the United States,” Martin said.
Destructive duty
All the successes of the last decade could come crashing down because of punitive trade actions including the most recent anti-dumping duty of 5.57 percent.
Suffering under the weight of record-low farm prices, Americans believe Canadians are selling live cattle into the U.S. at below their cost of production. A final hearing is due this fall and the odds are not in Canada’s favor. In past dumping cases, the exporting nation has only won about a third of the time.
At the final hearing in October, Canada must prove its exports are not causing injury to the American industry or that its exports pose no threat to American producers.
A duty is likely to continue, but if Canada appeals at the international level, the odds of winning improve because the World Trade Organization defines dumping differently than the Americans.
The WTO defines dumping as selling into an export market at a price lower than in the domestic market. The U.S. says dumping is selling into an export market at below the cost of production in a domestic market. The WTO says this only applies if the product is not sold in the domestic market.
“As usual, the U.S. is misinterpreting their international obligations under the guise of U.S. law to protect the lunatic fringe who can’t compete,” said Martin.
The U.S. sells a number of commodities below the cost of production including corn, soybeans, wheat and pork.
“It’s going to come back and bite them,” he said.
This trade action has a huge effect on Canada but little impact on the American marketplace.
Martin estimates both sides will spend about $20 million in legal costs on this dispute.
