U.S. bilateral trade agreements with South and Central American countries are rapidly becoming a “bear factor” that Canadian pulse growers must consider when growing and marketing their crops, says a crop trader.
Rob Tisdale, special crops business risk manager for Agricore United, is particularly nervous about pacts with Colombia, Peru and a group of Central American countries.
“As that progresses, it just takes us off the map as suppliers,” he said.
Jackie Blondeau, director of market development with Pulse Canada, said exporters will start feeling the sting of those free trade pacts within the next year.
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“We will lose market share in those markets,” she confirmed.
The deal with Colombia tops the list of knee-knocking U.S. bilaterals. The agreement, announced on Feb. 27, 2006, will immediately eliminate all duties on peas, lentils and chickpeas for U.S. exporters once the pact enters into force.
Canadian exporters will continue to pay a 15 percent tariff on those three crops and a 60 percent duty on beans moving into Colombia.
That is worrisome because Colombia was Canada’s second largest buyer of lentils, seventh largest buyer of peas and sixth largest buyer of chickpeas in 2005, spending a total of $32.3 million on Canadian pulses that year.
The proposed U.S.-Colombia free trade agreement has to be ratified by the congresses of both countries before coming into effect.
The deal with Peru is further along. Peru’s congress has ratified the agreement but the U.S. has not.
Announced on Dec. 7, 2005, the Peru pact eliminates the tariff on U.S. pea and lentil shipments immediately upon implementation. Chickpea and bean tariffs will be reduced over three years and five years respectively.
Canadian exporters will continue to pay a 20 percent duty on all their pulse shipments. Peru is Canada’s 12th largest buyer of peas and a significant lentil customer, purchasing $15.9 million of the two crops in 2005.
Tisdale said once implemented, those two free trade agreements will render Canadian pulse exports “immediately uncompetitive” into those important and relatively nearby markets.
“If they actually do go through, that really screws us up big time on peas and lentils into those two countries,” he said.
The other sensitive accord is the CAFTA-DR agreement, which includes the United States, Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras and Nicaragua.
The agreement has been ratified by all countries except Costa Rica and has been implemented everywhere except Costa Rica and the Dominican Republic, said Blondeau.
Pulse Canada is most concerned about how the multi-party pact will affect bean sales to the Dominican Republic. Canada exported about 27 percent of its pinto bean crop to that destination in 2005, generating $14 million in sales.
The CAFTA-DR countries account for less than one percent of Canada’s other three pulse crop exports.
Canada has a free trade agreement in place with Costa Rica and is negotiating accords with Guatemala, Honduras, El Salvador and Nicaragua.
Tisdale would like to see the government get more aggressive on that front rather than clinging to the fading hope that trade barriers will be reduced through World Trade Organization negotiations.
“To the eleventh hour our government has stuck to the WTO approach but the Americans saw early that didn’t seem to be going anywhere,” he said.
Pulse Canada is working with other commodity groups to keep the Canadian government abreast of the impact U.S. bilaterals are having on long-established markets like the large green lentil market in Colombia.
“We’re hoping the Canadian government will put more resources towards bilateral agreements so that these become less of a threat to us,” said Blondeau.
