Canada is about to move into a zero tariff situation with its fourth
largest agriculture trading partner.
Come Jan. 1, 2003, the tariff phase-out period with Mexico comes to an
end under the North American Free Trade Agreement.
It has been 10 years since Canada, the United States and Mexico signed
the contentious trade pact, and tariffs between the three countries
have been dropping ever since.
Mexico is the only country that has lingering tariffs with the other
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two countries.
“For Canada and the U.S., we’re practically tariff free already under
the Canada-U.S. free trade agreement,” said Agriculture Canada trade
policy analyst Todd Hunter.
In 2003, most of the tariffs between Mexico and the other two NAFTA
signees will also disappear.
Hunter said Canada’s agri-food trade with Mexico has grown rapidly.
Canadians exported a little over $500 million worth of agricultural
products to North America’s smallest country in 1999. By 2001, that
figure had almost doubled to nearly $950 million.
“We have to attribute part of it to the tariff phase-out,” he said.
Sales have also been boosted by a stronger Mexican economy, another
byproduct of the NAFTA agreement, said Hunter.
Canada’s top five agri-food exports to Mexico in order of dollar value
are canola seed, wheat, beef cuts, skim milk powder and canaryseed.
Canada’s top five imports from Mexico are beer, tomatoes, guavas,
mangos and peppers.
Oilseed and wheat represented nearly half of Canada’s total
agricultural exports to Mexico last year.
While grain shipments have been strong for years, meat exports are just
starting to take off. Six years ago the category totalled $8.9 million.
Last year it brought in $280 million for Canadian exporters.
Jacque Pomerleau, executive director of Canada Pork International, said
exports of fresh and frozen pork and pork offal have risen from $17
million in 1999 to $50 million in 2001.
Mexico is now Canada’s third biggest customer for pork and that’s in an
environment where tariffs are still a big impediment to trade. Exports
were racing in the early part of 2002, but sales stalled when Canada
met its tariff rate quota in March.
Pork sold within that quota faces a tariff of two percent. It rises to
20 percent for product sold outside the quota.
“That market is price conscious so when our quota was filled, they
moved to somebody else – the U.S.,” said Pomerleau.
Once the U.S. filled its quota, some of the sales came back to Canada.
But as of Jan. 1, 2003, there will be no quotas and no tariffs, which
will make Canada competitive year-round.
“Eventually it will become like the U.S. market in a way. We’ll have to
treat (Mexico) as an extension of our own domestic market,” said
Pomerleau.
Hunter said tariffs on almost all agricultural trade will be erased
next month, but as is often the case with international trade there are
a few exceptions.
One category is supply managed products – dairy, poultry and eggs. The
three other exceptions are corn, dry beans and refined sugar.
“They’re sensitive products for Mexico. They have longer phase-outs,”
said Hunter.
