Specialized trade policies advised for Canada

A report says country needs one approach for United States and China and another for more rules-based trading nations

Canada needs at least a three-pronged foreign and trade policy for a radically changed world, says Agri-Food Economic Systems.

The country needs separate, customized approaches to China and the United States, while forming and strengthening new operating systems to work with like-minded nations.

“To navigate this precarious situation, Canada must be prepared to enlist a policy approach that discriminates between the risks posed by agri-food trade with China and those posed by the U.S., and in so doing, avoid having trade policy dominated solely by the U.S.-China dichotomy,” says a policy paper released by Al Mussell and Douglas Hedley of Agri-Food Economic Systems of Guelph, Ont.

Canada needs to “take the lead” in building an association of rules-abiding trading nations such as the informal “Ottawa group” already established in order to give middle powers more heft in forming the new world trading order.

“Among its members, agri-food trade could be co-ordinated based on the interests of its members and avoid or mitigate the risk of sudden trade stoppages on technical grounds,” says the report.

Mussell and Hedley argue that the world trading environment has radically changed and the policies that have defined the past two decades are no longer sufficient.

Particularly with China and the U.S., Canada needs to have a policy and program response that deals with the outsized power of two nations that have begun to use trade as a lever in geopolitical and diplomatic disputes.

However, each of the countries requires its own unique policy approach.

China’s decision to block market access to pressure governments with which it has a dispute into submitting to its demands means Canada must protect itself.

Most of Canada’s agri-food exports to China are bulk commodities like canola, wheat and pork. Those are easy to block and have few Chinese defenders, since they are easily swapped out for other exporters’ products.

If Canada swung its China-bound exports into processed food products it would be more difficult for China to quickly and painlessly block them. Processed foods fall into different categories, plus they develop loyal domestic customers who would complain if they were suddenly unable to get what they wanted.

Mussell and Hedley also want Canada to establish “an appropriate review process” to oversee Chinese investments in Canadian agriculture and food companies and facilities in order to protect Canadian food security and avoid giving China another lever with which to coerce Canada.

The government could also help Canadian exporters with administrative compliance because China sometimes uses slight technical breaches as excuses for action.

With the U.S., Canada should work closely with people south of the border who rely upon Canadian products and services, as well as building up Canada-based supply chains less reliant upon U.S. elements.

That’s part of the “avoidance strategy” they recommend. But they also urge the government to be willing to undertake “bilateral trade remedies” when the U.S. engages in trade-distorting behaviour, such as subsidizing farmers, as it is now doing, and promoting overproduction and dumping of U.S. agriculture and food products.

Beyond the specific policies for dealing with the U.S. and China, Ottawa should focus on strengthening the loose alliance of like-minded, rules-based traders, including the United Kingdom, the European Union, Japan, Australia, Brazil and Chile. Coalitions such as the “Ottawa group” are much more effective than individual countries.

“Among its members, agri-food trade could be co-ordinated based on the interests of its members and avoid or mitigate the risk of sudden trade stoppages on technical grounds,” Mussell and Hedley say.

“Canada could take the lead in exploring this.”

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