Canada’s trade advantage over U.S. will cause trouble

It was tempting there, for a moment, to imagine that Canada’s strained relationship with the United States over trade in agriculture was easing.

Not so fast.

Canada is pursuing a distinctly different course with respect to trade in agriculture than the United States. And it will get noticed.

At the recent Grain World conference in Winnipeg, Frederic Seppey, assistant deputy minister of agriculture, outlined Canada’s strategy in the agricultural sector — including what he called a “broad FTA agenda” — that includes aggressive growth in exports.

Prime Minister Justin Trudeau’s Advisory Council on Economic Growth had set a goal of $75 billion in agricultural and agri-food exports by 2025 (up from $64 billion in 2017). But in September, the Agri-food Economic Strategy Table, led by AGT Food and Ingredients president Murad Al-Katib, recommended a more ambitious goal of $85 billion.

Forty percent of Canada’s gross domestic product comes from trade, but 75 percent of that comes from trade with the U.S. Seppey noted that Canada wants to pursue trade diversification.

Sixty-four percent of Canada’s trade is covered by free trade agreements, including the Comprehensive Economic Trade Agreement with the 28-country European Union, the Comprehensive and Progressive Agreement on Tariffs and Trade with 10 Pacific nations (which is now ratified by seven countries, and so goes into effect Dec. 30) and the recent United States-Mexico-Canada Agreement.

Canada is also pursuing free-trade talks with India and the Mercosur trading bloc (Argentina, Brazil, Paraguay, Uruguay, and Venezuela), and is conducting exploratory FTA discussions with China and the ASEAN 10 (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam) .

China and Canada recently agreed to double two-way agricultural trade by 2025. China imports $65 billion in food annually, and Canada’s share of that is 3.7 percent, so there’s lots of room to grow.

By comparison, the U.S. has trade deals with 12 minor countries and two multilateral trade agreements, most with smaller economies (Canada and South Korea being the exceptions).

China and the EU, with a combined gross domestic product of $30 trillion, are conspicuously missing from that list.

It is only a matter of time before Canada’s competitive advantage arising from these trade deals starts to have an effect on American agriculture. U.S. farmers are already complaining about their disadvantage in trade in the growing Asian markets because of the CPTPP.

On top of all this, there remains the dispute over the Trump administration’s tariffs on Canadian aluminum and steel.

Future disputes may target U.S. export subsidies. Seppey noted the U.S. is the largest provider of food aid, which can distort markets. Canada could be dragging the U.S. through more World Trade Organization disputes. They’re often protracted and they can be acrimonious.

This is bound to put pressure on U.S. farmers, who in turn will urge the Trump administration to do something. What that will look like is anybody’s guess. Will the U.S. join the CPTPP and settle with China? Or will Trump lash out, as he can do with great gusto, with more tariffs or non-tariff trade barriers such as renewed country-of-origin legislation?

All this means that when it comes to relations with the U.S. on agricultural trade, Canadians should fasten their seat belts, because it’s going to be a bumpy ride.

Karen Briere, Bruce Dyck, Barb Glen, Brian MacLeod and Michael Raine collaborate in the writing of Western Producer editorials.


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