By Carlo Dade
In the Calgary Herald/Edmonton Journal/Winnipeg Free Press/Vancouver Province/Saskatoon Star Phoenix/Regina Leader Post

July 31, 2015

 

Western Canadian access to vital new commodities markets hinges on the federal government’s willingness to stop giving dairy and poultry farmers special protection. With the U.S. pushing to conclude talks in Hawaii this week, Canada needs to move quickly.

Protection of the dairy industry is an as-yet unresolved stumbling block that threatens to exclude our country from one of the most important trade agreements of the early 21st century.

Canada sells most of its commodities to the United States, but the 12-nation Trans-Pacific Partnership (TPP) under negotiation would expand market access to New Zealand, Australia, Singapore, Malaysia, Brunei, Vietnam and Japan and improve access to the U.S., Mexico, Peru and Chile.

About 83 per cent of Western Canada’s merchandise and commodity exports go to the U.S. and the other 11 TPP countries. If Canada is not part of the partnership, it may find even its trading relationship with the U.S. at risk.

The U.S. has made it clear that the 20-year-old NAFTA will not be updated as it shifts its trading focus toward the TPP countries. This new agreement will, in effect, grant the TPP partners NAFTA-plus access to its market. That means the privileged access to the U.S. market that Canada and Mexico have enjoyed will largely disappear.

Being on the outside looking in could disastrously erode Canada’s trade balance. Which is why Canada’s reluctance until this week to open its dairy market to other TPP countries is such a high-stakes gamble.

All the other partners are prepared to make trade-offs. New Zealand and Australia have already opened their agricultural sectors, as have, to a lesser degree, the Latin American TPP countries. Japan and the U.S. have also announced they will take on entrenched agricultural interests at home in the interests of achieving a TPP deal.

Canada cannot win the day on dairy protections because every other TPP partner has made concessions and expects us to do the same.

It is hard to overstate how much is at stake. Three-quarters of our meat exports go to TPP countries, yet Canada has trade agreements with only four of them. Canada can ill afford to be on the outside when our main competitors for meat exports, Australia and the U.S., gain new access to the TPP through the agreement. The same applies to lentils, wheat and numerous other commodities.

These agreements matter. When the U.S. signed a trade agreement with Korea before Canada did, beef exports fell by roughly one-third. Conversely, when Canada ratified its trade agreement with Colombia before the U.S. did, wheat farmers there predicted losses of at least US$100 million a year.

There are long-term implications, too. Consumption of food and other commodities in most TPP countries is growing faster than in the U.S. In Malaysia, Vietnam and even Peru, where millions upon millions of people are just leaving poverty and entering the middle class, the upside is huge.

Getting in early is critical to gaining and holding market share. Beef producers have already seen the consequences of allowing U.S. and Australia better access to growing markets in Korea. The lesson needs to be shared with the rest of Canada’s commodity producers.

News reports suggest Canada is finally ready to bend on protectionist measures for dairy and poultry. International Trade Minister Ed Fast is mum while talks continue, but if the reports are accurate, this is a welcome signal of sanity and compromise at the last minute.

One reason the government has been slow to move is the perception that Canadian dairy farmers are the only group concerned about the TPP negotiations. The producers’ presence in Hawaii this week makes that point. All of the myriad agricultural and commodity interests — from beef to pork to wheat to lentils to timber have been comparatively quiet — as has the service sector.

That relative silence compared to the noise from the dairy industry continues to the peril of us all.

Carlo Dade is the director of trade & investment policy at the Canada West Foundation.