North America Brief
Issue 06 | March 3, 2023

The North America Brief is a compilation of stories and links on the United States and Mexico’s trade relationship with Canada’s Prairie provinces focusing on stories and topics not always “on the front page” of mainstream media.

In this issue: Why western Canadians should care about the Colorado River, optimism on U.S. “Buy America” policies, new NAFTA dispute updates and so much more.   

Why western Canadians should care about the Colorado River…

Canadians who eat greens in the winter, notably lettuce, are reliant on the water of the Colorado River, a CBC article notes. High lettuce prices in Canadian grocery stores this past fall were a costly reminder of our ties to the region. Jay Famiglietti, a thought leader on North American water politics and Executive Director of the Global Institute for Water Security at the University of Saskatchewan, is in the U.S. news again talking about the drought impacts in Canada, noting that “when I go to the grocery store in Saskatoon, my berries are coming from Watsonville, California. The lettuce is coming from Salinas, California.” Famiglietti also discusses the impact of moving production from California further north.  

Efforts to cut water usage and implement remedial plans are underway, but Canadians won’t be contributing to the water supply in the U.S. southwest. Despite having a personal stake in the river’s longevity, Canadian company EPCOR has confirmed that it won’t ship water across the border as a long-term solution, according to CBC News.  

Beef industry and drought…

Industry experts warn that an increase in drought and other extreme weather events in the U.S. and Canada is causing beef farmers to thin their herds in near-record numbers, potentially leading to supply issues in the beef industry in the long run, CBC reports. According to a report by the U.S. Department of Agriculture, as of Jan. 1, 2023, the U.S. had less than 29 million head of beef cattle, a decline of 3.6 per cent and the lowest number since the 1960s.  

But the integrated North American market is experiencing some positive change that could offset the negative news. Processing capacity in the United States is increasing rapidly, while beef cattle inventories in Mexico are on the rise. Plus, better conditions are expected to persist in Canada, The Western Producer reports.

Canadian oats…

Oat milk is taking over the plant-based milk market and Canada’s prairie provinces are benefiting from the surge in demand. With an 85 per cent share of North American oat production, Canada produced 4.6 million tonnes of oats in 2022, rebounding from a drought-limited harvest of 2.6 million tonnes in 2021. This surge in production propelled Canada past Russia as the world’s top oat producing nation, World Grain reports.   

The Canadian oat market is heavily integrated with the United States and Mexico, with 80 per cent of Canadian oats being sent for processing to the U.S., and Mexican imports of Canadian oats having more than tripled in the past six years. Mexico also has ownership in an oat milling plant in Edmonton.   

Mexico joins U.S.-Canada dairy dispute panels…

According to Inside Trade, the Mexican government has requested a seat at the table for the U.S. Canada dairy dispute panel first announced in January. While Mexico is not taking a position on the dispute, the timing on the heels of Canadian complaints about Mexico’s treatment of Canadian energy companies is interesting.   

BMW investing in Mexico manufacturing…

BMW’s recent announcement to invest $865 million toward expanding their electric vehicle production in Mexico suggests that their manufacturing capacity might be geared toward the U.S. market. BMW’s expenditure is part of $15 billion in investment announcements registered by the Mexican Automotive Assn. (AMIA) since 2021, and is largely influenced by both the U.S.-Mexico-Canada Agreement (USMCA) trade deal and tax credits granted by the U.S. Inflation Reduction Act (IRA), Wards Auto reports.   

Canada’s helium boost…

As the world undergoes a helium shortage—magnified by issues related to hydrocarbon-linked helium sources and the war in Ukraine—Canada is stepping up to fill the gaps, Business Wire reports. North American Helium Inc. (NAH) most recently announced the completion of two additional helium purification facilities in Saskatchewan. NAH is projected to make substantial gains in production during 2023 and increase its role in the North American helium supply chain. Despite last year’s removal of helium from the U.S. critical minerals list by the United States Geological Survey (USGS), NAH CEO, Nicholas Snyder, is optimistic that the USGS’s recent call for public comment on risks to helium supply indicates a potential reversal of this decision.   

USDA’s projections for the next decade…

The U.S. Department of Agriculture released a report on long-term projections of agricultural trade and commodities for the decade ahead. There are a few things Canadian producers and exporters should know:    

  • Wheat: While global wheat production is expected to increase by 7.9 per cent in the next ten years, the U.S. will import slightly less Canadian wheat in 2032/33 than it does today. However, Canada will remain in the top six leading wheat producing countries and will see an increase in total exports of wheat.   
  • Soybeans: Canada will increase exports of soybeans from 4.6 million tons in 2023/24 to 5.5 million tons in 2032/33. The cultivation of soybeans in Canada has extended beyond its conventional producing area of Southern Ontario towards the prairies in the northeastern region of Manitoba.  
  • Barley: Projected data indicates that Canada’s export of barley is expected to remain stable at 3.2 million tons during the forecast period. China is projected to remain the primary market for Canadian exports of both feed and malting barley.   

More on USMCA trade disputes…

The Mexican Government recently announced it would not ban genetically modified corn for livestock feed or industrial purposes. However, the ban on GM corn for human consumption remains, Reuters reports.    

Lawmakers in DC continue to push for the launch of a formal dispute under the USMCA as U.S. corn producers “plan for the 2023 planting season that will feed the world in 2024,” according to a letter addressed to USTR Katherine Tai and Ag. Secretary Tom Vilsack. See the full letter here. Canada has been quiet on the matter.   

Canada’s “Underused Housing Tax”, which states that any real estate deemed “vacant or unused,” typically owned by “non-resident, non-Canadian owners” is subject to an annual one per cent tax on the value of the property, is also in the hot seat. More on this from Inside Trade.   

Also, Mexico’s steps to ban products made with forced labour will spur North American cooperation. The move is part of Mexico’s compliance with the U.S.-Mexico-Canada Agreement which mandates that each party prohibits the import of goods produced with forced labor. The resolution will become effective in May 2023, Inside Trade reports.  

Canada and “Buy America” policies…

Despite new efforts to tighten “Buy America” policies in the United States, Canada’s ministers of industry and defense remain confident that the country’s unique position will be recognized in the U.S. discourse. During a recent visit to Washington, the ministers discussed bilateral economic and security issues, emphasizing economic interdependence between the two nations, an Inside Trade article highlights.  

Initial panic over the protectionist U.S. “Buy America” policy has settled in Canada as only two out of the top 25 Canadian products exported to the U.S. fall under the policy: aluminum and lumber. Laura Dawson, Executive Director of the Future Borders Coalition, stated that the impact of these new policies on Canada is “probably negligible.” She noted that Canadian suppliers, including lumber and pipe companies, are already familiar with the routine and have set up offices in the U.S. to avoid any potential issues, CBC reports.   

Going even further, Charles Benoit, a member of the Coalition for a Prosperous America, a pro-onshoring group, believes that the new law might actually be a blessing in disguise for Canada. The law follows WTO rules, which will allow Canada to retain access to certain U.S. public contracts, putting the country in a privileged group of only 47 nations, the same CBC article notes.   

Also, last month, the United States, Mexico, and Canada announced plans to enhance their coordination of semiconductor supply chains and map critical minerals resources.  

Applying lessons from COVID…

Something for states and provinces to keep an eye on is a statement from the U.S. Trade Representative that announced the U.S., Mexico and Canada are establishing a committee to study ways to keep trade flowing during future emergencies. Given the role that sub-national governments played in moving goods during the pandemic and the impacts on local communities, this committee could probably use more than just “consultation” with states and provinces.     

Other news

  • Northern U.S. states are keeping an eye out for the invasive Canadian ‘super pig,’ The Guardian reports.  
  • A joint working paper from Clean Prosperity and The Transition Accelerator, outlines seven low-carbon technology cases and the recommendation of two policy options for promoting decarbonization in Canada and the U.S. Read the report here.   
  • The U.S. and Canada have started their 12-day roadshow in the U.K. to boost business opportunities between the countries. Read more about that here.   
  • Watch this Brookings Institute event that explored building more integrated, resilient and secure supply chains for North American governments, industries and civil societies.  
  • Also this week was BMO’s 32nd Global Metals, Mining & Critical Minerals Conference in Florida. More than 175 North American companies attended.    

— Taylor Blaisdell, policy analyst

The North America Brief is a compilation of stories and links related to the U.S. and Mexico’s relationship with Canada’s West. The opinions expressed in the links don’t necessarily reflect the views of the Canada West Foundation.