FIDDLING WITH NAFTA
WHEN OPPORTUNITY KNOCKS, WILL CANADA ANSWER THE DOOR?
BY GEOFF GEDDES
As sayings go, “If it ain’t broke, don’t fix it” may not be profound, but for Canadian farmers faced with the reopening of the North American Free Trade Agreement (NAFTA), it offers more than a “grain” of truth. What impact might this have on grain trade among the three parties to the agreement (Mexico being the third), and Canadian grain farmers in particular?
It is indeed a relationship that has served Canada well for more than two decades. “The United States is one of our biggest customers and we’re one of their best,” said Cam Dahl, president of Cereals Canada. “This is a very positive trading relationship, so the bottom line approach should be to do no harm.”
RELIEVED OF OUR DUTIES
“As Canadian farmers, we’ve enjoyed duty-free grain movement since NAFTA was signed in 1994 and that’s something we don’t want to lose,” said D’Arcy Hilgartner, chair of Alberta Pulse Growers.
And there’s a lot to lose. From Aug. 1, 2014, to July 31, 2015, Canada exported 3.206 million metric tonnes of grains. Agri-food exports to our southern neighbour totalled $29.6 billion in 2016 and our imports of the same were $26.5 billion.
While the low Canadian dollar has slowed Canadian grain imports from the United States, that’s nothing new.
“When the dollar is low, we sell more to the U.S., and when it’s high, we buy more,” said Hilgartner. “I’m looking for a tariff-free trading arrangement where the market sets pricing rather than some artificial adjustment tax or other arbitrary measure.”
TURF AND TARIFF
“Agriculture has been a very positive part of NAFTA,” said Molly O’Connor, government relations adviser for the National Association of Wheat Growers in Washington, D.C. “They may want to look at [tariffs for] manufacturing or other areas, but we would hate to see the return of tariffs that negatively impact trade for wheat growers.”
The push to retain the status quo is complicated by the possible impact of supply management in dairy, poultry and egg production on the crop sector.
Alberta Wheat Commission chair Kevin Auch is concerned the grain industry may suffer if the government commits to protecting supply management at all cost. “Grain farming is 90 per cent of the farming sector. We have to be concerned that our interests would be traded away to protect one small part of one sector.”
Martin Rice, acting executive director of the Canadian Agri-Food Trade Alliance, thinks the effect will be minimal. “I assume the U.S. would want more access to Canada for dairy and poultry, regardless of what we ship to them,” said Rice. “Those sectors have their own interests in exporting to Canada that aren’t based on pork or crops or other products.”
In Rice’s view, the Canadian government doesn’t want to be seen as trading one sector against another. He feels we’ll be dealing with supply management from a defensive stance and largely in isolation from the export side.
“On export-oriented products like grain, oilseeds, beef and pork, we are looking at fairly friendly trading partners in the U.S. who want to preserve the benefits of NAFTA.” U.S. farm groups such as the American Farm Bureau Federation and the National Pork Producers Council have been vocal in support of trade integration between the three NAFTA nations.
One area that could be affected by renegotiation is wheat grading under the Canada Grain Act, but many experts feel that’s a good thing.
“The act states that wheat grown in the U.S. is only eligible for a feed grade, even if the variety is registered in Canada and has the same quality as grain grown north of the border,” said Dahl. “Regardless of what happens with NAFTA, that needs to change.”
Auch agrees. “It’s an irritant for them,” he said. “If they grow the same thing, follow the same rules Canadian farmers do, they should be allowed to sell here.”
FRIENDS WITH BENEFITS
Despite the longstanding alliance, American rhetoric around NAFTA has some Canadian farmers nervous. On the other hand, many industry members see reopening NAFTA as an opportunity.
“This is a chance to bring NAFTA up to speed with other trade agreements around issues like testing of new biotech crops and establishing maximum residue limits,” said Rice. “There are many areas where we can improve collaboration and harmonize regulations.”
Dahl echoes this sentiment. “We can use the re-opening to ensure we have similar ways of regulating pesticides, a common approach to new plant breeding techniques that facilitates investment and development, and electronic exchange of information that supports cross-border trade,” he said.
“These are all regulatory impediments that renegotiation can address in a positive way. I am optimistic we’ll use this time to modernize what we have while increasing trade activity.”
Also seeing win-win opportunities is Gord Kurbis, director of market access and trade policy for Pulse Canada. “A big focus of any revised deal should be a harmonized approach to health claims and nutrition labels,” said Kurbis.
From an American wheat farmer perspective, O’Connor sees positives for all three countries in the agreement. “We were all part of the TPP (Trans-Pacific Partnership), and while the U.S. stepped away from that, there were sanitary and phytosanitary provisions that could be incorporated in a revised NAFTA for the benefit of all.”
HOPE AND HOMEWORK
While concerns remain, there is much hope the right approach will bear fruit. “Canada must do its homework and come to the table with clear negotiating objectives and desired results,” said Rice. “We must be confident that we can forge a modernized NAFTA, which will preserve the North American market for another 20 years.”
While there was initial concern about reopening NAFTA from producers on both sides of the border, that may be changing. “As time has gone by, that concern has been replaced with some optimism, especially in light of the strong support for the deal from the U.S. agriculture sector, which universally endorsed it,” said Dahl. “We can improve NAFTA, but we must not do anything to impede trade or move backward.”
In light of global activity on trade in recent months, some feel that cautious optimism is warranted. “If there is one thing that has characterized trade-related developments over the last year or so, it’s the difficulty that even trade veterans have in predicting outcomes,” said Kurbis. Whatever that outcome may be, Canada is hoping that when the smoke clears, the only thing broken will be the seal on the champagne to celebrate a job well done.