Are we there yet – another trade deal signed… another round of bombast and trade-offs


One does wonder with all the trade deals Canada is involved in whether we even have enough food and agricultural products to export to all the new and expanding markets. When the Canada/EU free trade agreement (CETA) was signed, government and industry trade boosters were predicting that ag exports to the European Union (EU) were going to increase by the hundreds of millions if not billions of dollars. It was also predicted that CETA would give us a big advantage over the Americans because they didn’t have such a deal with the EU. No doubt trade with the EU will increase over time as it did before CETA but so far, the news hasn’t been all that positive for Canadian ag exports. Italy, apparently in concordance with CETA, has instituted new country-of-origin labelling restrictions against Canadian durum wheat imports resulting in increased handling costs for Canadian exporters – that’s tantamount to placing an artificial tariff barrier against Canadian durum imports. This restriction didn’t exist before CETA – has the deal made such trade harassment easier? One only has to look at the continuing restrictions on Canadian beef imports to wonder whether trade has actually become less free under CETA.
At present it doesn’t look like there will be any increase in Canadian beef exports to the EU for at least two years thanks to EU bureaucratic mischief about processing issues. Even then one expects new hurdles will arise that will make exports uneconomic. On the other hand, Canada has given the green light to meat imports from the UK; we have already seen the arrival of Welsh Lamb in Canada as well as approval for beef imports from the UK, and that is likely to remain in place even with Brexit. All in all, the Canadian consumer hasn’t yet benefitted much from the CETA. The agreement allowed for a large increase in tariff-free premium cheeses from the EU which was supposed to dramatically drop consumer prices for such cheeses. Your humble writer, a consumer of premium imported Dutch Gouda cheese, has not yet noticed any significant drop in prices for that delectable import. One fully expects that import wholesalers and retailers have quietly captured any savings resulting from the removal of tariffs. No surprise there.
Canada recently signed a new version of the Trans Pacific Partnership trade deal (now called Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), albeit without the USA. Although the details have yet to be released it is assumed that the trade deal will reduce meat, cereals and oilseed tariffs imposed mainly by Japan. It is being touted as a trade advantage over the Americans as they are not part of the deal. Trade boosters are hyping that this will result in, yes, hundreds of millions if not billions of dollars in additional Canadian exports to the partners in the deal. That bombast ignores the reality that Asian markets are already well-served by our competitors in Australia, New Zealand and the US, none of whom will willingly give up any market share. The only benefit for Canada is that it will put our exporters on a level playing field with our competitors.
One country that might be laughing all the way to the bank at Canada’s signing of the CPTPP deal is New Zealand. They will be granted increased tariff-free exports of dairy products to Canada. Now NZ can’t export fluid milk all that way, nor does it produce cheese of any con-sumer interest, but it does produce considerable quantities of ultra-filtered milk (UFM). That ingredient is used to produce very cheap industrial cheese used in the pizza business. NZ is always currency challenged as its dollar is not that tradeable, to overcome that they need to obtain tradeable hard currency, so they traditionally undersell everyone in any export market. Unless the details of the deal place restrictions on NZ dairy imports one can expect a flood of cheap NZ pizza cheese and UFM into Canada.
Interestingly, UFM imports are also a bone of contention between Canada and the US. The Americans want unfettered access to the Canadian UFM market while the dairy supply management lobby is pushing for more import control. If Canada grants NZ more access for UFM we can hardly argue against more American UFM imports. It may mean that another chunk of the Canadian dairy business will be sacrificed in order to close a deal with the Americans on NAFTA. Compensation to dairy producers are in order for these damaging trade offs.