Unlocking Canada’s trade potential

Canada has shown for the very first time it is willing to make major concessions involving agriculture

By Sylvain Charlebois, Associate Dean, College of Management and Economics, The University of Guelph

Some say the Canada-EU trade agreement is Stephen Harper‘s cure for all his recent troubles as Prime Minister even if many details have yet to be made public.

Parliament has had a brief overview of the trade agreement but still has yet to see anything in ink. When considering how complicated multilateral trade negotiations can be, we need to give credit where credit is due, however: a pact-in-principle with the EU is quite the accomplishment.

Nonetheless, those who elevate the agreement to the status of historical treaties are only reminiscing about the 90s and the forging of the North American Free Trade Agreement. The world is a much different place now. This agreement, if ratified, will only allow Canada to join the ranks of countries which are unconditionally committed to free trade – nothing more. In other words, with this agreement, Canada has shown for the very first time that it is willing to make some significant
compromises on trade restrictions involving agricultural trades, a highly contentious issue in global commerce. It’s a statement that has not gone unnoticed, and the agreement with the EU couldn’t have come at a better time.

As the American government has become increasingly dysfunctional over the last few years, the world is considering options for reliable economic leadership. Canada and the EU, amongst other players, are questioning the current global monetary regime led by the Americans. As a result, the fact that Canada crafted and signed an agreement with the EU before the Americans is not trivial. For one, the Canada-EU deal will likely be used as a benchmark instead of just an afterthought.

To be realistic though, since it may take up to two years for the agreement to be officially ratified, negotiations with the Americans may influence or even alter the content of the Canada-EU agreement. Yet even this attests to the significance of our path-breaking work. Secondly, both the Americans and the EU have shown an interest in each other but have a toxic history of political relations, mainly stemming from disagreements regarding the proper response to international conflicts. It is highly unlikely that a deal can be signed between the two parties by the end of U.S. President Barack Obama‘s second term. So for Canada to have secured an agreement with the EU brings a better sense of certainty.

For Canadian agriculture, this agreement is seminal, full stop. Over the last few years, Canada has signed trade agreements lacking in scope. Free trade agreements with Colombia, Panama, or Peru aren’t necessarily earth-shattering when the world is more concerned about what goes on in India or China.

This newest potential trade arrangement, however, can significantly support some of our major agricultural sectors like cattle and pork. Particularly in light of the Country of Origin Labeling rules in the U.S., which are becoming increasingly unbending, our livestock industry needs better access to global markets. Even though it may take a while before the deal is enacted, it provides some of our lagging sectors with a renewed sense of hope.

Our supply management system, which is precious to our dairy, poultry, and egg sectors, will survive unscathed. This is welcome news for these sectors. However, artisan cheese makers will see an influx of more European cheese coming into our domestic market. Should the agreement be ratified, quotas for fine cheese imports will double. In addition, geographic appellation for European cheeses will be protected. Consistent with European-based rules, Feta cheese, for example, can only be labelled as such if produced using strict traditional methods. Many industry leaders have already registered their concerns, and they will need to be properly supported moving forward.

Because of the St-Lawrence seaway, which provides a very economical way to move products eastwards to Europe, Ontario and Quebec are likely to gain from this new partnership. The food processing sector in Eastern Canada, which has been facing major macroeconomic headwinds of late, will likely embrace this opportunity in the future. For that reason this agreement, once ratified, is a step in the right
direction for our agricultural economy. But this should only be considered as the beginning of a renewed commitment to free trade.

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