Tuesday, October 8, 2019

Dire future for Canada predicted

Canada faces a dire future, warn three agriculture economists who run Agri-Food Economic Systems at Guelph.

Canada relies heavily on trade and agriculture needs exports, yet world trade is breaking down, they say.

The World Trade Organization’s disputes-settling mechanism is under threat by the United States refusal to appoint new judges, its free-trade negotiations are at a standstill and protectionist measures adopted by many countries, including tariffs imposed by China and the United States, are rampant.

The new trade deal the United States and Japan have struck would be illegal under normal circumstances because it violates most-favoured-nation standards, the economists say, but there doesn’t appear to be any nation willing to file a challenge.

“The world is turning away from rules-based trade- just as it begins to grapple with an unprecedented meat shortage- and major assumptions underlying our expectations of agri-food marketing, business risk management policy, and international trade will need to shift,” say economists Al Mussel, Ted Bilyea and Douglas Hedley in their new report.

The United States is helping its farmers with $28 billion in subsidies. Canada can’t afford to match a return to subsidies, the economists argue.

And Canada lacks clout when it comes to trying to restore trade to the disciplines of agreements, including the World Trade Organization rules, they say.

So “Canadian agri-food finds itself in an ominous situation on multiple fronts in the fall of 2019,” they write.

There are a few glimmers of hope. One is that China will need to buy more food. Losing half of its 40-million-sow hog herd to African Swine Fever is sending prices soaring and making the public restless, so China is shopping around the world.

But fewer hogs also means less Chinese demand for soybeans and canola. And the soybeans it does need it is increasingly sourcing from South America.

China also has a long-term strategy to build roads, railways and shipping such as an expensive link across Asia. That will impact trade patterns.

They say China appears to be “playing a larger geo-political game ultimately designed to wall-off its market to the US and its allies.”

They say that “among a range of its apparent options (for Canada) are:

• Pursue a revamp of WTO or a new trade policy alignment and rules with “willing countries”
• Food may be an entry point in discussions with China, not necessarily to settle current drivers in Canada’s tensions with China, but rather as a means to extend goodwill and willingness to engage
• Canada will need a new agreement with the UK post-Brexit. The apparent default is the CETA framework, but Canada could explore a further, more intimate commercial relationship in a Canada-UK trade agreement
  Finding, developing alternative crops to lower dependence on a few large ones and to offer flexibility in responding to market changes; Canada has excelled at this in the past
• Broaden Canada’s diplomatic messages at UN and other fora to specifically include agri-food trade. Canada will not use food as a weapon in dealing with other countries; how can we assist other countries to join us in this commitment?
• Canada has a comparative advantage in sustainable natural capital to produce food. In some cases (e.g., GHG’s) this can be measured and validated. Other food exporting countries lack Canada’s natural resources or fail to manage them sustainably. To protect its resource base from imports that are not produced as sustainably and are thus underpriced, Canada may wish to consider a tax on agri-food imports.

They say “a number of these options would have been seen as extreme,  wrongheaded and even absurd only just a short time ago . . . (but) it is in indication of the seriousness and abrupt change in the situation that these now warrant some consideration.”