Canadian agriculture faces daunting challenges, mainly to do with trade, according to a new paper from agricultural economists Al Mussell and Douglas Hedley at Agri-Flood Economic Systems.
The United States is ramping up production, fuelled by hefty subsidies and a trade agreement with China, but any hiccup could end up swamping the Canadian market with what can’t be exported to China.
China is also playing hardball, using trade restrictions to drive its political agenda, such as disrupting Canadian canola and pork exports to pressure Canada on the extradition issue with Huawei’s executive and Australia’s barley exports after it challenged China’s handling of the COVID-19 outbreak.
Mussell and Hedley note that China needs food imports because it’s about 18 per cent short of self-sufficiency, yet it’s disrupting imports.
They say China may be trying to disrupt supply chains to weaken companies that it can then buy at discounted prices.
That would give China more control over food supplies from overseas.
In earlier papers, Mussell and Hedley have outlined how the World Trade Organization used to be a place where smaller countries, such as Canada, could rein in the clout of the United States and now China by negotiating trade agreements with rules and penalties for violations.
That’s now gone because the World Trade Organization’s disputes-settling panels are crippled by the U.S. refusal to appoint people.
That means Canada is left to make the best of the situation by taking full advantage of market opportunities, especially in China, and bracing for disruptions.
They note that Canada’s exports to China are concentrated on six commodities with relatively little in processed food products.
They recommend an increase in processed foods with a strong Canadian identity, making it more difficult for China to impose nuisance trade restrictions.
But they also note that a great deal of Canada’s food-processing sector is owned by foreign companies and companies are hesitant to invest in today’s uncertain climate.
To counter the challenge of nit-picking trade bans, they say that “in a politically charged environment, small errors like mistaken entries on an export certificate present an opportunity to halt exports and pressure Canada.
“Assistance to upgrade compliance can minimize the likelihood of this.
“Secondly, if these barriers arise, provision can be set aside to support storage and/or alternate marketing of displaced product.
"This recognizes the fact that barriers erected by China against Canadian imports are ultimately transitional and temporary, and that Canadian production/processing capacity must be secured,” they wrote.
“Under the current structure of agri-food trade with China, Canada has been missing the growth segments, which are processed foods- meats, cereals, vegetables, and others.
“Further processing and value-adding is usually conceived from an economic development perspective, but in the current environment it is also defensive - an investment in market access protection.
“Practically speaking, as product origin or (better yet) brand becomes recognized, it becomes more difficult to unilaterally stop imports,” they wrote.