Trying to predict the future with any accuracy is a fool’s errand, but that doesn’t stop plenty from trying.
One of the biggest fallacies people fall into is the ‘recency effect,’ when the events of the near past are assumed to be more important than earlier events. Informally, it’s become shorthand for the assumption that the future will continue on like recent memory.
People make purchasing decisions based on the premise that interest rates will always stay low because they’ve been low for 20 years, for example — ignoring completely that rather unpleasant interlude in the 1970s and ’80s. Or house prices will always go up — until they don’t — as U.S. citizens found out, to their chagrin, just a few years ago.
One of the strongest examples of this thinking in the modern world is around trade. There’s the rather strong assumption now that we’re always going to see more trade and that anything that upsets that apple cart is nothing but a brief unpleasant interlude, a mere growing pain on the path towards greater prosperity.
That’s understandable, given this is the direction the winds have been blowing for decades now. Postwar Europe pursued its union, first in an effort to ensure there would be no more total wars on that continent, but ultimately for economic good and growth.
In North America, CUSTA, then NAFTA and the yet-to-be ratified USMCA agreements have opened up trade on this continent as never before.
Globally, the somewhat mushy and ineffectual General Agreement on Trade and Tariffs (GATT) of 1948 morphed into the World Trade Organization in the mid-1990s, becoming the largest economic organization in the world.
A global consensus emerged that trade is good, and that more trade was the inexorable fate of the global economy.
Lately however, that’s under attack on two fronts. There’s the political reaction in western democracies from those that feel they’ve been ignored, marginalized and left behind by this shiny new paradigm.
That’s been evident in the election of President Donald Trump in the U.S. and the Brexit vote that has the United Kingdom poised to pull out of the European Union, deal or no deal. In other jurisdictions we’ve also all observed the restive nature of the electorate as they punish incumbents and reward perceived outsiders.
The second front on this war is from the newly emboldened economic tigers, and in particular from China. It’s never been entirely clear that China endorses or particularly believes in this western neo-liberal trade model. Its leaders might use it when it’s to their own advantage, but their own economy remains a maze of policies and controls.
Especially troubling for Canadian farmers is how the two now seem to be combining in ways that will spin off effects that hit them at the farm gate.
Trump’s trade brinksmanship resulted in tit-for-tat tariffs that hit U.S. soybean growers hard, but benefited their counterparts in places like Latin America. But now that the two economic giants are making nice again, that could spell trouble for everyone else. Canola growers, for example, should be concerned about rumblings that any trade deal between the two could include minimum annual purchases of U.S. soybeans.
It’s a challenging picture for any middle-size country like Canada, especially one so trade dependent, as our Allan Dawson reports in our latest issue of the Manitoba Co-operator. Perhaps agriculture economist Al Mussell put it best when he noted that, absent the sort of leverage China or the U.S. enjoy, Canada is forced to rely on rules-based trade.
But that reliance, he and colleagues Douglas Hedley and Ted Bilyea concede in a paper he authored for Agri-Food Economic Systems ominously titled Disarray in Agricultural Markets, may not play out in the near term.
The paper concedes that right now much of world agriculture trade is dependent on geopolitics and that means “… the bounds or equilibrium that the market is moving toward is unclear. It is uncharted territory.”
It’s clear that food will continue to be traded internationally in the coming years. What’s less clear is how that trade will occur and how reliable it will be.
For Canada, with its plan to grow agricultural and food exports exponentially, the challenge won’t be producing the goods. Farmers have demonstrated they’re more than capable.
It will be putting the right resources into the right places to get them to customers in other parts of the world.
Without that concerted effort we’ll be sitting here, wishing for the “good old days.”