There are at least as many questions as answers when it comes to beef and trade.
Canadian beef is looking good in Asia with CPTPP, the replacement to the Trans-Pacific Partnership, proceeding. China remains a tempting fruit — but with more than a few thorns in the way — while questions remain over trade with Europe and the future of NAFTA.
Those were just some of the messages as Manitoba’s beef producers got a market-access overview during the Manitoba Beef Producers AGM earlier this month.
Fred Gorrell, AAFC assistant deputy minister of markets and industry services, presented a report card on trade during the two-day event in Brandon.
“There are countries that want products that are different than ours. If our goal is to produce the best food in the world for other markets, I think we need to produce what they want,” he said. “I made it very clear. We produce all sorts of things in Canada — hormone free, with hormones — they’re all safe, good, but if the other country doesn’t want it, we can’t really force it to take it.”
Waiting for NAFTA
Arguably the biggest trade question in Canada right now, Gorrell says there is little definite information on the future of NAFTA.
The free trade agreement between Canada, the U.S. and Mexico has been on the table since August, following months of U.S. comments threatening to reopen the deal or abandon it if no new deal can be made.
The negotiations have already missed their original deadline, which set the ambitious goal of a new deal by the end of 2017. More recently, Canada’s chief negotiator, Steve Verheul, told media that talks have made limited progress as the three countries approach the seventh round of talks.
Meanwhile, hardline rhetoric from the U.S., including on social media, has fostered anxiety in some corners of the Canadian market, including in the cattle sector.
Gorrell says he is paying little attention to the rhetoric and was reluctant to discuss moving away from the U.S., despite the current trade drama playing out in the headlines.
“It just makes perfect sense that that should be our No. 1 market, but you only start having these conversations when you’re having problems. If everything is good, you don’t think about that problem because you say that’s the easiest market to go to,” he said, but added that, “diversification is good in anything because you do mitigate your risk.”
The resurgence of the Trans-Pacific Partnership, now under the moniker CPTPP or TPP II, and without the U.S., that pulled out of the original deal last year, has boosted Canadian optimism on beef access to Japan.
The Canadian Cattlemen’s Association estimates that the deal will increase annual beef exports to Japan by more than $200 million. The Asian nation made up six per cent, or $143.6 million in beef exports in 2016, according to AAFC, a number that rose to $159 million the next year.
Japanese beef tariffs will drop to nine per cent within 15 years under the deal, down from 38.5 per cent for fresh, chilled or frozen beef (although frozen beef sits at 50 per cent after Japan temporarily hiked rates last summer) and 50 per cent for select offal.
“That is a huge opportunity for us and they pay a premium price for our product,” Gorrell said.
The 30-month age restriction, something that has been a thorn in the side of Canadian producers wanting to access the market, may also become a thing of the past, Gorrell hinted, although few details were offered.
Producers who have been eyeing the Chinese market for years had reason to celebrate last year. In early December 2017, the Canadian government announced a new pilot project targeting fresh and chilled beef and pork exports, as well as the realization of a 2016 promise to open Chinese markets to frozen bone-in beef.
Those changes are expected to boost Canadian beef exports to China to $125 million over the next five years.
The Chinese market is an opportunity, Gorrell said, but Canada will be going up against other beef-producing countries also salivating over a piece of it.
Hormone-free beef, something that has already reared its head in Canada’s dealings with the European Union, may also play a part in Chinese-Canadian beef trade, Gorrell said.
The Asian nation requires beef be ractopamine free, Gorrell reported, while synthetic growth hormones are also banned.
Beef exports to China declined sharply in 2016, something Gorrell blamed on the Chinese tightening regulation on hormone-free beef.
“They’re testing it, and when they test it, if they get hormones, they can delist a plant. They can put you on a warning, so only certain plants will be able to run through hormone-free beef going into China,” he said.
The Canadian beef industry may be looking at a similar hormone-free program for both China and Europe, he added.
MBP general manager Brian Lemon also weighed in on the hormone-free debate.
“Our producers continue to recognize that consumers have the right to decide what it is they choose to spend their money on,” he said. “The unfortunate thing is we’ve got a bottom line as producers… if there’s not profitability at the farm gate, there’s no industry. We need to look at ways to make sure that we protect that piece of it. I think where there’s frustration is when it’s an uninformed consumer choice.”
Lemon said producers might find opportunities in demand for “special attributes.”
“If people are going to say that hormone free is what they want to do and where they want to go, we’ve got two choices as an industry,” he said. “We either say, ‘Sorry, that’s not what we have,” or we say, ‘OK, we’ll do what we can to get it for you,’ and maybe part of that discussion is, ‘and this is what it’s going to cost you, because here’s what it costs to produce it that way.’”
The challenges with CETA, Canada’s free trade agreement with the European Union, continue.
The government celebrated when the deal came into effect last September, pointing to the immediate removal of 92.2 per cent of agriculture tariffs and room for 50,000 tonnes of fresh and frozen beef and veal, to be phased in by 2022.
In practice, beef producers are facing down regulatory hurdles to market access, not least of which is the requirement that beef entering the EU be hormone free.
The industry shouldn’t hold its breath on carcass wash approvals either, Gorrell said. The EU has yet to approve peroxyacetic acid or citric-lactic acid washes for carcass decontamination.
It might be upwards of five years before those washes get the nod from the EU, Gorrell said, pointing to research that still needs to be done.
“We do have certain carcass washes already approved,” he said. “What happens is in our industry — especially in North America, but I would say the world — we’re always innovating, looking at new ideas. So the washes we started with the EU, they were approved, the ones that we put on the table in the negotiations. Other washes developed because the plants looked at how they’re doing their innovation, how they’re doing their processing. Those weren’t part of the original discussions.”
Lemon said he is disappointed, but not surprised, by the timeline.
“We’ve seen it over and over again,” he said. “It’s played itself out in any number of trade deals. How long did it take us to get country-of-origin labelling dealt with? These kinds of things, unfortunately, just move way slower than any of us would like to see them move.”
While the “ultimate win” might be five years away, Lemon is holding out hope for smaller wins in the meantime to help producers take advantage of CETA.
Despite the challenges, beef exports to Europe did jump last year, Gorrell said. The EU accepted 46 per cent more Canadian beef from January-November 2017 than the same period the year before, mostly due to demand in France, Denmark and the Netherlands.
What about Brexit?
The United Kingdom is still finalizing its departure from the EU, and Gorrell says it’s still too early to tell what trade with a post-Brexit United Kingdom will look like.
“I don’t think the British yet know what they’re doing because they actually haven’t figured out how and if they’re going to finalize their negotiations with the EU, what conditions that will be,” he said. “Right now, whether that will have an implication for our trade with the U.K…. I don’t think we know yet.”