Livestock sectors are split on yet another free trade agreement, this one the successor to NAFTA.
Canada’s dairy sector has made no secret that it is unhappy with the United States-Mexico-Canada Agreement (USMCA), which promises new access for the U.S. dairy industry, an end to Class 6 and Class 7 milk products within six months of the agreement coming into effect and a penalty on global exports of milk protein concentrates, skim milk powder or infant formula over a given threshold.
The Dairy Farmers of Canada estimates that the deal will cost its producers almost 3.6 per cent of the current market, concessions that are on top of previous concessions under CETA, Canada’s agreement with the European Union, or the incoming Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
In a now widely publicized statement, Dairy Farmers of Canada president Pierre Lampron blasted both the deal and the federal government, saying, “The announced concessions on dairy in the new USMCA deal demonstrates once again that the Canadian government is willing to sacrifice our domestic dairy production when it comes time to make a deal.”
Outside the dairy industry however, the USMCA has prompted sighs of relief from both the pork and beef sectors, both industries that worried a NAFTA renegotiation would endanger already favourable trade terms.
Brian Lemon, Manitoba Beef Producers general manager, and Andrew Dickson, general manager of the Manitoba Pork Council, both welcomed the news as an indication that certainty might re-emerge in the market.
“It’s huge for us,” Lemon said. “We’re an industry that is built on trade and if we’re going to grow, the growth is going to be built on trade. We’re an industry where producers live and exist within a global marketplace and global marketplaces love certainty.
“Of course, the devil will be in the details,” he added, “but what we’ve seen so far is that, for our industry, the new agreement is largely exactly what NAFTA was. We certainly expect that this is going to allow us to continue to have that relationship with our trading partners in the U.S. and both take advantage of it.”
According to the Canadian Cattlemen’s Association, Canada exported 46 per cent of its beef and cattle production in 2016, and about three-quarters of that to the U.S. Provincially, most of Manitoba’s cattle go east or west within Canada, not directly south of the international border, Lemon acknowledged. At the same time, he argued, it is important to keep southern trade as an option for Manitobans.
Effects may be more direct for Manitoba’s hog industry, as Canada’s largest pig-exporting province. Unlike the beef industry, pork does account for significant traffic across the U.S. border.
The hog industry hopes the market will start to climb now that trade seems to be on more even footing. Experts have at least partly blamed U.S. trade tensions, including disputes with Mexico and China and ongoing uncertainty over NAFTA, for plummeting prices over the last year.
Dickson says the market is already showing signs of bouncing back.
“We’re hoping that now that there’s going to be a period of calm, that the marketplace will become restored to a more normal level of doing business,” he said. “The second thing we’re pleased with is that they were able to retain the dispute settlement mechanism, which the U.S. had wanted to remove. We would’ve potentially been in the situation where if we wanted to bring a complaint against the United States, we’d have to go through the U.S. court system. By keeping this dispute settlement mechanism in place, we’ll have a more objective view on trade cases.”
Canada made the previous Chapter 19 (now Chapter 10 under the USMCA) dispute settlement mechanism a sticking point during negotiations.
“We fully realize that some people may not have gained from this agreement, but from our perspective, the federal government will deal with that in terms of compensation,” Dickson said.
“There are some border issues that need to get fixed at some point or other, but they’re technical things about delays and timing and sampling and that sort of thing, which can create some problems,” he added.
Prime Minister Justin Trudeau met with the dairy industry in the first week of October and promised compensations, although Lampron criticized the lack of details provided at that time.
Supply-managed sectors in general are expected to take a hit under USMCA, including the egg and poultry sectors.
Wayne Hiltz, executive director of the Manitoba Chicken Producers, says the trade deal will take away another one per cent of their market share, on top of the 7.5 per cent currently taken up under current trade rules.
The sector is expecting that situation to decline further with CPTPP. The CPTPP Implementation Bill went before Parliament in June 2018. That trade deal will bring concessions up to 10.7 per cent of the current market, Hiltz estimated.
“It always seems like supply-managed commodities are used as a bargaining chip,” he said.
Hiltz expressed frustration with being required to give up more market share for already high import commodities. According to Statistics Canada’s poultry and egg trade reports, Canada imported almost $260 million more in poultry and egg products than it exported in 2017, including more than $200 million in poultry meat. Of those exports, the United States ranked among Canada’s top destinations for chicken meat and edible byproducts.
At the same time, Hiltz said, Manitoba’s chicken industry relies far more on the domestic market. An estimated 96 to 97 per cent of chicken produced in the province remains in Canada, he said.
The deal has caused frustration among local chicken producers, although Hiltz says there is also a sense of relief that the drama of the last few months is drawing to a close.
“Our producers are always investing or contemplating investing in their operations, as are processors, so having some stability and knowing what the rules will be going forward or what the trade agreement will be going forward does offer us some relief as far as: it’s done so we know what we’re dealing with,” he said.
The three countries now begin the long pro-cess towards ratification. In the U.S., the deal must pass through Congress, currently embroiled in midterm elections, while a new Mexican president is slated to take office in December.