Manitoba’s ag sector is getting ready for a new trade reality now that CPTPP has loosened trade bounds between Canada and Pacific Rim countries.
The 11-nation trade deal, which was almost derailed in 2017 with the sudden withdrawal by the U.S., officially came into force Dec. 30, 2018, with Canada as one of the first six ratifying nations needed to bring it into effect. Early adopters will benefit the most from the deal, according to trade analysts.
Why it matters: Most of Manitoba’s ag sectors are looking at good news with CPTPP coming into force, although the dairy industry is less than impressed.
The Japanese market has promised some of the largest gains for Canadian agriculture. The beef and pork sectors both expect Japan to be a key market under CPTPP. For pork, the deal promises to end tariffs on products under the gate price system (and currently facing tariffs up to 20 per cent) within the next decade.
Export Development Canada expects the pork industry to win an additional $639 million over what is already a $1-billion-a-year Japanese market.
Martin Lavoie, CEO of Canada Pork International, identified chilled pork as a potential area of expansion under CPTPP in front of the Senate agriculture committee last June.
“With the process and dedication of our exporter, we’re able to manage to have a 60-day shelf life. This is why we have chilled pork exports to Japan, and we’re very successful… There’s not a lot of countries, aside from the U.S., that can manage to have the chilled pork exports,” he said.
Andrew Dickson, executive director of the Manitoba Pork Council, says Manitoba should be able to claim close to half of those gains, although sectorial growth would be needed.
“We need to expand production because we’re short product now,” he said. “That’s one of the reasons we’ve got producers building new barns and we’ve got the processing plant by Hylife, for example, that have expanded their operation, because they’re looking for more product.”
Hylife Foods cut the ribbon on a new cutting floor and expansion of its Neepawa facility last April.
Dickson estimated the province would need an additional one million pigs to capture the $300-million goal.
Vietnam is also expected to eliminate tariffs on Canadian pork over the next decade.
“It’s going to take us time and we’re going to get in there and sell product,” Dickson said, adding that many of those markets will buy parts of the animal that have limited demand in North America.
The deal has earned similar praise from Manitoba’s beef sector. The deal will drop tariffs on frozen, chilled and fresh beef from up to 38.5 per cent to nine per cent over the next 15 years and drop tariffs on certain offal from 50 per cent to nine per cent.
Export Development Canada expects the beef industry to gain $378 million from the Japanese market, along with new access to Vietnam. Vietnam has agreed to do away with tariffs up to 31 per cent on fresh, chilled and frozen beef in the next two years, and eliminate tariffs on all beef products (penalties that currently sit up to 34 per cent) within the next seven.
“While we don’t know how quickly the impact of the CPTPP will be felt in Manitoba, it is expected that with the benefit of the lower tariffs Canadian beef exports to Japan could double in 2019. So Manitoba’s cattle producers should be able to help fill that market demand, and that’s good news for our sector,” Beef Producers president Tom Teichroeb said.
Manitoba’s beef sector will largely court the Japanese market, according to Teichroeb, although the industry is not discounting other possible markets opened in Asia as a result of CPTPP.
Livestock are not Canada’s only win under CPTPP.
The deal promises country-specific quotas in Japan for both Canadian wheat and barley, while Vietnam’s five per cent tariffs on wheat have been rolled back, now that the deal has come into effect. Potatoes have also been promised new market access, with tariffs rolling back on prepared potatoes in Japan, Malaysia, Australia, New Zealand and Vietnam over the next decade. Both Vietnam and Japan have also promised concessions on dried peas and beans.
Canola is also poised for gains. Canola seed is already tariff free going into Japan, but canola oil tariffs will also disappear within the next five years. Vietnam, likewise, has promised to eliminate tariffs on both canola seed and oil.
“The reduction in oil tariffs provides an exciting new opportunity for Manitoba to increase our value-added exports,” Manitoba Canola Growers executive director Delaney Ross Burtnack said. “Processing canola at home in Manitoba creates economic benefits domestically and provides future growth for farmers, their families and their communities. As most of our processing capacity is close to production, increased value-added activity supports our local communities, sustains and creates new jobs, and provides new delivery options for canola farmers.”
The commodity group estimates that $347 million of canola products went to CPTPP signatory countries in 2017.
While Manitoba’s pork and beef sectors celebrate, dairy farmers say they are braced for a blow.
CPTPP is expected to cede another 3.25 per cent of the Canadian dairy market to foreign products, a trend that Dairy Producers of Manitoba president David Wiens says has become all too common in Canada’s recent free trade agreements. CETA, the deal between Canada and the European Union that came into force last year, and NAFTA’s replacement, the USMCA, both included dairy concessions. The dairy sector estimates 18 per cent of the Canadian market will be taken up by imports by 2024 due to those trade deals.
According to Wiens, dairy farmers across Canada will feel the bite from CPTPP, and Manitoba is no exception.
“We’re basically going to take our share of it,” he said. “The effects of this trade agreement are going to be felt right across Canada, regardless of where these products come into the country.”
A number of planned on-farm and processing projects have already fallen through in light of the expected loss, Wiens said.
“There are farmers who are saying, ‘We really want to see what the outcome of some of these agreements are,’ so it has slowed down a number of potential building projects and investments in the farm,” he said. “Not that it’s stopped all together, but it has certainly slowed it down.”
The dairy sector has so far been unimpressed by any federal efforts to lessen the sting from their trade deals, Wiens said. The federal government did offer funds for dairy farmers to invest in their farms in the wake of CETA, although Wiens said those funds have only made it to a select number of farms.
The government has also promised compensation for the industry’s incoming loss under the USMCA, although details are still unclear.
In October, federal Agriculture Minister Lawrence MacAulay announced working groups of dairy farmers and processors to discuss possible mitigation and new directions for the dairy industry. CPTPP impact was expected to feature in those discussions.