As United States President Donald Trump follows his “American first” policy and pulls out of trade deals, it could spell future opportunity for the Canadian agricultural industry.
That’s according to Dermot Hayes, a professor with the department of economics at Iowa State University.
“In D.C. it’s chaotic. It’s the craziest situation I’ve ever seen, we’re shooting ourselves in the foot… I do think the U.S. is behaving so badly that it’s going to create opportunities for Canadian agriculture,” said Hayes on Jan. 24 during the Keystone Agricultural Producers (KAP) annual meeting in Winnipeg.
Immediately after Trump took office last year he pulled the U.S. out of the Trans-Pacific Partnership (TPP). On Jan. 23 it was announced the remaining 11 nations including Canada had reached a deal and would be signing it in March. According to Hayes, this is going to give Canada a leg up on the U.S. for the foreseeable future, even if the U.S. has a change of heart.
“Is it in Canada’s best interest to allow the U.S. back in (to TPP) given that it would have preferential access to Japan and Vietnam? I suspect that the damage is permanent, that the U.S. will never be able to get back into TPP,” he said.
North American Free Trade Agreement negotiations are ongoing as well and for Canadian agriculture it might not be the worst thing if it doesn’t work out. According to Hayes, it could lead to Canada receiving preferential access to Mexican markets.
“In the commodity business you can’t pay a 20 per cent duty if the Mexican producers are paying a duty and if the Canadian producers are not paying a duty. Again there could be opportunities here for Canada to the detriment of U.S.,” he said.
There is a plethora of opportunities for Canada trade-wise currently as the U.S. digs itself into a deeper hole, according to Hayes. During the KAP presentation he praised the Canadian government’s current approach to trade agreements.
“One of the things I’ve noticed is as bad as U.S. trade policy is right now Canada has actually got some rational trade policies. You’re cutting a European free trade agreement, a bilateral potential free trade agreement with Japan,” he said.
For Canada there is potential for more trade opportunities and Hayes expects demand to grow from densely populated Asian countries such as China. China has become a wealthy nation and is now paying attention to things like animal welfare and cleaning up its environment. It’s become a “rich country with rich country’s desires,” Hayes said.
People in China used to raise their own individual pigs and grow small crops, but now agriculture has become modernized with larger operations. According to Hayes, China will soon begin to realize farming crops like soybeans with manual labour on its mountainous terrain isn’t productive and it should switch to growing fruit and importing other crops to be more profitable. This should have Canada thinking of trying to make a trade deal with China, according to Hayes.
“If (Canada) can get rid of those duties going into China and especially if other countries do not have that access it could revolutionize (Canada). I’ve seen it in Australia. I’ve seen it in New Zealand. When China starts to buy your product you become prosperous,” he said.
If Canada does continue to take advantage of these trade opportunities in a few years it will give the agriculture industry a leg up against its American counterparts, according to Hayes.
“I think the U.S. will recognize eventually that not participating in these agreements is against its long-run best interest, but that’s not the case right now,” he said.