An atmosphere of uncertainty hangs over the Canadian cattle industry as it awaits a possible trade war with the U.S.
The newly minted U.S. President Donald Trump has repeatedly signalled his intention to either scrap or renegotiate NAFTA, which has helped make the U.S. Canada’s largest market for beef and cattle exports.
A more immediate concern is whether Trump intends to reinstate the former U.S. country-of-origin food labelling law, which seriously hurt the Canadian beef and pork sectors.
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Congress repealed the controversial rule after the World Trade Organization found it illegal and authorized Canada to retaliate by imposing punitive tariffs on selected U.S. imports.
The Trump administration hasn’t said if it will bring back the rule, although that was mentioned during the U.S. presidential election campaign.
But concern over a possible return to COOL was an undercurrent at the Manitoba Beef Producers annual meeting last week.
“To coin a phrase, all bets are off and we’re just going to have to watch,” said Rob McNabb, general manager of the Canadian Cattlemen’s Association.
“It’s pretty early. There certainly have been no initial signals.”
Trump rode to power partly on his promise to rip up international trade deals or change them to benefit American workers.
The president has already signed an executive order pulling the U.S. out of the Trans-Pacific Partnership, a massive 12-nation trade agreement covering 40 per cent of the world’s economy. The TPP is considered as good as dead without the U.S. in it.
Now Trump has turned his sights on NAFTA, signalling a desire last week to speed up its renegotiation. That could involve either minor changes to the agreement, a complete overhaul, or splitting it into separate deals with Canada and Mexico.
It’s uncertain what that would mean for Canada’s beef sector. But McNabb said reopening NAFTA could open a Pandora’s box of key issues, such as animal health, phytosanitary conditions, transportation and supply value chains.
The uncertainty worries beef producers, who have fought hard over the years to establish open trade with the U.S., which receives the vast majority of Canada’s cattle and beef exports.
The reinstitution of protectionist trade measures such as COOL would be a serious blow to Canada’s agricultural industry, which exports over half of its production. Beef and pork are especially vulnerable. CCA calculates COOL cost cattle producers $639 million a year in lost sales and depressed markets while in effect. Annual losses to the pork sector were pegged at $500 million.
Although Congress ultimately repealed COOL, the fight to scrap it took seven years and cost CCA nearly $4 million in legal fees.
People attending the MBP meeting tried to remain hopeful their industry will be unaffected.
“We think it’s not going to happen but we also thought Trump wasn’t going to get elected,” said Heinz Reimer, MBP’s outgoing president.
Agricultural Minister Ralph Eichler said Trump always cites China and Mexico as his biggest trade enemies and never mentions Canada.
“He has bigger fish to fry. I really don’t think he has a passion to destroy trade with Canada at all,” Eichler said during a break in the meeting.
Eichler said he was heartened by the appointment of Sonny Perdue, the former governor of Georgia and an avowed free trade advocate, as Trump’s secretary of agriculture.
Canada does have an ace up its sleeve should the U.S. decide to reinstitute COOL. The $1.1 billion in retaliatory tariffs, approved by the WTO but never applied, still remain and could be implemented quickly.
“We have not withdrawn those tariffs. They are still there if we decide we want to act,” Eichler said.
“It would be a difficult situation for us to have to get into but we certainly have not withdrawn those sections at all. They’re still on the table.”