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TPP II: Hedging against NAFTA, and America

The deal looks good for most farms but supply management will likely suffer and should plan for the future

Even as the North American free trade agreement talks continue, we’ve learned that the Trans-Pacific Partnership is not dead after all.

In fact, the trade deal among Pacific Rim countries has a new name: the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Along with Canada, it includes Japan, Mexico, Malaysia and seven other countries. The pact was made without the participation of the United States, which represented 60 per cent of the original group’s combined GDP. This was a massive loss for sure, but nonetheless, the CPTPP remains an important global deal.

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The original deal was all about the United States and Japan trying to counter China’s economic emergence. Donald Trump pulled his country out of the deal when he became U.S. president, but the world is marching on, so it seems, without the United States. CPTPP is indeed NAFTA – minus the United States, of course – but with a new link to a rapidly growing market.

For Canada, this is a significant gain on the world stage. If the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) was an opportunity for Canada to become a trading platform between two continents, CPTPP is a clear statement that Canada wants to become a relevant player worldwide.

This can only make our agri-food sector much stronger. Our grain and livestock industries will now have the chance to make a dent in many Asian markets. But for our supply-managed sectors, which believe that serving Canada’s population of 36 million is enough, signing CPTPP represents a new challenge.

  • Read more: TPP seen critical for beef sales growth in Japan

The new deal will allow more dairy, eggs and poultry products into our market. Details have not yet been released, but it appears CPTPP will loosen tariffs on some products that are not currently allowed in our market. In other words, supply management’s supremacy is slowly disintegrating. If CETA created a breach in our highly protectionist scheme, CPTPP will blow it wide open.

Maintaining supply management has been, to a large extent, a disservice to the sector. Those still in the system are content and are desperately trying to convince the Canadian public that supply management serves them well. But it only serves those still in the system.

Thousands of farms have disappeared over the past few decades, even though supply management was established to protect the family farm. The number of dairy farms in Canada has gone from more than 40,000 to about 11,000. With poultry and egg production, we have seen even more consolidation. This is a worldwide trend, but it begs the question: Why are we maintaining the status quo?

Through the years, politicians have all declared their support for supply management – with one notable exception: Maxime Bernier, who ended up losing the Conservative Party leadership race as a result. But governments are signing pacts that are slowly destroying supply management from the outside – while publicly supporting the regime.

Meanwhile, some major stakeholders are not waiting for governments to become more forthcoming and are hedging their bets against supply management. Canadian companies such as Saputo have already taken a position in the Asia-Pacific market by investing in Australia.

Canadian supporters of international trade should recognize, no matter what the politics are, that the Trudeau government did the right thing in agreeing to CPTPP. It validated the work of the Harper government by capturing the essence of the TPP deal.

Signing this deal will mean that, by 2025, Canada’s farmers and food processors, with their ambitious targets, could increase Canada’s agri-food exports to at least $75 billion annually.

CPTPP members probably hope the United States will eventually come to its senses and embrace multilateral agreements again. Until then, corridors crossing the Pacific to accommodate more trade will only get stronger.

As we ratify this deal, we need to remember that supply management requires a different approach – one based in reality.

Instead of fuelling what is already a highly polarized debate on the issue, we have to think about what Supply Management 2.0 will look like. And considering what is to come, sectors are running out of time.

About the author

Contributor

Sylvain Charlebois is senior director, Agri-Food Analytics Lab, and professor in food distribution policy, Dalhousie University.

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