Trouble on the trade front

The federal government has issued a long list of U.S. imports that could be targeted for retaliation if Canada’s biggest trading partner fails to comply with the WTO ruling on its country-of-origin labelling rules.

That list of 40 or so items includes live cattle and pigs, meat products, corn, processed foods containing spent fowl, chocolate, puffed cereal products, pastas, communion wafers, frozen orange juice, ketchup, jewelry, wines, wooden office furniture and swivel seats with adjustable height adjustments.

We have no idea how they choose which items to target; there is undoubtedly a process. But judging from the list, it’s safe to suggest that it will be Canadian consumers paying the price for the American’s pigheadedness on COOL, and they will be paying it on some items for which the original ingredients originated in Canada.

It might even bump up the cost of the imported corn used to feed Canadian sows, the offspring from which are then shipped to the U.S. to be fattened and processed, some of the meat from which is then shipped back to Canada, once again penalized under the retaliatory tariffs.

That’s if these measures are even implemented after the estimated 18 months to two years it will take to go through the WTO process.

That coincides with the possibility of a federal election in Canada. Success on the trade front has been one of the Harper government’s priorities, but gains have been limited.

There’s no argument that COOL is costing Canadian farmers dearly and their indignation is understandable. The Canadian Pork Council says that since COOL was introduced in 2008, Canadian exports of hogs to the U.S. have fallen by 41 per cent. Cattle exports have dropped by 46 per cent. The livestock industry estimates the U.S. law is costing their sector a cool $1 billion per year.

However, given some of the other Canada-U.S. issues on the table, such as its efforts to gain approval for the Keystone pipeline through the U.S., it’s unlikely Canada’s ruling party will want to initiate a trade war with its biggest trading partner.

Canada’s so-called pipeline deficit, the main push behind the Keystone project, is estimated by the Canada West Foundation to be costing between $30 million to $70 million per day. Granted, there’s a big difference between 30 and 70 when you’re talking millions, but suffice to say that over the course of a year it’s adding up to a lot more than the cost of COOL to the Canadian livestock sector.

The two issues have no relationship except in the tit-for-tat politics for trade.

These COOL provisions have strong support in the U.S. In a May 31 column, University of Tennessee economists Daryll E. Ray and Harwood D. Schaffer said the comment period for the revised COOL provisions drew in 936 responses, including 453 who supported the new rules. Also included were four petitions signed by more than 40,000 individuals.

“The 476 comments opposing the rule were from numerous producer, packer, and international trading partner entities, as well as individual ranchers, packing companies and foreign government officials,” they write.

The pundits are also eyeing the status of the Canada-EU comprehensive trade agreement, for which negotiations have dragged on far longer than first anticipated.

It was originally thought that Prime Minister Harper would be signing on to a deal as he heads off to the G8 summit this month. The media reports out of Ottawa last week speculated he might just go ahead and do that, desperate as he is to shift attention away from Senate spending scandals and staff that go and write a $90,000 cheque to make the first issue go away without even telling him.

As expected, it seems agriculture is one of the remaining stumbling blocks to a deal worth an estimated $12 billion to Canada’s GDP.

As expected, the Europeans want more access to the Canadian market for cheese. But it’s not just Canada’s protection for supply management that’s holding things up. The Europeans are balking at Canada’s demands for an increase in market access for Canadian beef and pork, which must be hormone free. Canada originally sought access for up to 100,000 tonnes. The EU is offering 40,000 tonnes.

In 2011, Canada shipped about 9,000 tonnes of hormone-free beef to Europe, less than half of its current quota of just over 23,000 tonnes. Part of the challenge for Canada shipping beef to the EU is that it must set up segregated supply chains to meet requirements for being hormone and antibiotic free. In theory, a larger quota would make that a more appealing proposition.

The only conclusions we can draw from all this is that trade deals and all their trappings are one thing, but real market access is another.



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