Are we staring down the barrel of another agriculture trade war?
That’s the multibillion-dollar question that should be keeping the Manitoba agriculture sector up at night.
After all, there are few that are more trade dependent. Manitoba is an export juggernaut.
A few numbers from Statistics Canada help set the stage. In 2017 Manitoba sent $1.7 billion of canola and canola products out of the country. The Keystone province also exported about $1.3 billion of pork, pork products and live swine. Close to half a billion dollars of potatoes — almost all frozen french fries — were shipped. Nearly a billion dollars of wheat and flour also moved out.
The province has staked a big part of its economic future on growing these markets. The Manitoba ‘protein strategy’ is all about creating new export markets.
There’s little doubt why the province focuses on agriculture exports. It’s a familiar refrain for most of the Canadian Prairies.
We are blessed when it comes to agriculture, combined with a relatively low population. A few years back I recall reading a statement on the Manitoba Agriculture website, which claimed the province had a population, at the time, of just over one million, and the agriculture productivity to provide food and fibre for more than seven million.
The weak spot however, is when there are upsets to the global order, and when they do come, they’re almost always because of political wrangling at the global level.
The 1980s agriculture crisis, was kicked off by an agriculture subsidy war between the U.S. and European Union. Those two powerhouses duked it out with export subsidies that cut a wide swath through farm country in Australia, Latin America and Canada, where smaller public purses simply couldn’t compete.
As Allan Dawson reports in this issue (see story on page 3) the goal at that time was to rein in EU subsidies and move to a world where agriculture trade was orderly and regulated, first under the GATT (General Agreement on Trade and Tariffs) and then through the later World Trade Organization.
Today it seems the goal is similar, though with a new opponent and a new goal. China is the target these days, and while many fret the U.S. is turning its back on liberalized global trade, it could also be argued that what is really happening is they’re getting fed up with ineffectual regulation of it.
Mike Gifford, Canada’s former top agriculture negotiator, describes the U.S. as “… increasingly less satisfied…” with the way the WTO regulates the economy of China. Since joining the organization in 2001, China has enjoyed increased access to global markets but resisted reforms of its own.
Rather than becoming a market economy, Gifford explains, they’ve actually become more interventionist, not less. That’s now meant the U.S. has, in the words of Gifford, “… deliberately created a crisis in order to force change.”
This sort of talk will, no doubt, make many Manitoba farmers more than a little nervous. Especially the ones who have been around long enough to remember the long, lingering pain of the latter half of the 1980s and much of the 1990s.
The late former prime minister Pierre Trudeau once famously observed our proximity to the U.S. was like sleeping with an elephant.
“No matter how friendly and even tempered is the beast, if I can call it that, one is affected by every twitch and grunt,” he told then president Richard Nixon.
Right now however, we’re stuck between two raging bull elephants that are trumpeting and stamping the ground, threatening to charge. Whether this posturing will blow up into a real pitched economic battle isn’t certain yet, but it’s not unreasonable to be a bit nervous about the possibility as it’s unfolding.
There are a few bright spots on the horizon that shouldn’t be ignored.
First, there’s the anemic loonie. While U.S. farmers are already holding auctions and calling it quits, Canadian farmers have seen the currency they’re paid in depreciate from par with the greenback to below 75 cents. That translates into grain prices domestically that are correspondingly higher, shielding producers.
Likewise, the low interest rates of recent years — a response to economic uncertainty — are keeping the costs of those expansion plans lower than they otherwise might have been. While farmers in the 1980s struggled with interest rates in the teens, current bank rates are in the low single digits.
Both provide some insulation from the worst of the pain, but neither should be taken for granted. An increase in oil prices could easily see the loonie soaring again. And historically low interest rates are unlikely to stay forever.
Now is the time to chart a course for the future, while there’s still room to manoeuvre.