GUELPH — International agri-food trade is increasingly dominated by politics and Canada risks getting squashed by bigger, more powerful players. Aggressive action is necessary, argues the Agri-Food Economic Systems, a Guelph-based agricultural think-tank.
In a report, written by Al Mussell and Douglas Hedley, they note that the two major actors are the U.S. and China. The U.S. trade agenda is broadly motivated by the idea that the U.S. is getting taken to the cleaners when it comes to trade, and it needs to push back, the report says. Growing U.S. production is coming on the back of increasing farm subsidies which will prove ever more difficult to reverse. China, meanwhile, is looking to boost its food security with the paranoia of a totalitarian state, putting pressure on imports to boost domestic prices and exert greater control over its supply chain.
Caught in the middle are countries like Canada, too small to go toe-to-toe with the major powers but reliant on exports markets. With the World Trade Organization floundering, absent powers of dispute resolution, Canada has to make its own way, the report argued.
Canada can’t afford to ignore either the U.S. or China, as they’re the world’s two largest economies. Dispute avoidance and soft power will be critical.
As for specific actions, the report offered a number of them. Canada’s vulnerability to political machinations by China is because our imports are largely commodities, which are highly replaceable. Increasing domestic processing and sending more processed products to China shields industry from disruption, as brands are much more difficult to replace than commodities. China is relying on Canadian supplies to improve its food security, and so the report noted that “barriers erected by China against Canadian imports are ultimately transitional and temporary,” and Canada must be willing to wait them out. The report also called for “an appropriate review process focused on proposed foreign acquisitions and investments in Canadian agri-food companies, apart from the existing foreign investment review process,” given that China has a vested interest in securing more control over its supply chain.
On dealing with the U.S., the report recommended reaching out to the members of the agri-food sector that support renewal of the WTO to try and create domestic pressure to that end, and take an aggressive stance on trade disputes with the U.S. that violate the new North America trade deal to signal that the loss of the WTO doesn’t leave Canada helpless or unwilling to push back. Especially if the U.S.-China trade deal isn’t renewed in 2021, Canada will have to be ready to block a potentially massive oversupply of U.S. ag products trying to flood north.
The report noted that the Canada-EU trade agreement is under utilized. Canada should pursue more trade with African countries.
The conclusion was a cautionary note. “The decisions facing trade policy today are not about how we get back to a world that existed some years ago, but rather how we accommodate a fundamentally different and unstable set of pressures in growth, trade, employment, equity, and hopefully without the dominating influence of a few very powerful countries setting the environment for all other much smaller players.”
