If you sifted through the noise on U.S.-Canada trade talks over the past year you would have seen signs that hinted to how it might all play out. Here are five.
Firstly, take Canada’s official position to defend supply management. What it means in practice is what makes dairy, poultry and egg producers a little nervous.
To get the Comprehensive and Economic Trade Agreement (CETA) with Europe, Canada opened the door to 17,000 tonnes annually of specialty cheeses. To then get the Comprehensive and Progressive Agreement for Transpacific Partnership (CPTPP) with 10 other countries, Canada gave up access to 3.25 per cent of our dairy market and 2 per cent of our chicken, turkey and egg markets.
If history is any indication of the future, defending supply management has wiggle room. But how much? La Presse, a Montreal-based French-language newspaper, reported last month that the federal government was “assessing the costs of the gradual abolition of supply management.”
When contacted by Farmers Forum, Dairy Farmers of Canada CEO Jacques Lefebvre declined to respond. But he has reportedly said that the article in La Presse came as a surprise.
Even if the article was true, it doesn’t mean much. Counting the cost of ending supply management might simply be prudent analysis even if you have no intention of going there. It’s all those points in-between that are cause for worry.
Secondly, our own government told us to anticipate change. Minister of Agriculture Lawrence MacAuley said that the U.S. call to eliminate supply management is a “non-starter.”
But again, there is an ocean between status quo and elimination. Prime Minister Justin Trudeau offered this hint on NBC’s Meet the Press in June.
CHUCK TODD: Let me go to NAFTA, do you understand what the United States wants in this renegotiation?
JUSTIN TRUDEAU: I think they want a better deal on their auto sector from Mexico, and I think they want more access on certain agriculture products like dairy to Canada.
CHUCK TODD: Are you willing to give them that?
JUSTIN TRUDEAU: We —We’re moving towards, you know, flexibility in those areas that I thought was very, very promising… “
Thirdly, tariff is a dirty word. The Dairy Farmers of Canada have effectively argued that without tariffs, a tsunami of milk from the giant to the south will drown many of our dairy farms. Yet the dairy industry still faces a lot of resistance in and outside of Canada.
U.S. President Donald Trump gets pounded by economists over the idea of using tariffs against China, while still offering exemptions. The critics scream that tariffs are a tax on consumers, businesses and workers. They are right. The counter argument rarely mentioned is that we don’t have a free-market system as much as a mixed system, in which much of our economy is protected. Singling out supply management seems a little hypocritical when government handouts and protections are plentiful. For example, about 20 per cent of the population are government employees, many in well-protected jobs. Nevertheless, when an economist sees a tariff, he sees a dragon to be slain.
Fourthly, few people know what supply management is and that makes it an easier target. While it’s helpful to know that every poll shows that consumers like farmers, when asked if they would like cheaper milk, most Canadians say, “yes, please.” Of course, the average Joe wants less expensive everything and lower taxes.
Fifthly, the United States is applying real pressure. The United States reached an agreement (but not yet signed) with Mexico on Aug. 27. Trump used the moment to offer Canada this choice: A tariff against Canadian-made vehicles and auto parts or tear down the tariff wall on dairy, poultry and eggs. Said Trump: “Frankly a tariff on cars is a much easier way to go but perhaps the other would be much better for Canada.”
What’s a prime minister to do? He knows that there are about 65,424 dairy farmers and workers in Canada and 130,000 direct vehicle manufacturing jobs. He can’t cave on supply management as he has adamantly declared that he will defend it. He also declared he would stand by the auto sector.
Trudeau could talk the talk, do nothing, and wait to see if there will be a tariff on cars. He could then slap a retaliatory tariff on U.S. goods, which in turn hurts more Canadians and more Americans and a trade war begins. He could also re-examine the wiggle room and agree to spread around some of the hurt. He could focus on other issues.
While there will be frequent trade deal announcements, the reality is that this could take months to resolve. In the end, no matter which street Trudeau eventually decides to take, there will be potholes.
Patrick Meagher is editor of Farmers Forum and can be reached at email@example.com