Politics stall trade agreements

Trade policy is never an exact science being it is affected by the politics of the day.

AHEAD OF THE HEARD — Trade policy is never an exact science being it is affected by the politics of the day and the longer trade talks are dragged out the more susceptible they are to being derailed. Most readers would be aware that voters in the United Kingdom (UK) decided to leave the European Union (EU). That is their democratic decision and they will have to face the consequences, but it was a much more encompassing decision that will have an impact on Canadian agriculture exports. The impact will be on the future of the Canada Europe Free Trade Agreement known as CETA. That agreement has not been ratified by EU members and now faces an uncertain future. There were some positive aspects to CETA in that it improved access to the EU for a number of Canadian farm commodities from beef to cereals. On the other hand, it presented a threat to the supply-managed Canadian dairy industry by allowing more tariff-free access for EU dairy products. All we know for sure now is that the ratification and fine-tuning of CETA has come to a grinding halt as the EU political and bureaucratic hierarchy has been overwhelmed with what to do with the withdrawal of the UK known as Brexit.

The departure of the UK from the EU will have considerable impact on the future of CETA, as the UK was the main supporter of the agreement. Other EU members, such as Ireland and France, are large beef, grain and oilseed producers and have never been thrilled with seeing more competition from similar Canadian farm products. In the Machiavellian world of trade politics, though, the EU may well go ahead with CETA to outflank any attempts by the UK to forge a free trade agreement with Canada and maybe even the USA. Devious EU negotiators may force Canada to choose between a free trade agreement with the EU or the UK. On the other hand, the UK may want to move quickly to forge new free trade agreements with North America to gain some political advantage with the EU. No doubt trade policy maneuvering is already starting up there is a lot of EU animosity over Brexit; how it will be resolved will take time. Trade between the UK and the EU is worth billions annually, so it is expected that this issue will be the priority. CETA may well be lost in the crossfire.

However, there would be some benefits to a Canada-UK free trade agreement. The EU-phobia over GMOs and hormone supplemented beef may be of less concern to the UK. There is also the past history of Empire and Commonwealth Trade Agreements that existed between the UK and commonwealth countries like Canada before the EU came into existence. Most folks would be unaware that a robust and extensive beef and pork export business to the UK existed for over 60 years prior to the UK joining the EU. Stories abound that in the early 1900s to 1930s hundreds of boatloads of live cattle were shipped from western Canada to the UK for slaughter. Those shipments were originally caused by massive high tariffs imposed by the US on Canadian cattle imports. The logistics and economics of those cattle shipments seem mind-boggling today. At the same time Canada was a major supplier of bread wheat to the UK. All of that trade virtually disappeared when the UK joined the EU. Is there a possibility that past trade could return? Perhaps but remember the Aussies and New Zealanders will want the same deal. The EU may also thwart such new trade arrangements as a price the UK has to pay to maintain tariff-free trading links to the EU. Until that relationship has been normalized, don’t expect the UK to be in any hurry to upset the present status quo.

One sector of the Canadian farm economy that may welcome the stalling of the CETA ratification process is the dairy sector. The CETA deal would have seen increased access of tariff-free EU products like cheese. There were fears that those increased dairy imports would displace as much as 10 per cent of Canadian domestic cheese production. That would have put pressure on existing milk production quotas and disrupt the most profitable sector of the ag economy. The Canadian government had planned to deal with that issue by means of a quota buy-out process that would be financed by billions of taxpayer dollars. All of that activity is now on hold by a decision of UK voters.