Ahead of the Heard
2014 may go down as the best year for progress on more access to beef markets. Specifically the South Korea Free Trade Agreement, the tentative European Union Free Trade Agreement and the recent COOL WTO victory all bode well for better marketing opportunities for Canadian exporters – at least that’s the hope. Ironically, as hope rises for better access to foreign markets, the industry finds itself in a declining cattle supply situation which has seen live prices skyrocket to levels that were a fantasy a year ago. That fortunate situation tends to lessen the immediate need for additional export markets, as supplying the existing markets gets priority.
The federal government and industry organizations continue to tout the EU free trade agreement as being a huge new market for Canadian beef exports. That enthusiasm in my view remains a bit optimistic and premature. The agreement still needs to be approved by the 28 members of the EU – that’s no easy task considering the conflicting vested interests many of the EU members have on agriculture issues.
What should be of most concern is the crafty and duplicitous nature of EU trade bureaucrats who are masters of the bait and switch. That being promising more access, but tying up actual access in restrictive protocols and nontariff barriers. Remember the EU won the hormone trade challenge by fooling Canadian and American negotiators into believing they were going to get better and more access to the EU market. The other matter to keep in mind is that the EU market is not a new market – present quota imports are being served by others such as the USA, Australia, New Zealand and South America. None of those exporters are expected to stand by whilst Canadian exports take away any of their market share. I expect the big packers have already determined whether the EU market has any economic potential.
More worrisome is the COOL dispute with the USA. Recently Canada won another WTO appeal on earlier decisions that favoured Canada. The federal government and their industry allies on both sides of the border have been crowing about how this third victory will force the US government to remove or amend the COOL legislation. The Federal Ag Minister is sabre-rattling a hit list of tariffs on selected US imports that will be imposed unless the Americans submit to the WTO decision and amend COOL. However, the American government seems unconcerned by what I suspect they see as idle threats by the Minister. If the Obama administration’s stand on thwarting the Keystone pipeline is any indication, I expect obstructing cattle and beef imports from Canada is pretty easy. Losing a WTO decision again is probably a minor annoyance and further appeals and delays are guaranteed to continue. Remember it took ten years to get the EU to the negotiating table on the hormone issue through the WTO process.
I suspect when all appeals and delays are finally exhausted the Americans may offer to negotiate the COOL impact on Canadian exports. But even that may not happen if Canada falters with its threat to impose retaliatory tariffs on selected American imports. The Americans may just call Canada’s bluff on tariff imposition and there is good reason to believe they will as there isn’t much precedent. Canada remains the boy scout of the trading world and adheres to the spirit of the North American Free Trade Agreement – but the Americans have a different attitude. Remember the soft wood trade dispute with the US – Canada gave in to American demands even though it was counter to NAFTA principles. It should be said that Canada has applied countervailing duties on American apple, corn and potato exports in the past, but this trade dispute situation is very different.
The real question is does Minister Ritz have the formal support of his government cabinet colleagues to impose the retaliatory tariffs on American imports when formally authorized by the WTO. Minister Ritz’s cabinet colleagues may not be that enthused to upset our biggest trading partner over what may seem to urban Ministers as some minor rural political issue. Throwing the economic interests of a few thousand cattle producers (who vote Conservative anyway) under the bus doesn’t have a lot of political consequences for the government.
A formal declaration on the imposition of retaliatory tariffs by the Canadian government would go a long way in putting some confidence into the whole WTO process against COOL. It’s the least the Canadian cattle and beef industry should expect from their own government.