There is an old joke about the sales guy that comes home from a sales call and announces: I have good news and bad news. The good news is that I got Walmart as a new customer, and the bad news is that I got Walmart as a new customer. Canadian trade with the U.S. is a little like having Walmart as a customer; it’s so big that it is an irresistible market. But it is so powerful that you may lose control of your product and your company in the process.
The North American Free Trade Agreement (NAFTA) (1994) has brought 25 years of stability and growth to trade across North America but that stability and almost free trade in goods and services are in jeopardy in the current round of NAFTA renegotiations. Repeated threats by U.S. President Trump to abandon NAFTA in favour of separate bi-national trade agreements are causing huge uncertainty in North American trade and business development in Canada this year. Trump assumes that separate bi-national deals can be made more U.S.-centric as Canada or Mexico alone would lose some of their bargaining power.
American and Canadian fruit and vegetable companies, for the most part, have united in their support for modernizing and improving NAFTA. The Produce Coalition for NAFTA believes that important issues such as border procedures, harmonization of regulation brings opportunities for improvements in free trade, but is concerned that the current negotiations are fixed on imposing new trade barriers instead of eliminating them. Proposals to make it easier to impose anti-dumping duties on produce threatens the dynamic nature of in-season trade of perishable fruits and vegetables.
In a letter to Canadian trade officials the OFVGA agrees that the proposed new perishable/seasonal trade remedy provisions would open the door for frivolous and harassing investigations based on narrow and regionalized circumstances and ignores the seasonality of growing regions and differing maturity and availability of fruits and vegetables from south to north during the growing season. Allowing trade remedy powers to be triggered by a small group of regional producers might disrupt supply chain networks, distribution networks and retailers that have grown trade under the existing stable rules under NAFTA.
The U.S. does not like to be told what to do or how to interpret trade disputes. As such they are calling for an end to Chapter 19 which governs the dispute settlement process. As an example, there is the U.S. commerce department practice of “zeroing” out the non-dumping margins when calculating whether dumping occurred over the course of an investigation. The World Trade Organization (WTO) has repeatedly found this interpretation inconsistent with international trade rules, yet the commerce department becomes duplicit in using this as a trade delay tactic. The department knows that it will take several years to be overturned, blocking access to markets in the meantime.
The proposed changes would be a huge step backwards as they open the doors for frivolous and trade blocking tactics, a time honoured tradition which act as non- tariff barriers to trade. Just look at Country of Origin Labelling (COOL) that cost Canadian pork producers millions of dollars and years of blocked access to U.S. markets that allowed the American pork industry to grow while the Canadian industry languished because of uncertainty.
President Trump does not have the final say on NAFTA. Rather it would require an act of Congress, but that has not stopped him from setting the negotiation agenda which apparently gets more and more demanding with each round. Dismantling the pact would require rebuilding global supply chains and would mean a return to tariffs on goods the United States imports and exports — all of which would be painful for all three countries.
Let’s face it. Food production and distribution are not what Trump is after. It’s American manufacturing of cars. Agricultural trade would be collateral damage or an “unintended consequence” of the demise of NAFTA.
Agriculture seems to be impacted by just too many “unintended consequences” these days.
For more information on environmental or animal welfare projects at Farm & Food Care Ontario, contact Bruce Kelly at email@example.com
Bruce Kelly is programs manager, Farm & Food Care Ontario.