International Trade: Where from and where to?
CAFTA.org
CANADIAN AGRIFOOD TRADE ALLIANCE (CAFTA) ALLIANCE CANADIENNE DU COMMERCE AGROALIMENTAIRE (ACCA)
CAFTA – ACCA
• Canola Council of Canada
• Pulse Canada
• Cereals Canada
• Canadian Pork Council
• Canadian Canola Growers Association
• Canadian Cattlemen’s Association
• Barley Council of Canada
• Canadian Meat Council
• Food & Consumer Products of Canada
• Grain Growers of Canada
• National Cattle Feeders’ Association
• Canadian Sugar Institute
The voice of Canada’s Agriculture and Agri-Food Exporters
2018: A Memorable Year for Agri-Food Exporters
In January
• TPP-11?
• Would others go ahead with TPP-10 and Canada would become a marginal supplier to Japan?
• NAFTA modernization negotiations were not going well
• Steel, aluminum, car tariffs?
• Pre-NAFTA?
In December
• Canada implements CPTPP
• CPTPP came into force on Dec. 30th; first set of tariff cuts and the second set began on Jan. 1st , 2019
• Vietnam cuts began Jan 14th
• On Nov. 30th, Canada joined Mexico and the US in signing CUSMA
Canadian Agri-Food Exports: Spectacular Growth
0
10
20
30
40
50
60
70
Bill
ion
s o
f D
olla
rs
Source: Statistics Canada
Trade is the Lifeblood of Canadian Ag
• 90% of Canadian farmers rely on exports for a significant portion of their farm income
• Nearly 1 in 2 jobs in crop production is export-dependent and for food manufacturing, it is 1 in 4
(CAFTA commissioned research by CERESSYS)
• Over half of Canadian agricultural production is exported (AAFC, 2017)
Agri-Food Exports Drive the Economy
• GDP: $30 billion for ag; $65.5 billion for food manufacturing
• Jobs: 355,000 in agriculture; 600,000 in food processing • Food processing jobs are greater than aerospace and
auto manufacturing combined (AAFC, 2017)
• Agri-food is growing faster than the rest of the Canadian economy – driven by exports. • Export share of primary production has increased from
36% in 1997 to 50% in 2016 (AAFC, 2017)
Implications for Canada
1. Being competitive in global markets is not a choice. It’s a requirement
2. Our success depends on access to global markets
Canada’s Trade Agreements
In force Concluded Negotiations
• Canada-U.S. (1989)
• NAFTA (1994) • WTO (1995) • Israel (1997) • Chile (1997) • Costa Rica
(2002) • EFTA (2009) • Peru (2009) • Colombia (2011) • Jordan (2012)
• Panama (2013)
• Honduras (2014)
• South Korea (2015)
• CETA (2017 provisional)
• Ukraine (2017)
• CPTPP (2018)
• Canada-United States-Mexico Agreement (aka USMCA, 2018)
• Israel update (2018)
• Pacific Alliance • Mercosur • ASEAN • India • Morocco • CARICOM • The Philippines • Costa Rica • Central
America • Dominican
Republic • Turkey
The World Trade Organization
• Advancing trade liberalization at the WTO is very difficult • Agriculture is always sensitive • WTO dispute settlement almost disabled • Negotiations stalled
• However: • WTO rules-based system underpins our trading system • FTAs must be compliant with WTO for recognition • Has been effective for disputes (e.g. US COOL) • Only forum to effectively address agricultural subsidies
New WTO Focus
• ‘Group of thirteen’ like-minded countries are working for reform
• Includes EU, Brazil and Japan
• U.S. not participating but is an interested observer
• Focus is on:
1. Work of the WTO committees (e.g., Agriculture);
2. Dispute resolution; and
3. Negotiating function
• Canada hosted first meeting in Ottawa in October
• Next meeting in January in Davos is positive sign
Comprehensive & Progressive Trans-Pacific Partnership
• Original TPP negotiations
• Canada was one of 12 countries who signed in
February, 2016.
• US withdrew in early 2017
• Fatal?
• U.S. – Japan bi-lateral?
• Canada’s participation
• Now the second largest economy in CPTPP
• CAFTA took leading role to demonstrate the importance of Canadian
participation
Japan is an Important Market
Rank in 2014 Canada’s Market Share
Soybeans #3 (after U.S., Brazil) 16%
Wheat #2 (after U.S.) 33%
Malt #2 (after Australia) 29%
Beef #3 (after Australia, U.S.) 2%
Pork #3 (after U.S., EU) 18%
Canola #1 94%
(Based on November 2015 policy note published by Agri-Food Economic Systems)
Agri-food Exports to CPTPP Countries What if?
-2,000
-1,500
-1,000
-500
0
500
1,000
1,500
2,000
CPTPP CPTPP w/oCanada
OpportunityCosts
($)
Mill
ion
s
(CAFTA report Caught in the Cross-Fire: Canadian Agricultural Outcomes under Alternative Asia-Pacific Trade Scenarios)
CPTPP: Advocacy and Implementation CAFTA’s advocacy efforts included: • Present at almost all negotiating rounds • Ongoing outreach to MPs, Senators, Cabinet Ministers, PMO,
Privy Council Office • Active public engagement
Implementation: • Fastest Canadian ratification of a trade treaty
• From tabling to ratification in 5 months
• Canada 5th country to notify • With Australia’s ratification, came into force
December 30
CPTPP: What did we get?
• New free trade rules with seven Asia Pacific countries, improved FTAs with Mexico, Chile, Peru
• Secured competitive access to major Asian markets
• Edge over the US and EU in Japan
• A head start in Vietnam with growing population and rapidly expanding economy
• A platform for expansion to:
• Philippines, Taiwan, Thailand, South Korea, Indonesia
NAFTA
• The world’s largest free trade area • Canada-US Free Trade Agreement (CUSFTA) -1989
• Superseded by NAFTA – 1994
• North American market • 400 million people
• Integrated supply chains
• North American GDP doubled over the past 20+ years.
• A success for Canada’s agri-food industry • Canada’s agri-food exports grew more than five-fold
• Agriculture trade balanced
• Globally competitive supply chains
Engagement in NAFTA Negotiations
• Present at every round of negotiations
• Regular engagement with negotiators
• Regular engagement with MPs and Ministers, including the House of Representatives Agriculture Committee
• Canada-US-Mexico Agreement (CUSMA) reached on September 30
• Signed November 30 on the margins of the G20 Leaders’ Summit in Buenos Aires.
• Tariff-free access retained for all of CAFTA members’ exports
• Trade remedy dispute settlement system maintained (known as Chapter 19)
• Increased access for sugar and further processed vegetable oil (i.e. margarine)
NAFTA – Recent Developments
• Canada, Mexico and the U.S. each need to ratify CUSMA before it comes into force
• Potential scenarios include:
1. Ratification by all three countries - CUSMA comes into force
2. U.S. Congress fails to ratify 2018 agreement without further changes - more negotiations
3. CUSMA/USMCA is not ratified - status quo (NAFTA)
4. CUSMA/USMCA does not pass and U.S. withdraws from NAFTA
CUSMA – What’s next?
Canada – EU (CETA) • Market of 515 million people
• Huge potential, even without the UK’s 66 million population
• Sept 21, 2017: CETA provisional application: • Approximately 98% of the agreement entered into force
• 94% of agriculture tariffs were eliminated
• Outstanding agri-food issues: • Meat processing protocols (e.g., sanitation measures)
• Crop protection products (including country of origin labelling)
• Timely approval of biotechnology traits
• CAFTA Focus: • Ensure implementation (e.g., Agriculture, Biotech, SPS)
Grain Exports to the EU have Increased with CETA
0
0.5
1
1.5
2
Soybean Corn
Ton
ne
s (m
illio
ns)
Five Year Average (2012/13 to 2016/17) 2017/18
(Canadian Grain Commission)
Brexit • Under it’s own law, the UK will leave the EU on March
29, 2019 - regardless of whether a new agreement is in place
• After Brexit, WTO provisions will apply
• The UK might seek to replicate:
• CETA (in force)
• EU-Japan FTA (expected to be provisionally applied early in 2019)
• EU-Vietnam (concluded but not yet ratified)
China
• Huge opportunity for growth – world’s largest agri-food importer
• Existing agreements with • Australia
• New Zealand
• Chile
• Peru
• Canada and China have agreed to double agricultural trade by 2025 at the Canada-China Economic and Financial Strategic Dialogue
• A critical market for Canada to achieve $75 billion in agri-food exports by 2025
Questions
Brian Innes
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