USMCA Makes Canadian Agriculture Poorer

It’s been a pretty tough past few weeks for Canadian agriculture. Of course, by now all of you know that we woke up to on October 1st, the USMCA, which stands for the US, Mexico Canada trade agreement. Some people here in Canada are calling it NAFTA 2.0. The American President is calling it one of the greatest trade agreements ever negotiated. However, I don’t quite feel that way, it is nothing to be celebrated especially when Canadian agriculture is poorer today.

There was lots of praise in Canada for successful negotiation of this latest free trade agreement with our American friends. How could you not heap praise on both Prime Minister Trudeau and Foreign Minister Chrystia Freeland. They were ripped apart over several months with personal insults being flung on them. After our American friends imposed steel and aluminum tariffs on us because we were national security threats, it surely became so much more difficult. At the end of the day, Canada still has quite a bit of market access to the United States, but we gave up quite a bit too.

Part of that give-and-take had to do with opening up our dairy market to American imports to the equivalent of approximately 3.9% of our Canadian dairy production. At the same time our feather industry gave up much more access to their domestic production of over 10%. At this early hour, none of this is particularly clear but it does represent a chipping away of some very successful agricultural marketing programs within Canada. Giving away some of this to guarantee access to other sectors was the price the Trudeau government gave to keep it. Our American friends didn’t give up a thing, except for reducing their demands.

There is lots of opinion on each side of the issue within Canada, hardly any in United States, where Canada probably will return to being a friendly curiosity and again not making their news. Many export related agricultural groups related to red meat have praised the agreement as well as those in the grain sector, even though grain had very little skin in the game. Some, within these sectors thought a trade-off with Canadian supply management was well worth it. In fact, many cannot understand why dairy and feathers cannot absorb the market access they lost.

This debate is surely churning within Canadian agriculture. Of course, the debate is quite different for Canadians outside the farm, where many commentators ask why we need supply management whatsoever in this country? Those commentators who represent large segments of the Canadian population had their temperature rising before the announcement thinking it was so crazy Canada wouldn’t trade-off milk for the auto sector and so much else. There seems to be this warped vision that if they can get rid of Canadian supply management then they would get cheaper eggs and milk. There is always very little mention of the oligopolies in Canada who represent big grocery that set food prices.

I used to be one of those people, but I changed my mind because I was wrong. We can have debates about free markets versus regulated markets, but it always boils down to the race toward cheap. The way we have produced milk and feathers in this country harken back to a time where farmers actually thought they could extract more profits from a marketplace, which wasn’t fair. The fairness always started once you left the farm. So over a period of years there was a Canadian marketing system set up to limit supply to satisfy domestic demand with import limits. Over a period of time, it is always made so much more sense to me. Needless to say, now, in 2018, the USMCA has been signed that takes part of that away, with another review six years down the road.

Simply put, the USMCA makes Canadian agriculture poorer. Large stretches of Québec and Ontario are dominated by dairy and feathers. Last week we saw the election in Québec of the CAQ, and the new Premier-elect Francois Legault. Legault said, “just watch me”, when previously asked if the federal government made concessions on dairy. For my American readers, that saying has special meaning for Canadians, as former Prime Minister Pierre Trudeau was asked that during in October 1970 during the October crisis over FLQ terrorism in Quebec. On being asked how far he would go to suspend civil liberties to fight terrorism, Trudeau said, “just watch me”. Francois Legault may help mobilize Quebec farmers, who would have no problem putting 7000 farmers on Parliament Hill over night.

There was also a provision within USMCA that Canada would need to seek approval from the United States over any potential free trade agreement with a non-market country. (China for instance) In the future if Canada wants to negotiate trade agreements with a non-market (USMCA) country, we have to submit that agreement to the Americans for approval. It sounds like a loss of sovereignty to me.

At the end of the day, well, in the case of USMCA, there likely will be no end of the day. In Canada, we’ve always known how this works. Free trade with our American friends is whatever they deem it to be. It’s not a new day, just another day, we’ve seen many times before.