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

Around the World in 45 Minutes

•Why export?

•WTO

•CPTPP

•NAFTA, and the new NAFTA

•EU

•China

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

The Value Of NAFTA

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

Other Trade Negotiations

• India

•Pacific Alliance

•Mercosur

•ASEAN

Questions

Brian Innes

innesb@canolacouncil.org

Sign up for CAFTA’s Trade Insights: www.cafta.org