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Big stakes and big risks in Trans-Pacific trade talks

Canola and beef sectors say there’s no middle ground — reaching a deal 
will be a huge win and failure will be ‘a really bad scenario’

Without a new Trans-Pacific Partnership deal, two ag sectors won’t just miss out on multimillion-dollar opportunities — they’ll take a major hit in key Asian markets, say canola and beef officials.

“There are some really clear benefits for Canada here in terms of growth potential, but also some very serious consequences if we don’t move ahead on this,” said Catherine Scovil, director of government relations for the Canadian Canola Growers Association.

  • Read more: Three other takes on the Trans-Pacific trade talks

“This will not just be simply status quo with a lack of growth opportunities. We would see the industry sliding back.”

About 90 per cent of Canadian canola seed, meal, and oil is exported, but that figure doesn’t tell the whole story, said Scovil, who points to Japan. The country is our third-largest customer but imposes a 16 per cent tariff on canola oil — a levy that would disappear if the 11-nation Trans-Pacific Partnership (TPP) trade deal becomes a reality.

“Right now, Canada exports seed, and then Japan crushes the seed — they get that value-added benefit,” she said. “If we could get rid of the tariff, then over time, Canada would be shipping the oil and keeping those jobs at home.”

The Japanese market is the big prize in the proposed deal, although other Asian markets, such at Vietnam, Malaysia, and Singapore also offer opportunity. (The others countries involved are Australia, New Zealand, Brunei, Mexico, Chile and Peru. U.S. President Donald Trump pulled the U.S. out of the talks shortly after his inauguration.)

Canola officials estimate that combined exports of oil and meal to Japan and Vietnam would take a major jump if import duties were removed.

“Total exports could increase by about $780 million per year, or about one million tonnes of additional canola oil and meal exports,” said Scovil. “It’s pretty significant in terms of additional growth.”

However, failing to get rid of those tariffs would mean more than just a lost opportunity, she added.

“Other canola-producing countries — like Australia — already have an agreement with Japan, and it’s already started its process of eliminating tariffs,” said Scovil. “Even right now, it’s going to be ahead of us in terms of a tariff advantage. In 2018, the estimate is that Australia will have about a 35 per cent tariff advantage over Canada.

“Without a TPP, Canada starts slipping behind Australia, and that gap will continue to grow the longer that we don’t move into TPP.”

Grow or fall back

It’s a similar story in Canada’s beef sector.

John Masswohl.
photo: Supplied

“For the beef sector, there won’t be any status quo,” said John Masswohl, director of government and international relations at the Canadian Cattlemen’s Association.

“Either we get the TPP and we grow in these Asian markets, or we lose what we currently have in those Asian markets.”

The key piece of this trade deal for the beef sector is Japan, said Masswohl. And again, it comes down to eliminating tariffs.

“We’ve exported about $100 million a year of beef to Japan in the last several years, and that’s with a 38.5 per cent tariff,” he said. “We paid nearly $40 million in duty to the Japanese government, and we’re still able to export $100 million of beef.”

So removing that levy would not only boost sales but “that tariff reduction is going to be all margin for Canadian exporters.”

But fail to reach a deal and the situation goes from a lucrative opportunity to a grim situation, primarily for exports of frozen beef and value cuts.

“Our estimate is that we will probably lose about 80 per cent of our share in the Japanese market,” said Masswohl. “Instead of being $100 million a year — which could increase to $300 million a year under the TPP — we’ll probably end up being at around $10 million to $20 million a year.

“Meanwhile, Australia will be getting a lower and lower tariff into the Japanese market every year.”

And if Canada backs out of trade talks, a bilateral agreement with Japan becomes “a pipe dream.”

“If you annoy the Japanese that much, there is zero chance that they are going to want to do a bilateral agreement with Canada because we will have forced them into a weaker position,” he said.

“It’s not inconceivable to think that if Canada decided not to be part of the TPP, we would lose out on all of the Asian access.

“And then Mr. Trump may end up pulling the plug on NAFTA. That’s a really bad scenario.”

Pressing for a deal

And there is certainly a risk of that, said Masswohl. Prime Minister Justin Trudeau was in no rush to sign a new agreement when the 11 remaining countries involved in the deal met in Vietnam in early November.

“The prime minister has not made up his mind, and the deal was not done in Vietnam when he was there,” he said. “He’s not entirely convinced yet that, that deal is in Canada’s favour.”

Masswohl is urging Canadian producers to contact elected officials and advocate for a deal.

“I think it would be very beneficial if the prime minister could hear individually from every single producer in Canada,” he said. “If anybody has an opinion on this, now is the time to voice it.”

Scovil agrees.

“We really want to see our government get to an agreement and implement that agreement as quickly as possible,” she said.

“There’s momentum here. Japan has really taken the lead in trying to pull the TPP together. We’d love to see Canada take a leadership role in pushing the TPP over the finish line and get a deal in place and implemented.

“We can’t put it off for too long.”

About the author

Reporter

Jennifer Blair is a Red Deer-based reporter with a post-secondary education in professional writing and nearly 10 years of experience in corporate communications, policy development, and journalism. She's spent half of her career telling stories about an industry she loves for an audience she admires--the farmers who work every day to build a better agriculture industry in Alberta.

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