TPP trade deal to impact Alberta

Livestock, canola and grain producers say it’s a big win, 
but supply management will see its market share shrink

Canadian dairy farmers protested against the Trans-Pacific Partnership in late September. Federal negotiators agreed to increase foreign access to Canadian dairy markets to 3.25 per cent, but Ottawa will set up a $4.3-billion fund to compensate farmers and processors who are negatively affected.
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It’s just what they hoped for — or not as bad as they feared.

News of a deal on the Trans-Pacific Partnership (TPP) was cheered by export-focused farm groups while getting a ‘it could have been worse’ reaction from many in the supply management sector.

Dave Solverson
Dave Solverson photo: Supplied

“This is really fantastic news for Canada’s beef producers,” said Dave Solverson, president of the Canadian Cattlemen’s Association.

His association estimated annual beef exports to Japan could double or triple to nearly $300 million. The trade pact will gradually reduce a 38.5 per cent tariff on Canadian beef in Japan down to nine per cent over 15 years and put Canada on competitive footing with Australia right from the day it comes into force, he said.

“Canada’s beef producers have long needed to have equal access to these important markets in order to compete with Australian and U.S. beef,” said Solverson, who ranches near Camrose. “Now, through this agreement, Canada will receive the same preferential access to these markets as its competitors, levelling the playing field for Canadian beef producers once and for all.”

Pork, grain, canola, and other export-oriented groups were also quick to praise the proposed deal, which still faces a lengthy ratification process.

But supply management groups had a different view from the other side of the trade fence.

Tom Kootstra
Tom Kootstra photo: Supplied

“We were advocating for no concessions in the dairy industry. Period,” said Alberta Milk chairman Tom Kootstra. “But dairy farmers are adaptable and resilient. I’m confident that the three pillars of supply management are still intact, despite this news. I look forward to more details.”

To get the deal, Ottawa agreed to open up 3.25 per cent of Canada’s 2016 milk production. That’s the equivalent of about 250 million litres of milk on a national basis, with Alberta’s share of that working out to about 22 million litres of milk yearly.

Ottawa was quick to promise $4.3 billion in compensation to soften the blow — a sum National Farmers Union president Jan Slomp found puzzling.

“The federal government’s promise of a $1.5-billion compensation package for loss of quota value over 10 years and $2.4 billion for loss of income over 15 years seems unnecessarily high if we are only talking about a 3.25 per cent dairy quota cut,” said Slomp. “This large dollar amount suggests that the intent is to completely dismantle dairy supply management over the next 10 years.”

The Globe and Mail — a fierce critic of supply management — had similar thoughts.

It quoted a Montreal-based agriculture consultant who called the deal “a transition fund in disguise.”

“I think the intention is to make a strong incentive for small inefficient dairy farms to exit,” Bertrand Montel told the newspaper. “They will know they can exit with a guarantee on the quota value. I don’t think the income support will be enough to maintain a small farm, so at one point they will just do the math and say it is better to exit now.”

Alberta Canola Producers also predicted a ripple effect — but a positive one.

The agreement will eliminate tariffs on canola oil and meal in markets such as Japan and Vietnam and that will result in Alberta shipping more of those two value-added products instead of raw seed, said general manager Ward Toma.

“The more value our canola is generating overseas, the more value growers will get back right here in Alberta,” said Toma. “Local rural and urban economies in Alberta and the entire canola value chain will see benefits.”

This agreement also includes commitments to prevent biotechnology-related measures from being trade barriers; improves co-operation and transparency around the approval of new biotech traits; and prevents low-level presence of approved biotech traits from being used as a trade barrier, he added.

In addition to Japan, Vietnam, and Australia, the TPP agreement covers Brunei, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, and the U.S. Together the 12 nations have 800 million citizens and a GDP of $28.5 trillion, representing 40 per cent of the world’s economy.

But Japan was the big prize for Canada’s farm sector.

So pork producers were happy to see the deal would end Japan’s over gate tariff of 4.3 per cent on fresh, chilled and frozen pork cuts within 10 years. As well, the under gate price tariff of up to 482 yen per kilogram will drop to 50 within 10 years. The over and under gate price in Japan on all other Canadian pork cuts will end within 10 years.

Japanese tariffs on imported Canadian feed wheat and barley will be dropped to zero when the agreement comes into force. Markups on food wheat and barley will be reduced by 45 per cent within eight years and Canada will have access to a Canada-specific quota for food wheat.

Many Canadian products including cranberries, cherries, blueberries, processed potato products, maple syrup and wine will get duty-free access immediately after the deal takes effect.

On the other hand, dairy wasn’t the only supply-managed sector impacted by concessions.

Egg farmers will lose 2.3 per cent of their market, and chicken producers will see a 2.1 per cent reduction. Turkey farmers and those producing eggs for broiler hatching will see a two per cent and 1.5 per cent reduction respectively. Market loss is also expected to reduce the value of existing quota.

A series of programs will compensate farmers for market loss, including an Income Guarantee Program, which the government said, “will keep producers whole by providing 100 per cent income protection to producers for 10 years.”

Over the course of those years, a typical dairy farm could be eligible to receive about $165,600 in compensation or just over $2,000 per cow. The average chicken farm could receive as much as $84,100 over the same period and an egg farm could be eligible for $71,500 in compensation. The Income Guarantee Program could provide as much as $191,700 to a typical hatching egg operation over the same period.

But compensation isn’t automatically triggered. Producers must be able to prove “demonstrable loss” before being compensated, said a senior official with Agriculture and Agri-Food Canada.

A Quota Value Guarantee Program will also be established to protect producers selling their quota in the 10 years following the TPP’s implementation, with $1.5 billion in funding being set aside.

Two additional programs — a Processor Modernization Program and a Market Development Initiative — will also be established to support supply-managed commodities as they adjust to the trade deal.

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