Trade agreements have changed in nature. Canada once went through a formal process via GATT or WTO. Now it is first come, first serve. This has been both favourable and limiting for our country.
Trade liberalization is just that — the freeing of trade. This transcends from country to country and even penetrates from business to country. It allows for the reduction or elimination of tariffs, but does not soften regulatory requirements of the trading partner.
For example, the Comprehensive Economic and Trade Agreement (CETA) with the European Union means Canada is first in line for reduced tariffs and improved market access for beef. The EU however, has not changed the requirements or standards under which the beef is to be produced or delivered. Although 94 per cent of the tariffs under CETA are to be reduced, no standards have been changed.
Industries and companies must respond then with what that customer wants. Increasingly, private standards and brand assurance is what is being sought in trade agreements. The current industry declaration of high-quality grain-fed beef misses the mark under CETA as the EU looks specifically for beef that has not been enhanced with growth promotants or beta-agonists. We cannot look away from this.
Our other trade agreements shirt-tail trade acceptance, such as with Japan and Korea. The U.S. was first at the gate and coming in second on a trade agreement does not mean preferential treatment. There can be enhancers to trade agreements that pave a smoother way for investors in both Canada and their trading partners. That does not guarantee a transfer of value.
For example, on a per-kilogram basis, China may be the least profitable export market for beef — earning $5.93 less than a kilogram of beef sold to the EU. Our dependency on U.S. trade may be reduced if we manage the EU agreement well — as the value of beef sold to the States is expected to be $3.50 a kilogram less than beef sold into the EU. This proposes quite a shift in conventional thinking and in production practices.
Canadians who wish to trade often ask themselves: Can I compete? Do I have access? Can I change? And in the case of the beef industry — do I have the product?
The massive populations we are hoping to serve require much more than we produce unless we pull away from American dependency for exports of cattle and beef. Can our leadership and our industry adapt to this new reality?
If not, the beauty of trade liberalization is that businesses can deal with foreign business and be supported in doing so. Private-sector standards are not set by governments, but they are part of the agreement. It is part of the role of government to inform and promote those standards, but it can only do so if and when they exist.
Once an agreement is in place, governments step in to help by promoting the agreement and enabling companies to do business. It is this enabling environment that is extremely important to business. A Canadian Agri-Food Policy Institute study found an enabling regulatory environment is the background in all business decisions, and that includes regulations and taxation as well as market access. Regardless of the product, there must be an avenue to sell it.
Expecting a windfall when industry won’t meet brand expectations or product standards is folly. It is also a waste of time to continue to hope upon a star when your country is the bridesmaid in the trade agreement, such as the case with Japan. Certainly tariffs will be reduced, but slowly and over a long period of time. Smaller markets are important as they take a variety of beef products, but it is the time of the tariff reduction that is important. An 11-year phase-out period is substantially different than 11 months.
The real action will happen in those agreements where tariff barriers to trade are lifted quickly so that manufacturers can respond before the market changes. And even then, the beef industry must be willing and ready to respond.
In the world of trade we must ask ourselves if this will be our limitation.