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CATTLE COUNTRY February 2018
Losing NAFTA could affect Canadian beef industry BY RON FRIESEN Canada’s beef and cattle exports would be relatively unscathed if the United States rips up the North American Free Trade Agreement but it won’t exactly be business as usual. That’s the opinion of Mike Gifford, Canada’s former chief agricultural trade negotiator. Duty-free access to the U.S. for cattle and hogs would continue. But a worst-case scenario could see Canada forced to negotiate tariff-free import quotas for beef, according to Gifford. Gifford spoke recently about the state of NAFTA negotiations to a group of academics at the University of Manitoba. Canada, Mexico and the United States are attempting to renegotiate NAFTA because of U.S. President Donald Trump’s demands to either refashion the agreement to benefit American interests or scrap it altogether. Trump has repeatedly called NAFTA “the worst trade agreement in history.” Agriculture is a rela-
tively small factor in the negotiations. The only farm sector that would be significantly impacted is supply management, which the U.S. wants eliminated. Most other Canadian agricultural sectors would remain largely unaffected if the U.S. withdraws from NAFTA. The CanadaU.S. free trade agreement (CUSTA), which still exists, would kick in and duty-free access would continue, Gifford said. But there could be a problem if the U.S. decides to cancel CUSTA as well. Cattle and hogs would see little impact but beef could be affected, Gifford said. With both agreements gone, World Trade Organization rules with Most Favoured Nation (MFN) tariffs would apply. Both Canada and the U.S. have MFN tariff rate quotas (TRQs) for offshore beef, which admit certain volumes from other countries with low in-quota tariffs. Volumes above those amounts are subject to over-quota tariffs of 26.5 per cent. The U.S. provides TRQs for beef to countries like Australia, New Zea-
Mike Gifford, Canada's former chief agricultural trade negotiator, was in Winnipeg recently to give a talk about the importance of NAFTA. Photo Courtesy of Cory Knutt, Golden West Radio.
land and Costa Rica. All its quotas are currently used up. Right now, that’s not a problem for Canada, which has duty-free entry under NAFTA and CUSTA. But it could become a problem if both agreements were eliminated. Canada might have to apply to the U.S. for TRQs that are presently not available. In that case, Canada would have to negotiate a side agreement with the U.S. to keep beef trade
flowing. “In theory there could be a problem,” Gifford said. “But in practice, because of the large two-way trade flows, there will be an inducement by both countries to sort this out sooner rather than later so that basically we end up with duty-free access.” As things stand now, all of this is a moot point because the NAFTA negotiations are underway and no one knows how they will end up. It depends on whether Trump makes good on his threat to pull out of NAFTA if his demands are not met. Besides dismantling supply management, U.S. demands include: eliminating dispute-settling mechanisms, requiring automobiles to contain mainly U.S. content, limiting other countries’ access to public works contracts, and a sunset clause ending NAFTA after five years unless all countries agree to continue it. Canada considers those demands so egregious it isn’t willing to consider them. All of which makes the Americans’ take-it-or-
leave-it position difficult to deal with, Gifford said. “It’s not a normal negotiation,” he told his audience. “Normally you don’t have a negotiation with one party saying, we’re not going to make any changes whatsoever. All the concessions are going to come from you. That is a very unusual negotiation.” Gifford said Western Canadian agriculture is better able today to withstand the shock of the U.S. withdrawing from NAFTA/CUSTA because of efficiency gains. The Western Grain Transportation Act is gone and beef plants are large-scale, world class and competitive with U.S. plants. “It allows us to adjust to the shock of losing NAFTA or the Canada-
U.S. trade agreement. It helps our ability to adjust to those changes.” Still, most sectors, especially red meat which depends heavily on the U.S. market for exports, would be worse off if duty-free access were lost, he said. On the positive side, most of U.S. agriculture favours NAFTA, Gifford added. Most sectors realize they would lose “big time” if the U.S. withdraws because Canada will still have preferential access to Mexico and the U.S. will not. As a result, U.S. agriculture is pressuring its politicians to proceed very carefully with negtotiations, said Gifford. “You’ve got most of U.S. agriculture saying, do no harm. Don’t screw up a good thing.”
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