Bigger or Better? NAFTA, COOL and TPP

With TPP supposedly around the corner, I’ve been thinking a lotNorth-America about NAFTA and what the impact on Canadian farmers has been after 20 years and I’ve decided that I can argue that it’s been really good and I can argue that it’s been really bad. How success is measured makes a big difference. Driving a Bentley is the ultimate symbol of success, however, statistically, you are way more likely to end up stranded at the side of the road in this luxury car than if you drive a good old reliable Honda.

At first glance, NAFTA appears to be have been positive for Canadian agriculture – since 1988, agri-food exports have nearly tripled, which is a faster growth rate than either the US or Mexico, the other 2 trade partners. As an industry, it appears like this has worked out about as well as we could have hoped. That’s one way of looking at it. Seen from another perspective, in the same time period, net farm income, after adjusting for inflation, is down by 24%, there are 16% less farmers and we have lost 2,400 jobs in agri-food processing. So at the end of the day, we’ve sold way more product and we have fewer farmers making less money –  who are the winners here?

NAFTA is a comprehensive agreement that was supposed to create a framework where products were traded under a uniform set of standards and agreed upon scientific testing, along with a fair process to settle disputes that arise between trading partners. To say that we have tested this model is a major understatement.  In 2002 the US government signed into law a bill requiring Country of Origin Labelling for beef, pork and lamb. This law is commonly known as COOL. The argument made by proponents was that, in the interest of food safety, consumers had the right to know the country their meat was coming from, even though Canada, Mexico and the USA had all agreed to a uniform set of food safety standards, which were regulated by USDA. It appeared to be a clear case of the US creating an unfair trade barrier, which was specifically at odds with NAFTA. Canada, always one to play by the rules, appealed to the World Trade Organisation, who began the dispute resolution process. That was in 2009, and in 2015 the WTO has finally exhausted all of the appeals and ruled in Canada’s favour giving the US two choices – either change the law or face retaliatory tariffs on commodities coming into Canada. It has been suggested that cost of COOL to Canadian farmers may have been as high as 2 billion dollars a year and there are no mechanism to recover that cost. It’s also not a sure thing that the US will comply with the WTO ruling.  True to form, Ontario Premiere, Kathleen Wynne has suggested that we give the US more time to comply with the WTO ruling in order to “foster a good relationship”. While the quote is rather tough to swallow, Ms Wynne may have a point – even though the WTO has ruled that we are completely within our rights to impose retaliatory tariffs, what really is the likely outcome of an escalating trade war with the Americans? As Canadians, we enjoy many benefits of being neighbors to a superpower, but in terms of negotiating clout, we just don’t have as big a stick, a fact which many Canadians struggle with when thinking about our national identity. As is becoming apparent with COOL, when push comes to shove, there may be very little pushback we can offer. This might be a good point to keep in mind as we wade into the TPP and before we make concessions (like supply management) we had better be sure that the trade agreement can truly be enforced.

No matter which way you look at it, NAFTA has definitely helped to turn Canadian agriculture into an export dependent system, making international trade agreements even more important. Hopefully Canadian negotiators will take what we have learned from NAFTA and COOL and get the best deal possible for Canadians. I just hope that the final deal makes Canadian Agriculture Better as well as Bigger.

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