The Deal Makers

October 5, 2017

Donald Trump boasted that the crowd assembled for his inauguration was the largest in history, thus introducing “alternate facts” into our lexicon. In like fashion we have been told that Canadian livestock producers have achieved a great breakthrough with the CETA trade agreement.

 

If I have my facts, or “alternate facts” anywhere near right Canada has negotiated a quota access agreement for beef that will rise from a 15,000  to 65,000 tonnes over a six year period. But European access to the Canadian beef market is FREE and unrestricted by QUOTA from the beginning. How is that fair? Belgian farmers protested claiming that this quota would damage their prices even though Canadian exports at the full final quota level would not amount to 1% of their market.

 

Not many will remember the days back in 1983-85 when the EU, burdened with a mountain of surplus beef, used generous export subsidies to send large quantities of beef to Canada. The Canadian Cattlemen’s Association protested and the Canadian International Trade Tribunal sided with the CCA, finding this “dumping” of product injurious to the Canadian Industry. I recall two things about that incident which may be applicable today. First, the Canadian Government had tried to dissuade the CCA from proceeding with the case arguing that there was no chance of success. (actually the Minister of Agriculture of the day told us that his experts put our chance of success at 4%) Second, I recall the vehemence with which the European side argued both sides of the street at once, pointing out that export subsidies were necessary to take price depressing surplus beef out of the EU market, a market with a human population of over 400 million at the time, while also contending that sending that export subsidized product to the Canadian market of less than 30 million could not possible cause price damage in our market. 

 

So, with this experience behind us, how does one find any sense of balance, or fairness, in a deal that gives the huge European Union immediate duty and quota free access to a market that is less than one tenth as big as their own and in return the EU grudgingly agrees to a gradual scale up over a six-year period to a limit of 65,000 tonnes?have  This makes no sense at all and signals that there had to have been some trade off that we know naught about. This has to be true because it would be idiotic to sit down at a negotiating table and trade instant unlimited access for delayed and restricted access.

 

There may be another angle to this lopsided deal. Conceivably, an analyst could have looked at the Canadian Beef Industry and reported to negotiators that Canada exports most of its product to the USA and, given the size of its national herd, cannot, in the foreseeable future ever fill the quota granted; especially so when other restrictions, such as the limitation of access to “hormone free” beef remain. So why fight for reciprocal access when the Canadian Industry is presently incapable of filling the present quotas? On the other hand, if the argument that Canada cannot possibly fill a quota larger than 65,000 tonnes, a point I dispute, why would the EU have insisted upon a quota?

 

I would like to make three concluding points. First, there is a large potential to increase beef production in Canada but assured access to foreign markets may well be a necessary signal to producers to increase output. Second, it is sheer folly for Canadian negotiators to accede to a deal as lopsided as this one without some very worthwhile trade off and, if the trade off was worthwhile, it should be admitted. Third, of course, one should ask why the Europeans would brazenly insist on unlimited access to the Canadian market while simultaneously insisting on sharply restricted access to their own. I learned in 1984 they could do so shamelessly. No change there.

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