Canada risks squandering our trade potential

Opinion

Trade is so critical to the health of the Canadian economy.

With vast natural resources, millions of acres of farmland, and a growing technology sector, Canada is open for business in the global trade arena.

But are we really up to the opportunity in front of us as a nation?

Some believe that change is needed if we are to truly reach our trade potential.

I tend to agree.

In July 2021,  Meena Aier, senior research economist at Export Development Canada Development Canada published a research paper evaluating Canada’s current performance on trade. Although much of the report focuses on opportunities for improvement by country and not industry, there are some notes and items that agriculture should be aware of:

• Canada can expand trade with the U.S. and China, as both markets are underperforming relative to the author’s calculated potential. Canada’s market share in the U.S. is expected to continue to decline even though the total trade can still grow.
• Canada will need to refocus efforts on India and South Korea over the next decade if it wants to diversify from the U.S. and China.
• Emerging markets cannot be ignored. As Canada’s share of trade to the U.S. and UK declines, countries such as Indonesia will become increasingly important.

The report is quite thorough and supports what many in the agricultural industry are expressing concerns about.

In a recent column submitted to RealAgriculture, Protein Industries Canada CEO William Greuel notes “Canada needs to stop being comfortable. We often talk about Canada taking our place atop the podium as the most reliable and preferred supplier of safe, nutritious food. I fully believe that we can get there – and that we deserve to be there – but we won’t get there by doing what we have always done.”

In the analysis of Canada’s trade with the United States alone, the picture is telling. Whether it’s the luck of proximity to the United States or the export advantage of the Canadian Dollar, we are rather complacent.

David Parkinson of The Globe & Mail describes Canada’s trade performance and over-reliance with the United States “a bit like living above an ice cream store. It’s convenient, it’s filling, but it’s an invitation to unhealthy overindulgence. It’s left us looking increasingly out of shape.”

The Canadian Agri-Food Trade Association published  recommendations for changes to improve Canadian trade back in April.  Claire Citeau, CAFTA executive director, discussed with me in an interview the need for Canada to demonstrate a clear commitment to rules-based trade. One of the suggestions is that Canada create a Chief of Trade Implementation at Global Affairs Canada.

Canada has a trade minister in cabinet, but that person is a politician who tends to lack technical knowledge and instead focuses more on trade promotion rather than implementation and execution. In comparison, the President of the United States appoints a United States Trade Representative (USTR) who has a strong technical background and experience in trade. In fact, the USTR has a chief agricultural negotiator to focus on expanding and implementing trade for agricultural goods.

Regarding EDC’s conclusion that Canada underperforms in our largest traditional trading zones, there is an agricultural example that supports it.

During the NAFTA renegotiation that was initiated by the Trump administration, agriculture focused on keeping what they had instead of talking about expanding trade between the three countries. Whether it was dairy, poultry, beef, pork or any other commodity, agriculture was on defense instead of looking to expand its presence.

Greuel argues that Canada needs to rely less on raw commodities and forge a new era of trade growth through value-added products. “Our ingredient- and food-processing capacity is declining as we are watching the global explosion of plant-based foods. We need a course correction,” he writes.

The EDC findings would agree and suggest Canada re-evaluate its export basket, “which is rich in primary commodities but lags other advanced economies in value-added.”

There are common opinions on the constraints that diminish agriculture’s trade potential. They are also likely common in other sectors having these same discussions. Whether it is lack of implementation, too heavily focused on the United States and not on emerging markets, or enforcing current trade agreements, the regulatory system needs to drive success and not deter it. There needs to be an intellectual commitment to change.

Increasing regulatory burdens or thinking small or local will limit the opportunity for change as well.  When I interviewed Sean Speer, former advisor to Stephen Harper, he noted, “on Canada’s Agriculture Day, politicians celebrated small, quaint, pastoral perceptions of agriculture, as opposed to owning the real economic powerhouse that is our agriculture industry.”

Many politicians and industry leaders refer to the (Dominic) Barton report, wave it in the air and proclaim there is opportunity ahead. Across all industries, EDC calculates that Canada is leaving $50 billion a year in trade on table.

Recently Nova Scotian Liberal MP Kody Blois promoted agriculture as an economic super power at the Liberal party policy convention.

Assuming Barton and Blois are correct, what are we doing about the constraints to really unleash our trade potential?

Thinking small and being the quaint, self-deprecating Canadian will limit our opportunity to change on the trade front. Our Canadian personality has gotten us far, but the result is still underperformance and the EDC numbers prove it