How Canadian farmers risk missing a global agri-boom

Mark Carney likes to remind U.S.-focused exporters that a "massive new middle class" is forming in big emerging markets like China and India -- to the tune of 70 million people a year.

For a net exporter of agricultural products, like Canada, this should be an unmitigated bonus. Urbanization and higher incomes across Asia are fuelling an unprecedented increase in the number of middle-class consumers, and that means an unprecedented increase in the number of families who can afford meat, fruits, oils and other imported foods on a regular basis.

But reaching those customers is harder than it should be, business leaders say, and making it easier could depend on a major shift in trade policy, namely relaxing supply-management protections on dairy and poultry that date back to the 1970s.

In a new paper for the Canadian Council on Chief Executives – the Ottawa-based lobby group headed by former Liberal finance minister John Manley – Michael Gifford, Canada's former chief agricultural trade negotiator, takes up the cause, urging Ottawa to ensure it does all it can to get Canada a piece of arrangements that are going to reshape global trade. Participation in massive regional bloc deals like the Trans-Pacific Partnership (TPP), for instance, could eventually allow Canada's agri-food industry to become a "growth engine" for the entire economy.

"If Canadian agricultural producers are to maximize their export potential in Asia, they cannot allow themselves to be placed at a competitive disadvantage compared to other exporters," Mr. Gifford argues. "The most urgent trade policy challenge, therefore, is to ensure that Canada is not locked out of the preferential trade agreements that will increasingly shape the future of trade in the Asia Pacific region."

Mr. Gifford argues farmers across the country will miss out unless the government makes clearer an apparent willingness to budge on the long-standing, politically sensitive protections for certain Canadian products. A key barrier to Canada joining the TPP is what many participating countries view as punishingly high tariffs on imported milk and eggs, and the U.S. in particular has opposed Canada entering TPP talks, citing those supply-management protections.

The Harper government has pledged to keep the underlying supply-management system – a hot-button issue in Quebec, for instance, where the country's dairy industry is based – intact, but officials also have hinted at being willing to compromise in order to get in on the TPP.

Mr. Gifford is clearly hoping to push Ottawa into making this a reality.

"Political sensitivities notwithstanding, the rest of the economy, including the 80 per cent of Canadian agriculture that is tied to world prices, cannot afford to be held hostage to demands by dairy and poultry producers to preserve the status quo," Mr. Gifford writes.

A problem, though, is that even as Canadian officials increasingly realize this, it is debatable whether U.S. negotiators are ready to entertain anything other than a full abandonment of agricultural protections. Canada is reportedly willing to put everything on the table, but only after it is offered a place at the table, and also wants to see how far the U.S. is willing to go on its own restrictions. The Americans, meanwhile, want Canada to formally signal a readiness to scrap supply management as a condition for joining the discussions.

The only solution, Mr. Gifford says, is for all countries with quota and tariff systems to be willing to at least partially liberalize them, since this is about as far as the agreement will go in the best-case scenario with so many participants restricting one product or another. Again, easier said than done.

But he warns we must not find ourselves on the outside if a huge economy like Japan – which accounts for $3-billion of Canada's agricultural exports – joins the TPP.