Transcript Slide 1

Canadian Agriculture, and International Trade
“A country that depends on exports, imports its misfortunes”
Stephen Leacock, 1941
Trade has always been a big part of what Canada is all about
Trade and trade routes motivated discovery (short cut to the East)
Early development in the East the result of trade interests
supply of resources to the colonial powers (Britain, France)
Exploration and settlement of Western Canada: driven by trade interests
Company of Adventurers
The CPR + Macdonald’s National Policy (1878)
Fortunes and misfortunes of the 1600’s – 1900’s: All linked to trade
Late 1700’s – Napoleonic Wars – Louisiana Purcahse (1803)
1822 - Canada Trade Act
1840 – Corn Laws – 1849 Montreal Manifesto
1854 – Reciprocity Treaty
1900’s – prosperity linked to agr. exports
1911 – Federal Election (Laurier loses ….. again)
Late 1800’s MacKinley Tariff
1930’s - Smoot Hawley Tariff
Post WW II and future prosperity depends on our success in international trade
Canada Depends on Exports
1971 = $21 Billion
2005 = $500 Billion
Exports of Goods and Services ($m illions)
1971- 2005
600000
500000
400000
300000
200000
100000
0
71
19
73
19
75
19
77
19
79
19
81
19
83
19
85
19
87
19
89
19
91
19
93
19
95
19
97
19
99
19
01
20
03
20
05
20
Importance of Trade to Canada
Exports are a significant part of our economy
(output, income, employment)
$1.3 Trillion GDP (2005)
Exports/GDP (Percent)
45.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Exports, GDP and Current Account for Some Trading
Partners
Country
US
UK
Japan
China
GDP ($T)
Exports
($B)
13.2 T
1020
2.34 T
469
2.5 T
590
10 T (PPP)
974
%GDP
Source: CIA World Fact Book (2006 estimates)
8
20
12
10
Current Account
- 862
- 58
174
179
Canadian Trade: All Goods and Services (Current dollars $million)
2001
Agricultural and fishing products
Energy products
Forestry products
Industrial goods and materials
Machinery and equipment
Automotive products
Other consumer goods
Special transactions trade
Unallocated adjustments
31078
55770
40288
67792
102554
92527
16307
8168
6248
2003
29243
60482
34433
66893
88679
87385
17187
7689
6962
2005
30218
86924
36606
84641
94641
88162
17321
8289
6257
Total Exports
420730
398954
453060
% Agr Exports
7.4
7.3
6.7
Canadian Imports
350071
342692
388210
Trade Balance
70,659
56,262
64,850
Canadian Trade Balance ($millions)
70000
60000
50000
40000
30000
20000
10000
0
-10000
1971
1976
1981
1986
1991
1996
2005 trade balance with US = $150 Billion
2001
The US is our most important trading partner
85% of exports go to the US
60% of imports come from the US
Both have declined after 2001
Canada-US Trade (Exports) ($millions)
500,000
400,000
300,000
200,000
100,000
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Canada-US Trade (Imports) ($millions)
400,000
300,000
200,000
100,000
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Agri-Food Trade is Important
62% of Agr Exports go to the US
Canada-US Agri-Food Exports
($millions)
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
60% of Agri-Food Imports come from the US
Trade Balances:
Total $9 Billion
US $6 Billion
Canada-US Agri-Food Imports
($millions)
25,000
20,000
15,000
10,000
5,000
0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
1980’s and 1990’s The Three Amigos
1989 CUSTA
1993 NAFTA
1995 WTO Uruguay Round
Conditions Leading to These Agreements 1970 - 80's
Agriculture becoming more trade oriented as part of the early process of globalization
Government intervention escalating, particularly during the 1980's (US/EU)
programs based on support on a per unit of production
> encouraged more production
> coupled support
interventions very trade distorting and costly to consumers and governments
Benefits and Costs of Support to Farmers in
Industrialized Countries (1986-87) ($Billions)
Producer Benefits
95.4
Consumer Costs
72.4
Government Costs
63.1
Total Costs
36.9
Benefits of Liberalization
35.3
Transfer cost:
$1.42 per dollar transferred
Industrialized countries agreed that there would be benefits from
liberalizing trade
ITO, GATT, WTO and the Uruguay Round
(1986-1995)
Kennedy and Tokyo rounds and agriculture
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progress on industrial goods
agricultural support in the EC and US extensive
general unwillingness to address the issue
Motive: level of intervention and the expense
attempt to reduce trade distorting interventions
Principle objectives of the Uruguay Round
1 - reduce production and export subsidies (distort trade)
2 - market access - lower import barriers of all sorts
3 - eliminate exceptions: all countries subject to the same rules
4 - better dispute settlement process
5 - general approach rather than different approaches/rules for different
commodities
6 – include agriculture
Cairns Group - countervailing power
Canada’s Schitzoid Position (Article 11 (2c))
Concluded December 1993
CUSTA and NAFTA
While the GATT dragged on, Canada and the US began to talk
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Motive: growing restrictions (lumber & hogs) by the ITC
ITC acted as prosecution and judge
US wanted better access to Canadian resources (OIL)
negotiated within the GATT framework
CUSTA approved in 1988; implemented in 1989
• 1988 federal election was fought on the deal with the
conservatives (Mulroney) winning who had negotiated the deal
Some Results from CUSTA (1989)
1 - agreement to phase out all tariffs, time lines up to 10 years
2 - liberalization of trade in services, financial transactions, investment
3 - guaranteed access to resources (both ways) e.g. energy resources
4 - 1965 Auto Pact
5 - harmonize technical and phyto-sanitary reg's
6 - new dispute settlement panel
For Agriculture
1 - preserved supply management
2 – WGTA (GONE)
3 - meat inspection systems (exemption re: meat import laws)
4 - eliminate export subsidies between the two countries
5 - preferential treatment of wine in Ontario (GONE)
NAFTA 1991-93
Negotiated 1991-92, completed before GATT
• extended CUSTA to Mexico, GATT framework
• extending to Mexico not important to Canada
– bilateral trade was small
– (1-2%) of Canadian or Mexican agr exports
• Much more important to Mexico and US trade
• Canada: be part of a growing system of trade agreements between
US and other countries in the America's
• Environmental and labour concerns
NAFTA Outcomes
1 - extended CUSTA tariff reductions to Mexico over periods of up to 15 years
2 - eliminated quantitative restrictions (e.g. import quotas)
3 - SM still protected
4 - Tri-national panel to deal with subsidy issues
5 - commitment to work towards elimination of export subsidies
6- technical, sanitary and phytosanitary regulations and standards still sovereign
• must be based on science criteria
7 - strict limits on export taxes and no new tariffs
8 - Commission for Environmental Cooperation (CEC)
GATT/WTO Agreement (1986 - 1995)
Agricultural Outcomes of the Agreement:
.
1 – Market Access: Tariffs - reductions by an average of 21% by 2001
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tariffications subject to GATT reductions
minimum access to increase to 5% by 2001
2 - Domestic supports - progressive reductions of 20% on average by 2001
3 - Export Subsidies - progressive reductions in expenditures of 36%
4 - Sanitary & Phytosanitary Reg’s: - international scientific criteria
5 - Better dispute settlement process - International Trade Court
Some impacts on Canada
1) Market Access:
Canada agreed to a schedule of tariffs for Supply Managed commodities, and
grains and oilseeds. These were to be reduced over time. 5% access with no
tariff
Canadian Tariffication Rates Under the GATT
C om modi ty
Milk
But ter
Cheese
Chicken
T urkey
Wheat
Feed Barley
Tariff Rate for Imports
241%
298%
246%
238%
155%
77%
21.3%
$34/hl
$4/kg
$3.53/kg
$1.67/kg
$1.96/kg
$99/t onne
$16/t onne
2) Domestic Support Provisions
organized into categories: extent to which supports distorted trade
GREEN BOX - minimal trade distortion - decoupled supports
research, environment, disaster payments, structural adjustment
AMBER BOX - trade distorting - subject to reduction over time
• direct support payments, input subsidies
• many Canadian programs fell into this box
• (GRIP, NISA, crop insurance)
BLUE BOX - US/EU programs (fixed areas); transitory programs
RED BOX – policies to be stopped - no agreement
e.g. quantitative restrictions that were replaced by TRQ’s
3) Export Subsidies
impacted the US EEP and EU export restitutions
subsidies for grain exports (WGTA in 1995)
Bottom Line
1)
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3)
4)
SM emerged unscathed in real terms
Prices for Western grains did move down
Set the stage for more livestock production and
exports to the US and Asia (Japan)
More market access for grain and oilseeds in the
international market, and processed agr-food
products
What’s Ahead - Doha Round
2001 - ??
1999 – Seattle: no agreement or real progress
2003 – Cancun: again no progress
2005 - Hong Kong
2006 - talks suspended, potentially revived in 2007
2008 - near agreement on agricultural texts
2007 US and EU - unwilling to agree on concessions on levels of domestic
support and tariffs
Future Issues for Canada ?
>“Mega tariffs”
> Environment
> Food safety & food labeling (GMO)
NATO II ? - trade agreement with the EU ?
For centuries, England has relied on protection, has carried it
to extremes and has obtained satisfactory results from it. After
two centuries England has found it convenient to adopt free
trade because it thinks that protection can no longer offer it
anything.
Very well then, Gentlemen, my knowledge of our country leads
me to believe that within 200 years, when America has gotten
out of protection all that it can offer, it too will adopt free trade.
Attributed to Ulysses Grant, President of the US, 1868 - 1876
(Excerpted from Le monde diplomatique, December, 2003)