How Government Regulation, Policy and Canada/US Relations impact the Canadian Food & Ag Sector
The Agriculture Industry flash is a bi-weekly newsletter by Origin Merchant Partners outlining industry highlights including: Commodity Handling News, Equipment Manufacturers & Services, Food Processing News, Fertilizer & Crop Inputs, and Additional News & Agriculture Commodities Update. You can read the full report by clicking here.
Canada/U.S Relations and the Agriculture Sector
Months into the Biden administration, our eyes are on the White House to determine how new policies will impact the Canadian Agriculture Sector. In this introductory article, we provide an overview of the US/Canada agricultural position: where we are now, and what we know to date. We will follow this up in subsequent issues with a deeper dive into the implications of evolving US policy for Canadian Agribusiness.
Our largest trading partner
Canada and the US enjoy the largest agricultural bilateral trading relationship in the world. Canada is the top destination for American agricultural exports, accounting for approximately 15 percent of total agricultural exports. Conversely, the US is the foremost buyer of Canadian agri-food products, accounting for 58 per cent of total exports. In short, while the relationship is important to both countries, Canada is highly reliant on the American market, and new developments in the US Department of Agriculture can have significant implications for Canada.
A new (or not so new) US Ag Secretary
In December, Tom Vilsack was confirmed as Agriculture Secretary, sending the former Iowa governor back to the Cabinet position he served for the entirety of the Obama administration, where he focused on conservation, stimulating new business in rural communities, and increasing access to healthier food for low-income families.
Vilsack, who in the interim period has served as president and CEO of the US Dairy Export Council, said his dairy experience has given him a greater appreciation for the importance of US agricultural exports. We will be closely watching what Vilsack has to say about supply management – particularly regarding dairy – given his historic push for Canada to open its dairy market.
What about trade agreements?
The direction that the Biden administration takes in pursuing new preferential trade agreements will also have an important impact on Canadian agri-food trade. The competitiveness of Canadian agri-food exporters is limited by market access restrictions, including tariffs and quotas, trade distorting domestic support, export subsidies, tariff escalation and non-tariff barriers.
We believe that under Biden/Vilsack, the US will pursue a more predictable trade policy course. While this does not necessarily mean new trade agreements or more liberalized trade, a return to more predictable, rules-based trading relationships will foster a more investment-friendly climate. Prime Minister Justin Trudeau and President Biden are much closer in terms of policy objectives and leadership style than Trudeau was with Trump, and they share views on eliminating trade barriers instead of imposing them.
As of March 2021, much is still unknown. The US and Canada are still trying to wrestle the COVID-19 pandemic to the ground while dealing with its economic fallout. At the same time, the Biden administration is returning attention to climate change, which will have impacts in Canada, including for agriculture. Messaging from the Biden administration, Vilsack and US dairy groups suggests a less confrontational approach to agri-food trade issues, including supply management. Politics is fluid, however, and we will be watching.
Stay tuned for Cumberland Strategies’ next Ag Flash piece, focused on what Vilsack’s position on supply management means for Canada.
Mackenzie Taylor is a Toronto-based Consultant with a focus on agriculture and the agri-food sector. Bliss Baker is the Chairman and founder of Cumberland Strategies and has represented a range of large Canadian and multi-national companies in the ag-sector.