The influx of quality, affordable dairy products will force Canada’s dairy industry to redefine itself within a more competitive landscape
After meltdowns and temper tantrums, the Comprehensive Economic and Trade Agreement (CETA) may finally be ratified.
It’s nothing short of a miracle and will bring about dramatic change in Canada.
The path to a Canada-European Union trade deal has faced several roadblocks in recent months.
CETA was initially about growth and prosperity, and how to facilitate more trade across the Atlantic.
In the end, however, it could be ratified not for what can be gained but what would have been lost. Europe is saving global face. And Canada has an opportunity to recalibrate whole industries, and its trading ambitions in agriculture and food products.
While Canada remains a relatively insignificant trading player globally, Europe needed to signal to the rest of the world that it remains open for business, despite its recent internal problems.
As well, Russian embargoes have left the EU desperate for new markets for their food products.
And CETA may well ease the deflationary pressures Europe has been feeling for some time.
With Great Britain’s exit from the EU, the potential gains from CETA for Canada are not as significant. But better access to Europe is still good news.
Canada’s cattle and hog industries are desperate to reach new markets, and CETA will help.
In addition, Canada’s supply management sectors will receive a badly-needed wakeup call from CETA. The influx of high-quality, more affordable dairy products will force Canada’s dairy industry to redefine itself within a more competitive landscape. Canada’s domestic dairy processors have been preparing for this for years. Massive investments from Saputo, Agropur and others have changed the structure of the processing industry.
But many of Canada’s 11,000 dairy farmers are concerned about the future of the quota system. While some adjustments have been made by provincial boards in recent years, it’s not nearly enough. More trade-focused programs are needed, as are ways to make dairy farmers more competitive.
Supply management is about producing what Canada needs. The quota system allows producers to be confident about markets and income. And high tariffs on imports keep foreign products away from Canadian consumers. It’s a simple system that has long drawn heavy criticism from most of the industrialized world.
CETA will change that, allowing European cheese to enter the Canadian market exempt from tariffs. That will result in a market loss for a small portion of Canada’s milk production. And even that small loss could destabilize Canada’s entire dairy system.
And that’s just the tip of the iceberg, since every Canadian province has endorsed CETA (under the previous federal government).
But it’s not all bad news. CETA will force long-overdue supply management reform. Dairy farmers have long been led to believe that the status quo serves their interests best. But Canada has lost more than 30,000 dairy farms under supply management, so it’s time government and industry worked on a comprehensive plan to allow the Canadian dairy industry to become more competitive. A recent report suggests that Swiss dairy farmers are the least competitive in the world. Canadians are a close second.
In the face of more European competition, Canada’s dairy sector will desperately require reform to survive.
CETA will be a catalytic force for change, and the federal government will need to contend with years of fiscal and socio-political baggage.
Prime Minister Justin Trudeau’s mandate letter to the minister of agriculture a year ago didn’t mention anything remotely close to reforming Canada’s archaic supply-management practices. But a complete overhaul must now happen and Ottawa’s leadership will be key.
As the deadline for ratification of CETA loomed, the government’s inexperience in diplomacy and global negotiations was painfully obvious. In fact, the government hasn’t shown much desire for trade negotiations in general.
That’s not very reassuring for those looking to Ottawa for leadership in reforming the supply management regime.
Patience and reserve are particularly important when it comes to ever-contentious agricultural trade.
The long, painful road to ratifying CETA is not over and much work will need to be done even after ratification. That will require a more mature, thoughtful approach by the government. Canada’s dairy farmers, and many others, should expect at least that.
Because dramatic change is coming to Canada and we must be prepared.
By Sylvain Charlebois
Sylvain Charlebois is dean of the Faculty of Management and professor in the Faculty of Agriculture at Dalhousie University.
www.troymedia.com
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