Abbotsford Today has been receiving a number of questions from local dairy farmers, and other exportable goods producers, about the effects of the recently announced Comprehensive Economic and Trade Agreement (CETA). Canada’s Minister of International Trade, Ed Fast, sat down with me for a conversation on this subject. This column addresses the points raised by local farmers, the Minister’s responses and my opinion on CETA.
Let’s begin with some background. What is CETA? Sure, it is there in the name, but let’s talk basics. It is essentially, a Free Trade Agreement between Canada and the European Union. Yes, it also covers copyright provisions and some other items, but at its core, it is a framework for the removal and/or phasing out of tariffs, paving the way for trade.
Generally, it has received criticism from Canadian companies in that it will create unfair market competition. Minister Fast points out that it is quite the reverse. CETA opens the European market to Canadian companies. That’s more than 500 million consumers that can now be exposed to Canadian products like never before.
This negotiation between Canada and 28 European countries comprises the largest Trade Agreement in history, and, the EU is the largest single consumer market in the world. Currently, Canada exports more than $50 billion to the EU and imports approximately $62 billion.
Local dairy farmers are concerned that EU competition will drive them out of the market back here in Canada.
This could be true…but let’s break down some essential numbers to see what might really happen.
Canadian Market = 35 million
EU Market = 500 million
EU current Canadian market share = 4%
Market share increase in CETA is 4% for a total of = 8%
Dairy industry historical growth rate = 1% per year
Potential market growth for Canadian Dairy in EU = 100% +
The Canadian Government has stated that it will support farmers through this process of adaptation, and that includes, in some cases, financial support. Additionally, the recent Throne Speech offered assurances that our Supply Chain and Supply Management Systems would be fully protected.
Minister Fast believes that CETA will mean significant growth for local food manufacturing and processing industries. Our standards for food processing, for example, are so strict that the resulting product is superior to any in the world. With tariffs removed, the EU market now becomes more receptive to these Canadian products.
The demands of the EU marketplace will also effect Canadians in a positive way. Take the beef industry for example. In order to export to the EU, Canadian beef will have to become hormone free. This hasn’t made economic sense for a market of 35 million, but for a market of 500 million, it surely does.
Much has been made of the perceived trade-off between a benefit for the beef industry while sacrificing the dairy industry. Minister Fast was clear in the negotiation of a Trade Agreement of this nature is not like trading hockey cards. He said “…an holistic approach to the entire Agreement is taken and the primary goal of the Canadian Government was reached. That goal was to give Canadian businesses unfettered access to the European market. We accomplished that goal and added security to the Canadian economy for generations to come.”
To facilitate this growth, the Canadian Government is working with industry, including small and medium sized business, to plan for their entry into the EU market. While the Agreement itself may take up to 2 years to ratify and become official, the Government of Canada is working to insure businesses hit the ground running when those tariff free doors open. In fact, 98% of all tariffs will be removed on Day One of the Agreement coming into effect and over the next 7 years, the rest will be gone.
This means no tariffs for our East Coast Seafood products, no tariffs for our local fruit and berries, and much more.
It sounds great…and it is. It means Canada has taken the lead in the liberalization of trade in the world. However, this leadership, and the benefits of CETA do come with some warning signs.
You all know, I’m no reporter. So, in the above text, I’ve tried to encapsulate the conversation I had with Mr. Fast. I believe I have conveyed his feedback correctly. Generally speaking, I am an optimist about this trade deal, but nothing is ever perfect and so I have my opinion…and here it is.
As someone who has read the Government literature on CETA (you can find it here: http://www.actionplan.gc.ca/en/page/ceta-aecg/agreement-overview), I do find some potential hazards awaiting us.
For example, it does bring new competition to industries like the dairy industry that they have never had to face before. However, I think this will only be negative in the short term. For any business to be sustainable, it must adapt and innovate. Our dairy industry has not really needed to do that for a very long time. Competition creates an environment for growth.
Remember folks, this isn’t globalization we are talking about. CETA doesn’t put us into an imbalanced trade agreement with a developing nation where their labour costs are so outrageously lower than ours we will kill an industry here in Canada. No, we have a trade agreement in place with a group of countries that are naturally aligned with Canada. They largely govern like we do. They do business like we do. Their wages and standard of living are comparable enough that true market differentiation will come not in the pricing of a widget, but in the quality of that widget.
This is an opportunity for Canadian industries to start to think of secondary and tertiary production, to develop new methods for marketing their products and services, to begin to make strategic partnerships with 27 new countries in a tariff free environment.
Adapt and grow.
Before you all think I have somehow lost my mind, I do have two serious concerns about CETA.
The first is environmental. Here in Abbotsford, we are very familiar with water supply issues. We came very close to having a private company control our water supply. We came to our senses and voted that down, but CETA does not exclude domestic water supply acquisitions by foreign private companies.
Recall, that this is exactly what was going to happen here. In fact, we may very well have been a “test case” for the Harper Government in this respect. How that company would gain control over our water supply is by simply loaning us the money to build our access to it.
Why this is a concern with CETA is that it has been reported by the Council of Canadians that European member states want to exclude public water from CETA and Canada does not.
I made this statement as I ran for City Council and I’ll say it again here. Water is a human right and it should never be owned by a private company. The Government will not turn the taps off if a citizen can’t pay their water bill, but a private company will do so in a heartbeat. This is immoral. To treat water like it is HBO should concern every single Canadian.
So, in this respect, CETA needs to include protection for some things that Canadians hold dear…like keeping our water public.
The second concern I have fits so nicely into the potential of foreign ownership of Canadian assets that you’d think I was making it up….but try it on and see if it fits.
Our water source above was nearly lost to a private company because your Governments want to be involved in Public Private Partnerships, or P3’s. In the case of our water source, the Private part was the money lender.
I raged against this notion because we can borrow money from the Municipal Finance Authority (MFA), and also directly from the Bank of Canada (as a Province), and the interest rate is low, or even zero. This private lender’s interest rate was 2% higher than the MFA resulting in tens of millions of dollars paid in extra interest.
Why?
I don’t know. Man, it bothers me to say that…but I really don’t know. All 3 levels of Government supported that move…the move of taking $80 million of your money to pay interest to a company when we didn’t have to. It now seems that CETA sets the stage to not only allow more access for foreign companies to attempt these backdoor takeovers, but it also seeks to undermine Municipal procurement policies.
A full legal opinion on how CETA effects the ability of Municipal Governments to decide who they buy things from is here: http://www.civicgovernance.ca/files/uploads/FINAL-Shrybman_CETA_report.pdf
So, do I think CETA is good for Canada? Yes.
Do I think that there are some serious issues with aspects of the Agreement? Yes.
Do I think we should stop the CETA process? No.
Since it is impossible to ever please everyone all the time, I do believe that actions should be taken based on a value statement. In other words, will more Canadians benefit from moving forward with CETA? My opinion is that the answer here is yes.
My hope is that Minister Fast does not overlook these potential negative side effects while he is celebrating the CETA victory. Both sides count CETA as a big win and that really means a mutually productive and positive negotiation. We are Canadian after all.
But the devil can be in the details, as they say … and so over the next 2 years, it is my hope that the Harper Government ensures that our water and the authority of Municipal Governments are both protected in the final draft of CETA.