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CCA Report: Our negotiating position

From the June 2017 issue of Canadian Cattlemen

The beef cattle business is an interesting one in that there are many factors at play in determining a successful year from a less successful one. The Canadian Cattlemen’s Association (CCA) does a lot of good work to ensure the long-term competitiveness of the industry, including advocating for responsive business risk management tools and disaster programming to help with external risk factors beyond a producer’s care and control like severe flooding or drought. Another element of risk is currency fluctuations in the Canadian dollar. Over the last month, the loonie had been at its lowest level in over a year. The downward pressure is attributed in part to political influences related to the U.S. wishing to initiate a renegotiation of the North American Free Trade Agreement (NAFTA) and the Trump administration’s resurrection of the softwood lumber dispute with Canada.

The upside to this currency scenario is that while North American cattle markets have been strengthening, the weaker Canadian dollar has added an extra boost to Canadian prices. This has added to the profit margins cattle feeders are seeing. The Canadian dollar is a big driver in the Canadian market and can add volatility to our markets. While a weaker Canadian dollar is good for cattle prices, a stronger Canadian dollar can take a bite out of local prices. The Canfax rough rule of thumb in the current market is that a one cent move in the dollar can have an impact on calf prices by about five cents per pound and yearling prices by about three cents per pound. Therefore, if the Canadian dollar were to drop three cents, price projections improve 15¢/lb. on calves, but if the dollar were to rise three cents, expected calf prices drop 15¢/lb.

The chilling effect of Trump’s threats of trade actions on currency markets provides a mildly interesting and ironic backdrop to the NAFTA renegotiation scenario. Meantime, going forward Canadian beef producers can count on the CCA to continue to provide a solid effort to ensure fair market access to the U.S.

Canadian beef producers strongly support keeping the existing NAFTA provisions on beef trade intact. Over the past month, CCA has been sharing its perspective on the renegotiation of NAFTA with industry counterparts and government officials. CCA vice-president David Haywood-Farmer discussed the issue with counterparts at the Mexican cattle producer convention in Durango, Mexico. During the trilateral leaders’ meeting, U.S., Mexican and Canadian cattle producer associations agreed on the need to have a common position in the anticipated NAFTA renegotiations. In Ottawa, CCA staff John Masswohl and I presented to the Standing Committee on International Trade.

The CCA feels the unlimited duty-free beef trade that NAFTA enables between Canada, the U.S. and Mexico reflects the true integrated nature of the North American beef cattle industry. Moreover, NAFTA’s ability to provide market access without tariffs or quotas for either beef or live cattle trade is an example of how free trade should work and such access should be preserved, CCA advised.

We requested that NAFTA’s existing rules of origin for beef remain as they are. These rules of origin determine which products are eligible to be traded duty-free amongst the NAFTA countries. Under these rules, either beef that is “wholly produced” in the NAFTA territory or transformed from a live animal into beef in a NAFTA country is eligible for NAFTA treatment. It also means that importing beef from a non-NAFTA country and shipping it to another NAFTA country does not provide a back door, which is why we’ve advised these rules to stay as is.

Maintaining dispute settlement provisions in NAFTA and seeking to improve enforceability of NAFTA panel decisions were also recommended. Strengthening the NAFTA option would provide the Canadian beef sector with a meaningful alternative to the World Trade Organization (WTO).

CCA told the committee it understands that a U.S. protectionist group is advising the Trump administration that the renegotiation of NAFTA is the ideal forum to reinstate the repealed country-of-origin labelling (COOL) legislation for beef and pork. In addition to being counter to Canada’s interest, such a move would jeopardize American jobs. Should the Trump administration formally include such a demand in its NAFTA position, CCA advised that Canada reject it unequivocally and work with U.S. allies to demonstrate how U.S. jobs depend on livestock trade with Canada.

On the topic of market access, I recently met with Commissioner for Agriculture of the European Union Phil Hogan, in Ottawa, along with representatives of the Canadian Agri-Food Trade Alliance. Hogan was in Canada to promote the Comprehensive Economic and Trade Agreement (CETA) and lead a mission of EU businesses to the SIAL Canada show. The discussion focused on opportunities for Canadian agricultural exporters in Europe and resolutions of outstanding issues for the grains and oilseed and meat sectors. I emphasized that while the Canadian beef sector had been a major supporter of the CETA and that CCA’s support has always been based on the potential beef access that the CETA offers, it’s also conditioned on the resolution of the remaining technical issues. The commissioner’s response confirmed that the CCA’s strategy of working to submit a rock-solid application to the European Food Safety Authority and work co-operatively with the government to dispel misperceptions and biases in European member states is sound and necessary.

Until next time.

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