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CCA Report: Keeping tabs on NAFTA

From the October 2017 issue of Canadian Cattlemen

The Canadian Cattlemen’s Association (CCA) attended the second round of North American Free Trade Agreement (NAFTA) trade talks in Mexico City September 1-5. CCA executive vice-president Dennis Laycraft participated to ensure the industry’s key objectives were heard. In addition to maintaining NAFTA’s terms of trade for beef, the CCA seeks to improve the flow of trade for beef and cattle through greater regulatory alignment.

Addressing regulatory co-operation issues is key to eliminating or mitigating regulatory impediments to trade. One area of interest here is meat inspection at the border. For instance, although Canada and the U.S. consider each other’s meat inspection systems equivalent, Canadian beef sent to the U.S. faces greater regulatory burdens than U.S. beef exported to Canada. Specifically, after clearing U.S. customs, Canadian beef is diverted to an inspection house for a second inspection after it has already been inspected in Canada. Such re-inspections not only add cost, but denigrate product safety by breaking the cold chain under which imported product moves.

To mitigate the re-inspection issue, the CCA suggests a pre-clearance approach to meat inspection with any additional oversight at the originating federally inspected facility. The CCA proposes a NAFTA renegotiation include a regulatory co-operation chapter in which a mutual recognition principle that goods produced in or imported into one NAFTA country that may be lawfully sold in that country, be permitted to be sold in the other NAFTA countries without meeting any additional compliance requirements.

CCA was in Washington, D.C., for the first round of talks and will participate in talks planned for Canada in September, and Washington in October. The U.S. wishes to have the talks concluded by year’s end, ahead of Mexico’s presidential vote in 2018 and U.S. midterm elections that fall.

Another area of intense focus for the CCA are the proposed changes to the taxation of private corporations announced by the Government of Canada purportedly to close loopholes aimed at the wealthy. However, many family farms are also private corporations and, if implemented, the proposed tax changes will have a significant negative impact on cattle producers and farm families across Canada.

The most notable areas of change for private corporations — including family farms — are income sprinkling, passive income in a corporation and capital gains.

The changes would see small business owners such as ranchers restricted from sharing income with family members within the farm corporation. Additionally, the proposed changes could limit certain types of saving within a small business, putting cattle producers at more risk during volatile economic conditions and reducing their ability to invest in innovative practices and growing their business in the future.

Changes to capital gains rules will also make it more problematic for cattle producers and farmers to transfer the operation to the next generation. The added complexity created by these proposed tax changes could undoubtedly make it harder to keep multigenerational farms within the family and make succession planning increasingly difficult.

The CCA is working to ensure lawmakers in Ottawa are aware of cattle producers’ concerns about the proposed tax changes and stand ready to work with the federal government to examine whether changes are needed and offer solutions. The CCA would like to think these unfair consequences for farm families are an unintended outcome of the proposed tax changes; the Barton Report, a set of recommendations from the Government of Canada’s Advisory Council on Economic Growth, highlighted agriculture as a primary industry for growth and exports for Canada, with an objective to increase agricultural exports to at least $75 billion annually by 2025.

We have also joined forces with more than 30 organizations representing small business under the Coalition for Small Business Tax Fairness. Collectively, the group is recommending that the Government of Canada take these proposed changes off the table and launch meaningful consultations with the business community to address any shortcomings in tax policy without unfairly targeting independent businesses.

In September, the unprecedented wildfire situation in B.C. continued and despite some containment on some fires, the situation was far from under control. Indeed, the fires may not be truly out until next spring or summer. Most of land lost to fire is what B.C. cattle producers depend on for grazing and raising their herds.

We applaud the Governments of Canada and British Columbia for their concerted effort to quickly provide up to $20 million in AgriRecovery assistance. Assistance for affected ranchers and farmers includes feed costs and transportation to feed livestock through the recovery period, to re-establish safe winter feeding facilities and general cleanup, and up to 70 per cent of the market value of breeding animals for mortality. Assistance is also earmarked for expenses associated with veterinary mustering, transportation and rental of temporary production facilities, labour costs to repair private fences and other critical infrastructure not covered by insurance.

This information will help affected producers make the necessary management decisions and go a long way in alleviating the huge emotional and mental toll on them.

AgriRecovery does not cover income losses, however, and there will be a huge impact in loss of growth as well as ability for affected B.C. producers to market their animals per usual. The CCA continues to work closely with B.C. Cattlemen’s Association on this evolving situation.

Until next time.

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