On Oct. 28 the Quebec Farmer’s Association, which advocates for the English-speaking agricultural community in Quebec, hosted a virtual talk on the subject of how the agricultural industry is being affected by ongoing trade dispute with the U.S..
The talk was hosted by Tyler McCann, the managing director of the Canadian Agri-Food Policy Institute, an agriculture-focused think-tank, who happens to also be a beef producer in Clarendon. McCann was a federal political staffer in the Harper era, primarily working for the Minister of Agriculture and specializing in trade.
He started by quoting the infamous “known unknowns and unknown unknowns” line by former U.S. Defence Secretary Donald Rumsfeld in regards to the uncertainty that President Trump’s negotiating strategy has created.
“This is a giant disclaimer for everything I’m about to say,” he said. “I’m going to speak to what I know are the known knowns and what I think are the known unknowns, but there’s a whole bunch of things that we just don’t know anymore. For example, I don’t think anybody knew that an ad campaign was going to lead to the breakdown in trade negotiations between Canada and the United States.”
McCann also spoke about how the U.S. treated its agricultural sector as a bargaining chip in trade negotiations during Trump’s first term, and just compensated its farmers for any losses.
“This idea that you can just pay farmers off, which I think they used that approach relatively successfully in the first administration, just isn’t as effective now, there’s too many moving parts, too many things being disrupted at the same time,” he said, pointing to reporting from Forbes that showed compensation to U.S. farmers exceeded spending on the U.S. nuclear weapons program.
McCann said that despite the focus being paid to the president’s social media posts, this fixation on tariffs and the rejection of the bipartisan free-trade consensus that dominated U.S. trade policies in the recent past is part of a larger ideological movement.
“It isn’t just the president and his tweets, but it is a movement of people that have come behind him that are taking advantage of his popularity and they’re using that to re-write how global trade works,” he said, pointing to the book No Trade is Free by Robert Lighthizer, the U.S. trade representative during Trump’s first term, as an articulation of this worldview.
“If you look and understand what’s going on behind, I think it’s much worse, because this isn’t about a president that doesn’t like how the world works, this is like a movement of people that are looking for generational change in how global trade politics work,” he continued. “This is not something that will go away when the U.S. president changes and goes away, this is something that as long as the Republicans keep getting elected – and it looks like the Republicans will keep getting elected – it’s likely to be the predominant view.”
He added that while there has been domestic opposition to how the president implemented his tariff scheme (including a case before the Supreme Court), he was sceptical that it would change much.
“I think there’s this hope that the Supreme Court will come to the rescue, but even if they do that’s likely to be short-lived because the president will just use some other powers and that will have to go through the courts and that will go through this whole process again,” he said.
The four Ds
As far as the primary focus of trade talks between Canada and the U.S., McCann said they were focused around the “four Ds”: drugs, defence, the digital services tax and dairy.
He said that on drugs and defence, the Canadian government had moved aggressively, making moves to beef up border security and pledging to increase its defence spending to five per cent of GDP.
He added that the government also quickly scrapped the digital services tax in June, which would have taxed large tech companies, many based in Silicon Valley, on the revenues they generate from Canadians. With those out of the way, the only irritant that remains, in the view of U.S. representatives, is dairy.
“It seems like the old rules, where you just have to make the U.S. dairy stakeholders happy [ . . . ] That may not work anymore because the president’s got a different fixation,” he said. “We’re waiting to see what this looks like.”
In the question period following the talk, McCann expanded on his view of how the U.S. dairy industry sees the Canadian market, as compared to the president’s bluster. He said that their specific demands relate mostly to the access that they have already been granted in previous negotiations, through what are called tariff rate quotas (TRQs).
“It reflects that they don’t want to flood our market, they don’t want to see supply management disappear,” he said. “They view the Canadian market as a high value, high margin market. If they destroy supply management it just becomes a little more of the U.S. market and that doesn’t benefit them in the same way. They need, to be honest, our high milk prices to be maintained in order to really be able to benefit from access to the Canadian market. That’s why I don’t think you see the U.S. dairy industry itself really aggressively asking for the type of concessions that would disrupt supply management.”
He said that while Canada is living up to the letter of the law in regard to dairy TRQs, likely isn’t living up to its spirit.
“The way we gave this access is with these tariff rate quotas, which said for these agreed-to volumes, the United States will get access to the Canadian market. But we limited how the U.S. could get access into that market by saying only, effectively, processors could get access to that quota,” he explained. “And that meant that retailers, who were ultimately, you would have thought would often be the ones that would be getting the access to it and selling it, couldn’t get access to it. The preference for U.S. dairy exporters was to be able to deal directly with Canadian retailers, which would mean, kind of, one less middleman in the way, more money for the U.S. exporter, more money for the retailer. It would give them a chance to go after higher value products, but Canada put in place a set of rules that meant that that couldn’t happen.”
McCann said discussions around whether supply management should be on or off the table are beside the point, as the decision is out of Canadian hands.
“You know, we’ve had this big debate in Canadian agriculture, Canadian ag policy over the last year about whether supply management should be on or off the table, and I don’t think that’s a relevant debate. If the U.S. says, ‘We want to talk about dairy,’ Canada’s going to talk about dairy, and that’s just the practical reality of the situation,” he said. “This isn’t about whether we should make concessions or not, but this recognition that governments only make concessions when it’s necessary. I don’t know of any government that goes into a negotiation and willingly gives things up, but if they have to make concessions, governments are going to make concessions.”
McCann said that Canada has a lot more at stake in these negotiations than other countries, which is why he believes that Canadian negotiators are moving slower than some of their counterparts who have already secured trade agreements. He said that calculating what constitutes the national interest is really difficult.
“The space I think we’re getting into is, how do you decide what’s a good deal for Canada at the end of the day, and that math is really hard to do and that math really depends on where you sit,” he said.
