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Building global trade partnerships

The backbone of many Canadian agriculture commodities is trade. It's what has allowed several sectors to expand and has given us our reputation as a global breadbasket. The last year was an active one on the Canadian trade front with some new bilateral agreements being signed and negotiations continuing on others, including a free trade deal with the European Union.

What lies ahead for 2010? Plenty of opportunities but also some potential pitfalls to be mindful of, predicts Mary Lou McCutcheon, an economist and consultant with Guelph-based Synthesis Agri-Food Consulting.

According to statistics from Agriculture and Agri-Food Canada, Canada's agri-food exports in 2008 totaled more than 38 billion dollars. Canadian agri-food products went to 195 different countries around the world.

In the last two years, Canada has signed new bilateral trade agreements with Jordan, Columbia, Peru and the European Free Trade Association (Norway, Switzerland, Lichtenstein and Iceland) and is actively involved in negotiations on 12 others.

"Exports are vitally important to Canada, especially for agriculture so the opening of new trading relationships is critical," says McCutcheon. "And although Canada is really supportive of the WTO process, we can't rely solely on it to open doors for us. That's why we have to move ahead with bilateral agreements."

The current round of global trade negotiations at the World Trade Organization (WTO) began in 2001 in Doha, Qatar with the goal of helping poorer countries prosper through trade and is still ongoing. US President Barack Obama and other G-20 leaders have set a goal of finishing the almost ten year old WTO negotiations this year, but talks have stalled over demands for more market access in exchange for cuts in farm subsidies. For Canada, the WTO talks are a complex issue due to the parallel nature of Canadian agriculture.

"We produce a very diverse group of commodities in Canada and not all are looking for the same outcomes to the WTO talks," explains McCutcheon. "This makes Canada's position very challenging."

A free trade agreement between Canada and the European Union would give this country access to a collective market of approximately 500 million people across 27 member states. Canadian agricultural trade is also growing on a commodity-specific basis, including an expansion of meat exports into Russia. In the fall of 2009, Russia announced it would expand access for Canadian beef to include all beef from cattle under thirty months of age and boneless beef from cattle over thirty months of age.

Canada has to continue to aggressively pursue trade opportunities if it wants a healthy and competitive farming sector, says McCutcheon.

"If we don't work to get bilateral agreements - like free trade with the EU - in place while the WTO talks are ongoing, we will lose out" she explains, adding that the United States in particular has been aggressively pursuing free trade agreements over the last number of years, with 17 currently in place and another three are awaiting Congressional approval.

However, Canada's global agricultural trade prospects come with some cautions as well. According to McCutcheon, there is risk in further developing a market based largely on export opportunities. Both Canadian beef and pork have seen markets shut down or their access limited - H1N1, Country of Origin Labelling and BSE are recent examples - that have had devastating impacts on their sectors.

Insights - so what does it all mean?

Maintenance is as important as expansion: The size and strength of Canadian agriculture is already heavily based on export opportunities. We need to work proactively to maintain those markets and ensure we have strong relationships with our trading partners.

Pursuing global opportunities: We must pursue global agreements to make sure we have market access for many of our export-based commodities. Meeting the diverse needs of consumers in different markets will be important to future growth for Canadian agri-food exports.

Alternative strategies: There are risks attached to developing an industry based on market access to another country. Canadian pork, beef, canola and flax producers have experienced this first-hand. Diversity in products and markets is important and it should be part of agriculture's long term outlook to have alternative strategies in place should product be unable to move to an export country.


Sincerely,
The Synthesis Agri-Food Consulting Team

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