USMCA a win for trade protectionists and a loss for the Canadian consumer, says critic
While dairy farmers and those in other supply managed sectors of the economy might be grieving the new USMCA deal signed between Canada, Mexico and the United States, the rest of the Canadian agriculture sector is likely counting their lucky stars, says Danny Le Roy, a professor at the University of Lethbridge’s Department of Economics and Senior Fellow with the Frasier Institute.
“One needs to keep in mind the other 92 per cent of primary producers that aren’t producing supply-managed commodities,” says Le Roy. “I think these people are breathing a huge sigh of relief that there wasn’t a bigger cluster-flub.
“There is some certainty now in the way beef, cattle, oil seeds or grains are marketed.”
Le Roy is an outspoken critic of Canada’s supply management sector’s protections, but even those of the keenest nationalist sentiment when it comes to trade, he says, must realize if it is a matter of choice between Canadian autos or Canadian cheese the decision was pretty obvious for the Canadian negotiators.
“There was certainly tacit knowledge there would be increased access for American dairy products in Canada,” states Le Roy, “and some form of compensation had been in the works for probably some time.
“One of the original comments by President Trump was supply management had to be eliminated, but rather than having it eliminated the federal government was able to negotiate a 3.6 per cent access.
“The upside for dairy producers, as opposed to having to lose their beloved system, is they only ended up only conceding 3.6 per cent of the market, which is tiny.”
Le Roy says the agreement also ensures supply managed sectors have time to adjust by having a six-year phase in time and promises of off-setting compensation from the Canadian government as that transition takes place.
But Le Roy does acknowledge the loss of Class 6 and Class 7 milk product categories may have a more far-reaching impact than anticipated on the Canadian dairy sector as farmers need to find new markets for their raw milk products outside of the United States.
“That could be problematic,” Le Roy admits.
According to the Dairy Farmers of Ontario, Class 6 or Class 7 milk was used to “process skim milk components or condensed skim milk components, wet or dry, into an ingredient to be used in processed milk products. For example, skim milk powder, milk protein concentrate, or ultra-filtered milk.”
But still, says Le Roy, the big loser in this USMCA agreement isn’t the dairy sector, it is the Canadian consumer.
“I thought it was an agreement negotiated between protectionists on either side of the three borders,” he states. “One of the things that underscores this, as somebody said in the newspaper last week, they had the decency to take the words ‘Free Trade’ out of the agreement …
“We talk about concessions to the dairy industry, but what really should have been talked about was improved access to Canadian consumers for products they wouldn’t have been able to get otherwise.”
By this measure, the agreement was an a resounding dud, says Le Roy.
“The gains are really minimal,” he states bluntly, “and on the edges of the margins.”
But still, Le Roy admits, it could have been worse.
“If we limit our focus to agriculture, I would say the outcome is probably as good as could be expected,” he says.
“The reality is the positions haven’t changed. How long were the negotiations? Fourteen months? And nothing really changed at the end of the day.”