While the new US presidential administration strikes a different tone than the last four years, it is too early to say if that will translate into significant changes in relations with Canada, particularly when it comes to trade, said a Canadian official during the Canadian Crops Virtual Convention.
“Biden is much more congenial, affable, and I think means well,” said David MacNaughton, Canada’s former ambassador to the United States. “Is the substance of the Americans on trade issues, particularly as it relates to Canada, is it going to be different than it was under Trump? That’s still an open question. All of the words sound good, but I’m waiting to see the evidence, and that will take time.”
Because of the coronavirus pandemic, the normal three-day in-person event was changed to a half-day virtual event and featured speakers on a variety of topics. Next year’s event will return to the previous format and is planned for March 8-10, 2022, in Ottawa, Ontario, Canada.
Along with government officials, event attendees heard from a grower and an economist about the global outlook and life after COVID.
MacNaughton said he would be cautious about being overly optimistic about the new administration and Congress. When he worked with senators and representatives during Barack Obama’s presidency, there was a significant amount of protectionism within the Democratic party.
“The good news is we were able to renegotiate NAFTA to have a foundation in place,” he said. “I would not want to be renegotiating a trade deal under this administration. As friendly as they appear on the surface, they have in their DNA a certain amount of protectionism.
“The fact that we got that out of the way, and we were able to retain almost all the things important to Canada, sets us up well.”
China relations, WTO
Two key issues for the Canadian agriculture sector will be the ongoing struggle between China and the United States, and how Canada fits into that equation, and what the Biden administration will do about the World Trade Organization (WTO). The Trump administration did not appoint new members to the WTO Appellate Body, making it defunct.
“There’s been all sorts of nice words about rejoining international institutions and making them relevant, but I have not yet seen any pronouncement on the WTO appellate process,” MacNaughton said.
While institutions like the WTO are not going away, they may not be as effective as they once were, he said.
“They’re just not functioning as well as they have in the past,” he said. “People have found ways to use those organizations to achieve their own national objectives. There’s a lesser sense of camaraderie and shared goals. We need to continue to work with those organizations, but we have to be realistic.”
Canada will have to find ways to work with people who have common interests and take advantage of its leverage, he said.
“We’re going to have to have sharp elbows and brass knuckles every once in a while,” MacNaughton said. “We can’t just rely on the international rules-based system to protect our interests. We’re not without leverage; we just have to figure out how we’re going to exercise that and do it appropriately.”
China was allowed into the WTO with the notion that it would then be part of the international order. Instead, it is constantly abusing the rules, he said. While Canada will likely align itself with the United States on a host of issues such as Hong Kong, minorities in China and international trade issues, the tricky part will be ensuring Canada’s interests are protected.
“We’re going to have to work collaboratively on all of those issues or it’s just going to be too easy for the Chinese to use us as an example,” MacNaughton said. “It doesn’t mean we won’t have differences of opinions with the Americans on China. On the key elements, we’re going to have to have their back. We have to make sure they have our back, too, and make sure they don’t make side deals. It’s going to be a delicate balance.”
For too long, Canada has taken its relationship with the United States for granted, he said. When Trump threatened NAFTA, it jolted Canadians into action.
“We have to continue to over-engage in the US in terms of making sure that we are seen to be their best friend and strongest ally,” he said.
That means working with the United States not just on trade but security and defense, two major concerns for the United States.
“I don’t think we’ve stepped up to the degree we should,” MacNaughton said. “We have to become a better partner on security and defense if we want the same kind of partnership and recognition in trade that we expect from the Americans.”
MacNaughton was encouraged that not only did Biden and Prime Minister Justin Trudeau meet in February, but an ongoing dialogue was set up with Canadian cabinet ministers and US cabinet secretaries. Canada and the rest of the world was jolted by many things the Trump administration did, he said, so the United States needs to show it can be a trusted partner again.
“Canada can help bring the Americans back into the international community, which is going to be really important,” MacNaughton said. “If the rest of the democracies don’t trust the Americans, it opens the world for the Chinese to become more and more dominant.”
There’s no question that protectionism is on the rise, and it will manifest in a variety of ways, he said. Canada needs to show how it can contribute to the overall security of the supply chain. For example, it can be a source of minerals and rare earth elements needed for devices, renewable fuels and energy as well as oil.
“The US still depends on our oil and our emissions are lower than they are from California,” MacNaughton said. “There’s a lot of ignorance about the contribution Canada can make to their economy. We need to highlight that more and educate them more about what we can do to make them more secure and resilient because that’s the way we can fend off that protectionism.”
That will take all of the Canadian interests working together, like the Team Canada approach used in negotiating the new NAFTA.
“Unless we work together, we’re not going to be successful in a world that is becoming more competitive,” MacNaughton said. “It’s the only way to be strong enough to come up against strong countries like the US, China and the EU.”
It became particularly clear during the pandemic that Canada can do so much more and move much faster when its leaders work together, said the Honorable Jim Carr, special representative for the Prairies.
“As we come out of the pandemic, we are going to be able to build on the pillars there for us already,” he said. “They are impressive: We are growing and producing what the world needs and wants.”
Along with keeping its people safe, a top priority for 2021 is strengthening the food supply chain and agricultural innovation, Carr said.
“I get to be excited with you and the people across the prairies as we develop more sustainability in every step of what we produce, as we add value to it and export to literally every continent in the world,” he said.
Canada is following an aggressive policy of trade diversification after China started blocking canola shipments in March 2019. The Canola Council said China’s move cost the industry between $1.54 billion and $2.35 billion from lost sales and lower prices between March 2019 and August 2020.
Carr said Canada sold its first canola to Chile not so long ago and the nation has led trade missions to Japan and Korea. The nation backed its export diversification strategy with $1.1 billion in investments, including expansion of its CanExport funding program to provide up to $75,000 to help small- and medium-sized businesses break into new international markets.
“I think we’re in a better position today than we have been in a number of years,” he said. “I feel confident we’re going to emerge out of this stronger because of our commitment to diversification, more investment in trade commissioners and beefing up CanExport. I believe that 2021 will be a more optimistic year, and I’m actually quite bullish about our prospects.”
Carr was questioned about the carbon tax, which the federal government announced in December would increase from the current $30 per tonne of greenhouse gas emissions to $170 per tonne in 2030. Agriculture groups were quick to respond, saying the 467% increase over 10 years would be a major burden not borne by its international competitors.
Agriculture Minister Marie-Claude Bibeau is committed to supporting farmers and new rebates for on farm fuel use, such as grain drying, Carr said.
“This is a commitment she made and the government is making,” he said. “There will be more to learn about it in coming days and weeks. We don’t like to call it a carbon tax, we like to call it a price on pollution. It’s a price mechanism that even conservative economists around the world think is the right way to go.”
Carr agreed that agriculture’s role in reducing emissions is underacknowledged and underappreciated.
“We have an obligation to have our ears wide open to changes that are being made here,” he said. “Canada has understood the changing nature of the international energy environment. We’re on the road to sustainability and are investing in thermal energy, solar power, wind energy and hydrogen. Producers are an integral part of that. You have done an awful lot already and will continue to do more. You are an essential part of what this mix means for Canada going forward.”