Brexit Could Boost Canada’s Ag Industry by Billions

Britain has officially left the European Union and faces the challenge of negotiating a new trading relationship with the bloc before the end of the transition period on Dec. 31, 2020

by Jack Buckby – PostMedia

As a net importer of most food products, the United Kingdom faces a choice of making concessions to the European Union to maintain access to its agri-food market or forging new trading relationships with Commonwealth countries like Canada that offer high-quality products with fewer regulatory barriers.

Any new agreement would come in the wake of an ineffectual rollout of the Comprehensive Economic and Trade Agreement (CETA), a deal between the EU and Canada.

“The EU’s tough quality assurance rules mean CETA hasn’t delivered for Canadian farmers. Brexit could be the answer”

 

Any new agreement would also be dependent on Canadian Prime Minister Justin Trudeau abandoning his wait-and-see policy and becoming more proactive in trade talks with the U.K.

CETA’s failure is evident in the example of True North Foods, a Canadian beef processing plant that spent $100,000 obtaining certification to export its products to Europe, only to see vastly insufficient return. The Financial Times reported that True North sent a single shipment of beef to the EU in 2019.

The owner of the plant, Calvin Vaags, said the company wasn’t motivated to export to Europe and had no immediate plans to increase shipments.

Despite the promises of improved trade following the implementation of CETA, agricultural exports from Canada to the EU fell by 15 per cent in 2018 and those numbers are not improving in any meaningful way.

Canada is unable to export much of its agricultural goods because of Europe’s strict standards relating to the use of antibiotics and growth enhancement. But Britain’s departure from the European Union could result in freer co-operation with Canada. The United Kingdom is no longer bound by Europe’s strict regulations.

In recent weeks, EU negotiators have suggested any future U.K.-EU trade deal might have even more stringent terms than currently required of Canada. The European Commission suggested it would be a mistake to allow U.K. industry bodies to certify products as compliant with the EU’s regulatory standards, signaling a potential end to a U.K.-EU Mutual Recognition Agreement that removes some of the red tape when transporting goods onto the continent.

Bad faith tactics like this were expected by Brexit supporters. And while it will likely be overcome in time, it means there has never been a better time for trade discussion between the U.K. and Canada – particularly with regards to agri-food products.

Figures from the Department for Environment, Food and Rural Affairs (DEFRA) show that the U.K. is less than 60 per cent self-sufficient in terms of fruit and vegetable production. Similarly, the U.K. still imports small quantities of wheat, more than 20 per cent of its beef and poultry, and almost 50 per cent of its pork.

This signals that the U.K. is very much open for business and ready to take new deals on agri-food imports if a deal with the European Union sours. Currently, 73 per cent of the United Kingdom’s agri-food imports come from the EU. That figure that should be enticing for Canadian businesses struggling to overcome the EU’s demanding regulatory barriers.

Co-operation between the U.K. and Canada has tentatively begun, albeit in a different form than early trade talks. U.K. Research and Innovation has offered a £2-million fund for small and medium-sized farming operations in Canada. As part of the U.K. government’s Transforming Food Production Challenge, Canadian businesses can access funding to change the way food is produced with a view to reducing emissions and improving efficiency.

The European Union’s inflexibility around the importation of modified foods could mean that such an endeavour would only benefit the U.K. and Canada, assuming an improved agri-food trade deal is agreed as part of the Brexit transition.

The U.K. imports around £3 billion worth (C$5.19 billion) of agricultural products every year. In 2015, it imported 968,000 tonnes of pork, primarily from the European Union. A new U.K.-Canada trade agreement could vastly increase pork imported from Canada.

The temporary suspension of beef and pork exports from Canada to China in 2019 cost the industry almost C$100 million, signalling both the size and strength of this industry in Canada.

The European Union’s tough quality assurance rules mean CETA hasn’t delivered for Canadian farmers. Brexit could be a light at the end of the tunnel.

Both Canadian and U.K. governments would be wise to begin trade talks and agree to a streamlined quality assurance process that encourages farmers to export meat and agricultural products.

Combined with new technology that increases yield and efficiency – something the European Union appears averse to – any new deal could see an injection of billions of dollars a year into the Canadian farming industry.

Jack Buckby is a research associate with Frontier Centre for Public Policy