The Standing Senate Committee on Foreign Affairs

Wild Rose Agricultural Producers perspective on NAFTA 

An Albertan producers look at the policies that effect the 1994 North American free trade agreement.

Wild Rose Agricultural Producers recognizes the value that the NAFTA has brought to Alberta since the inception of the NAFTA Agreement in 1994.  The United States (US) and Alberta share a strong trading relationship based on NAFTA with the United States representing our largest export market.  In 2000, Alberta exported over $2.8 billion worth of agri-food product and because of NAFTA, less than 5% of our total trade is ever in dispute.  Under NAFTA, Alberta’s exports to the US have grown from 69% of our total exports to 84%.  The potential growth in the Mexican market is also very high.  The simple fact is that Alberta agricultural exports to Mexico since 1998 have risen from in the neighborhood of $155.2 million dollars to around $414.2 million in 2001.  This 266 percent increase shows that the agreement has worked fairly well up to this point for Alberta producers.   It has improved the standard of living and level of income in Mexico, which in turn facilitates the purchase of products such as beef, pork, canola seed, malt and malting barley, and other value added products processed in and from Alberta.  Since the NAFTA implementation in 1995, there has been a 40% increase in Alberta exports to the U.S. Not only exporting to the US, Alberta also imported $1.0B worth of US agri-food products in 2000, an increase over $890M in 1999. 

Governments within NAFTA face internal pressures on a political and economic front to also use the agreement to their best advantage, however domestic policy can seriously undermine the nature of NAFTA, such examples of these are the Americans implementation of Country of origin labeling on certain products but not on others, their use of intrusive and constant countervail investigations, complex anti dumping procedures or arbitrary food safety protocols can act as a barrier to free and proper trade.  Also any changes in political climate in Mexico must be watched carefully the current President has only been in office 2 years, replacing the party that had governed Mexico for the previous seven decades a climate of political stability is important to continue increasing trade with Mexico. 

It is always important to be mindful of the impact of domestic policies on an agreement such as NAFTA.  The policies of governments in regards to taxation, social policy, regulations, internal sector supports and fiscal management ha great deal of impact on the ability of producers to compete effectively within a trade agreement such as NAFTA.  Onerous taxation levels can make it difficult to attract the skill sets and the investments into the value added sector, which is an important component to add profit to the agriculture industry in Alberta.

Increasing environmental and biosafety protocols that put the full financial cost of implementation on the producer and does not share the costs with all that share in the benefits of such as program should be avoided to maintain to retain competitiveness with trading partners that are not yet or do not intend to implement these measures.  Yet, there needs to be the recognition amongst producers that properly designed, implemented and recognized programs such as, HACCP – based on farm food safety initiatives may help strengthen our position as a sage, clean, properly managed source for agricultural production. 

Transportation:  To properly, effectively and efficiently utilize the NAFTA agreement between Canada, USA, and Mexico there needs to be an honest and dedicated review of the transportation issue.  Canada’s transportation system was developed to move products east to west.  With the need to access markets north and south the transportation methods and corridors have to be strengthened with policy put in place that encourages competition and efficiencies in this area.  Be it in recognizing the need for improved roads, or in allowing more and better access to other forms of transportation.  Railways for example continue to lag behind the rest of the transportation system by resisting many of the ways that would improve and streamline the movement of products while increasing competition and minimizing transportation costs in the marketplace which is key to the long term success of NAFTA for Alberta producers.  The continued success of NAFTA relies very heavily on the ability to move products quickly and cost effectively to the desired marketplaces. 

International Borders:  With the, at times, perishable nature of products and the ability to capture higher values for premium markets on account of just in time delivery and freshness of product, it is important to achieve and maintain an efficient and quick way to transit products across international boundaries.  Untoward delays and loss of transit time can cause serious losses both financially and in reputation to both the shipper and the end user of a product.  It is always important to work towards ways to ensure easier/faster transiting of borders that still satisfies all other national needs for security and food safety protocols, and all other regulatory and customs standards. 

A discussion of NAFTA could not be complete without mention of two other issues, firstly the U.S Farm Bill and the impacts it can, and will, have on Alberta’s crop and livestock sector.  At a recent meeting of representatives of the agricultural in Alberta, the matter of international trade and the repercussions of enacting the US farm bill dominated the session.  The summary of the discussion illustrates the depth of concern producers in Alberta have with the present bill. 

As it relates to crops the following concerns were raised: 

·        The US farm bill will stimulate increased production of corn and soybeans through generous loan margins in turn depressing prices and reducing demand for barley and canola.

·        The development of ethanol plants in the US creates more byproducts for feeding.

·        The natural advantage Alberta has in the pulse sector may be jeopardized by US subsidies.

·        There will be a reduced demand for domestic feed if hog and cattle numbers are forced to decline. 

As it relates to the red meat industry producers raised the following points: 

·        The growth of the livestock and hog market is uncertain due to obtrusive country of origin legislation.  This uncertainly may lead to packers and retailers buying Alberta product at discount prices.

·        Alberta’s natural competitive advantage of being a low cost producer of grains, oilseeds and livestock may longer exist.

·        The viability of the livestock industry may hinge on the decisions of enterprises such as Cargill and IBP. 

While we can only ponder some of variations and complications the US farm bill presents to Alberta farmers and ranchers.  It is important to remember that much of the economic viability of the future of agriculture in Alberta hinges on mutually beneficial trade policies with the USA.  Alberta’s farmers and ranchers are willing to adjust, to seek new opportunities, new crops, new methods of production, but the challenges that the US farm bill present are daunting.  At a time when governments are demanding that our farmers and ranchers become more self-sufficient the possible closure of market opportunities with our largest trading partners leave the industry in a very precarious situation.  We need a commitment from government, from industry, and from individual producers to allocate resources for developing new markets, to reduce our dependency on the American market.  We need everyone to work towards ensuring that the country of origin legislation remains voluntary.  We need to challenge the US and its inward looking policy, and to ensure that they walk the walk of their talk.  Also something that I’m sure you have heard many times during your meetings in Ottawa and across the country, the issue of water.  Wild Rose Agricultural Producers position on water is that there should be at no time the trade of water, there is an ever-dawning realization that water may and will be at some point the most valuable commodity that we may have that the Nafta trading partners may covet.  We do not feel we have the right to trade away what may be the most valuable thing we can leave future generations and that is our water resources. 

There are policies that need to be monitored and improved.  Cross border access times, transportation issues need to be improved.  All efforts to increase our competitiveness within the framework of NAFTA should be considered. 

The very nature of an accord of this type and its effects on agriculture, are that it benefits the strengths (geographically, climactically, politically and socially) that fall within the different partners of the agreement.  We must capitalize on these strengths in order to fully gain from NAFTA, but with full understanding that anything that removes or decreases our competitiveness takes away the benefits of this agreement.  The North American Free Trade Agreement is a valuable tool in the toolbox for Alberta agri-food producers and processors but always adjustments must be made in order to gain the maximum usage and advantage of this tool.