The North America Free Trade Agreement (NAFTA) is positive for agricultural trade. The freer movement of farm and food products enables greater specialization and efficiency. NAFTA has led to substantial economic growth driven by north-south trade. The opening of negotiations to modernize NAFTA creates possibilities for further improvement, but also some uncertainty.
Historically, agriculture is the major sticking point for comprehensive trade negotiations. Perennial complaints about state-trading companies (Canadian Wheat Board) and export subsidies (Crow Rate/Benefit) are no longer on the table. With the exception of the dairy sector, agricultural concerns are over-shadowed by the loss of manufacturing jobs. In particular, the migration of car assembly jobs to Mexico. Rather than being in the thick of trade talks, Western Canadian agriculture is standing on the sidelines and could get side-swiped. For example, the Canada Transportation Act that now is before Parliament preserves the Maximum Revenue Entitlement (MRE), but some in the U.S. grain industry see the MRE as an unfair export subsidy.
After 23 years, a comprehensive review of NAFTA is desirable. The original agreement was neither perfect, nor inclusive. In the case of transport, “free trade” is non-existent. Vehicles can cross the border to deliver or pickup freight, but cargo movements within neighbouring countries are restricted to domestic carriers. Important sectors are excluded from NAFTA, like Canada’s supply managed commodities and softwood lumber. Even though customs duties have been eliminated, many non-tariff barriers (regulations, grading, licensing, etc.) continue to block trade in general. Some improvements to NAFTA are attractive. The risk is that once a process has been set in motion, it can take on a life of its own. Some concessions will be necessary on both sides.
Even as access of American and Mexican markets threatens to become more difficult, Canada has signed the Comprehensive Economic and Trade Agreement (CETA) with the European Union. CETA offers the opportunity to regain markets in the east that have been virtually closed for decades. Infrastructure investment can also reduce port bottlenecks on the west coast that affect western flows of grain to Asia. Shifting grain exports from southern markets to the east-west routes is unlikely to offset what could be lost, but having a Plan B is better than depending on hope as a strategy.