Canada’s agri-food export sector, including Canada’s beef, pork, grain, barley, and pulse producers, supports the Canadian government’s efforts to expand economic ties and trade with Japan. But, to be successful, a trade deal with Japan must include a strong and commercially meaningful agriculture package.
Agriculture and food processing are key components of the Canadian economy and of Canada’s trade portfolio. Agriculture and food account for 11 per cent of Canada’s goods GDP and almost 10 per cent of Canada’s total merchandise trade. Food processing is by far the largest manufacturing employer in Canada, supporting over 250,000 jobs across the country. Added to that, there are over 220,000 farms across Canada, 90 per cent of which are dependent on or supported by export markets.
Canadian farmers and food processors already export $40 billion a year, making us the fifth largest agri-food exporter in the world. With an abundance of natural resources and boasting world-class agri-food research and innovation, Canada can continue to grow its agri-food production. But to support that growth, we need to find new markets as well as expand and improve trade to our existing overseas customers.
Japan is already an important and stable customer for Canada’s agriculture and food products. It is Canada’s third largest export market after the United States and China, representing $4 billion in agri-food shipments.
A substantive free trade deal with Japan could help expand this trade and improve export opportunities for Canadian farmers and food manufacturers. Japan is heavily dependent on food imports, has the lowest rate of food self-sufficiency among G8 countries, and boasts a large agri-food trade deficit. Quite simply, Japan must import to maintain adequate food supplies. This presents a tremendous opportunity for Canada if we can negotiate better access for our food products.
Like any trade deal though, negotiations with Japan will not be without challenges.
To start, there are significant questions about Japan’s readiness to negotiate a comprehensive trade deal that includes agriculture. While Japan relies heavily on food imports, it also protects its own farmers and food processors through tariffs and non-tariff measures that add significant costs to trade.
In 2010, Japan approved its Basic Policy on Comprehensive Economic Partnerships which suggested it would introduce domestic reforms to its primary sectors as part of a strategy to aggressively pursue bilateral trade. This has, however, proven controversial with Japan’s agriculture, forestry and fisheries sectors. How Japan manages these sensitivities is a question for internal political reflection. But the issues must be addressed. Given the importance of agri-food trade to Canada, any trade deal with Japan must include a solid agriculture and food component.
While pressing for an ambitious deal, Canada must also move quickly. In vying for Japan’s attention, Canada has some tough competition. Japan has already started negotiating trade deals with some of our key competitors, including Australia and the European Union. A multilateral trade negotiation is the best means of achieving a level playing field for agriculture and food exports around the world. However, with little progress at the WTO, export countries like Canada have to prove their metal in the bilateral trade arena aggressively staking their claim to key markets ahead of their competition. Canada learned its lesson in South Korea, when we lost half of our agri-food exports in the wake of the Korea-U.S. Free Trade Deal which came into effect just last year. We can’t afford for this to happen again with Japan.
Japan’s interest in joining the Trans Pacific Partnership (TPP) is another interesting twist - not only because of its potential impact on Japan’s bilateral negotiations with Canda, but because the TPP’s ambitious mandate will place even more pressure on Japan to address internal sensitivities. The TPP is one of the most significant and far-reaching trade initiatives around the globe. TPP leaders are advocating for a comprehensive and ambitious, next-generation regional trade agreement that liberalizes trade in goods, services, and investment, and that addresses existing and emerging trade issues in a way that meets 21st century objectives. If Japan can subscribe to these goals, its inclusion in the TPP would be a welcome development for agri-food exporters in Canada. However, there is also a risk that Japan will lower the ambitions of all TPP members.
Japan is a critical market for Canada and many countries. The Canadian government has done well to make enhanced trade relations with Japan a priority and to try and do so ahead of our competition. But, at the same time, Canada must ensure that Japan is held to a high standard in any trade deal – whether a bilateral agreement with Canada or a regional deal like the TPP. To do otherwise would sell Canadian interests short.