Over the past few years the phrase “unprecedented times” has been used often and for good reason. There has been a continual domino effect of global events that has put a unique strain on many things, especially global trade. The result is that change isn’t coming — it’s here.
As a country, Canada needs to look at what needs to shift within our policies in order to remain a main player in the global trade game, says Al Mussell, research director with The Canadian Agri-food Policy Institute (CAPI).
Mussell has co-authored a report looking at possible policy solutions that would address the quickly-changing global trade market. He agrees that these are in fact unprecedented times, this even in comparison to the early 1970s where food prices were reaching an all-time high. He says that factors and variables present today create a more worrisome situation than what it was 50 years ago.
There are a handful of key factors that create a perfect storm of vulnerability and possible scarcity among countries. Firstly, China’s aggressive economic growth goals push the first domino as that means they are a massive importer of ag products.
“If you look at countries like Argentina, for example, on soybeans, China will go and just basically buy all the soybeans or if Argentina would prefer to sell oil and meal? Well, then then China just literally buys all of it,” Mussell says.
Exporting countries, such as Argentina, and more-so now with the focus being on Ukraine, are becoming increasingly concerned with their own food security, which then affects the amount of product which is available for export and revenue. This issue leads in the next domino where governments, specifically in the United States, are looking at freeing up conservation reserve acres to use for crops to alleviate some of the scarcity concerns. Mussell also points to another emerging market that may take some by surprise, effectively pushing another domino.
“The other thing that’s playing along here, sort of in parallel, is this move to renewable diesel. So this is diesel fuel, that can be made from 100% vegetable oil, so canola oil, soybean oil, rendered animal fats, etc. And, you know, the capacity that is going in the U.S. in particular, I think, largely driven out of some of the aggressive climate change, or greenhouse gas emission mandates of California, but we’re also building plants in Canada, largely around canola oil, like the demand, this demand is massive. On the green side, it’s not it’s a new demand for green, but it is a demand for acres that switch between oil seeds and green. So as a result, everything goes up with us. I don’t know how we’re gonna manage all of this.”
Speaking of climate change and reducing greenhouse gas emissions, the report that although we need to shine a light on the issue and work towards those reduction goals, it should not be at the expense of the agri-food industry, nor at the expense of feeding people here at home and around the world.
“The dilemma we’re facing now is we only have limited resources here. How are you going to be so proactive on climate change, and we’ve focus somewhat on fertilizer and nitrogen fertilizer, which everybody knows has a yield response to it? So, how are we going to do that, and then also address this, these worrisome food security problems in the world? Now, now, very much exacerbated by the immediate term situation in Ukraine. I think we have to take seriously the idea that you can’t save greenhouse gas emissions in agriculture by just, let’s say, cutting back to fertilizer and producing less. That’s not, That’s not real. So, we have to balance our ambitions between greenhouse gas emissions, but also we have to feed people.”
Mussell and his colleagues also outline a possible emerging concern with predatory trade disputes — one that we’ve already seen play out with Canadian meat exports to China within the era of COVID. In this scenario, China implemented new measures Canadian meatpackers would have to abide by if they wanted to export their product to China. This in turn cuts into the bottom line of those meatpackers and if done long or often enough, could either bankrupt those businesses, or leave them vulnerable to be bought by foreign entities for pennies on the dollar, who very well may not have the same interests in mind.
At the end of the day, Mussell says he is concerned that Canada may be playing too naïve of a hand within changes that need to be implemented rather soon in order to combat all of the above, or at least to try and get ahead of it.
The perspective report ultimately outlines three suggestions that Mussell and his colleagues, hope are taken under advisement when looking at policy change in the wake of global change. These suggestions include:
- An emphasis on sustainability and climate change is needed but it cannot be at the exclusion or expense of agricultural productivity and Canada’s role in domestic and global food security. Agri-food policy must take on a more ambitious agenda that recognizes that important norms and guardrails — established historically, and the basis for current policy parameters — are at risk of being breached.
- The distortions in agri-food trade are increasingly being used as a geo-economic weapon in which open-economy exporters like Canada are vulnerable. Greater efforts in market access advocacy will help, but Canada needs to adjust its trade policy to recognize these risks by aligning with like-minded countries in using market leverage to mitigate these risks.
- Governments in Canada must find a way to work differently, or create a new policy space, with agri-food firms and exporters to mitigate increasing risks from predatory trade disputes, or acquisition of Canadian agri-food assets by others whose interests are not aligned with Canada’s.