Report calls for reduction in food import tariffs

Wednesday, July 31, 2013

by SUSAN MANN

A Conference Board of Canada report calling for a reduction in tariffs on food imports portrays the country as closed to food trade, particularly for supply-managed products, but that’s not true, say officials with Canada’s chicken and dairy organizations.

Mike Dungate, executive director with Chicken Farmers of Canada, says by email about 11 per cent of global chicken production is traded internationally and Canada is right in line with that by importing 10 per cent of its consumption. That makes Canada the 15th largest importer of chicken in the world.

Of the Trans-Pacific Partnership countries, which are in the midst of negotiating a trade deal with Canada, the United States and other countries, only Mexico, Vietnam and Japan import more chicken than Canada, he says. Canada allows more chicken into its country than the combination of Peru, Chile, New Zealand, Australia, the United States, Brunei, and Singapore.

And New Zealand, which is always being cited as the “shining star of international trade,” doesn’t import any chicken into its country, Dungate notes.

Released Wednesday, the conference board’s report argues significantly lower import duties on food would benefit both the food industry and Canadian consumers, who would get a greater variety of food products at lower prices. The food industry can become more prosperous by serving fast-growing markets, which benefits all Canadians.

Dungate says the report is a one-sided argument against supply management “for no good reason.” The conference board picks and chooses “questionable, if not spurious, arguments that attack Canada’s supply management sector.”

Michael Burt, conference board director, says food tariffs should be reduced to “as low as possible.”

He also questioned whether some tariffs, such as the ones on coffee and tea, should be in place at all. “Aside from revenue raising, what’s the policy objective of those sorts of tariffs?” he asks.

Food is the one last major area where there is huge room in Canada and in other countries for reductions in trade barriers. “It (the food industry) is still very much protected,” he notes. The supply managed commodities in Canada – dairy, eggs and poultry – are the ones with the highest tariffs still in place “and where they are the most restrictive in terms of allowing imports.”

Asked how Canadian consumers would benefit with lower import duties, Burt says there would be lower prices for goods and “the other major benefit for consumers would be a greater variety of food choices.” For example, in Europe there are a variety of yogurts available. “They are much more widely available than what they are here,” he says.

The report recommends the federal and provincial governments re-evaluate supply management policies “in terms of trade gains,” the board’s July 31 press release says. “Extremely high barriers in dairy, eggs and chickens are holding back opportunities for growth in other less-protected agricultural commodities like pork and beef.”

Thérése Beaulieu, spokesperson for Dairy Farmers of Canada, says there’s no substance behind the conference board’s claim supply managed sectors are holding other agricultural commodities back. “They (the conference board) have nothing to back it up.”

In the past, a number of trade deals have been signed by Canada “while keeping supply management,” she explains.

The conference board focuses on over-quota tariffs, which are very high. For example, the over-quota tariff for chicken is 238 per cent, while for yogurt it’s 237.5 per cent. The over-quota tariffs kick in when the amount being imported exceeds the limit on imports Canada agreed to allow as part of a previous World Trade Organization agreement. But most importers don’t pay the high rates because imports don’t exceed the limits allowed in at the lower tariff.

Dungate says the chicken being imported into Canada comes in either duty free or at a minimal 5.4 per cent tariff.

Beaulieu says no dairy importer actually pays the over-quota tariffs. For example, importers of Italian Parmesan cheese are only paying three cents per kilogram of import duties because the amount coming in is within the limit permitted at the lower tariff level.

“Trade is never black and white and it’s not one-size fits all,” she says, noting the conference board report talks about consumers but fails to note it is retailers who set the prices in the stores.

The conference board’s report hasn’t shaken governments’ resolve to support supply management. Patrick Girard, spokesman for Agriculture and Agri-Food Canada, says by email the federal government strongly supports supply management and defends interests important to these industries domestically and internationally. “Canada’s supply management system serves both Canadians and the dairy, poultry and egg sectors well.”

Gabrielle Gallant, spokesperson for Ontario Agriculture Minister and Premier Kathleen Wynne, says by email the province supports the supply management system, which “has a proven track record of protecting Ontario producers, processors and consumers from extreme market fluctuations experienced in other countries around the world.”

Ontario is working with the federal government to ensure its interests are well represented as trade talks are conducted, including “the ongoing commitment to maintaining supply management,” she notes.

Highlights from the report include:

• Food trade barriers have fallen during the past 20 years but Canada still maintains high tariffs especially compared to similar countries.
• Canada is unlikely to gain the full benefits of its current trade negotiations, in particular ones underway with the European Union and the Trans-Pacific Partnership (involving 12 countries in the Asia/Pacific region), without agreeing to reductions in tariffs on food products.
• Food imports provide Canadians with products they could not otherwise obtain at affordable prices.

The conference board says in its release a forthcoming Centre for Food in Canada report will consider potential options for reforming supply management policies. The centre is part of the conference board. BF