Tag Archives: Canada

When the Pan-Canadian Approach to Pricing Carbon Pollution was announced in October 2016, it was met with passionate responses, from supporters and those in opposition.

Agricultural groups were quick to dismiss the announcement, condemning the federal government for imposing costs on their operations. Farmers in Western Canada were particularly incensed. After investing in zero-tillage practices that sequester massive amounts of carbon into the soil, they were still being forced to pay a tax.

Understanding the likely effect of the tax is of course more nuanced. I’ve spent a significant amount of time on this issue, informing farmers and interest groups in the agricultural sector on what to expect with the new policy.

How much will it cost?

Amid the cacophony of complaint, common themes have emerged. The loudest complaints are understandably economic.

Farmers produce a homogeneous product and sell into an international market. This is a perfect recipe for having zero control over the price to sell their output. This means that any additional costs incurred by farmers — from a carbon tax, for example — are difficult to pass on in the supply chain.

To make matters worse, we’re far from consensus on the extent of those additional costs, especially as the federal backstop (the policy that takes effect when provinces, including Saskatchewan, don’t have their own plan) has only just been implemented.

Farmers are exempt from most of the direct costs with the backstop policy, but indirect costs remain. The costs associated with the carbon-intensive transportation required to get the product to market will likely be the largest, followed by increases in heating expenses and, possibly, fertilizer.

Both sides of the debate tend to bolster their arguments by pointing to British Columbia’s experience with an agricultural carbon tax. When the tax was implemented in 2008, agricultural energy inputs such as diesel were not exempt.

This naturally prompted concern about the sector’s ability to remain competitive with international jurisdictions not subject to the tax — a rational, justified concern. Later, economists Nicholas Rivers and Brandon Schaufele demonstrated that such concerns were likely overblown. Perhaps the study came too late, or perhaps the political power of the farm lobby was too strong to overcome, but in 2014, the sector was permanently exempted from the tax.

Diverging strategies on the Prairies

The bulk of Canada’s agricultural production occurs in the Prairie provinces where carbon tax opposition has been fierce.

Saskatchewan is in the midst of a lawsuit challenging the authority of the federal government to impose such a tax, and several parties throughout the country have taken sides as intervenors in the case.

Alberta, overruling the objections of its farm sector, imposed its own tax in advance of the federal announcement. In designing a custom tax policy, Alberta moved to protect its agricultural sector from the direct costs of the tax while still providing incentives to cut emissions.

This level of flexibility has been removed in the latest iteration of the federal backstop, constraining provinces that have not yet adopted carbon pricing to a much narrower range of choices. Alberta’s system is far from perfect, but does more than the federal policy to reduce agricultural emissions.

Misplaced focus?

Neither B.C.’s progressive system, the flexible system of Alberta, nor the default federal backstop tax the largest source of agricultural greenhouse gas emissions. In 2016, agriculture accounted for 8.5 per cent of Canada’s emissions, and of that, carbon dioxide only accounted for four per cent.

Nitrous oxide (48 per cent) and methane (48 per cent) make up the rest. Both are potent greenhouse gases. Preventing the emission of one kilogram of nitrous oxide can be much less costly than preventing 300 kilograms of carbon dioxide.

But a well-understood fact from environmental regulation suggests that an optimal policy induces change at the lowest possible cost. Taxpayers benefit more from greenhouse gas reductions that cost $15 per kilogram compared to those that cost $30.

The current federal policy does not facilitate this lowest possible cost arrangement, nor was it designed to. The idea was for each province to construct a plan suited to its economy and energy generation sources, not to act as a one-size-fits-all for a country as diverse as Canada.

For provinces with large agricultural sectors, the lowest-cost option for reducing greenhouse gas emissions may very well be in agriculture. But the political strength of the sector makes such policies difficult to envision.

Can Canada reach its climate goals without incentivizing meaningful emissions reductions in agriculture? Perhaps in the first few years of the policy. But for the most cost-effective reductions, we need agriculture to play a role.


Saskatchewan is asking Ottawa to increase its cash advances to canola farmers because of China’s decision to block imports of the oilseed from Canada.

The province says it is looking to the federal government for help because China’s ban has caused trade uncertainty in the canola industry.

Saskatchewan is requesting the amount of money available to canola farmers through a federal advance payment program be increased to $1 million from $400,000.

The province also wants the program’s end-of-March deadline to be extended by one month and that no interest be charged on the maximum payment amount until the issue with China is resolved.

Saskatchewan’s ministers of agriculture and trade are to meet with their federal counterparts in Saskatoon this afternoon.

China’s move to ban $2 billion worth of canola imports is perceived to be part of a growing rift between the two nations since Canada arrested Meng Wanzhou, daughter of the founder of telecom giant Huawei, at the behest of the United States.

WASHINGTON, D.C. – Quick Congressional approval of the U.S.-Mexico-Canada Agreement or USMCA, while vital to maintaining $39 billion in agricultural exports as a result of NAFTA, will send much a bigger trade message to other U.S. global trading partners.

In comments to Michigan farmers attending the Michigan Farm Bureau’s annual Washington Legislative Seminar, American Farm Bureau Federation Economist Veronica Nigh said approval of USMCA, has far bigger implications.

“If we can’t renew our trade vows, so to speak, with Canada and Mexico, it seems unlikely that other countries are going to be very excited about entering into new trade agreements with the United States,” Nigh said. “Really it’s more of a gatekeeper type of agreement to show the U.S. is serious on the promises that we’re making related to trade and our trade negotiations.”

Even though USMCA, the successor to NAFTA, was signed by the three countries last November, under Trade Promotion Authority rules authorized by Congress, several steps must occur before a vote, including a published list of the changes to U.S. law necessary to implement the agreement.

One final preliminary step, says Nigh, is an Economic Impact report by the U.S. International Trade Commission, due to Congress in mid-April. Even though Congress has a limited number of days to consider the trade agreement, the behind the scenes horse-trading is already in play to ensure Congressional passage once the USMCA agreement is released.

This is also the first Free Trade Agreement (FTA) that includes measures to related to biotechnology and gene editing, as well as provisions that enhance science-based trading standards among the three nations as the basis for sanitary and phytosanitary measures for ag products, as well as progress in the area of geographic indications.

According to MFB National Legislative Counsel John Kran, NAFTA exports to Canada and Mexico for Michigan farmers represented over 65% of all Michigan agricultural exports.

EU Trade Negotiations

Nigh said the U.S. and European Union (EU) have agreed to begin negotiations for a trade agreement, and is expected to expand the world’s largest commercial relationship, currently worth $1 trillion of trade in goods and services annually and $3.7 trillion in two-way direct investment.

While the EU has strongly resisted including agricultural issues in negotiations, the Trump Administration has insisted that agriculture be included in the talks and the negotiating objectives that were submitted to Congress on January 11, 2019, include agricultural issues.

The U.S. exported $12.7 billion in agricultural products to the EU in 2018 while the EU exported $23.7 billion in agricultural products to the U.S.

According to Nigh, disputes around sanitary and phytosanitary (SPS) measures and their impact on trade have been a significant part of the strained agricultural trade relationship between the U.S. and EU., resulting in barriers to exports of U.S. beef, pork and poultry, along with the slow approval process for biotech products.

“The biggest issues we have today are no longer tariff issues but their non-tariff barriers in the scientific realm and that’s really where a lot of our issues with the EU why it’s related to how they treat science,” Nigh said.

Farm Bureau is insisting that measures taken to protect human, animal or plant life or health should be science-based and applied only to the extent necessary to protect life or health. The U.S. follows a risk-assessment approach for food safety while the EU is additionally guided by the “precautionary principle,” which holds that where the possibility of a harmful effect exists, non-scientific risk management strategies may be adopted, according to Nigh.

“Farm Bureau has also asked for substantive changes to the EU approach for approving the products of biotechnology,” Nigh said. “The EU system for regulating biotech products must be science-based and efficient in generating approvals for U.S. products.”

The EU systems of geographic indications (GIs) for foods and beverages that designate their production from a specific region are legally protected for their original producers. The U.S. has opposed recognizing geographical names for foods that would inhibit the marketability and competitiveness of U.S. food products.

Achieving tariff reduction and elimination is important for the future growth of U.S. exports to the EU. The average U.S. tariff for imported agricultural products is 5 percent, with 75 percent of tariff lines at zero to 5 percent tariff. For the EU, the average tariff on imported agricultural imports is 14 percent, with 42 percent of tariff lines at zero to 5 percent tariff.

What about China?

Nigh said even though trade negotiations are ongoing, the damage to U.S. agricultural exports and the fallout on the U.S. farm economy has been severe – with a long-lasting impact even after the tariff and trade disputes are resolved.

“All U.S. soybean exports to China are basically done,” Nigh said, adding that even with prices on U.S. soybeans plummeting to competitive levels even with tariffs, Chinese buyers are seeking other sources.

“As the world’s largest hog producer, China normally had a 20 percent inclusion rate for soybean meal in their feed rations,” Nigh said. “Now they are seeking not only alternative sources of soybeans, but alternative sources of protein, with a goal to reduce their overall soybean meal inclusion rates to 12 percent.”

What about recent reports of record Chinese purchases of U.S. corn? While acknowledging the 300,000 ton purchase is substantial, Nigh said it pales in comparison to the total 49 million tons of U.S. corn exports in 2018.

Canadian farmers are facing an uncertain future after China escalated its feud over canola on Tuesday.

“There is a lot of confusion amongst farmers about what is able to be exported,” said David Quist, executive director of the Western Canadian Wheat Growers. China blocked canola shipments from a second Canada-based producer on Tuesday over alleged contamination issues.

A statement on China’s General Administration of Customs website said officials detected several hazardous organisms in canola shipments from Regina-based Viterra Inc. Viterra, which is part of Glencore Agriculture, did not immediately respond to a request for comment.

Winnipeg-based Richardson International Ltd. had its export permit revoked in March due to hazardous organisms allegedly found in the company’s product.

Since then, the Canola Council of Canada said all of its members have reported that Chinese importers are unwilling to purchase their products.

The result is uncertainty at the cusp of planting season, which begins in mid- to late-April for many farmers.

Quist said farmers have a lot of questions: “Therefore, a lot of people are saying: ‘What should I be planting? What should I be putting in the ground? Is there going to be a market for my product by the end of harvest season when it’s coming off the field?”

The canola council echoed that concern.

“When China injects uncertainty, it makes growers question whether they should grow food for Chinese people, said Brian Innes, vice-president of public affairs with the council.

Canadian producers will make decisions that are best for their farm, he said.

One canola farmer, David Reid, told The Canadian Press late last week that the reports of a purchasing block by China on Canadian canola will make him think about other options.

“We don’t want to grow something we can’t sell,” he said, adding there aren’t many other crop options in the part of Alberta where his farm is located. Other options available to him tend to sell for less than canola traditionally has, he said.

Both the wheat and canola groups called on the government to send a delegation to China to address the issue.

China — a major market for Canadian canola that accounts for about 40 per cent of Canada’s exports of canola seed, oil and meal — is the sole country to raise a technical issue with the product, said Innes.

Authorities in Canada’s other export markets, including the U.S., Mexico, the European Union, India and Japan, have not raised any issues, he said.

“We’re very perplexed because we’re confident in the quality of our Canadian canola.”

But China raised a technical concern and there needs to be a technical solution, he said.

Prime Minister Justin Trudeau mentioned the possibility of sending a delegation, in response to questions from reporters during a stop in Winnipeg on Tuesday.

“We’re very much looking at the possibility of sending a high-level delegation to China,” he said.

“We know that the canola produced here in Canada is top quality, and the oversight, inspection and science that surrounds what we do here is top-notch and world-class, and that is certainly something that we are going to continue to impress upon … our Chinese interlocutors on this issue.”

Some have suggested the canola ban is connected to the Canadian government’s decision to arrest a top Chinese tech executive in December at the behest of the United States. Canadian authorities arrested Meng Wanzhou, the chief financial officer of Chinese tech giant Huawei, in Vancouver and the government has since approved for her extradition case to proceed.

“But we are taking very seriously this situation around canola as well,” said Trudeau.

WASHINGTON (AP) — President Donald Trump and House Republicans moved to build congressional support for the U.S.-Mexico-Canada trade accord on Tuesday with lawmakers selling the plan as offering big benefits for American workers. But prospects remain uncertain as Democrats are in no hurry to secure a political victory for the president.

GOP lawmakers emerged from a White House meeting knowing they likely have a narrow window to push it through both chambers of Congress, given that lawmakers tend to avoid tough trade votes during election season.

“There are a lot of big wins for American workers in this agreement,” said House Minority Whip Steve Scalise, R-La. “We’d like to see it move through Congress as fast as possible and create even more jobs with this growing economy.”

The White House described the meeting as the first in a series that Trump will have with lawmakers on both sides of the aisle “to build broad support” for the pact.

Rep. Earl Blumenauer, D-Ore., the chairman of the House subcommittee that has jurisdiction over trade, said the pact needs adjustments to be “worthy of support.”

Some Republican lawmakers also have concerns. Sen. Chuck Grassley of Iowa, the Republican chairman of the Senate Finance Committee, maintains that the president should lift steel and aluminum tariffs on products brought in from Canada and Mexico as a first step to getting the trade agreement through Congress.

Trump’s top trade negotiator, Robert Lighthizer, told lawmakers during a recent congressional hearing that if they don’t pass the trade agreement, the United States will have “no credibility at all” with future trading partners, including China.

“There is no trade program in the United States if we don’t pass USMCA. There just isn’t one,” Lighthizer said.

The White House’s legislative affairs team has talked to more than 290 members of Congress and staff over the past two months to push the deal. But the administration knows that making changes in the agreement to win over lawmakers could jeopardize support for the pact from Canada and Mexico.

Sen. Joni Ernst, R-Iowa, told reporters recently that many in her state’s agricultural community are “still with the president, but if we don’t get the trade deals done, they could turn quickly.”

She said, “We need to start wrapping this baby up.”

The trade deal is designed to supplant the North American Free Trade Agreement , which took effect in 1994 and gradually eliminated tariffs on goods produced and traded within North America.

U.S. trade with its NAFTA partners has more than tripled since the agreement took effect, and more rapidly than trade with the rest of the world.

But Trump has called NAFTA a disaster for the United States. The new pact his administration negotiated is meant to increase manufacturing in the United States. Trump is warning that if lawmakers don’t approve the pact, the U.S. may revert to what he has described as “pre-NAFTA.”

Blumenauer is looking to make changes to the agreement in four areas: enhancing environmental and labor protections, ensuring enforcement of the agreement, and taking on protections for pharmaceutical companies that he believes drive up drug costs for consumers.

“I don’t think anyone wants to blow it up, but there is interest in strengthening it,” Blumenauer said.

Rep. Vern Buchanan of Florida, the ranking Republican on the trade subcommittee, said he believes the vast majority of Republicans will end up voting for the agreement. He’s tried to assure Democratic colleagues that Republicans were “open-minded to try and get some things done” to address their concerns.

Still, Republicans conceded that Democrats are in charge of the calendar.

“Ambassador Lighthizer has said legislation will be sent to the Hill when Speaker Pelosi gives the green light,” said Rep. Kevin Brady, the ranking Republican on the House Ways and Means Committee.

Brady said Republicans would work with Democrats to address “any fine-turning” they’d like to see, adding “we think it’s crucial … that we come together and pass this new agreement and get it to the president’s desk this summer.”

Canadian officials have been lobbying the U.S. to end Trump’s steel and aluminum tariffs and have suggested that approval by Canada’s Parliament could be conditioned upon them being lifted. David MacNaughton, Ottawa’s ambassador to Washington, has said it will be a tough sell to pass if the tariffs are still in place.

Dan Ujczo, a trade lawyer and Canada-U.S. specialist in Columbus, Ohio, said the trade deal could pass “relatively quickly” once the tariffs are removed.

But Scalise described the tariffs as helping to create more leverage to get a deal done.

In Mexico, the administration of then-President Enrique Pena Nieto spearheaded Mexico’s negotiations, but representatives of current President Andres Manuel Lopez Obrador were deeply involved in the talks to ensure an agreement that both the outgoing and incoming administrations could live with.

Allies of Lopez Obrador, who took office Dec. 1, enjoy a large majority in the Mexican Senate, so passage of the agreement would seemingly go smoothly.

Kenneth Smith Ramos, who was chief negotiator for Pena Nieto’s government and now works as an international trade consultant at Mexico City-based AGON, said Mexican enthusiasm for the deal could dim though if there are significant new demands on labor, pharmaceuticals, the environment or other issues.

“We made some important concessions,” he said, adding that if “the U.S. still wants more, then that starts to unbalance the agreement and there may be a growing opposition in Mexico.”

The Congressional Research Service is looking into whether or not President Trump can legally withdraw from the North American Free Trade Agreement on his own. Politico says it’s a question the trade world would like an answer to sooner rather than later.

Can the president withdraw without Congressional support? Politico says the answer is not clear. Congresses’ research arm says, if you look solely at international law, it looks like the Trump Administration would be able to act on its own. However, it’s quite likely that the president would have problems based on domestic law. It’s difficult to say how a court case would get resolved if affected companies pursued litigation. Trump has threatened to withdraw from the original NAFTA agreement as a way to put pressure on Congress to pass the U.S.-Mexico-Canada agreement.

Administration aides have told Politico that there are no immediate plans to back out of the existing deal. One factor that might increase the possibility of legal action is if Congress signals disapproval of any attempt to withdraw from NAFTA. In the past, the Supreme Court typically says presidential power to act unilaterally is at its weakest when the White House takes action that Congress doesn’t agree with.