Brexit Could Boost Canada’s Agricultural Industry by Billions

Commentary, Economy, Jack Buckby

Britain has officially left the European Union and now faces the challenge of negotiating a new trading relationship with the bloc before the end of the transition period on 31st December 2020. As a net importer of most food products, the United Kingdom faces a choice of making concessions to the European Union to maintain access to their agri-food market or forging new trading relationships with Commonwealth countries like Canada that offer high-quality products with fewer regulatory barriers. 

Any new agreement would come in the wake of an ineffectual rollout of the Comprehensive Economic and Trade Agreement (CETA), which has seen EU regulation bolster attempts to export meat products. It would also be dependent on the Canadian Prime Minister abandoning his wait-and-see policy and becoming more proactive in UK trade talks. 

CETA’s failure is evident in the example of True North Foods, a Canadian beef processing plant which spent CAD $100,000 obtaining certification to export its products to Europe, only to see vastly insufficient return. The Financial Times reported that True North sent a single shipment of beef to the EU in 2019 which was completed in just one day in July. The owner of the plant, Calvin Vaags, said that the company wasn’t motivated to export to Europe and had no immediate plans to increase shipments.

Despite the promises of improved trade following the implementation of CETA, agricultural exports from Canada to the EU fell by 15 percent in 2018 and those numbers are not improving in any meaningful way. I have written previously about Canada’s inability to export much of its agricultural goods because of Europe’s strict standards relating to the use of antibiotics and growth enhancement, and how Britain’s departure from the European Union could result in freer cooperation between our two countries. I believe this remains the case.

The United Kingdom is no longer bound by Europe’s strict regulations, and in recent weeks, EU negotiators have suggested that any future UK-EU trade deal might have even more stringent terms than currently required of Canada. The European Commission suggested that it would be a mistake to allow UK industry bodies to certify its products as compliant with the EU’s regulatory standards, signaling a potential end to a UK-EU Mutual Recognition Agreement that removes some of the red tape when transporting goods onto the continent. 

Bad faith tactics like this were expected by Brexit supporters all along, and while it will likely be overcome in time, it means there has never been a better time for trade discussion between the UK and Canada—particularly with regards to agri-food products. Figures from the Department for Environment, Food, and Rural Affairs (DEFRA) show that the UK is less than 60 percent self-sufficient in terms of fruit and vegetable production. Similarly, the UK still imports small quantities of wheat, more than 20 percent of our beef and poultry, and almost 50 percent of our pork. While some of this is explained by carcase balance, whereby specific parts of an animal must be imported to meet demand, it signals that the UK is very much open for business and ready to take new deals on agri-food imports if a deal with the European Union sours. Currently, 73 percent of the UK’s agri-food imports come from the EU—a figure that should be enticing for Canadian businesses currently struggling to overcome the EU’s demanding regulatory barriers. 

Cooperation between the UK and Canada has tentatively already begun, albeit in a different form than early trade talks. UK Research and Innovation has offered up a GBP £2 million fund for small and medium-sized farming operations in Canada. As part of the UK government’s “Transforming Food Production Challenge” initiative, Canadian businesses can access funding to change the way that food is produced with a view to reducing emissions and improving efficiency. The European Union’s inflexibility around the importation of modified foods could mean that such an endeavour would only benefit the UK and Canada, assuming an improved agri-food trade deal is agreed as part of the Brexit transition. 

The UK imports around GBP £3 B worth (CAD $5.19 B) of agricultural products every year. In 2015, we imported 968,000 tonnes of pork primarily from the European Union. A new UK-Canada trade agreement could vastly increase Canadian pork imports. The temporary suspension of beef and pork exports from Canada to China in 2019 cost the industry almost CAD $100 M, signalling both the size and strength of this industry in Canada.

The European Union’s tough quality assurance rules mean that CETA hasn’t delivered for Canadian farmers, but Brexit could be a light at the end of the tunnel. Both Canadian and UK governments would be wise to begin trade talks and agree to a streamlined quality assurance process that encourages farmers to export meat and agricultural products. Combined with new technology that increases yield and efficiency, something that the European Union appears averse to, any new deal could see an injection of billions of dollars per year into the Canadian farming industry.

 

 

Jack Buckby is a Research Associate with Frontier Centre for Public Policy.