Brenda O’Farrell
The Advocate
With the U.S.-Canada trade war ramping up and switching gears on an almost daily basis in what feels like a whirlwind of cross-border chaos and growing concern over how it will impact the economy, a report by the Royal Bank of Canada suggests the country’s agricultural sector could be a trade diversification leader and generate $44 billion in new agri-food exports in the next 10 years.
“We have an opportunity to turn agriculture into a driving force for trade diversification,” said John Stackhouse, RBC senior vice-president who heads the bank’s Economics and Thought Leadership group, which published the report Food First: How agriculture can lead a new era of Canadian exports, at the end of February.
“If we act now, we can ensure Canadian farmers, processors and exporters are well positioned to lead the global food economy rather than losing ground to competitors,” Stakehouse continued.
With the country’s political leadership and provincial premiers now focused on finding new trade partners around the globe in an effort to reduce Canada’s reliance on the U.S. as the country’s key export destination, the RBC report outlines not only where the agricultural sector can diversify its markets abroad but delves into why it needs to do it now – and quickly.
“While Canada’s agricultural exports have quadrupled in value since 2000, its global market share has shrunk by 12 per cent as competitors like Brazil and Australia expand into high-growth regions,” said the report’s author Lisa Ashton, who is also the agriculture policy lead with RBC’s Thought Leadership. “With rising trade uncertainty and escalating tariffs in North America, Canada must accelerate efforts to diversify its trading partners, particularly in Southeast Asia, Africa and the Middle East.”
To map out the path forward based on the data, RBC partnered with BCG Centre for Canada’s Future, a division of the Boston Consulting Group, an agency that specializes in helping businesses build and sustain competitive advantages.
According to the findings, more than $100 billion in agricultural and agri-food products cross the Canada-U.S. border annually, with the U.S. buying the majority share of that – almost 60 per cent. That represents a huge increase in the last quarter century.
The report states: “Canada is now the source of 20 per cent of U.S. agriculture and agri-food imports.”
“No longer just a bulk commodity producer, we are now a dominant foreign supplier to America’s grocery aisles and dining tables, as Canadian farmers and processors have become more advanced in developing new products and marketing them to Americans,” the report highlights.
But those gains are now the focus of the dilemma Canada faces as the tariff war takes hold.
In addition, what the gains do not show is how Canada, while increasing its agricultural exports overall, its growth has lagged behind advances made by other countries. In fact, Canada overall is losing market share on a worldwide scale.
“… we’re not keeping pace with the rest of the world, which saw agriculture and agri-food exports grow five-fold over the same period,” the report states.
In fact, in the last 25 years, Canada dropped from fifth place in the world in terms of agricultural exports, to seventh place, putting it now behind China and Brazil. If the current trend continues, the report states, Canada could drop to ninth place in the next 10 years.
That is the warning.
The challenges, however, are cast in a more optimistic light. The sector can regain market share and reverse that slide – even in the current tariff-threat climate – by taking vital strategic action, the report’s authors argue.
“Our model estimates that Canada’s share of the global export pie could grow by 30 per cent by 2035, adding $44 billion to total exports, if we pursue three main trade objectives: grow where Canada has market access, expand in the world’s best growth markets and maintain existing relationships through strengthened ‘food diplomacy,’ ” the report outlines.
The opportunities:
- Grow where Canada has market access:
“Canada has 18 free-trade agreements providing access to over two-thirds of the global economy. Through these agreements, there is room to make better use of Canada’s market access in Europe, Asia,” the report states.
- Expand in the world’s best growth markets:
That starts in Asia.
“Consumers in Southeast and South Asia are expected to have more to spend on higher value products over the next decade, thanks in part to expectations for economic growth that will be among the best in the world, with GDP per capita forecast to rise 3.9 per cent, annually between 2024 and 2033….”
Sub-Saharan Africa, the Middle East, North Africa and Latin America are also expected to see large GDP expansions.
- Maintain existing relationships through strengthened ‘food diplomacy.’
“These markets include the U.S., Japan, China and Mexico — the first three of which are projected to have food trade deficits over the next decade that surplus producers like Canada will compete for. Our advantage is established business networks and consumer confidence in our products.”