Sunday, April 26, 2015

Ontario's Agri-Food Export Dream Turns Into a SM Mirage

Ontario is trying to enhance its agri-food exports to help our limping and damaged economy.  Will their plan work?

Better Farming reported that Ontario's Premier Kathleen Wynne has hired an Agri-food Trade Advisor to start June 1, 2015 to enhance agri-food exports from Ontario to China.  This is supposed to help Ontario double its agri-food exports by 2020.

Figure 1:   Historical foreign exchange rate between Canadian $ and Chinese Yuan (Renminbi).
Canadian goods are now 34.8% cheaper than 10 years ago for Chinese consumers to buy.
Too bad that can't help Canada's Supply Management commodities of dairy, chicken, & turkey.
Using Bank of Canada data for the last 10 years, the foreign currency exchange rate between the Canadian $ and the Chinese Yuan (Renminbi) has dropped by 34.8% from April 2005 to today, making Canadian goods cheaper for Chinese consumers (momentary spikes were as high as 63.3%).  See Figure 1.

That would seem like an ideal reason for Ontario to hire an Agri-Food Trade Advisor in Beijing China.

Beef, other non-Supply Management commodities, Canadian technology and manufacturing seem like natural winners.

But what about Canada's Supply Management commodities of chicken, turkeys, eggs, and dairy?

Oops! Sorry, those are commodities with artificially high prices and whopping import tariffs of around 285% that Canadians are forced to pay.  Under World Trade Organization treaties that Canada signed, exporting those Canadian SM commodities would be subject to illegal dumping charges if they are sold in export markets at prices lower than the prices paid by Canadian.  That will likely lead to trade sanctions against Canada.

The Chinese aren't so stupid as to pay what Canadians are forced to pay every day; 50% to 300% higher prices for SM goods than what the rest of the world pays.

Since the foreign exchange improvements are only 34.8% in 10 years, that is equivalent to a 3.03% per year decrease on average over the last 10 years.

At that rate, it would take another 25.1 years to eliminate Canada's 285% import duty on SM products (ie. 1.0303^(25.1+10)= 2.85).

Perhaps Premier Kathleen Wynne should schedule a ribbon cutting ceremony with her Agri-Food Trade Advisor in Beijing China for a May 2040 launch of Ontario's SM products for China.

It's always good to plan ahead.  You know how quickly everybody's schedule fills up.

Until then, too bad for Canada and its dysfunctional Supply Management systems.  They hold all of us back from prosperity and Canadian jobs working in the export industry.

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