NAFTA and GATT: Prospects for Canada's Red Meat Sectors in a New Trading Environment Open Access
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Veeman, Michele M.
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As relatively competitive segments of Canadian agriculture for which the dominant markets are domestic consumption and exports to the US, the pork, beef, swine and cattle industries can expect to benefit from the combination of the influence of the US-Canada Free Trade Agreement (FTA) which became effective in January 1989, its extension to Mexico through the North American Free Trade Agreement (NAFTA) in January 1994, and the provisions relating to agriculture within the General Agreement of Tariffs and Trade (GATT) that will start to apply in 1995. From a North American point of view, these agreements contribute to an improved trading environment for agriculture. From the viewpoint of the rest of the world, this is true in principle for GATT, but not necessarily for NAFTA which, like any other trade bloc, has the potential to divert rather than create agricultural trade with the rest of the world. There seems to be some credence to this viewpoint for beef. The major implications of GATT for agriculture are, in brief overview, for a direct increase in agricultural trade opportunities from the requirement to replace import quotas, levies and other trade distorting measures by bound tariffs and reduce these, allied with the requirement for specified levels of import access. The Agriculture Agreement also provides for restraint in export subsidization; the establishment of clearer and more effective world trading rules; and provision of clearer limits on the use of barriers to trade based on sanitary and phytosanitary (SPS) measures. The Canadian red meat sectors potentially should gain from each of these provisions. Specific gains are expected from modest improvements in market access for both pork and beef; reductions in European Union (EU) export subsidization of beef and pork; and clearer and more enforceable world trade rules that may reduce the ability of large trading nations to pursue administrative protection through the application of their national trade policy. Benefits are also expected from the clarification of SPS measures that may apply to trade in animal semen, embryos, livestock, and meats. The largest proportion of Canadian red meat and live animal exports are to the US. In 1993, the US absorbed some 70 percent by value of Canadian pork, hogs and related product exports; Japan accounted for a further 20 percent. The US imports more than 90 percent of Canadian beef and cattle exports. Canadian production of both categories of red meats is relatively small compared to US production levels. The US is, arguably, the world's most powerful trading nation. It is a nation which has actively pursued a concept of fair trade at the expense of free trade (Chase Wilde, Klein and Richter 1990). Thus, from a Canadian perspective, the moves to clarify and strengthen world trading rules may well be the most significant outcome for red meats from both FTA and GATT. The direct effects of GATT on increased market access for red meats include Japan's tariff reductions on beef imports and the lower minimum import prices for pork to be phased in over the implementation period. Improvements in market access for newly industrialized countries are expected. An example is provided by Korea, which will increase its current beef import quota, reduce the state trading agency's consumer markup on beef, and replace these trade barriers by a bound tariff in 2001. The European Union will improve market access by the introduction of a tariff rate quota for pork (including a specific quota for high value products) to replace variable levels. The commitments by the EU to reduce export subsidization of beef and pork from the base of 1986-90 translate to appreciable reductions in the volume of subsidized beef and pork from current levels by year 2000 (Agriculture and Agri-Food Canada 1994).
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