Many in the West don't benefit from Free Trade
by Margret Kopala

Published in the Ottawa Citizen, September 10, 2005,
Revised September 16, 2005.

Three kilometers from the north end of Beverley McLachlin Drive, looking past the Red Roof Café, you can see a train station and grain elevators. To the southeast there’s Highway No.3 dipping and winding its way past a feedlot and, eventually, a few oil rigs. To the west, past fields of energy-generating windmills and bales of hay, the forested Rocky Mountains loom.

No matter where you look from the street named after Pincher Creek’s most famous daughter, there’s a reminder of the Canada-U.S. trade issues that increasingly dominate Canadian headlines. Most recently, these headlines concern the latest instalment of the 250 year old softwood lumber wars, but here, in southern Alberta, you can’t help thinking the next set will belong to the growing saga of cross border trade in cattle.

Alberta is home to 6.9 of Canada’s 17.3 million head of cattle. Most are raised in northern Alberta, while around Pincher Creek it’s smaller cow-calf operations. “The majority of cattle are produced by ranchers who have less than 50 head,” says Stewart McRae who has 200. “And they are two income families.”

The 43 year old father of two adolescent sons who purchased the family ranch from his father is breathing easier these days: cattle under 30 months of age started moving across the U.S. border this summer. But he’s not out of the woods yet. Having core equity in his land helped him survive the border closures when Canada’s first case of bovine spongiform encephalopathy was discovered but larger issues about meeting the cost of cattle production remain.

For one thing, he says, there’s little competition in the system. Before multinationals Cargill and IBP took over the meat-packing industry, there were 15 packing plants but free trade killed off the tax credit system that made them possible. Now it will be very difficult for meat packing start-ups, even if there were more viable markets than the United States.

“The basic dysfunction in agriculture today is everyone except the primary producer is a margin operator. Feedlots, meat packers and supermarkets factor in all their costs, add their profit and name their price while the primary producer deals with fluctuating costs and takes whatever price he can get,” McRae says. Worse, the federal government is clawing back $22,000 of the $35,000 income stabilization funding he received at the height of the crisis – the same income stabilization funding that gave meatpackers a windfall.

Of course, meat packers employ Canadian voters so the politics involved isn’t rocket science. Much like softwood lumber in British Columbia where government stumpage fees encourage local employment, cattle processed in Canada means more jobs for Canadians.

Unprocessed Canadian logs, calves, barrels of oil or bushels of wheat, on the other hand, can also mean more jobs for Americans which may explain why raw logs, when they are available, tumble into the U.S. duty free while lumber attracts $5 billion in duties. It’s no coincidence either that the U.S. border opened to Canadian cattle just as American meat packing interests were losing jobs due to an insufficient supply of live animals.

The U.S. Drug Administration insists it was about good science on BSE, not employment, but R-Calf, the 18,000 member American cattlemen’s association, is suing anyway. Meanwhile, the judge who first closed the border could close it again. Not unlike softwood lumber, the Canadian cattle industry too could face more cattlejams.

Back in Alberta, oil can’t be extracted and piped south quickly enough but recent high gas prices demonstrate how inadequate refining capacity (made worse by Hurricane Katrina) must now be addressed urgently. How much of this additional capacity, plus employment opportunities, will come Canada’s way?

In a globalised world where jobs trump everything, the need to assess how raw materials, labour, investment and international trade rules intersect in western Canadian commodities is as pressing today as it was in the 1960s when the Canada-U.S. Auto Pact was a gleam in somebody’s eye. Eastern Canadian manufacturing interests flourish in the free trade environment that followed while the western Canadian resource sector remains vulnerable to the uncertain mercies of courts and tribunals.

It’s time to connect the dots. By suggesting this week that NAFTA be revisited, Stephen Harper made a start in this direction but until the Canadian and U.S. governments go the distance, primary producing families in both countries will be its primary casualties. “If I’m not able to meet the cost of production, I’ll quit,” says Stewart McRae. “I won’t erode the equity Dad built in the land. But if I’m not producing the food, who will?”

MARGRET KOPALA’s column on western perspectives appears every other week.

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