Agriculture manufacturers on edge over trade
With Canada in the midst of numerous free trade agreement negotiations, the Canadian agricultural manufacturing industry is feeling on edge.
While the future of some trade deals for Canada is bright, others aren’t looking so good.
“The lack of clarity around NAFTA is the big issue at the moment. It’s got a lot of people, I would say, on pause in terms of investment decisions,” said Nigel Jones, CEO of Seed Hawk and director with the Agricultural Manufacturers of Canada (AMC).
In 2017, Canadian manufacturing of agricultural implements accounted for $1,988 million in exports, according to Innovation, Science and Economic Development Canada. The top three countries Canada exported to were the United States, Australia and Russia.
While most agricultural equipment is exported tariff free, trade deals still affect the industry. The larger market access farmers have can translate into them spending more money on equipment purchases.
The latest trade deals have kept AMC busy. AMC president Leah Olson was on hand at the signing of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in Santiago, Chile on March 8. While there, it was announced Canada would be starting negotiations for the Canada-Mercosur Free Trade Agreement.
“Overall (CPTPP) clearly demonstrates an open trade agreement and some desire to work together. Which in particular with the steel and aluminum tariff that the U.S. administration has announced, they’ve given us some exemptions but that protectionism is very concerning,” Olson said.
At the start of March, U.S. President Donald Trump announced he would be placing tariffs on steel and aluminum imports. Canada and Mexico later received temporary exemptions depending on how North American Free Trade Agreement (NAFTA) negotiations go. The steel tariffs are concerning as any price fluctuations for steel will directly impact manufacturers.
“(The tariffs) could have an effect on supply; the supply/demand ratio, that comes into play. If supply tightens up then it could be a big impact,” Jones said.
Seed Hawk manufactures air seeders and drills in Langbank, Sask. Steel is used in a lot of Seed Hawk’s equipment and Jones is concerned steel prices could rise which would affect both Canadian and U.S. manufacturers.
Olson has heard from AMC’s U.S. counterparts that they aren’t impressed with the steel and aluminum tariffs or possibility NAFTA could be scrapped.
“There’s just so much trade that flows between Canada and the U.S. that to put up barriers at this point, I don’t understand how that can be positive for both sides,” she said.
The Association of Equipment Manufacturers, which AMC works with, spoke out in concern, offering to work with the U.S. administration after the steel and aluminum tariff announcement. AMC’s direct U.S. counterpart, the Farm Equipment Manufacturers Association, has also voiced concern.
Olson also feels U.S. farmers could be impacted and possibly lose access to Canadian-manufactured agricultural equipment.
“I think that there’s enough innovation, particularly on the Canadian side when it comes to farm equipment that U.S. farmers will want to see Canadian farm implements continue to be available to them,” she said.
While NAFTA and the steel tariffs have AMC and its members concerned, the Mercosur trade deal could help the industry. Argentina and Brazil, that have large agriculture industries, are members of the potential deal; in the past it has been difficult for Canadian equipment manufacturers to get into that market.
“What holds farm equipment manufacturers back from going into a market will be the distribution or the dealership network. And when you get into countries with different languages, the legal realm, you just have to be careful with how you’re getting into that,” Olson said.
The Mercosur deal could help Canadian agricultural manufacturers expand into the Latin American market. Canada currently exports agricultural equipment into more than 150 countries.