CPTPP: An exciting opportunity for Canadian red meat
Throughout May, FCC Ag Economics will explore the CPTPP and how it intersects with several Canadian agri-food sectors. Last week, we looked at Malaysia, a little-known market and competitor for Canadian producers. This week, we examine the expected benefits of the deal to Canada’s red meat sectors.
A strengthening global economy and growing world population will support increased demand for red meats. Global beef exports are expected to increase 5% in 2018, while pork exports are forecast to increase 1%.
Canada is the world’s sixth-largest beef exporter representing nearly 5% of world beef exports and totalling 480,000 metric tons. Canada is the third-largest pork exporter behind the European Union and the United States, representing 16% of world pork exports and totalling 1,400,000 metric tons.
The Canadian and U.S. red meat sectors are highly integrated with roughly 60% of Canada’s red meat exports destined to the U.S. CPTPP provides an opportunity for Canada to diversify its export destinations towards high-value and fast-growing economies in Asia and South America.
CPTPP member countries currently account for around 20% of Canada’s total red meat exports. Canada exported over $1.8 billion worth of bovine and swine products to CPTPP countries in 2017.
The timeline for the reduction in tariffs ranges between two and 15 years for beef and pork products. Tariff reductions will include:
Japanese tariffs of 38.5% on fresh/chilled and frozen beef, as well as tariffs of 50% on certain offal will be reduced to 9% within 15 years; tariffs of up to 50% on processed beef will be eliminated within 15 years.
Vietnamese tariffs of up to 31% on fresh/chilled and frozen beef will be eliminated within two years; tariffs of up to 34% on all other beef products will be eliminated within seven years.
Japanese over-gate price tariff of 4.3% on fresh/chilled/frozen pork cuts and pork offal will be eliminated within 10 years. The under-gate price tariff will be reduced within 10 years.
Japanese tariffs of up to 20% on pork products not currently subject to the gate price system will be eliminated within ten years.
Vietnamese tariffs of up to 27% for fresh/chilled and frozen pork will be eliminated within nine years; tariffs of up to 31% on all other pork products will be eliminated within nine years.
The U.S. is currently exploring bilateral negotiations with Japan, the largest and highest valued market for red meat exports under CPTPP. Canada’s first-mover advantage allows for the establishment of improved relationships with buyers in export markets. Canada’s market share in the Japanese imports of pork increased from 17% in 2013 to 21% in 2017 reflecting the strong demand for Canada’s high-value products. At the same time, U.S exports of pork products to Japan have declined with the U.S. market share of Japanese pork imports declining from 41% to 33%.
Tariff reductions in some cases can make the price of further processed products less expensive relative to primary processed meat products. That can lead to changes in the composition of Canadian meat exports.
Larger export demand for Canadian meat can result in higher productivity investments and expansion. And stronger demand for Canadian livestock will lead to higher profitability across the entire supply chain.
Craig joined FCC in 2009 as an Agricultural Economist, specializing in monitoring and analyzing the macroeconomic environment, modelling industry health, and providing industry risk analysis. Prior to FCC, he worked in the livestock branch of the Saskatchewan Ministry of Agriculture. Craig holds a Master of Agricultural Economics degree from the University of Saskatchewan.