Something strange is happening on the farm.
Canada should be a world food superpower. We have everything: the second-largest amount of arable land per capita in the world, a 10th of the world's fresh water, a high ranking on the Organization for Economic Co-operation and Development's sustainability index, and sophisticated science and transport infrastructure.
We enjoy these advantages just as the Green Revolution, which massively improved humanity's ability to feed itself, is running out of steam. For the first time in decades, world population is increasing faster than food production, presaging food shortages.
Canada should be farmer and food processor to the world.
Instead we are seeing our share of markets steadily eroded as other countries literally eat Canada's lunch and breakfast and dinner too. We've lost world market share in everything except pulses, including in good old Canadian standbys like wheat and beef. In the highest value-added processed foods aimed at the final consumer, we've gone from fairly balanced trade just a few years ago to running a $9-billion trade deficit.
And far from fighting back through investment in new machinery and equipment that would make us more productive and competitive, depreciation of the existing agri-food capital stock now exceeds new investment. That's particularly true in the matter of building brand new, world-beating facilities on greenfield sites. What investment there is goes chiefly to keeping old capital stock operating for a little while longer, not to building new processing facilities.
It used to be that we could blame supply management, trade protectionism and currency fluctuations, but that won't wash any more. Other rich industrial countries like the U.S., Australia and New Zealand are making inroads in world markets despite facing similar problems of protectionism and currency.
As for supply management, there was a time when Canada paid a high price in international trade negotiations to protect a decrepit system that virtually everyone else has abandoned, but no more. In fact, the untold story of the recent negotiations with the European Union and transpacific countries is that Canada finally agreed to marginally dilute supply management in return for better market access and the sky did not fall on the politicians.
The cracks in the dike are there for all to see. In fact, the head of one of the rare Canadian agri-food success stories, dairy giant Saputo, said just the other day that he'd rather be working in a market-based system than under supply management. The system's days are numbered and if recent trade agreements with Europe and Asia are approved, our market-driven agriculture sectors will have more access to foreign markets than ever before.
So what can explain our poor performance?
As in so many other sectors, we've been slow to realize that our major international success story, trade with the U.S., is no longer enough to sustain us – especially at a time when skepticism regarding free trade is reaching new heights in the great republic.
Moreover, too many of our large agri-business enterprises are in fact subsidiaries of huge American firms that see Canadian operations as either serving the Canadian market or producing intermediate inputs for their U.S. plants. Exporting beyond North America isn't part of their business plan.
The most successful Canadian firms are therefore mostly small and medium-sized enterprises for whom exporting to the U.S. is already a stretch and international markets in Germany or Japan are just too big a nut to crack.
According to Larry Martin, a leading agricultural economist, some of the obstacles we face are in fact self-inflicted policy wounds. In particular, he singles out federal and provincial regulatory agencies like Health Canada, the Canadian Food Inspection Agency, provincial departments of agriculture, interprovincial barriers and so forth, all of which act as a "wet blanket" on innovation and a huge tax on investment. In fact, according to Mr. Martin, "policies in this area are apparently applied mainly by sociopaths who think their job is to harass Canadian agri-food investors." Lard onto that uncompetitive minimum wages and (in Ontario especially) ruinous energy costs and it's not surprising investors keep their wallets closed.
Then there are the politicians whose shtick is singing paeans of praise to the family farm, which is in reality code for keeping industry players too small to compete globally. Food is business, and big business at that. Canada is having trouble competing because it cannot achieve the economies of scale to pay for innovation and lower costs. Yet Canada spends too much on farm income support relative to its competitors and too much of that money goes to support small uneconomic players.
Despite the affection for grand-sounding strategic plans in capitals across the land, there is no will to fix these problems. In the meantime, an ever-hungrier world is looking elsewhere for its next meal.