CUSMA laid the groundwork for Canada to feed house-bound Americans
This is the second of two posts covering Canada’s agri-food trade performance after the coming into force of three multilateral agreements with major global markets: the Comprehensive and Economic Trade Agreement (CETA) in 2017, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in 2018 and the Canada-United States-Mexico trade agreement (CUSMA) in 2020. Our first post looked at cereal and oilseed exports; this covers Canada’s food exports.
The importance of meat exports to overall Canadian trade performance is hard to overstate. In 2023, Canada exported $47.6 billion worth of food and beverages to 176 countries. Pork and beef accounted for 17% of total export values. They’re also subject to a wide array of tariff and non-tariff barriers, underscoring even more the significance of agreements that open access to global markets.
CUSMA has been a boost to meat and non-meat food exports
Overall, CUSMA has been good for Canada’s food exports, with faster growth since the start of the pandemic when the deal came into force (Figure 1). The agreement allowed Canada to respond to the increased U.S. demand for foods used in home cooking during COVID. Last year, Canadian non-meat food exports reached 14.8 billion kilograms, growing, on average, 4.9% each year between 2020 and 2023. CUSMA, as NAFTA had before, has provided access for Canadian exports at a time of increasing demand, and has been particularly useful in exports of fats/oils.
Figure 1: Meat exports get much needed assistance since CUSMA came into force
Source: Statistics Canada
Canadian meat exports to the U.S. and Mexico, while at much smaller volumes than non-meat exports, have grown more since 2020 than they had in the five prior years. In fact, meat exports to North American partners had been stable for years. Between 2020 and 2023, they grew 6.3%, on average, each year, with beef export growth dominating. That perhaps shouldn’t be a surprise: U.S. pork production has outpaced demand for awhile, leading to the availability of ample domestic supplies at the same time that the country responds to low domestic beef supplies stemming from the smallest herd in 60 years.
There is reason to expect further growth this year considering strong demand from the still-buoyant U.S. and Mexican economies. Canadian exporters will, however, have to keep an eye on the potential for much weaker sales growth in 2025 amid an expected North American economic slowdown and a potential surge in protectionism in the aftermath of November’s U.S. elections.
Has CETA found a bottom for Canadian meat exports to the EU?
The European Union is the largest developed market in the world by population, with high levels of disposable income and millions of consumers with a preference for high-quality food products. The signing of CETA established tariff rate quotas for red meat, giving Canadian farmers yearly duty-free access for up to 80,000 metric tonnes (MT) of pork (including consolidation of existing quota of approximately 6,000 MT) and 50,000 MT of beef exports per year. In 2017, Canada had been allowed just over 5,000 MT of pork and just under 3,300 MT of beef.
However, the once-bright promise of CETA to bolster Canadian meat exports seems to have faded (Figure 2). Prior to signing, Canadian meat exports to Europe were declining, falling a disappointing 22.4% each year, on average, between 2013 and 2017. In 2017, the year CETA was signed, meat exports to Europe totaled 3.7 million kilograms. By 2022, they had fallen 42.6% and were well below the allocated quota, largely due to more stringent EU regulations and increased aversion against growth hormones and vaccines in meat production.
Figure 2: Non-meat food exports to the EU grow as meat exports fall
Source: Statistics Canada
However, the pre- and post-CETA periods do show some reason for optimism. Between 2018 and 2022, our beef and pork exports continued to decline, but they did so at a slightly slower pace, averaging a 9.2% loss each year, compared with the 22.4% annual loss prior to signing. And in 2023, meat exports more than doubled in volume year-over-year to almost reach the volumes exported in 2019, perhaps a good tiding of things to come. European beef production was down 3.9% year-over-year in 2023 and another decline is forecasted for 2024, as their herds also shrink and Europe’s consumers increasingly turn to plant-based proteins.
Canadian exports of non-meat food products haven’t maintained their pre-CETA rates of growth since signing, but that growth has remained robust. Between 2013 and 2017, export volumes rose, on average, 7.0% each year. Between 2018 and 2022, they also rose, but on a reduced average of 4.7% each year. That was driven primarily by the tremendous increases in exports of fats/oils in 2020 and by growth in exports of coffee, milled products, sugar, cocoa and beverages throughout the pandemic.
While our overall food exports to Europe have increased over the last 10 years, it’s important to note that they are marked in millions of kilograms, compared to the billions of kilograms in which our CUSMA and CPTPP exports are measured. In part that’s because, although we don’t fulfill our allowable quotas, the EU’s potential to greatly increase Canadian exports may be overstated. Moreover, the recent shift to the right in European politics is more likely to raise trade barriers than lower them.
Canadian trade with CPTPP partners ebbs and flows with our trade to Japan
Asia is another lucrative market for Canada to develop. Canadian exports to CPTPP countries are heavily influenced by Japan, who is among Canada’s top three export markets for many ag commodities. In 2023, it was also Canada’s second-largest buyer of meat, behind the U.S. With a small land base and large population, Japan is a net ag and food importer; its wealthy consumers prefer access to high-quality, relatively higher priced goods – the kind that Canada provides. Most of the other signatories in the CPTPP are small importers of Canadian food, although some have grown quickly in recent years.
As a case in point, food exports to CPTPP countries were gaining traction prior to the agreement (Figure 3). Meat grew 6.6% and non-meat grew 7.5%, on average, each year between 2014 and 2018. Between 2019 and 2023, both rates slipped. Meat exports were stable in the next five years, but other food and beverage exports declined, on average, 3.9% each year.
Figure 3: Meat exports to Japan drive growth trends in food exports to CPTPP partners*
Source: Statistics Canada
Japanese import volumes were the principal driver of those trends. Japan’s growth in importing Canadian red meat averaged over 8% each year between 2014 and 2018, but that trend reversed post-CPTPP, falling 4.4% each year, on average, between 2019 and 2023. Over that same 10-year period, meat volumes took up more room amongst all food exports to Japan, rising from 31.3% of total exports in 2013 to 43.4% of total exports in 2023.
While Chile and Mexico are signatories to the CPTPP, Canada had prior access to each: Mexico thanks to NAFTA/CUSMA and Chile, with whom we share a bilateral trade agreement. Looking ahead, the region offers opportunities and challenges for Canadian exporters. A growing middle class in CPTPP developing economies raises food demand. But geopolitical instability arising from numerous global conflicts is expected to put a damper on overall trade by making it more expensive to source materials and ship goods, which will impact many economies in Asia-Pacific. That may be especially true for Japan, which is expected to see weak growth in 2024 and 2025, while continuing to suffer from an aging population, high debt levels and the possibility of a weakening yen.
Economics Editor
Martha joined the Economics team in 2013, focusing on research insights about risk and success factors for agricultural producers and agri-businesses. She has 25 years’ experience conducting and communicating quantitative and qualitative research results to industry experts. Martha holds a Master of Sociology degree from Queen’s University in Kingston, Ontario and a Master of Fine Arts degree in non-fiction writing from the University of King’s College.