‘Status quo would be a victory:’ FHCP’s Michael Graydon on CUSMA’s future
As the July 1 deadline to formally extend the Canada-U.S.-Mexico Free Trade Agreement (CUSMA) or continue the deal under annual reviews looms, Canadian Grocer caught up with Food, Health & Consumer Products of Canada (FHCP) CEO Michael Graydon about what the future may hold for CPG and food manufacturing companies.
This interview has been edited for length and clarity.
What do you think will happen on July 1?
I anticipate that there will be some annual reviews. I just do not think on July 1st that we will be in a position to renew it for a longer period of time. The amount of conversations that are going on are significant. I think there’s a clear understanding from the U.S. what the irritants are and I think the Canadian government is working to try to resolve some of those irritants. The list of [U.S.] irritants with Canada is much less than the list of irritants with Mexico. Ours are, I think, minimal. I just don’t think it’ll get done by July 1st, so that just buys us more time.
One of the things that’s been very important is that there have been a number of issues where the U.S. continues to observe CUSMA. I think that’s very positive because there’s an element of respect for the agreement.
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Do you see a period of annual reviews contributing to uncertainty in the food sector?
It will contribute to a certain extent to the uncertainty, but I think manufacturers should have some level of confidence since the U.S. has honoured the existing agreement. If the last year is any indication, there’s been an element of stability because of the honouring of the existing agreement.
What effects have tariffs imposed by the U.S. administration had on your members?
Not much because most of the tariffs have been protected by CUSMA, so they haven’t applied. Where we ran into a little bit of issue was on country-of-origin products like coffee which were not covered by CUSMA, as well as packaging materials and especially aluminum cans. We ship raw aluminum to the U.S. for the purposes of manufacturing and finished products coming back across the border are tariffed.
Are there elements of the current trade deal you would like to see changed?
I think it was quite well thought out the first time. I would like to see the agreement broadened so that things like coffee are included because we have a large roasting capacity here in Canada and a number of manufacturers that roast in Canada and ship to the U.S. Other than that, hopefully, getting the removal of some of the aluminum tariffs would be very helpful. On a finished goods basis we’re in pretty good shape. Status quo would be a victory for our industry.
READ: How Canada's food and beverage companies can grow outside the U.S.
Are you concerned that Canada may make concessions in certain areas to make a deal, such as on supply management?
Supply management is an important infrastructure that supports the dairy, egg, and poultry industries in Canada. To unwind it through concessions significantly would be detrimental to the industry. I don’t think that is what the Canadian government wants. The President of the United States tells us he doesn’t need anything that we have. He needs our minerals, he needs our aluminum, he needs our fertilizer, he needs our oil, he needs our electricity, he needs our water. So, we do have some tools we can negotiate with. He’s always going on about the imbalance of trade, but when you factor out oil, the trading environment is very much in favour of the United States versus Canada. Part of the issue we have with the President of the United States is just getting him to look at accurate information versus his opinions. It’s a very unique style of negotiating Mr. Trump has.
Do you think Trump’s low approval ratings improve the chances the agreement will be renewed?
I think so because where there’s strong support for free trade is in manufacturing in the United States and agriculture. A lot of things that Trump has done that he indicated would value the economy have been massively detrimental, so I think his approval ratings are indicative of his lack of strategy on the economy. I take confidence not in what I hear from Trump; I take confidence in what I hear from the people on the ground doing the negotiating. [U.S. Trade Representative Jamieson Greer and Minister for Canada-U.S. Trade Dominic Leblanc] are talking in relatively positive terms and if you tune out [U.S. Secretary of Commerce Howard Lutnick], Trump—which I think is just negotiating noise versus substance—I think we’re going to be in pretty good shape in the end. It just may not happen as quickly as everybody had hoped. I’m sure we would all have loved to do a victory lap July 1st. We still may but I doubt it; I still think there will be good process in place that has an outcome that will be satisfactory to Canada.
