What Goes Around Does Not Always Come Around
Recent Business Headlines…..the Campbell Soup Company has closed their Canadian facility, ending more than eight decades of successful operations. The company is consolidating in the United States. Texas and Ohio are benefiting, in part because of high quality education, health care and access to the arts. Incentives include grants and subsidies.
In Canuck Land, laid off employees, all levels of government, suppliers, and customers are grieving because of job losses, lower tax revenues and the erosion of yet another domestic industry.
Existing Canadian soup manufactures have seized the opportunity to fill the void. Federal and provincial agencies were soon on the stakeholders’ speed dials lobbying for all manners of assistance. Outcomes include duties on imported soup products and generous manufacturing incentives. Research and development grants for improved nutrition and health benefits are also available.
American made soup products are now at a competitive disadvantage as a result.
A recent windfall for Canadians north of the 49th is our Canadian Maple Syrup producers who are relishing in a rapid increase in demand. A major force is the desire for organically certified syrup in the United States, available exclusively from Canada. American producers contend that syrup from Canada is subsidized because sap originates from maple trees grown on crown land, attracting very low royalty payments. The scenario is analogous to the ongoing soft wood lumber debate.
Recourse has been realized with the American implementation of high duties on syrups from Canada. Trade officials suspect that these duties are in part a retaliation to the soup duties applied by Canadians.
Traditionally food product moved duty free between Canada and the United States and a long term contractual agreement is in place under NAFTA (North American Food Trade Agreement). Now however the soup and maple syrup deals have thrown these contracts into a cocked hat.
To replace this lost market Canadians syrup suppliers were soon successfully marketing into Finland. The Finns supply their domestic market with a blended product made from corn syrup and artificial flavoring. Nutrition exports claim a superior flavor and lower sugar intake. Producers in Finland opposed the importation from Canada, sighting inadequate labeling, failing to meet their stringent food quality standards and dumping charges.
Canada’s successful appeal to the International Trade Tribunal over turned the dumping charges. The labeling issue remains, highlighting non-monetary barriers to free trade.Finish syrup producers were in need of customers to replace the reduced domestic market. Argentina is a favored trading partner. Syrup was soon flowing into kitchens throughout Argentina.Alas, Argentinean politics shifted to the right and a pluralistic government acted to change trade imbalances. Trade with Finland was singled out…..too much lumber from Finland and insufficient shipment of beef to Finland. Rectification included extraordinary imposition of duties on all Finish imports to Argentina, including lumber and syrup.
Decades of sophisticated production of building materials in Finland has resulted in the transformation of lumber into strong, fire resistant, worm resistant and convenient materials suitable for Asian applications. There is a growing attraction, because of an evolving middle class. Finish building prodcts to Vietnam are replacing previous shipments to Argentina.
Vietnam’s business strategy is particularly focused on international trade. The country’s currency is strong, logistics efficient and politics between the two nations congenial.
Meetings among senior government and business officials from both countries generate many dollars of promised deals. However during a recent trade conference Vietnamese officials hinted their continuing interest in construction materials from might depend on exports of lychee nuts to Finland….reciprocity is in the wind.
International trade takes many twists and turns. This time the journey has taken us from soup to syrup to lumber to beef to building materials to lychee nuts……from soup to nuts so to speak.