Trade war affects mining The march of folly

This newspaper really missed the Brazilian Ministry of Mines and Energy at the recent annual convention of the Prospectors & Developers Association of Canada, and not merely because we felt the absence of the charming Paulistas and Mineiras that staffed the ministry’s PDAC booth each year. The Brazilian government’s withdrawal from the show left a large hole in what is supposed to be one of the international mining industry’s most important annual exchanges.

The ministry cancelled its participation in the PDAC’s trade show in response to the Canadian government’s Feb. 2 ban on imports of Brazilian processed beef. The Canadian Food Inspection Agency (CFIA), a unit of the Department of Agriculture, said at the time that the Brazilian Ministry of Agriculture had not supplied it with answers to a questionnaire on meat-hygiene practices it had submitted the previous year. The CFIA, in effect, told the outside world that it had reason to believe bovine spongiform encephalopathy (BSE, or “mad cow” disease) could have entered the Brazilian cattle industry through imports of live cattle from Europe.

The beef ban was instantly copied by the United States and Mexico in compliance with North American Free Trade Area rules; both those countries are much larger importers of Brazilian beef. Moreover, the Canadian action was like shouting “fire” in a crowded theatre: other countries without trade-treaty obligations put their own bans in place as precautions.

A week after the CFIA announced the ban, two scientists at the Department of Health described it as a “ruse motivated by politics,” and an unnecessary step to protect the food supply in this country. One of them, Margaret Haydon, was suspended for her comments. There was no fire in the theatre; the politics that motivated the ban, it appears now, was the trade dispute between Canada and Brazil over aircraft subsidies.

The dispute centres on the pride of the two countries’ aircraft industries: Bombardier and Embraer. The two are the world leaders, as well as the main competitors for market share in the very lucrative small passenger-jet market; and each accuses the other of being supported by lavish handouts from government.

Canadian trade authorities took the issue to the World Trade Organization (WTO) in 2000 and won a ruling that it could apply penalties against Brazilian imports. So far, so good: that is what international trade bodies are supposed to be for. Brazilian trade officials protested, but in the end the WTO decision was accepted. A country committed (as we are always reminding our WTO partners) to liberal international trade would have been satisfied.

Then the CFIA, ostensibly in the business of protecting the food supply, came down with its ban. Beef exports are not vital to Brazil, but the country’s beef producers see the export market as the main channel for their industry’s growth. To have trading partners suddenly slapping bans on the industry’s product was not so much a direct hit to the pocketbook as it was a setback in the industry’s long-term strategy of building exports.

The Department of Agriculture managed to cast Canada as a bad guy, in international eyes as well as in Brazilian ones. It also backed away from its ban, telling the world that the Brazilian government had co-operated fully with a joint Canadian-Mexican-American investigation team, and that Brazilian agricultural regulators were doing everything necessary to keep BSE out of Brazil. (For the record, Brazil has had no BSE cases among its cattle herds; Canada has had one.)

Canada should not be treating Brazil like the enemy in a comic-opera trade war. Brazil has business connections to Canada that date back to the turn of the century. The country is an immense emerging market for capital and consumer goods. It’s a mining and metals-production giant, and its exploration projects, mines, mills and smelters make up a vast potential market for Canadian equipment manufacturers and engineering companies. Its huge state enterprise, Companhia Vale do Rio Doce, is in the process of being privatized, and opportunities for Canadian resource companies are still opening up.

From the point of view of the Canadian resource industry and the Canadian suppliers, contractors and consultants that serve it, Brazil is one of the very worst places for this country to be playing trade games. Our industry could make great strides there, and does not need to be tarred by the gutter politics that hangs over the beef ban.

Apart from the sheer foolishness of offending a country that can and should be a good trading partner — in more than just the resource sector — political motives for the beef ban are unworthy of a civilized and developed trading nation. But they are not necessarily out of character. If there was political pressure on the CFIA to ban beef imports, the places that pressure came from are obvious to anyone. The enthusiasm of some cabinet ministers for trade disputes in the abstract, and this trade dispute in particular, is evident, as is the current government’s long-standing admiration for Bombardier.

Gutter politics is not a surprise from a government that has, for the past seven years, seemed bent on teaching everyone and anyone just who’s boss. Brazil is getting a taste of the same artlessly displayed arrogance Canadian voters have been living with. It looks no better on the government that foreign beef producers, rather than Canadians, are on the receiving end this time.

And perhaps the principal beneficiary of the government’s attitude toward Brazil should recall that the mining industry does buy more than its share of snowmobiles. Do not take this as a veiled threat, because it is not. But we knew you, and bought from you, long before you made aircraft: does that relationship no longer matter?