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Many people in the Saskatchewan agriculture industry are wondering how the possibility of U.S. tariffs will impact them.
Murad Al-Katib, President and Chief Executive Officer of AGT Foods and Ingredients Inc. was on The Evan Bray Show on Jan. 27, to talk about the impact any tariffs would have on AGT Foods and the agriculture industry.
He said they will feel the effects, but not as badly as industries such as steel or manufacturing as our agriculture exports have alternative markets, such as India, the Middle East and North Africa.
Al-Katib said the two countries have such an integrated agricultural market the implementation of tariffs is going to be something that is certainly going to affect Saskatchewan.
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Listen: AGT Foods’s Murad Al-Katib speaks about agriculture and tariffs.
This interview has been edited for length and clarity.
EVAN BRAY: Would the tariffs mean something devastating for you and the team at AGT?
MURAD AL-KATIB: If I look at the product in southern Saskatchewan, whether it be durham wheat for pasta in the United States grown in west central Saskatchewan and southwest Saskatchewan, or pulses going into the U.S. for processing for protein, the U.S. manufacturing relies a lot on our inputs.
While it’s going to be very challenging for our producers to have that type of tariff put onto our market, we do have alternative markets for these commodities in the short term.
For example, we do have pulses going into the U.S., but we also have other markets like India, the Middle East and North Africa that could absorb some of it in the short term.
BRAY: Are we too reliant on the U.S. as a trading partner?
AL-KATIB: Canada in general, (and) the province of Ontario has the U.S. in the high 80s or low 90s, as the percentage of their trade.
We are lucky in Saskatchewan. We do have a diversified trading regime, as a result of the fact our potash exports and agriculture exports are very much global. So we’re more like 60-per-cent reliant on the U.S. market.
Ultimately it’s about the growth. Our exports and what we’re forecasting in the next decade do show us the diversification of markets like India are going to be critical to balance the ongoing trade wars that we’re going to see between the U.S. and China — and we’re going to get dragged into those.
I’m not, very bullish on the short and medium-term trade relationship with China, but I’m actually much more bullish on the prospects in a country like India.
BRAY: Do we need to build up infrastructure and invest in that?
AL-KATIB: If I was Prime Minister for one day, I would invest $100 billion in trade infrastructure. In my perspective, it will pay dividends for generations to come.
We have a problem in this country where we plan infrastructure on election cycles.
Countries like Australia are planning trade infrastructure on a 50-year rolling forecast. In our country, we haven’t even planned where our railways will be relocated outside of major centres in Western Canada yet.
If you look at Saskatchewan alone, we’re forecasting in the next seven to eight years, 10 million additional tonnes of agri commodities and another seven or eight million tons of potash.
How do we get that to market if we haven’t planned for that long-term interaction of roads, rail, ports and even the urban planning that hasn’t been done? How do we plan where the industrial developments are, residential developments are if we haven’t planned where that trade infrastructure will be built for the future?
So it’s imperative that we’re pounding drums with the federal government and the provincial governments to get their acts together because we’re not a reliable trade partner if we can’t get our products to market. It’s not only about that physical infrastructure, it’s about labour as well. We continue to have constant disruptions in labour that are putting our reputation at risk in the global trading system.
Bray: Where are those infrastructure investments needed?
AL-KATIB: It’s about provinces, municipalities, federal governments, but also the private sector. The private sector has a duty and a role to play in first and last-mile infrastructure.
If I look at some of the most successful times in our last two decades, it was things like the Asia-Pacific Gateway initiative which was started under the Paul Martin government and then continued by the Harper government.
That was true coordination of municipalities, provinces, port authorities and private sector, railways, grain companies. We need more coordinated gateway and trade corridor initiatives.
Without a functioning economy, we don’t have the tax base to be able to pay for healthcare, education and the things that are important to Canadians. Jobs drive that, not the government’s ability to just tax.
BRAY: What needs to happen for us to keep manufacturing and production lines in Canada?
AL-KATIB: We continue to be caught in what I would call the commodity ghetto. We have a mentality in this country — and part of it could come from the fact that we had decades of central monopoly purchasing of wheat with the Canadian Wheat Board.
The board used to tell producers that you can’t produce pasta at the origin of the raw material, you have to produce it where the populations are.
I always say ‘boy, those people in North Dakota sure eat a lot of pasta,’ because there are only 700,000 people and two million tons of production, so that never resonated with me as a child growing up in Davidson, or as a business leader that came into this sector.
We can do more, but we do have some challenges. Construction costs in Western Canada are absolutely out of control. We have to realize that capital is like a commodity. It will flow to where the most competitive jurisdictions are. We have to realize that we have to be able to build projects, we have to be able to run them, and we have to be able to access markets with the trade infrastructure that’s needed.
Those all have to be put together in order to allow us to do more refining. We may not be doing all the finished food products, but we have to do more ingredients, we have to do more semi-refined products, and we have to plug into global value chains.
BRAY: What can be or needs to be done to get construction costs under control?
AL-KATIB: More planning with trade schools. We need more kids to be considering the trades.
I want governments to be partnering with the private sector, but I don’t want them to be competing with us, building infrastructure themselves and competing for scarce construction resources, driving up the cost of projects.
BRAY: Is it mostly construction costs that caused the FCL canola crush plant to be put on the back burner?
AL-KATIB: When we look at inflation and construction inflation, you’ve got inflation at single digits and construction inflation at multiple double digits. So that was one consideration.
But I think that the bigger issue is just the regulatory regime. You’ve got a Republican president in the U.S. now that is saying ‘drill, baby, drill,’ and you have a transition likely coming in the policies in the federal government here, no clarity in the Canadian federal policy on clean fuels.
I believe the canola fields of Saskatchewan are like Saudi Arabian oil fields, every spring we plant it and every fall we harvest it. So that will be a generational opportunity that still will come in this province.
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