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Assessing the Market and Trade Impacts of Canada’s Proposed Plastic Packaging Restrictions
This is an excerpt of the Farm Foundation Issue Report, Assessing the Market and Trade Impacts of Canada’s Proposed Plastic Packaging Restrictions. The full Issue Report, Jason Grant and Nicolas Legrand, evaluates the economic implications of Environmental and Climate Change Canada’s proposed plastic packaging restrictions for retail prices and per capita fresh fruit and vegetable availability for Canadian consumers under alternative import supply reduction scenarios.
In August 2023, Environmental and Climate Change Canada (ECCC) issued a pre-proposal notice to phase out plastic packaging for fresh produce. The proposal seeks to achieve up to 75% of fresh produce sold in major retailers in Canada using bulk or non-plastic packaging by 2026, increasing to 95% by 2028. An often-overlooked reality of environmental regulations, even if well-intentioned, is the significant economic toll on consumers and the potential disruption of crossborder trade. These concerns are exacerbated due to the absence of fully established alternative packaging solutions that reliably ensure comparable quality, freshness, and food safety for consumers. For Canada, a country that straddles temperate and subarctic climate zones, imports of fresh fruits and vegetables make up an outsized share of domestic availability on supermarket shelves. We evaluate the economic implications of the ECCC’s proposed plastic packaging restrictions for retail prices and per capita fresh fruit and vegetable availability for Canadian consumers under alternative import supply reduction scenarios. We begin by reviewing U.S. exports of fresh fruits and vegetables and the importance of the Canadian market, followed by a closer look at the share of imports of fresh fruits and vegetables in Canada’s total availability from domestic and imported sources. Finally, we summarize the market impacts on Canadian retail prices and per capita availability of fresh produce and the likely economic burden on households in Canada if the ECCC’s restrictions on plastic packaging entered into force.
Background
International trade of agricultural products has lifted millions of people out of poverty, increased food availability for the undernourished, enhanced competitiveness and affordability, and improved the livelihoods of many.1 The United States is one of the largest producers and exporters of food and agricultural products. Thus, international trade is vital to the prosperity of agricultural producers who depend on exporting to support farm incomes and diversify their customer base. Through trade, producers gain access to foreign markets which allows them to lower average costs and expand sales at competitive international prices. Consumers in foreign countries gain access to products year-round that may not otherwise be available in the absence of trade due to differing seasonal and climatic conditions. An often forgotten, yet important, benefit of agricultural trade is its critical role in linking regions with food surpluses to regions with food deficits, thereby fostering resiliency in the global food system and ensuring access and availability to nutrient-rich foods such as fresh fruits and vegetables, seafood, meat, and dairy products.
On January 1, 2024, the (former) North American Free Trade Agreement (NAFTA) between the United States, Canada and Mexico celebrated its 30th anniversary. Over a 15-year period, NAFTA members began a series of reforms that effectively removed most barriers to agricultural trade and solidified the integration of North American supply chains.2 Twenty-five years later, on July 1, 2020, NAFTA was re-negotiated and updated to become the United States-Mexico-Canada Agreement (USMCA).3 Since 1995, U.S. exports have increased over three-fold from $62.3 billion in 1995 to a record $196 billion in 2022. The significance of USMCA/NAFTA members for U.S. agricultural exports is stark; in 1995, just 15%, or $9.4 billion of U.S. agricultural exports were sent to Canada and Mexico. Seven years later, in 2002, that share doubled to nearly 30% and has remained between 27% and 31% since then. This means that nearly one third of U.S. food and agricultural exports continue to be sold in North America. This highly integrated, regionally focused supply chain is one of the most dynamic food systems globally, feeding a wealthy population with a robust set of safe and nutritious food choices throughout the year.