Trade practices could hurt food sector: speaker

Food-processing is an important part of a value-added agriculture industry.

Food-processing is an important part of a value-added agriculture industry.

But if a country’s trading practices could undermine this sector, says a University of Lethbridge researcher.

Pascal Ghazalian, an assistant professor in U of L’s department of economics, was in Red Deer on Thursday for the Alberta Agricultural Economics Association’s Visions 2012 conference.

He told the group that there are differing theories about the impact of food imports on a country’s food processing industry.

On the one hand, said Ghazalian, some think food imports expose domestic processors to increased competition, and create an incentive for them to be more innovative to preserve their market share.

There’s also a belief that bringing foreign products and technologies into a country has a “spillover effect” that encourages improved production methods there.

The counter argument, he said, is that imports reduce domestic processors’ market share and cut into their margins.

This causes them to spend less on research and development.

With respect to exporting processed foods, Ghazalian said the consensus is that this practice stimulates innovation at home.

Processors gain access to foreign knowledge, must respond to more intense competition abroad and have a larger market base with which to support R&D spending.

Ghazalian looked at the trade practices and R&D spending of countries belonging to the Organisation for Economic Co-operation and Development to determine the connection between the two.

“I found that imports have a negative influence on the research and development activities of food processing firms for the OECD countries,” he summed up.

Exports were found to have a positive impact on R&D spending.

Ghazalian stressed the importance of innovation for countries like Canada.

“Research and development activity, spawning innovation, are considered to be one important channel to realizing economic and industrial growth, and to maintain international competitiveness,” he said, adding that in the case of food processing this is important for producers of crops and other ag commodities.

Awareness of the correlation between import intensity and innovation is important to policy-makers, said Ghazalian.

It’s also something that officials who negotiate international trade agreements should keep in mind, he suggested.

The Alberta Agricultural Economics Association is organized through the University of Alberta’s department of rural economy.

Its members include academics, government officials, producers and others interested in economic, social and environmental issues related to agriculture.

Visions 2012 continues today at the Holiday Inn on 67th Street.

hrichards@bprda.wpengine.com

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