Protectionism, Global Trade and Finding Our Dignity in a Bottle of Ketchup!

This blog, I want to talk about pride and dignity on the national scale.  There are obvious signs of national pride— flags, parades, anthems, the traditional pomp and circumstance used to rally and demonstrate a belief in a country. When we’re looking for national dignity, the indicators can be a little more subtle, and can sometimes be found in the ordinary, for instance in a humble bottle of ketchup.

August 2016 074I grew up on a farm in southwestern Ontario, where fertile soil and the warm breeze blowing off Lake Erie create a lush micro-climate, a hospitable place to grow fruits and vegetables. Barring disease and hail, just about any seedling you set in the ground in May will flourish until the first frost.  This perfect mixture is particularly habitable for tomato plants. Consequently, many international food companies set up processing plants in the community: Bick’s, Campbell and Heinz were household names, and not just because their cans and jars were lined up on our pantry shelves, they were the names we saw on trucks and paycheques.

Tomatoes grown in southern Ontario could be found in a jar of Heinz ketchup, eaten with french fries in places as far away as Australia and Japan.  This may not be hard to believe for those who grew up in an age where free trade and globalization are normal.

As of 2012, more than 650 million bottles of Heinz Tomato Ketchup were sold worldwide. From 2000 to 2006, Heinz unsuccessfully experimented with a coloured ketchup.  The ‘EZ Squirt’, in vibrant green and purple just didn’t work. My kids still talk about the time our friend, Molly, a great cook, used neon ketchup to make her ribs; we ate blindfolded!

When Heinz first started making ketchup in 1876, then, without preservatives, their business was necessarily locally focused. Once preservatives were incorporated into the recipe, markets expanded and going to where the tomatoes grew for the processing also made good sense. In 1906 Heinz set up a ketchup processing plant in Leamington Ontario—a plant that ultimately became that town’s biggest employer. In 2014, 108 years later, Heinz tomato ketchup stopped being made in Leamington; and most of their ketchup is now made in Fremont, Ohio.

Besides the discovery of preservatives, what else changed to encourage an American company to set up a ketchup factory in southwestern Ontario in 1906, and then to shut that factory down in 2014? John_A_Macdonald_(ca._1875)

John A. Macdonald, Prime Minister of Canada, ca. 1875 

Let’s do a little history lesson on trade between Canada and the U.S. When Canada became a nation on July 1st, 1867, trade reciprocity with the United States that had been in place since the mid-1850s was no longer the norm. Just a few years earlier, near the end of the American Civil War (1861-1865), the U.S. Congress revoked the free trade deal between the British North American provinces and the U.S. In response, in 1879, Canadian Prime Minister John A. Macdonald implemented ‘The National Policy’, a Canadian economic program calling for high tariffs on imported manufactured goods to protect the manufacturing sector in Canada. Playing tit-for-tat, the Americans put even stronger trade protections in place, with tariffs higher than what Canada had imposed. As a result, Canadian firms were at a disadvantage in competing in the U.S. but American firms could enter Canada. This inequity set up Heinz to establish their ketchup processing plant in Leamington, Ontario.

Fast forward to 2013.  H.J. Heinz Co.’s century-old plant at Leamington Ontario has 740 full time employees and 350 seasonal workers. The tomatoes it processes for Heinz account for half of Ontario’s $52 million dollars’ worth of crops. Heinz has just been purchased by Berkshire Hathaway and a Brazilian private equity firm 3G Capital, for $23 billion. The new owners then decide to shut down their Leamington ketchup plant. Incidentally, in March 2015, Kraft announced a merger with Heinz. The resulting Kraft Heinz Company is the fifth largest food company in the world.

May 2017 144In late 2014, The French’s Food Co. LLC, famous for its mustard, started to sell ketchup in grocery stores. Buying tomato paste made from tomatoes grown in southwestern Ontario, and processed at the former Heinz plant in Leamington (and until very recently bottled as ketchup in Ohio), French’s rolled out a marketing campaign focused on “buying local”.  A social media backlash against Heinz’s and for French’s, related to Heinz’s  shutdown of the Leamington plant and French’s capitalizing on using 100% Canadian grown tomatoes, went viral.

Protectionism can be played as a zero-sum game, with real winners and losers. Protectionism is powerful, and the job losses, denied opportunities and local pain are real.

In recent months, President Donald Trump has denounced the North American Free Trade Agreement (NAFTA), the free trade deal in place among the U.S., Canada and Mexico since 1994, as “the worst trade deal ever signed by America”. Trump’s trade negotiator, Robert Lighthizer, initiated a 90-day consultation period and formal renegotiation will begin in August. Trump vows that NAFTA must be changed to better serve American interests, especially trade regimes for softwood lumber, dairy products, the automotive industry and pharmaceuticals.  We’re also nervous about energy and steel.

August 2016 081Tomatoes have, apparently, escaped his notice.

National pride is being deployed to market French’s new brand of ketchup. As a sign of support I tried this new brand; I care about the southern Ontario people, their farms, their jobs and their economy.

And, national pride will no doubt be rallied in support of Canadian (and American and Mexican) interests at the NAFTA renegotiation table. There will be more talk of protectionism.

Pride can be useful to build political and economic will. But what about national dignity, shouldn’t our own sense of who we are as Canadians also be at the negotiating table? Pride is not the same as dignity. Pride is dependent on what others think of us; dignity is innate, it’s what we know of ourselves as a country, it’s not dependent on what others think. Pride can become defensive; dignity protects self-interests by holding firm and strong on values.

August 2016 076So, let’s return to those tomato plants flourishing in southwestern Ontario.

French’s, owned by foreign multinational, U.K.-based Reckitt Benckiser Group PLC with a market cap of $46.72 billion, and including brands like Durex, Clearasil and Lysol, was taking those lovely, plump, red Canadian tomatoes to Ohio to bottle its new brand of ketchup.  Waving the Canadian flag even more vigorously, this spring, French’s committed to bottle its ketchup in Ontario.

Interesting side note: Loblaws, one of Canada’s largest companies, employing 200,000 Canadians, produces a PC brand of ketchup at a plant in Winona, Ontario that employs 430 people, using tomatoes from California.

What do Canadians know about our tomatoes and ketchup? We know that Canadian soil and weather and farmers can produce top-quality tomatoes. We know that international and domestic processors of ketchup want access to top-quality, reliable, reasonably priced sources of tomatoes. And, we know people around the world like ketchup on their french fries.

Beyond that, we know:

  • We all love a David-and-Goliath tale, and we root for the underdog (especially in hockey). How French’s (a multi-national) became the David to Heinz (another multi-national), the Goliath, is fascinating.  Heinz still produces lots of products in Leamington—HP Sauce, Bravo pasta sauce, Catelli tomato sauce, over 70,000 metric tonnes of products are produced by Heinz in Leamington. Who knew?
  • Even our tomatoes, as well as our softwood lumber, and milk solids, and oil and gas, and auto parts, and steel, and a host of other Canadian-produced resources and goods (not to mention services) — can be co-opted by the marketing of national pride.
  • Unless you are colour-blind, it’s best to avoid neon-coloured ketchup.

NAFTA, and its predecessor the Canada-U.S. Free Trade Agreement, have tied the North American continent’s economy together for three decades. As someone who has worked on projects all over the globe, I see Canada as a trading nation. According to Wikipedia, our total trade is worth more than two-thirds of our GDP, the second highest level in the G7 after Germany.  We’re a trade-dependent economy, an export-oriented economy. Seeing protectionism turning into the defining theme of the recent “America first” U.S. election concerns me. Yes, we’ve got loads of other partners in the E.U. and Asia-Pacific who want to bring down trade barriers. Yet our primary trading partner logically is our neighbor with whom we share the longest border in the world, the U.S.

What I’m wondering about is the effect of “America first” on how we, as Canadians, see our own economy, and choices. We can:

  1. Respond in kind, with our Canadian brand of national pride.  “Canada first!”  With honour and pride, it’s our reputation that makes us honourable or proud and we have to respond, aggressively, to aggressors, or risk losing that sense of worth. Revenge, retribution, vendettas, and ‘Tit-for-Tat’ reactions, are expected.
  2. Be the victim. Be a David to the American Goliath. Attract global sympathy, not by emphasizing either our own strength or inner worth as Canadians, but by complaining about the America-first trade aggressions. Focus on our powerlessness.
  3. Act with dignity. Operate from the belief that all people, and arguably, by extension nations, have dignity, inherent worth that exists independently of what others think. Yes, insults and attacks can try to take away our dignity as Canadians but, we can choose to exercise self-restraint in the game of “Tit-For-Tat” and direct our energy to negotiating agreements that reaffirm the soundness of Canada as a strong and resource-full trading nation. In any circumstance, we can act as masters of our own fate.

The first two options keep us in a reactive battle with not only the United States but potentially all of our trading partners.  Being moved to aggress or collapse in negotiation is not helpful in the long term and makes us vulnerable to the changing winds of global trade. The third option means standing in the eye of the storm, responsive to an inner strength and knowledge that is less dependent on the whims and upheavals of our partners.   I think you can tell the choice I’m leaning towards.

May dignity accompany our negotiators as we continue to engage with the complexity of globalization and our citizens as we make important daily choices in our purchases.

Donna Kennedy-Glans, July 13, 2017

 

 

5 thoughts on “Protectionism, Global Trade and Finding Our Dignity in a Bottle of Ketchup!

  1. Donna: I owned stock in Heinz years before Berkshire purchased them. For the record I also owned Coke before Berkshire owned their stock. Pretty good eh? So I sold out Heinz a bit before Berkshire bought them. What Berkshire wanted was the condiment packet business. They produced the little blister packs of mayo and ketchup for McDonalds and so on. The plants counted these packs in the billions. So the Leamington operation was but a blip on their radar. When I owned Heinz they had trouble with the management. The list of officers often sounded like an invitation to a royal ball rather than a business. They hired their buddies. The wife of the present owner, (a grandson) was a serial Democrat which annoyed me as she donated millions to the Democratic party but was a capitalist by wealth. Worse yet, married into money. Sort of a bite the hand that feeds you. So management was lax. The union in Leamington became all powerful. This union was the real reason Berkshire closed the plant. Their ketchup has never been even close to as good. I can taste the difference in the blister packs and the squirt bottles. So dumping the union to get rid of the legacy costs. The bad management of Heinz now gone Berkshire is producing hundreds of new products under the Heinz name. So trouble in the office and trouble in the shop. Capitalism is nasty, but it is usually better off in the long run.

    Free trade is going to be difficult to police. To me there are social costs that should not be shuttled to the rest of the country if a competing country favors an industry. If a country supported an industry then the receiving country should be allowed to pass the identical law, or tax (tariff) the cost of the advantage. Tit for Tat, I called it. An extreme example was Canada put in a national health plan a few years back. This in effect gave every Canadian company a discount as they no longer had to buy health plans for their employees. This huge advantage had the effect of backing up trucks across the Ambassador bridge. A billion dollars a day rolled over that bridge. Full into the States, empty return. Easy enough to witness when you look at the customs. Empty trucks roll right through. All the die shops in Michigan were put out of business during this time. So back to my Tit for Tat. The Canadians should have been charged a tariff equal to the advantage of the free health care. Now the Americans have their own national heath care the tariff would have to be removed.

    John Darnbrook

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