Summer 1995
Time for U.S., Canada to Start Cooperating
by Paul Aasness, Chairman
Minnesota Wheat Council
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Prairie Grains is the
official publication of
the Minnesota
Association of
Wheat Growers,
North Dakota Grain
Growers Association,
South Dakota Wheat,
Inc., and the
Minnesota Barley
Growers Association.
Think of all the time, energy, and resources that have been spent on this conflict that could have been used more productively -- perhaps in developing new and expanded uses for wheat -- to benefit producers in both countries.
Hopefully, by the end of this year, we can put our bilateral small grains trading problems behind us. The Joint Commission on Grains, given the charge to recommend long-term grain trade solutions to both national governments, is scheduled to present its initial findings in June, 1995, followed by non-binding recommendations by September, 1995.
Small grains leaders on both sides of the border were invited to submit comments. Following are seven recommendations put forth by the Western Canadian Wheat Growers Association (WCWG), which represents farmers in Alberta, Saskatchewan, and Manitoba:
- Free trade in wheat and barley. The WCWG recommends a continental market in which farmers and private sellers would be free to sell any and all grains in either country. The current volume cap on Canadian wheat exports to the U.S. would be eliminated, and so would import restrictions on U.S. barley entering Canada.
"It is our experience that American farmers do not mind competing against Canadian farmers providing that sales are made on normal business terms," the WCWG says. "Similarly, we in Canada do not oppose U.S. grain and oilseeds entering Canada. In fact, we welcome the business. These added supplies help keep out plants operating and provide jobs in Canada." - The Canadian Wheat Board (CWB) could participate in the continental market, provided its wheat and barley sales into the U.S. are made to end users at a price that is not below the CWB's acquisition price. In short, the CWB wouldn't be allowed to undercut the U.S. market. The WCWG recommends compliance with this provision be confirmed by an independent auditing firm.
- End-use certificates would be eliminated on both sides of the border. They are unnecessary barriers to trade and merely add to the cost of doing business, says the WCWG.
- U.S. and Canadian farmers should be free to become members of grain or food processing cooperatives on either side of the border. This would enhance trade relations and provide farmers with an opportunity to share in processing profits, says the WCWG.
- Remove the Western Grain Transportation Act subsidy on the export of grain to all markets, including the U.S., and redirect proceeds to Canadian farmers in the form of direct income support. For budgetary reasons and to meet specifications under GATT, the Canadian government has already made this a done deal. August 1, 1995, will mark the end of a grain rail subsidy that dates back almost 100 years. Started originally in 1897 to lure settlers to western Canada, the transportation subsidy evolved later into an export tool.
- The U.S. Export Enhancement Program (EEP) should be converted to a direct income support program that is production and trade neutral.
- Each country may continue domestic support programs, (U.S. deficiency payments, Canada's revenue insurance) given that they meet obligations under GATT and are not production or trade distorting.
Further, the WCWG urges the two countries to work toward harmonizing regulations, taxes and user fees in the grain handling and transportation system.
It seems to me that the root of this conflict is that there are essentially two completely different marketing systems in operation, and grain sectors in both countries feature tools designed to hinder the other's ability to compete.
The bulk of Canadian grain is marketed through the monopolistic Canadian Wheat Board, which does not buy grain in an open, competitive arena for re-sale and has the ability to undercut private competition.
We have the Export Enhancement Program, designed at first to counter European export subsidies and force a GATT resolution, and expanded later to compete with the CWB.
It's my contention that both serve merely to lower the value of wheat in the export market. To counter a CWB garage-sale level wheat bid, the U.S. boosts EEP bonuses, triggering another CWB price action which brings on a U.S. counter action, and so on.
In its seven recommendations, the WCWG is essentially saying that this process is nonsense, and I agree. Budget constraints, trade agreements and fledgling regional trading blocs are sending the message that it's time for all of us to put away our trade manipulating tools.
The Joint Commission's final word should be used not only as an impetus for greater cooperation between the two countries in small grains trade, but also small grains research and value-added market development -- an area which perhaps holds the most promise for U.S. and Canadian farmers.
Instead of trying to outgun each other through our respective governments, we need to work together to support policies that enhance the functions of a new global trade environment, and forthrightly address those policies which inhibit the market's role.