For Your Information

Americans Impose Further Tariffs

on Canadian Wheat

On May 2, the U.S. Department of Commerce announced it was imposing additional preliminary tariffs of 6.12 per cent on spring wheat and 8.15 per cent on durum, charging that the Canadian Wheat Board (CWB) is dumping wheat into the American market. These tariffs are on top of the 3.94 per cent imposed in March on charges that the Canadian government and CWB unfairly subsidize prairie farmers.

Final determination is expected in both cases later this summer, and the probability that the tariffs will be lifted is quite high, given the lack of evidence to back up any of the American claims. However, the combined value of the tariffs - around $17 U.S. per tonne on wheat and $25 U.S. per tonne on durum - is prohibitive enough to ensure that sales of Canadian wheat into the U.S. market are shut down for now.

This is the tenth trade challenge launched by the Americans to try and keep Canadian wheat out of the U.S. since the Free Trade Agreement was signed. Each previous challenge has been unsuccessful. The costs of defending these charges, which in the U.S. are largely funded by the American government, are borne almost entirely by western Canadian farmers in this country. This current challenge is expected to cost between $6 and $10 million to defend, with no possibility of recovering these costs if the charges prove baseless as they have so many times before.

One of the main aims of the American challenges is to dismantle the CWB, which is the last of the Prairie grain collectives. Because the CWB has a legislated monopoly on the sales of all wheat, durum and barley produced for human consumption, the American grain transnationals - companies like ADM, Cargill, ConAgra and Louis Dreyfus - have been unable to profit from the 20 to 24 million tonnes of prairie grain sold on the world market each year. Instead, all revenues from the sale of this grain are returned directly to western Canadian farmers through a pooling system.

The charge of dumping is patently ludicrous; studies done by the U.S. International Trade Commission (ITC) which examined sales of Canadian wheat into the U.S. market over a period of 96 months found only two months when Canadian grain prices were the same or lower than equivalent American grain. At hearings organized by the ITC last October, American millers and pasta makers testified again and again that they buy Canadian grain because of its high quality and consistency, not because of cheaper prices. One buyer told the ITC "If they [CWB] are dumping grain, then I am the worst durum buyer ever."

However, despite these facts, in order to try and win their dumping case the Americans have included a cost of production determination on spring wheat. To determine whether sales were being made below cost of production (which happens regularly in modern agriculture, where farmers are at the mercy not only of world markets but also the weather), the Americans are using figures taken from just 27 randomly selected farmers. They are trying to claim that these 27 farmers represent a statistically valid snapshot of the production costs of the 50,000 western Canadian farmers who grow spring wheat. The validity of these claims is questionable.

As for the subsidy charge, the latest figures from the OECD show the subsidies received by the average American grain farmer are over three times greater than the subsidies received by Canadian grain farmers.

As is the case with the ongoing softwood lumber dispute, the Americans are again challenging a system - in this case a marketing system - which impedes American corporations from making maximum profits.