This could be bigger than the lumber dispute. Now Canadians are attacking cute cuddly USA farmers, LOL...
Canada set to challenge U.S. farm subsidies at WTO
Ottawa's tougher stance on Washington's rich handouts targets corn, overall aid
theglobeandmail.com
STEVEN CHASE and BARRIE MCKENNA
OTTAWA, WASHINGTON -- Canada is for the first time challenging the United States' multibillion-dollar farm subsidies at the World Trade Organization, a move that represents a more aggressive stand on trade for the Harper government.
The complaint has two targets: $9-billion (U.S.) in annual U.S. corn subsidies that Ottawa says hurt its producers, and the overall trade-distorting farm aid Washington doles out, an amount Canada estimates has exceeded $19-billion in five of the last eight years.
"The United States has been providing subsidies to its agricultural producers that create unfair market advantages," said International Trade Minister David Emerson, who last fall signalled Ottawa will no longer play a "Boy Scout" in global commerce.
The move is also a bid to forestall expected efforts by the protectionist, Democrat-controlled U.S. Congress to enrich Washington's handouts to U.S. farmers as it reviews the Farm Bill this year.
The first step in Canada's WTO grievance is to request a consultation with the United States.
If negotiations fail, Ottawa can request a panel of arbitrators be appointed.
Trade lawyer Lawrence Herman called yesterday's challenge a major development in Canada-U.S. trade relations because it could lead to one of the biggest cases yet for Ottawa at the WTO.
Former Liberal governments bemoaned U.S. farm subsidies publicly, but this is the first time Ottawa has challenged them before the WTO, which functions as a global trade referee.
"This is more than just a shot across the bow. It's the deliberate engagement by Canada in a full-scale naval battle," said Mr. Herman, with Cassels Brock & Blackwell LLP in Toronto.
Lawyer Greg Somers, with Ogilvy Renault LLP, said Canada's challenge is significant because the entire world watches U.S. farm aid.
"It's been the elephant in the room for years," he said, adding that it's possible other countries may join the challenge.
Canadian farmers have for years complained that U.S. farm aid depresses the international prices for agricultural goods and consequently reduces their income.
A win for Canada at the WTO won't by itself persuade Washington to back off on the kind of farm aid that distorts international markets. But it will embarrass the United States -- which considers itself the world leader on free trade -- in a high-profile international forum.
Canadian trade expert Bill Dymond sees the move as merely bowing to pressure from Canadian corn farmers, and not part of a larger strategy. Corn farmers lost their bid in 2006 to persuade Canadian trade regulators to impose long-term tariffs on U.S. corn.
"Now they want the government to take up the cudgels," Mr. Dymond said of corn farmers.
U.S. corn production is up compared with three years ago, despite falling world prices. New ethanol requirements for U.S. gasoline have boosted demand and prices for corn, which is the primary feedstock for making ethanol.
Gretchen Hamel, a spokesman for the Office of the U.S. Trade Representative, said U.S. farm support programs are not harming Canadian corn producers and comply with WTO rules.
"Canada's own International Trade Tribunal found just last year that Canadian corn growers have not been injured by imports of U.S. corn," she noted.
With the Doha round of WTO talks on agricultural trade stalled and the U.S. Farm Bill due for renewal this year, the Harper government apparently sees an opportunity to try to roll back subsidies that have long been a thorn to Canadian farmers.
Congress is due to take up the farm legislation early this year, and already farm groups are girding for a fight.
American Farm Bureau president Bob Stallman warned yesterday that farm subsidies have "big targets" on them because Democrats are determined to curb federal spending.
But he insisted Ottawa's WTO challenge wouldn't get in the way of its effort to keep subsidy levels high.
"The consultation phase is simply the beginning of a potentially long process," Mr. Stallman said. "This request for consultations has no bearing on our goals in domestic and international policy, which will be based on what is good for U.S. agriculture."
U.S. farmers pocketed an estimated $21-billion in subsidies in 2005, up from $12.5-billion in 2004, according to the Washington-based Environmental Working Group. More than 90 per cent of the money went to prop up prices for just five crops: rice, wheat, corn, cotton and soybeans.
Ron Litterer, vice-president of the U.S. National Corn Growers Association, said Canada is clearly trying to take advantage of the looming debate in Congress over farm subsidies. And while he insisted that existing subsidies meet U.S. trade obligations, Mr. Litterer said migrating to a revenue-based model "could address some of the concerns" of its trading partners, including Canada.
Corn producers have been pushing for an overhaul of the system to plug what it calls "holes" in the safety net for farmers. Under its plan -- so far not endorsed by other producers -- the government would base its subsidies on farm revenues rather than commodity prices.
By the numbers
$9-BILLION
Approximate average annual U.S. government subsidy to corn farmers in each of the past two years.
$21-BILLION
Estimate of subsidies U.S. farmers pocketed in 2005. |
