Letter from Saskatchewan
Truth suffers, traders win in US ruling
against Canadian wheat board exports

By Paul Beingessner


Meet Paul

Saskatchewan farmer Paul Beingessner has missed only a handful of deadlines in writing a weekly column during the past eight years. He covers Canadian agriculture from a High Plains perspective. His straight-talk style informs readers about corporate influence in national and international agriculture, national ag politics on both sides of the border, and why some farmers do the things they do. Click here for more information about Paul.


TRUAX, Saskatchewan, Canada, September 15, 2003: Since the Cold War ended and governments adopted globalization and international trade as the panacea for we-are-not-sure-what, a whole new cold war has opened up, sparked by trade itself.

On this new battlefield, nations sign agreements that promise greater trade by lowering tariff barriers and reducing domestic subsidies. After these are signed, various interest groups in those countries spend the ensuing decades trying to subvert the agreements to gain some advantage. Caught at the bottom of this massive pile-up is usually the little guy – the farmer or worker in the affected industry.

In this new cold trade war, the first casualty, as in all wars, is truth. Propaganda displaces fact and reason is simply shoved out the window.

Probably some of the best examples of this new cold war are found in the field of agriculture. A recent ruling by the U.S. Department of Commerce (DOC) concerning Canadian wheat exports to the U.S. is a prime case. Released August 29, that ruling slapped punitive tariffs of approximately 14 percent against Canadian spring wheat and durum going into the U.S. The ruling will achieve what nine previous attempts over the past decade by American farm organizations and governments have failed to do – it will shut down exports of Canadian wheat to the U.S. (Note that the last decade of such complaints coincides with the life span thus far of the Canada/U.S. Free Trade Agreement.)

As a Canadian farmer, I have a hard time looking at this trade war with unbiased eyes, so I will have to admit to my bias and let the reader judge my opinions. As I said earlier, much of what passes for fact in trade wars is simply propaganda. Consider the press release from the North Dakota Wheat Commission (NDWC). In celebrating its victory, the NDWC ran somewhat roughshod over the truth.

The press release repeats many of the contentions made in the NDWC's original statement of claim. Thus it lists the benefits that accrue to Canadian farmers by virtue of the Canadian Wheat Board's relationship with the Canadian government. These include government guarantees of initial payments to farmers, government credit extended to foreign buyers, government backing for CWB borrowings, etc. The press release says "the Commerce ruling substantiates the NDWC claim that the Canadian Wheat Board sells wheat with the aid of government subsidies and without regard for its true market value."

These statements are designed to create an impression, but how true are they?

First of all, the original points raised by the NDWC were almost all rejected by the DOC. It denied that credit sales to foreign buyers represent an unfair advantage. No credit arrangements are available to American customers. The DOC also rejected the notion that Canadian regulations regarding railways and short lines give some advantage to Canadian farmers. Nor did the DOC attack the Canadian grading system, which the NDWC claims penalizes Americans wanting to export to Canada.

Only in two areas did the DOC find fault. It said the government guarantee of CWB borrowings represented a subsidy, as did government ownership of part of the grain hopper car fleet. (In fact, grain going to the U.S. pays ownership costs for the cars that carry it. The DOC simply said it did not receive evidence on that point.)

The claim in the NDWC press release that the CWB sells wheat "without regard for its true market value" was rejected outright by the U.S. International Trade Commission (ITC). The ITC found that Canadian wheat and durum sold in the U.S. fetches consistently higher prices than similar American grain.

The press release claims that the proof of damage to American farmers is found in the reduction in spring wheat and durum acres in the U.S. since the Free Trade Agreement. It fails to mention that Canadian acres of wheat have also fallen dramatically in this time period – due to the severely depressed price of wheat on world markets.

Many ironies

There are many ironies in all this. Imports of American corn into Canada are much larger than our wheat exports to the U.S. These have depressed the price for Canadian feed barley in our domestic markets. Americans are also blamed for destroying the livelihood of many small Mexican farmers since the North American Free Trade Agreement was signed in 1994. Cheap American corn, propped up by massive government price supports, has flooded into Mexico.

Oddly enough, the NDWC showed no shame in recently asking the U.S. Department of Agriculture to provide trade financing for flour mills in Indonesia. "Indonesia's imports could be… double or triple the current level — if guaranteed credit or other trade financing would be authorized". The NDWC is asking for the very thing it attacked Canadian farmers over – credit sales to foreign countries.

The other pillar of the American judgement against Canadian farmers concerned dumping. After demanding the records of 27 Canadian farmers, the DOC decided the CWB sometimes sell wheat below the cost of production. Surprise, surprise! Market prices are sometimes below the cost of production. Since the ITC decided that Canadian wheat sold in the U.S. fetches higher prices than comparable American grain, American farmers must be selling below the cost of production as well.

It is all most unfortunate. As I have said repeatedly in this column, farmers around the world do not receive adequate compensation for what they produce, but the problem is not other farmers. The problem is an economic system that leaves farmers powerless against the near monopolies that buy their product and sell them their inputs. When Canadian farmers benefit by setting up their own "monopoly," the Canadian Wheat Board, it is sad that other farmers, or organizations claiming to represent them, would try to destroy it.


© Paul Beingessner, beingessner@sasktel.net . The author is a columnist, transportation consultant and third-generation farmer in Truax, Saskatchewan.