Letter from Saskatchewan

Free trade and the case of the missing profits

So who has benefited as Canada’s agro-exports zoomed by $17 billion under NAFTA as of 2002, while all its farmers received only $400 million more in net income? The answer is a lesson to all farmers.

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 25, 2003: Farmers in Canada feel under siege. Though this feeling has taken a quantum leap forward with the BSE crisis and American wheat tariffs against Canada, it has nevertheless been building for decades. Most Canadian farmers are increasingly reliant on exports and prices for these have been stagnant for two decades. World markets no longer seem to respond to price signals that once drove prices up when world grain stocks plummeted. Input costs rise continually, and generally much faster than inflation.

If Canadian farmers feel under siege, and so they should, imagine the despair that is gripping farmers in Third World countries as they see world markets flooded with cheap products from wealthy countries that dump them into these markets. (As an aside, it is politically incorrect now to talk about "Third World" countries. They are "developing" countries. In fact, much of the Third World is sinking deeper into poverty and becoming less "developed".) How, for example, can the Mexican farmer with a hoe and maybe a single small tractor grow corn to compete with the American farmer receiving massive government subsidies to produce 200 bushel an acre corn on thousands of acres? The North American Free Trade Agreement (NAFTA) opened Mexican markets to American ag exports and is devastating the Mexican farm economy.

The answer to all these problems was supposed to come out of the World Trade Organization conference in Cancun, Mexico. According to countries like the U.S. and Canada, that answer is more trade, more exports and an opening of hitherto closed markets. And while governments and some farm organizations get all excited by this prospect, farmers in general give a cynical shake of their heads. They've seen it all before.

Like when we signed the Canada/U.S. Free Trade Agreement in 1989 and the NAFTA in 1994. The problems facing the ag sector were to be solved by an increase in trade. Canadian farmers responded with gusto. Canadian agri-food exports rose from a value of $10.9 billion in 1988 to $28.2 billion in 2002. This near-tripling of exports resulted in a staggering increase in realized net farm income in Canada from $3.9 billion to $4.1 billion in the same time period. Staggering, because when adjusted for inflation, it represents a 24 percent drop in income.

Now, Canadian farmers, and farmers across the rapidly shrinking globe are being told that more of the same, on a much larger scale, will solve their problems. If Canadian farmers have trouble falling for this one again, imagine how hard it must be for farmers in India or Egypt. Many Third World countries have suffered as brutally as their farmers in this new economic world order. These countries had a small surplus in the food trade balance in the late 1970's. That means the value of their food exports exceeded the value of food they had to import. Today, that surplus has become a deficit of $6 billion. It is projected to grow to $18 billion in 12 years.

The Cancun meeting saw something almost unprecedented in world trade talks. For almost the first time, poor countries banded together in a block to oppose the position taken primarily by the European Community and the U.S. Led by India, China and Brazil, the so-called G21 demanded an end to subsidized dumping and greater access to markets in rich countries. All this would not be inconsistent with the official line of the rich countries except for one thing: the G21 are saying they do not want to give up their own subsidy programs or further open their markets to the rich countries until they make back some of the ground they lost.

Nor is it some Third World fantasy that the agriculture sector in poor countries has suffered as a result of increasing world trade. The UN's Food and Agriculture Organization acknowledges that the last round of world trade talks, the Uruguay Round, worked for wealthy countries and disadvantaged the poor.

Canada tried to talk the good talk in Cancun. Trade Minister Pettigrew agreed that the trade playing field must be re-balanced to undo some of the harm done to poor countries by prior WTO agreements. But, having hitched its wagon to the horse of increasing exports, the Canadian government continues to push for greater trade access to the markets of those same countries.

Unfortunately for this strategy, Canadian farmers are beginning to realize that increasing access to the markets of a world that is essentially saturated with cheap food and dominated by a few multinational food companies will not bring any greater good.

The search for real answers is more complex. Canadian farmers, and farmers worldwide are beginning to realize this. There is a lot of work to be done.

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