Letter from Saskatchewan
Canadian farmers left wondering
about impact of WTO subsidy cuts

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, August 17, 2004: American farmers seem pretty happy these days, and it isn't all the result of sky high cattle prices due to eliminating imports of Canadian livestock. I say livestock, because about the only creatures allowed across the border are pigs. Pigs are just as likely to get BSE as sheep (i.e. not at all), but sheep get turned back at the border like rats with bubonic plague. Not that I'm bitter…. All that is another story, however.

American farmers seem pretty happy because of the recent signing of the WTO framework agreement. The National Cattlemen's Beef Association, National Corn Growers Association, American Soybean Association, National Pork Producers Council, U.S. Wheat Associates, National Association of Wheat Growers, National Milk Producers Federation, and the American Farm Bureau Federation all seem to believe they will benefit because the WTO will open up new markets, end export subsidies, eliminate import tariffs and reduce domestic subsidies in other countries more than they will be reduced in the U.S.

The latter part seems to be the key to American satisfaction and the American government is pushing it hard. It is promoting the view that the U.S. is not the problem in world agricultural trade. Other countries are, and according to U.S. Trade Representative Robert Zoellick "countries that have trade-distorting agricultural subsidies two to three times higher than ours -- such as the European Union and Japan -- will be required to cut their subsidy programs more than we do."

Zoellick, and the farm groups also make much of the end of export subsidies. Zoellick fingers the EU, saying it will "have to phase-out billions of dollars that directly displace our wheat, beef, sugar, dairy, and other producers." In fact, the U.S. gradually got rid of many of its export subsidies over the last decade and replaced them with higher domestic subsidies.

These domestic subsidies may be largely untouched by the so-called cuts. At least that is the position of the U.S. government. Zoellick claims the immediate 20% cut in domestic subsidies would have no effect on American farmers because the cut is made from what the subsidy levels could be, not what they are. The WTO allows the U.S. a total subsidy package of $40 billion, twice the $20 billion currently doled out.

For Canadian farm groups, the reaction has been a bit more cautious. The Canadian Wheat Board has expressed deep concerns about the future of the organization given what Canada agreed to. The Canadian Federation of Agriculture says "there is a risk the final outcome could give the U.S. wide latitude to continue to provide substantial subsidies to its farmers, while severely limiting Canada’s ability to assist its producers."

Agriculture Canada claims it has the U.S. on the ropes. "Certainly the U.S. is on the defensive" claimed the Deputy Director of Agriculture Canada's trade negotiations office. He argues that American political leaders are misleading their farmers.

Canadian farmers will have to decide who has the credibility problem. Agriculture Canada, which took us through the Uruguay round of trade talk in the 1990's promising an end to foreign subsidies (check out the 2002 American farm bill to put the lie to that), or the U.S. government which has all its farmers applauding.

Or, speaking of credibility problems, we could look at the success of Agriculture Canada and its rules-based system for food safety at getting the American border open to Canadian cattle. (Oops, I again deviated into bitterness.)

The WTO talks might have been held up by agriculture, but they are really about other things. The National Association of Manufacturers in the U.S. declared that "This is a huge accomplishment." The U.S. Coalition of Service Industries called the agreement "A very important step forward for services". Zoellick pointed out that the American economy is about manufacturing and the export of services. In the latter, the U.S. already has a $60 billion trade surplus.

Canada has its eye on the same goals. But, unlike the U.S., which claims to have preserved its farm subsidies, Canada had far fewer to preserve. Instead, in the true Canadian style of giving something away to show how pure we are, Canada offered up the CWB and, to a lesser extent, supply management. While Agriculture Minister Andy Mitchell says he will not compromise Canadian farm interests, other commentators say the deed is already done.

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