[A-List] US imperialism: Canadian wheat sales

["Michael Keaney" <michael.keaney@xxxxxx>]

US disputes Canada wheat sales system
By Edward Alden in Washington and Ken Warn in Toronto
Financial Times: December 18 2002

The US on Tuesday said it would seek to dismantle Canada's 65-year-old
system for selling wheat on world markets by launching a dispute settlement
case in the World Trade Organisation.

The decision will aggravate US relations with its largest trading partner
just as the two countries are battling over a US decision earlier this year
to slap an average 27 per cent import tariff on Canadian lumber.

Robert Zoellick, the US trade representative, said the US wanted to end the
monopoly powers of the Canadian Wheat Board (CWB), a farmer-controlled
agency that negotiates all world sales of Canadian grain.

"The Canadian Wheat Board is a monopoly, and its special benefits and
privileges put American wheat farmers at a disadvantage and undermine the
integrity of the international trading system," he said in a statement.

The US administration has been under steady pressure for more than a decade
from western farmers and their congressional allies who are eager to force
changes to Canada's wheat-selling system.

The US argues that, because Canadian farmers are required by law to pool
their wheat for international sales, the CWB is able to discount prices in a
strategic way that robs US farmers of sales in third markets. US farmers
claim they have lost ground in some key developing countries such as
Algeria, Brazil and the Philippines as a result of Canadian underpricing,
particularly for high quality durum wheat used to make pasta.

The WTO case will also challenge what the US says are unfair government
subsidies for rail transportation of grain within Canada.

The US is the world's largest exporter of wheat and Canada is second. Over
the past 5 years US grain exports have risen slightly faster than Canadian
exports.

The US is also in the midst of a separate antidumping investigation of
Canadian wheat sales to the US launched as a result of complaints from North
Dakota wheat growers. A decision on tariffs is due early next year.

For Canada, the US challenge raises social as well as economic issues. The
Wheat Board was established in 1935 in the depths of the Depression, and
many Canadian farmers believe pooling their wheat for international sales
helps to smooth out the ruinous booms and busts of the commodity markets.

The board is the biggest seller of wheat and barley in the world, with more
than 20 per cent of the international market and about C$4bn-C$6bn
(US$2.6bn-$3.8bn, ?2.5bn-?3.7bn) in annual sales. Some Canadian farmers are
sympathetic to the US claims, however, believing they could get higher
prices by selling directly on the open market.

Canada on Tuesday vowed to fight the US action. "We believe the board is
WTO-consistent and we are ready to take on the challenge," said Sebastien
Theberge, spokesman for Pierre Pettigrew, international trade minister.

A Canadian official said: "This has been looked at so many times by the US.
Yet another challenge seems to have a touch of desperation about it."