Front Page	E-mail PagePrint Version

Ottawa seeks WTO-approved talks with the US over corn, other agricultural subsidies

OTTAWA, Canada – 01/12/07 – Canada has filed a formal request with the World Trade Organization (WTO) to begin formal discussions with Washington over what Canada claims are illegal US government subsidies to American corn growers.

The request to the Geneva, Switzerland-headquartered trade group for the talks reportedly takes the issue a step further by challenging whether the farm subsidies paid out by the US government to the country’s soybean, sugar, and wheat producers comply with international commerce rules.

“Canada is concerned that these US subsidies continue to cause economic harm to our corn farmers,” said Canadian Minister of Agriculture, Charles Strahl, in a prepared statement to the press.

The action was taken, he stated, “in order to provide the best possible support for our producers by pushing for a level playing field so that they can compete.”

David Emerson, Canada’s international trade minister, also released a statement saying that “the United States has been providing subsidies to its agricultural producers that create unfair market advantages.”

Canada, he said, “hopes to see the US live up to its WTO obligations, particularly given that it has the opportunity to do so when it rewrites its Farm Bill this year."

A spokesman for International Trade Minister, David Emerson, said that Canada “did not have specific demands at this point,” adding that if the US does not reduce its farm subsidies, Canada will ask the WTO to begin a formal dispute settlement hearing on the issue.

Under WTO rules, a three-month consultation period is required before a country can ask the trade body to launch a formal investigation. A WTO case can result in punitive sanctions being authorized, but panels take many months, and sometimes years, to reach a decision.

Not surprisingly, Canadian corn growers were pleased with Ottawa’s action, while some others feel the government should have skipped the request for discussions and, instead, immediately filed a formal complaint with the WTO.

Ryan Brown, general manager of the Ontario Corn Producers’ Association, told Dow Jones that “we are encouraged by the Canadian government’s request to hold WTO consultations with the US over their use of corn subsidies.”

The collapse of the Doha Round, he said, “leaves Canada with only one viable long-term solution to level the playing field for both corn producers and corn users in Canada.''

The country’s corn producers have for the last couple of years wanted the Canadian government to launch a WTO complaint against the US Farm Bill, he said. “The fact that the Canadian government has finally gone ahead and taken this consultation route is definitely a step in the right direction.”

US corn producers, said Brown, “are isolated from price drops that occur on the Chicago Board of Trade, while corn producers in Canada are not.”

This, he said, “means US corn producers are going to get paid a certain price even though values have dropped below the minimum government support.”

This creates a situation in which the excess US corn supply is shipped cheaply into Ontario, Quebec, and Manitoba, and further lowers the price of corn in Ontario and feed grains in western Canada, Brown added.

Gretchen Hamel, a spokeswoman for US Trade Representative (USTR) Susan Schwab, said officials in Washington were still studying Canada's request in detail and could not comment on the claim that its overall farm subsidy levels constituted an infringement of WTO rules.

She said, however, that US support programs for corn were not harming Canadian producers and were legal under World Trade Organization guidelines.

"Corn prices have increased significantly in both the United States and in Canada. In addition, US corn exports to Canada have declined in the last year," she said, adding that given “the dramatic improvement in the market over the past year, we're surprised that Canada believes that our corn programs are now causing harm in breach of WTO rules."

At the core, Canada – the US’ largest bi-lateral trading partner – is arguing that the US has exceeded the permitted level of subsidies for a number of years on a wide range of agricultural products including wheat, sugar and soybeans.

Ottawa has urged the US Congress to address its concerns when it soon begins to draft a new Farm Bill, which will set out the parameters of all US agricultural support programs for the next five years.

Washington has said it has offered cuts as part of the WTO's Doha Round of global free negotiations, but other countries have called the pledges largely artificial, addressing only maximum levels of government subsidies and not those actually distributed to US farmers.

With the so-called Doha round of talks currently in a state of suspended animation since last July, it is unclear whether the new Democrat-controlled Congress will honor its previous offers to support the new Farm Bill.

The specific complaint on corn concerns some $9 billion in export credit guarantees and other subsidies paid out by the US annually that Ottawa says unfairly and illegally deflate prices.

The US is the world's largest producer and exporter of corn, accounting for a full 41% of global production and 68% of all exports in the past two years.

Canada has been a net importer of corn for more than a decade, with most of the corn coming from the US.

The country’s Conservative Party returned to power in February 2006 for the first time in more than 12 years and based a significant part of its federal election platform on fostering better relations with Washington.

Last September, the two countries signed an agreement to regulate the export to the US of Canadian-produced softwood lumber, a key component in home-building.

Though strongly opposed by Canada’s lumber industry, the agreement was credited with ending a decades-long dispute that on several occasions fueled talk of an outright trade war that would have severely impacted what is the world’s most unfettered trade relationship.

The US and Canada signed a landmark free trade agreement (FTA) in 1989 with the $610 billion in current two-way trade in goods and services between the two countries exceeding the US’ trade with all of its 15 other FTA partners put together.

According to figures recently released by the Canadian Embassy in Washington, DC, a year's worth of imports from the US' six CAFTA partners is the equivalent of a bare three weeks' worth of Canadian imports.

US-Canada trade accounts for 5% of all the trade in the world, while Canada accounts for one-sixth of all US goods imports and over a fifth of exports.

In addition, the US currently buys some 80% of Canada’s exports – a figure amounting to 38% of Canada’s total GDP.

Go back, or read the latest Front Page stories:

WTO Fearful of Growing US Protectionism

GENEVA, Switzerland � 06/17/08 � The World Trade Organization has voiced serious concerns over what it feels is a ''worrying level'' of a re-emergence of protectionist sentiment in the US at its recent two-day review of US trade policy; such a trend ''is demonstrated in events such as the US Congress failing to extend the president's trade promotion authority, and the Congress recently passing a new farm bill which provides huge agricultural subsidies,'' says China�s WTO representative.