Canada’s Wheat Board Faces its Toughest Challenge
Published in the Ottawa Citizen, August 7, 2004
The beleaguered and misunderstood Canadian Wheat Board appears to have been outmanoeuvred at the recently revived Doha round of talks on agricultural subsidies at the World Trade Organization in Geneva.
After years of fighting allegations from American producers of unfair trading practices, after years of wrangling with those western farmers who see in the wheat board monopoly yet another reason to feel alienated, it is more than ironic that the CWB should find itself isolated when 147 WTO member states recently agreed on a framework for more detailed negotiations over the next year.
Even its most likely ally, Australia – the only other country to run a single desk, state sanctioned monopoly for marketing its grain – agreed on Section 18 of the draft agreement. Among other things, this calls for the elimination of ‘trade distorting practices’ with respect to STEs (state trading enterprises) including government underwriting of borrowings, guarantees of initial payments and the future use of monopoly powers – all of which cut to the heart of wheat board operations.
“We are delighted that – state trading enterprise has been a major challenge for us - we have an understanding in our bilateral agreement with Australia to move on to elimination at a later point, and now we’ve got the Canadian Wheat Board,” said U.S. Trade Representative Robert Zoellick.
Finally all the questions about the relevance of a venerable institution in the era of global trade are meeting their ultimate test. In the past, various WTO tribunals allowed for bodies such as the wheat board so long as they complied with commercial business practices. Now it is not just the U.S., where the wheat board markets only 10% of its grain, but the WTO itself that apparently opposes it.
During the First World War grains were marketed through The Board of Grain Supervisors. Today’s farmer-controlled Canadian Wheat Board, which returns all sales revenue less marketing costs to some 85,000 Prairie grain growers, has become the world’s largest marketer of wheat and barley. Indeed its success is clearly its problem.
“The transnational companies ...would like the Canadian Wheat Board gone so they can take over those markets and can monopolize the wheat industry in western Canada,” says Bob Friesen, President of the Canadian Federation of Agriculture.
Wheat board chairman Ken Ritter agrees, adding those would be the same transnationals whose meat packing operations are doing so well from the BSE crisis. Besides, he says, referring to massive U.S. and EU farm subsidies, farmers are being asked to make significant concessions in exchange for vague promises other countries will do the same. “Section 18 was cobbled together by our competitors, the U.S., the EU and Australia … (who) should not be allowed to dictate the way farmers market their grain.”
He also says there’s no proof the single desk distorts trade and that only once in 13 years has the wheat board called on a government loan guarantee.
It’s early days in this current round of negotiations and the ministers of agriculture, international trade and the wheat board have responded with undertakings to support the board and to minimize any impacts from the trade negotiations. Still, if crisis breeds opportunity, there is something to be said for a modernized CWB which with superior product and marketing expertise should be able to navigate the new global environment without government help.
In any case, pressure for choice between selling crops to the wheat board or on the open market has led to a private member’s bill challenging the wheat board monopoly in the Alberta legislature. This suggests the need for a dual system. And free-traders rightly point to how government involvement through subsidies or other support mechanisms diminishes value to tax payers as well as consumers while undercutting exporters from poor nations.
Various business models are available, including the Australian Wheat Board which privatized its operations with a billion dollars in capitalization. The task for Canada’s wheat board officials and think tanks is to retain Canadian farmers as the de jure as well as de facto majority shareholders. They should also honour the spirit of a co-operative endeavour that has made the Canadian Wheat Board a hallmark of Canadian excellence.
Whether the CWB justifies its current status or adapts to the new global realities, it must stop hiding its light under a bushel and come out fighting.
Margret Kopala’s column on western perspectives appears weekly.