A Canadian institution fends off Machiavellians with wheat envy
Published by the Ottawa Citizen, September 27, 2003
The future of the Canadian Wheat Board, now under attack from without and within, appears uncertain. Since 1989, when the Free Trade Agreement was implemented, this prairie icon and national institution has successfully deflected nine challenges from United States’ farming interests. In the 10th, most recent challenge, the U.S. Commerce Department imposed duties of up to 14 per cent annually on Canadian spring and durum wheat. The U.S. International Trade Commission, now investigating whether the alleged subsidies and dumping practices injure U.S. farmers, will decide in October whether the duties should be permanent.
If successful, this will be the latest in a succession of blows to the CWB. Last autumn, 13 Alberta farmers were jailed protesting CWB regulations on independent marketing. Then in February, Alberta passed Bill 207 calling for a 10-year window for an open market for barley and wheat. And last week, hard on the heels of failed talks at Cancun, the Canadian Chamber of Commerce passed the Red Deer/Regina resolution recommending that the “Board of Directors of the Canadian Wheat Board authorize on a trial basis a free market for the sale of wheat and barley …”
Machiavelli himself couldn’t devise better divide-and-conquer tactics, but the noble and still mighty Canadian Wheat Board is standing pat. From its digs in Winnipeg where it employs 500 people, it isn’t forgetting its origins nor its achievements for western farmers.
Created at the height of the Depression, the CWB became a government-selling monopoly of western Canadian wheat abroad. Like other farm assistance programs, its creation was a political victory for prairie farm families. Through a system of determining initial, interim and final payments based on averaged international selling prices, the Board continues as a source of farm income stability.
Once a fully run government operation, the Board now comprised elected directors from 10 prairie and north central B.C. districts, plus five government appointees. Selling up to 24 million tonnes of grain with revenues of about $5 billion and commanding one-fifth of the global market spread over 70 countries, it is the largest wheat and barley marketer in the world. In the U.S., it sells $400-million worth of high-quality durum and spring wheat to pasta makers and flour mills.
Why then is this Canadian success story encountering so many problems? One reason is simple wheat-envy by U.S. farmers who, being heavily subsidized, over-produce grain that doesn’t compare with Canadian quality. Thanks to a get-out clause in NAFTA, which stipulates nothing supersedes U.S. trade law, American farmers have endless avenues for grinding away at their competitors. This, for instance, allowed the North Dakota Wheat Commission and U.S. Durum Growers to allege a whole range of subsidies, all of which the U.S. Department of Commerce dismissed, save those concerning free government hopper cars and guarantees of CWB borrowings (overall $200 to $500 million per year).
The duties, if upheld, are particularly punitive and hypocritical, given that Canada since the Doha Round of world trade talks is among those countries calling for the elimination of key subsidies and the U.S. is among the biggest offenders. Even so, until WTO agreements take effect (or the NAFTA get-out clause is addressed), the CWB is vulnerable to unilateral, government-funded action from U.S. farmers.
Domestically, opponents agree the issue is the Board’s monopoly. Though it allows for independent sales, the vendor must obtain a permit and agree not to undercut the Board price. Other opponents, such as the Chambers of Commerce, argue that the monopoly inhibits value-added industry growth. While it is clear that yet another venerable Canadian institution must prepare for a vastly different future, leading change rather than being its victim seems the more appropriate course. Unless the WTO makes significant progress, key G-22 countries may well emulate the CWB, serving notice to U.S. interests that, while they may challenge Canada, it will, ultimately, be very difficult to challenge everyone.
In the meantime, the future of the institution rests with the farmers who use its services. Respecting the spirit of those Depression farmers who fought for the creation of the Canadian Wheat Board, western wheat and barley farmers, by voting in a plebiscite, have the sole power to alter or terminate it.
Margret Kopala’s column on western perspectives appears here weekly.