Reuters | February 15, 2002 WASHINGTON - U.S. farmers were awaiting a decision on Friday on whether the Bush administration would grant their request for punitive tariff-rate quotas against Canadian wheat, which they say is being marketed illegally in the United States and other foreign countries.
While the U.S. wheat industry and the Canadian Wheat Board were each publicly predicting victory, experts said each side might win some and lose some with Friday's announcement.
The United States and Canada are two of the world's leading exporters of wheat, and aggressive competitors.
Last week, U.S. Trade Representative Robert Zoellick indicated his opposition to tariff-rate quotas on wheat handled by the Canadian Wheat Board, a government-owned monopoly based in Winnipeg.
During congressional testimony, Zoellick said such a quota on durum and other varieties of Canadian wheat sold in the United States might violate free-trade rules between the two countries.
Currently, an unlimited amount of Canadian wheat can enter the United States tariff-free under the North American Free Trade Agreement.
But calling state-trading enterprises such as the Canadian Wheat Board "rotten" and in need of reform, Zoellick hinted that USTR might file a World Trade Organization complaint.
He encouraged the U.S. wheat industry to request anti-dumping and countervailing duties against Canadian wheat, indicating they would be easier to defend than tariff-rate quotas.
U.S. wheat growers have accused the Canadian Wheat Board of using transportation subsidies, illegal pricing schemes and other practices to compete unfairly in foreign wheat markets, including the United States.
The wheat board disputes the allegations.
Export Competitors
According to the U.S. Department of Agriculture, the United States is expected to export 27.2 million tonnes of wheat, about half of its production, in 2001/02 (June-May).
For Canada, the USDA projects 16 million tonnes in exports, of 21.3 million tonnes produced.
While the USTR findings are expected to generally support U.S. wheat industry contentions that the Canadian Wheat Board has gained an unfair advantage in world markets, the decision could fall far short of the request for immediate relief.
A WTO challenge could take 12 to 16 months, while the pursuit of duties could be a yearlong process.
Canadian Wheat Board practices, according to the U.S. industry, cost U.S. farmers at least $500 million in lost revenues and profits during each of the past five years.
North Dakota wheat farmers have argued that temporary tariff-rate quotas were the best way to pressure the CWB to embrace market-oriented practices.
The North Dakota Wheat Commission wants a $50-per-tonne tariff on durum wheat beyond 300,000 tonnes shipped into the United States. Other varieties, such as spring wheat, would face a $50-per-tonne tariff on any shipments beyond 500,000 tonnes.
In the 1999 marketing year, Canada shipped 296,900 tonnes of durum wheat to the United States, according to USDA figures. For red spring wheat, Canada sold 1.3 million tonnes to the United States in 1998, the most recent marketing-year information provided to the USTR.
As part of a new round of global trade talks launched in November, the United States hopes to negotiate the elimination of state-trading enterprises such as the Canadian Wheat Board. Those talks are in their early stages.
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