SASKATOON – The Canada-U.S. Joint Commission on Grains has proposed a series of sweeping policy changes designed to reduce grain trade tensions between the two countries.
If fully adopted, the panel’s recommendations would end the U.S. Export Enhancement Program and produce a radically different Canadian Wheat Board that would operate much like a multinational grain company.
The commission’s interim report, given to governments last week, includes 19 specific recommendations touching on everything from cross-border trade to grading standards to transportation infrastructure.
While the panel avoided direct criticism of either country’s grain export activities, saying simply that both countries have the capability to distort world markets, it made the following recommendations:
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- The wheat board should market grain on a profit or loss basis, rather than its current mandate of maximizing returns to prairie farmers. The panel suggested a number of ways that could be accomplished, including ending government guarantees of initial payments, voluntary pooling, dual marketing or changing the board’s pricing policies.
- End, or at least significantly reduce, the U.S. Export Enhancement Program.
- Eliminate trade-distorting domestic programs, particularly U.S. commodity-based price supports, and ensuring domestic support programs are relatively balanced between the two countries.
- Convince other grain exporting countries, particularly those in the European Union, to take similar steps to reduce their use of subsidies in world grain markets.
Commission members emphasized that those recommendations must be treated as a package and urged farmers and industry groups not to take them out of context.
“Those have to go together,” commissioner Milt Fair said in an interview. “All of those things must happen at the same time.”
Distorts market, lowers price
In its 42-page report, the panel says both countries must stop “discretionary pricing,” whereby the same grain product is sold to different customers at different prices. While that’s a normal commercial practice, when it’s done by governments or their agencies it distorts markets and often lowers prices.
Anthony Flagg, a U.S. panel member and president of an Oregon milling company, said both countries rightly accuse the other of selling wheat for less than it’s really worth on world markets.
“Our recommendations are designed to get that money that is being left on the table back into the pockets of North American farmers,” he said.
Bill Miner, Canadian co-chair of the panel, told reporters the panel found no evidence that the wheat board has used discretionary pricing to undercut U.S. competitors, as some American wheat industry lobbyists and government officials have charged.
In fact, he said, studies have consistently cleared the board of wrongdoing. Nevertheless, the board clearly has the ability to affect market values through its actions, as do the U.S. government and the European Union through export subsidies.
“You could have a long argument over the extent to which one or another program has created the environment we’ve operated within in the last decade,” Miner said. “What we do know is the perception is there and we must … find a way to have normal and fair competition, seen to be fair through either the visibility of the market or other means.”
Reaction from Canadian and U.S. farm groups was predictable. U.S. wheat industry groups said the panel should have called for even more drastic changes to the wheat board. Canadian groups that support the board said the report would undermine single-agency marketing, while those that favor deregulation were more positive in their reviews.
Among the panel’s other recommendations:
- Cross-border trade – An industry-based committee should identify potential trade disputes before they arise, and notify industry and government so appropriate short-term action can be taken. The panel made no recommendation about the fate of the cap on exports to the U.S., which expires in September.
- Grading and regulatory issues – Common scientific standards should be used by grain inspection agencies on both sides of the border. The grading systems would remain distinct. Grain should be offered for sale on the basis of specifications, not just grade. Canada should look for ways to ensure non-registered varieties receive full market value and can be handled in a manner that ensures varietal integrity. End-use certificates should be abolished.
- Infrastructure – Farmers and shippers on each side of the border should have reciprocal access to each other’s handling and transportation systems. Rules governing grain trucking should be standardized.
Canada should continue deregulating its rail system and ownership of government-owned rail cars must be managed in a way that doesn’t distort trade. Both governments should study future use of the St. Lawrence Seaway and the Mississippi River systems.
