The machinations going on behind the scenes in the trade dispute between the United States and China spilled into the public realm last week, and it’s likely that Canada’s farmers will get caught up in the crossfire.
If so, the Canadian government must be prepared to act.
Early last month, Canadian officials submitted a question to the World Trade Organization’s agricultural committee seeking information on what the U.S. plans to do with $30 billion made available to the Commodity Credit Corp. to support U.S. farmers in its trade dispute with China.
The CCC can stabilize farmers’ income through various means, including direct payments, loans and purchases of product. So this is not a tentative measure. The U.S. appears to be prepared to go all in to help its farmers during what may be a prolonged trade war. Whether such a move would fall within WTO rules is unclear.
On June 25, U.S. Agriculture Secretary Sonny Perdue, who is known for his gentlemanly demeanour, published an opinion piece in U.S.A. Today under the headline, “Trump will protect farmers from China’s trade retaliation,” accusing China of all sorts of nastiness, with words such as “bully,” “stealing,” “predatory” and “theft.”
The U.S. plans to place 25 percent tariffs on $50 billion worth of Chinese goods July 6. China says it will retaliate with tariffs on U.S. imports, including soybeans. Trump now says he is considering tariffs of up to $200 billion on Chinese goods.
China is a significant market for U.S. agricultural products, importing $14 billion in U.S. soybeans.
In a news conference, Perdue said the CCC is a potential tool to support U.S. farmers. If that happens, it could warp world crop prices. The CCC spends much of its support on soybeans, corn and wheat. If those prices were to be driven down by the U.S. pouring as much as $30 billion into farm support, it could have a significant effect on Canadian farmers.
For perspective, total annual subsidies to the U.S. farmers are estimated to be about $20 billion. So the signal is clear: the U.S. is preparing to buttress its agriculture sector to go to war on trade.
Prime Minister Justin Trudeau’s government has said Canada will help business hurt by the trade dispute should Trump levy debilitating tariffs, most prominently on the steel, aluminum and auto sectors.
Unlike softwood lumber, in which the Canadian government has provided more than $860 million in support after the U.S. placed 20 percent tariffs on Canadian product last year, there was no help for Canadian cattle producers when the U.S. enacted country-of-origin legislation that is estimated to have cost producers up to $8 billion over the years that the legislation was in force.
That can’t happen this time. Canada does not have a regime in place to help farmers in the manner that the U.S. does. There are various support programs, the most relevant being AgriStability, which is not designed to facilitate support for a trade war.
If the trade dispute erupts into a prolonged war, like the Trump administration, Canada must also go all-in. Senior levels of governments must support agriculture.
The Trump administration has already placed tariffs on imported steel and aluminum, hitting The European Union, Canada and Mexico.
The Western Producer recently published a story quoting a U.S. pork producer lamenting Mexico’s retaliatory tariffs headlined, “We are bleeding.”
The preference would be that the U.S. does not see Canada bleed, but if we do, we must be prepared to administer a transfusion, not a Band-Aid.
Karen Briere, Bruce Dyck, Barb Glen, Brian MacLeod and Michael Raine collaborate in the writing of Western Producer editorials.