Canada is poised to launch a trade challenge against a key feature of the United States sugar policy which Canadians say is costing as many as 2,500 Canadian jobs.
Agriculture minister Ralph Goodale last week convened a meeting of sugar interests and told them the U.S. has refused to drop its re-export program for sugar-containing products.
They will be given one more chance at a meeting of the North American Free Trade Agreement Commission in mid-March.
After that, barring American movement, Canada will launch a trade challenge under the NAFTA.
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“In our view, there is a very clear requirement that their re-export program with respect to sugar cane products is to terminate,” Goodale said after the meeting. “They have not done so and therefore, in our view, they are off-side with respect to their obligations.”
Sandra Marsden, president of the Toronto-based Canadian Sugar Institute which has been pressuring the government to launch a NAFTA challenge, said she was surprised Goodale made the commitment.
“Frankly, we went into the meeting not expecting him to be that firm so we are very pleased,” she said.
At issue is a policy which allows sugar-importing American companies to bypass American sugar import duties as long as they re-export the sugar in manufactured products such as cereals, confectioneries and drink crystals.
The policy allows these companies to bypass the protectionist U.S. sugar policy which keeps American sugar prices higher than world prices. In effect, they become more competitive in the Canadian market because their products use sugar purchased at world prices rather than American prices.
Marsden estimates close to 400 American companies take advantage of the re-export exemption, shipping the equivalent of 75,000 tonnes of sugar into Canada. The number is growing as tariffs fall under NAFTA rules and those products become more competitive every year.
Thousands of jobs created
She said that if the end of the re-export program moved production of even one-third of those products to Canadian plants, it would create 2,500 Canadian manufacturing jobs.
When it signed the NAFTA, the U.S. agreed to end its re-export program by Jan. 1, 1996. Several Canadian subsidiaries of American companies, which import U.S. products, won an extension from the Canadian government to last October.
That deadline passed, the Americans did nothing, Canada protested and then nothing happened.
Sugar industry officials have said Canada’s trade bureaucrats were anxious to launch a NAFTA challenge but Goodale and Agriculture Canada wanted more discussion.
On Feb. 11, representatives from importers, manufacturers, sugar beet growers, unions, Alberta and Manitoba provincial governments and MPs gathered at Goodale’s invitation to go over the arguments one more time.
Marsden told the meeting the government’s failure to challenge the Americans sent a bad signal. “Indecision on the part of the Canadian government continues to create uncertainty for Canadian manufacturers of refined sugar and sugar-containing products who strive to maximize their existing Canadian investments and who have been considering new or expanded investment.”
