OTTAWA — Canadian officials were puzzled by how the Americans decided to attack Canadian grain shipments.
Under international trade agreements and American domestic law, there are a number of ways they can penalize imports of products that unfairly claim American market share.
The method they chose — a little-used article of the General Agreement on Tariffs and Trade (GATT) — seemed the least likely.
The North American free trade agreement allows dispute settlement panels if it is proven that subsidy or dumping restrictions are being violated.
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The U.S. Agricultural Adjustment Act allows quotas or other restrictions if it can be proven that imports undercut domestic prices and thus drive up the cost of U.S. farm support programs. In fact, such an investigation against durum wheat is now under way and will report in July.
Yet the Americans decided to use (Canadian officials say “misuse”) Article 28 of the GATT, a clause under which the U.S. does not have to prove unfair trading.
Article 28 allows any country to claim that it erred in setting tariffs too low, and then to raise them.
The catch is that it must compensate the exporters hurt by the move and if compensation levels cannot be negotiated, the offended country can retaliate with its own tariffs of equivalent damage.
So why would the Americans use international trade law that will give Canada the power to retaliate, even though it claims to be acting because Canadian durum sales are subsidized and therefore presumably vulnerable to more direct challenge?
Canadian officials say they think the answer is that the Americans do not think they can prove their allegations about unfair Canadian practices.
Four separate earlier investigations have exonerated Canadian Wheat Board selling practices.
And in order for the current hearing on durum to produce a ruling against Canada, the commissioners would have to find that Canadian imports are depressing prices.
Instead, the Canadian government has produced figures indicating that American durum prices have increased 90 percent in the past year as demand has soared and U.S. supplies have remained tight because of reduced production and aggressive subsidized sales of U.S. durum abroad.
“It really is hard to find any evidence of hurt,” said one Canadian trade official at a briefing for reporters.
