A $50 million question for prairie farmers will be answered by the end of this week.
The United States International Trade Commission is to rule Oct. 3 whether imports of Canadian wheat have injured the U.S. wheat industry.
If the answer is yes, then prohibitive tariffs on spring wheat and durum will remain in place indefinitely, effectively cutting Canada off from the large and lucrative market south of the border.
If the ITC finds no injury, the tariffs will be revoked and any money paid will be refunded.
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“This is obviously a very significant decision,” said Larry Hill, a CWB director and chair of the board’s international trade committee.
“The grain that’s not sold into the U.S. will have to go somewhere else in the world and it will be difficult to sell it at the same value we were obtaining in the U.S.”
The U.S. buys about 10 percent of Canadian wheat and durum exports every year.
But its importance is greater than that because U.S. millers and processors buy high quality grain and pay premium prices.
Sales to the U.S. generate roughly $400 million a year in revenue, which is about $50 million more than that same wheat would fetch if it was sold into other markets, says the board.
That $50 million in lost revenue represents about $2.77 per tonne of wheat and durum sold in a typical year. Looked at another way, it represents an average of $590 in lost income for every CWB permit book holder.
Aside from the financial impact, Hill said a negative ruling would send a terrible message about the future of free and fair agricultural trade.
“To have this tariff upheld as a result of politics and protectionism would be a real setback,” he said. “As Canadian farmers we need to be able to export.”
He said the board remains confident that the facts are on its side and that Canada will win if the ITC bases its ruling on the evidence.
The decision will be made by a vote among the ITC commissioners, although it remains unclear how many will vote. Four commissioners heard evidence at the ITC’s public hearing on the case Sept. 4, although a fifth recently appointed commissioner is also eligible to vote. A tie would uphold the tariffs, so Canada needs at least three votes.
If the tariffs are upheld, then farmers will probably have to resign themselves to being cut off from the U.S. market for some time.
The tariffs originate in a complaint launched with the U.S. department of commerce by the North Dakota Wheat Commission in late 2002, alleging that Canada subsidizes wheat exports to the U.S. and dumps at prices below market value.
In its final ruling on the case at the end of August, the department imposed a combined countervail duty and anti-dumping tariff of 14.16 percent on spring wheat and 13.55 percent on durum. That works out to a total import tax of about $30 a tonne on spring wheat and $36 a tonne on durum.
An ITC spokesperson said that if the tariffs remain in place, they would face a statutory review in five years, although they could be reviewed sooner if any of the circumstances on which the original ruling was based were to change.
The board says it is operating on the assumption that the tariffs would be in place for five years, making a favourable ruling even more vital.
“If you think about them lasting that long, that is a serious amount of money that Canadian farmers would be losing,” said Hill.
That cost will be part of the analysis that the board will undertake as it considers whether to launch an appeal, should the tariffs remain in place. Appeals could be launched through the U.S. courts, through a North American Free Trade Agreement panel or by going to the World Trade Organization.
At the ITC hearing, the North Dakota commission argued that imported Canadian wheat drove down wheat prices in local markets and prompted U.S. farmers to switch from wheat to other crops.
The board argued that Canadian wheat imports make up such a small percentage of the total U.S. market that they have no significant impact on prices, which are determined by world market conditions.
U.S. millers supported the CWB, telling the ITC they buy Canadian wheat and durum for its quality and consistency and generally pay prices above the going market rate.
