Canadian subsidies move upward

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Published: July 10, 2003

Canada has lost some bragging rights when it comes to who can point fingers at whom in the agricultural subsidy blame game.

Last year for the first time in six years, according to the Organization for Economic Co-operation and Development, Canada moved ahead of the United States in the level of support it paid farmers.

Canada still was well below OECD average levels of support and spent barely half of what the Americans did in the wheat sector.

But overall, Canada’s level of support for the industry, calculated as a percentage of the value of production, was higher than in the U.S. and in the middle of the pack of the Cairns Group of exporting countries that fight subsidies.

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“According to OECD estimates, transfers to Canadian producers rose by $1.06 billion (in 2002), increasing the PSE (producer support estimate) … from 17 percent to 20 percent,” said an Agriculture Canada analysis published in late June.

Meanwhile, the American PSE fell during the year to 18 percent from 23 percent. Ironically, that was the year the U.S. launched its much criticized and high subsidy new farm program.

The federal analysis said Canada’s PSE jumped sharply for a number of reasons. The federal government sent $600 million in agricultural policy framework transition funds to farmers.

Meanwhile crop insurance payouts were up sharply because of the prairie drought and the gap between Canadian and world prices for poultry, milk and eggs widened as world prices dropped.

The OECD considers the gap between domestic regulated prices and world prices to be a consumer subsidy to farmers and 46 percent of Canada’s PSE calculation involves fixed prices for supply-managed goods.

According to the OECD, Canada’s support levels are far lower than OECD averages, except in milk and eggs.

It calculates that regulation gives the dairy industry a benefit equivalent to 55 percent of the value of its production, compared to an OECD average of 48 percent and an American level of 46 percent.

It calculated Canada’s beef sector PSE at 12 percent, compared to five percent in the U.S.

However, Canada’s 18 percent PSE in wheat compares to 30 percent in the U.S. In oilseeds, Canada’s support level of 17 percent was higher than the 13 percent calculation in the U.S. The least subsidized country was New Zealand, followed by Australia. Canada is in the middle of the pack and offers little more than half the subsidy level in the European Union.

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