Canadian wheat growers have reason to hope that they will soon regain access to the lucrative market for high quality wheat south of the border.
A binational trade panel last week ordered the U.S. International Trade Commission to reconsider its 2003 finding that Canadian imports were harming the U.S. wheat industry.
That ruling allowed for the imposition of a prohibitive 14.15 percent duty on imports of hard red spring wheat.
In its 68 page ruling, the North American Free Trade Agreement panel castigated the ITC for ignoring crucial evidence that supported the Canadian position.
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In particular, it said the commission failed to consider that average farm wheat prices in the United States are based on the Minneapolis Grain Exchange and that Canadian imports of hard red spring wheat have no effect on that trend-setting MGE price.
“This amounts to a failure to support with substantial evidence the conclusion that the domestic injury producing hard red spring wheat is materially injured by reason of subject imports from Canada,” said the unanimous decision by the five-member panel.
The panel sent the case back to the ITC for reconsideration with a list of nine questions to be answered. They mirror the arguments put forward by the Canadian Wheat Board during ITC hearings in 2003.
The commission must issue a new decision by Sept. 8.
Wheat board officials described the NATFA panel’s ruling as a “clear and decisive victory” for western Canadian farmers that will inevitably lead to a re-opening of the border.
“We are confident the ITC will do the right thing and remove this prohibitive tariff,” said CWB chair Ken Ritter. “With any luck we will be able to once again freely sell wheat to American customers before the end of the year.”
International trade minister Jim Peterson welcomed the decision and said the government expects the ITC to issue a “no-injury” finding after it reconsiders the case.
Wheat board officials say that if the commission follows the panel’s instructions and considers the nine questions, it will have no choice but to remove the tariff.
CWB chief executive officer Adrian Measner said the board’s confidence is based on two factors: the questions reflect the Canadian position and the commission’s original finding of injury was based on a 2-2 vote of the four ITC commissioners.
“Our arguments are so compelling and so strong that we think as they go through those questions the answer will be quite clear to them,” he said.
The North Dakota Wheat Commission, which in 2002 initiated the petition that resulted in the tariffs, repeated its arguments for keeping the tariff.
“Unfairly traded imports of Canadian hard red spring wreaked havoc on U.S. spring wheat growers prior to the offsetting duties being put in place,” said marketing director Jim Peterson, adding the imports forced down prices, took away market share from U.S. growers and forced U.S. farmers to switch to other crops.
The wheat board has argued that Canadian shipments of hard red spring accounted for only about three percent of the total U.S. wheat market and couldn’t have negatively affected prices.
The wheat commission says Canadian imports accounted for about 20 percent of the U.S. domestic food market for hard spring wheat and did affect prices.
The wheat board also noted that U.S. prices have declined since the imposition of the tariffs, illustrating that prices are determined by global factors, not Canadian imports.
The North American Millers’ Association, which supported the CWB’s position in an appearance before the NAFTA panel, welcomed the decision to return the case to the ITC.
Association spokesperson John Miller said the ITC’s decision was based on critical errors.
“We are calling on the ITC to address the numerous problems identified by the
NAFTA panel and reach the appropriate decision, namely that imports of Canadian hard red spring wheat are not causing injury to U.S. growers,” he said.
Before the tariff was imposed, Canada exported about one million tonnes of hard red spring wheat annually to the U.S., fetching about $47 million more than the prices available in alternative markets. Since the tariff, exports have been negligible.
Measner said the board has maintained contact with its U.S. customers in and expects to resume sales if the tariff is lifted.
“Maybe not right away, but over a period of a few months we should be able to gear up to our traditional level,” he said, adding that U.S. millers will need time to re-adjust their grists to meet Canadian wheat’s quality specifications.
