For the first time in almost eight years, Canadian hogs are crossing the Canada-U.S. border duty-free.
Last week, the U.S. department of commerce ruled that based on a review of government support programs in 1994-95, Canadian hog farmers were largely unsubsidized.
It dropped the duty on hogs crossing the border to zero, at least until its next review in the autumn of the 1995-96 data.
Martin Rice, of the Canadian Pork Council, said last week he expects the zero rate to be re-affirmed in autumn.
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“I think we may be in for an extended period of no duty,” he said. “This reflects the very substantial decline in government programs.”
CPC president Jim Smith, of Innisfail, Alta., called the American decision “a welcome and much-awaited event.”
For individual pig farmers, there will be little immediate impact.
The countervail duty was paid by exporters through a deposit on export shipments. It had a dampening but not direct effect on prices and the drop to zero will not mean an immediate price boost.
Still, Rice said it is an important development for hog producers.
It could result in a strengthening of prices, since buyers will not be able to bargain down the price with the argument that a duty likely will have to be paid.
Industry boost
More importantly, it will be a morale boost for an industry that has been singled out by the Americans as a subsidized trader.
“I think this will have a real psychological impact, to finally get this countervail out of the way,” Rice said.
And with the prospect of freer trade, it will put the onus on Canadian packers to be more efficient.
“This judgment says that supports for farmers are no longer a barrier to trade,” he said. “It underlines the need to have a competitive packing industry in Canada. There is nothing to hold the industry back now.”
The Americans first slapped a countervail duty on Canadian hogs in 1984, after deciding that subsidies ranging from cheap grain and transportation supports to direct government payments gave the Canadian hog industry an unfair advantage that allowed it to claim an undue share of the American market.
Since then, Washington has kept the Canadian industry under the microscope, studying it each year and varying the duty level to reflect American conclusions about subsidy levels.
In the past 13 years, hog shipments south have been subject to duty for all but a few months in 1989.
The duty was as high as 20.5 cents per kilogram between 1991 and early 1994.
Programs ended
Since then, Canada’s tripartite stabilization program has been dismantled, grain transportation subsidies have ended and various provincial programs have ended or been trimmed.
“This is good news but we know the Americans will still be monitoring us closely, watching for us to revert,” said Rice. “For the moment, though, I guess they would say they won their point and the supports we had have gone.”
