Canadian trade minister Sergio Marchi has warned against the growing American tendency to try to settle trade disputes by pushing for product-specific “managed” trade agreements, rather than relying on free trade rules.
“I am concerned and troubled, if it begins to set a trend, that every issue will get managed,” Marchi said in the House of Commons Sept. 25, responding to a Reform question about why the government seems willing to make deals that limit exports rather than fight American protectionism through free trade dispute panels.
“Managed trade is not freer trade and one-way trade is a dead end.”
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He said the government often makes a trade-limiting deal, as it did on grain three years ago, soft wood lumber and then sugar this year, because the affected industry would rather compromise than go through the cost and risk of a trade panel hearing.
“We have to take stock of how the industry feels on a particular issue as opposed to simply going to the wall and in the end only hurting the industry even more,” said Marchi.
The same week that the minister raised the issue, representatives of the Canadian sugar industry were privately warning the government that one of its latest managed trade deals on sugar may actually confer fewer benefits on the Canadian industry than originally imagined.
“This was not a great deal to begin with and it might be worse than we thought,” said Canadian Sugar Institute president Sandra Marsden.
At issue is an August agreement which allows the United States to continue its controversial sugar re-export program into Canada in return for guaranteed Canadian access to the American market for fixed levels of sugar from sugar beet refineries, and sugar-containing products made from Canadian-refined cane sugar.
The sugar industry had accepted the deal grudgingly because it halted U.S. threats of even greater import restrictions. However, the sugar institute argued that if Canada had taken the U.S. to a free trade panel in 1996 when the re-export program was supposed to end, it would have won a better deal.
Instead, the government delayed action, hoping for a political settlement.
The sugar re-export program allows American-based manufacturers of sugar-containing products to import sugar at low world prices as long as the sugar is used to make products that are then exported to Canada.
The Canadian industry said this costs thousands of Canadian jobs by creating unfair competition from cheap American product.
To keep the re-export program, the U.S. agreed to guarantee Canadian companies a 59,250 tonne share of the American market, beginning Oct. 1.
Now, Canadian sugar industry officials have been told the U.S. might use up to 14,000 tonnes of that quota to import crystal drink mixes made from sugar sent to Canada under the re-export program.
Marsden said that effectively would set aside 25 percent of Canada’s hard-won quota for American product.
“To see American product take part of the Canadian quota into the U.S. would be perverse and not what was expected when the deal was signed,” she said.
“We are waiting for an American interpretation of rules of origin but what we have heard so far concerns us.”
