OTTAWA – The federal government was to receive recommendations from the Producer Payment Panel this week on how to redesign the Crow Benefit subsidy system to make it internationally acceptable.
The panel is expected to suggest the existing pot of just under $600 million, now paid to the railways, be put into a safety net program available directly to farmers.
“Our conclusion has been that under the new GATT rules, it really is not possible to continue with the pay-the-railway approach,” said panel chair Ed Tyrchniewicz from the University of Alberta.
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“In our view, we have to look at a new way of paying it, a decoupled approach.”
Late last week, officials were scrambling to finish the report. By late Friday, a meeting to deliver the report to agriculture minister Ralph Goodale had not been arranged.
Tyrchniewicz would not reveal the exact recommendations the panel was to make. He did say the panel has concluded that depositing the money into a safety net account, not tied to grain sales or shipment, would make it “GATT-compatible.”
“That was our conclusion but I’m not saying we will be recommending a safety net system,” he said. “We will be recommending a package that we think will make it GATT-acceptable.”
It then will be up to Goodale and transport minister Doug Young to recommend to cabinet whether to accept the proposals or not.
While Goodale has been very cautious about signalling his conclusions, Young has been telling anyone who would listen that GATT rules mean the end of the system.
His comments have led to a public debate and some farm group disagreements about the actual obligations being imposed on Canada by the GATT rules that take effect next year.
All sides agree the possible implications are anything but simple.
Subsidies reduced over six years
Under the GATT, export subsidies will be subject to reductions during the six-year implementation period 1995 to 2000 – to a 36 percent reduction in money spent, compared to a late 1980s average, and a 21 percent reduction in volume of subsidized product exported.
In the late 1980s, average Crow Benefit spending was close to $745 million, according to National Transportation Agency figures.
Subsequent budget reductions will reduce that to $555 million. Meeting the overall budget reduction would require shaving another $80 million.
More grain moving through West Coast ports means more of the grain is now subject to GATT restrictions than was the case in the late 1980s, making gross figure comparisons difficult.
The real problem for Canada would be the requirement that volumes exported from the West Coast be reduced by 21 percent by the year 2000. This would affect millions of tonnes of Canadian grain.
Goodale said farmers face the choice of seeing less of their grain subsidized or having the system of subsidy changed to a domestic, non-trade-distorting system.
He plans to use the consultation period after getting the Producer Payment Panel report to develop “a full and complete understanding of the implications of the GATT for the WGTA and then to take that into account as we address the long-term situation.”
