SASKATOON – The U.S. will break the free trade agreement if it imposes quotas or tariffs on Canadian wheat, say Canadian government and grain industry officials.
Some members of the U.S. International Trade Commission have recommended to the president that Canadian imports of wheat and durum be limited to about 900,000 tonnes a year because they are interfering with U.S. wheat programs.
But Canadian officials said the U.S. can’t legally do that.
“If they went ahead with this, they could well be faced with a binational panel dispute,” said Canadian Wheat Board information officer Brian Stacey.
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Article 705.5 of the Canada-U.S. Free Trade Agreement says cross-border grain shipments can be restricted only if they increase significantly as a result of “a substantial change” in either country’s support programs for the grain in question.
That’s clearly not the case for wheat and durum, said Stacey. Sales to the U.S. haven’t increased because of any change in wheat support programs in Canada. They are up because the quality of last year’s crop on both sides of the border, along with subsidized exports of U.S. wheat and durum, created strong U.S. demand for Canadian feed wheat and durum.
A federal government spokesperson agreed. Jean-Dominque Ieraci of the department of international trade said Article 705.5 lays out a clear set of conditions under which tariffs or quotas could be put in place.
“We don’t think those conditions have been met, so we don’t think that they can apply restrictions on wheat,” he said.
That position has been put forward to the Americans, but there has been no specific response, Ieraci said.
“The Americans don’t always agree with us.”
Section 22 against GATT
The U.S. is threatening to impose sanctions under Section 22 of the U.S. Agricultural Adjustment. Ironically, that procedure will be outlawed when the new General Agreement on Tariffs and Trade goes into effect and any restrictions in place will have to be removed. The GATT will be implemented sometime in 1995.
The free trade agreement between Canada and the U.S. makes no reference to Section 22, although Canadian officials say it’s clear it is governed by Article 705.5.
“Section 22 is just their way of doing the things that 705.5 refers to,” said an agriculture department official who asked not to be identified. “It puts additional conditions on having those quantitative restrictions or import fees and we don’t think they’ve met those conditions.”
He said asking for a binational trade panel investigation “is certainly an approach we could take.”
Blair Rutter of the Western Canadian Wheat Growers Association said the problem with a panel is timing: “If the U.S. imposes restrictions, a suitable response is not simply to challenge it under the free trade agreement, because we’re not going to see a resolution for eight months. “Even though I think we’d win, I think we would need a more prompt response,” such as retaliatory penalties against imports of U.S. goods, he said.
