The U.S. government has again asked the World Trade Organization to condemn the Canadian Wheat Board.
At an appeal hearing last week, the United States asked the trade body to overturn an April decision in which a WTO panel rejected U.S. allegations that the board engages in unfair and illegal trading practices.
CWB senior counsel Jim McLandress, who was in Geneva for the July 12 hearing, said he is confident the appeal will fail.
“They didn’t really put up much of an argument,” he said of the U.S. government lawyers.
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As it has done throughout the process, he said, the U.S. presented “vague and unspecified” accusations about CWB conduct with no evidence to back it up.
“Their complaint was essentially that the previous panel got it all wrong, without saying they got it wrong in these specific places for these specific reasons. It’s very frustrating to have to deal with.”
The original U.S. complaint was based on Article 17 of the General Agreement of Tariffs and Trade, which states, in part, that a state trading enterprise such as the CWB must buy and sell in accordance with commercial considerations.
The U.S. argued that since the CWB operates in a manner designed to maximize revenue, rather than profit, it acts in a non-commercial manner.
The WTO panel threw out the U.S. complaint on April 6, saying that a business enterprise does not have to generate profits in order to be commercial.
The panel said that because the board is controlled by farmers, not government, it has no incentive to steal markets by dumping grain at cheap prices, nor does the board’s single desk status give it any reason to make non-commercial sales.
“We see nothing in the legal structure of the CWB, or its mandate or privileges, which would create an incentive for the CWB to discriminate between markets for reasons which are not commercial. Nor have we seen any evidence of such sales behaviour,” the April 6 ruling stated.
The three-member appeal panel, made up of lawyers from Australia, Egypt and Japan, will issue its decision by the end of August.
Meanwhile, the relentless U.S. attack against the wheat board continued on another front with the publication of a paper by a U.S. Department of Agriculture official.
Carol Goodloe, senior economist for international trade in the U.S. department of agriculture, said the government guarantees of CWB borrowing and export credit sales give it an unfair advantage in world grain markets.
“The CWB is able to take advantage of this special privilege to generate a financial cushion, or non-market based revenue, that it can use to enhance returns to producers, discount export prices or pay administrative expenses,” she wrote in the report.
The U.S. Department of Commerce has calculated that the combined effect of the government guarantees provided a subsidy equal to about five percent of the value of wheat.
Without the guarantees, the CWB would have to borrow money at a higher rate of interest, operating costs would be higher and returns to farmers would be lower.
CWB spokesperson Louise Waldman acknowledged that the guarantees provide a financial benefit to prairie grain growers but denied Goodloe’s suggestion that it is used to discount export prices.
She added that the modest financial benefits realized by farmers through the government guarantees pale in comparison to the massive direct payments received by wheat growers in the U.S. and Europe.
“It’s ridiculous to suggest that this one small benefit gives an unfair advantage,” Waldman said. “It doesn’t even begin to level the playing field.”
