SASKATOON – An unlikely source has fingered the Export Enhancement Program as a major reason for the jump in exports of Canadian wheat to the U.S.
A study by the U.S. department of agriculture says Canadian wheat exports would only have been about half as high over the past decade if there had been no EEP.
“Over the period 1986 to 1993, EEP has been accountable for 40 to 48 percent of the yearly growth in U.S. imports of Canadian wheat,” said the study by Stephen Haley of the USDA’s economic research service.
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Haley’s findings bolster an argument that has been made by Canadian farm leaders, wheat industry and government officials throughout the Canada-U.S. grain trade war.
They say that by subsidizing exports under EEP, the U.S. has shorted its own domestic market and created demand for Canadian wheat.
The Americans have generally dismissed that idea, insisting the main reason for the increased north-south trade is unfair competition by the Canadian Wheat Board.
But using a series of complex computer models and statistical analyses, Haley studied such things as import trends, price effects, demand for different types of wheat and production trends and concluded that the EEP has had a major impact.
Canada sales to U.S. increased
During the eight-year period under study, wheat sales from Canada to the U.S. increased by an average of 150,000 tonnes annually (54,000 tonnes of durum and 96,000 tonnes of other wheat). EEP expenditures during the period totaled $3.7 billion.
The study emphasizes that Canada and the U.S. compete with each other in both international and domestic wheat markets, and it only stands to reason that a program like EEP will affect trade flows between the two countries.
“A program that shifts U.S. wheat to foreign markets increases domestic acquisition costs while at the same time displacing Canadian wheat from foreign markets,” Haley said. “Given close geographical proximity, increased shipments to the United States might be reasonably expected.”
The paper looked specifically at the use of EEP subsidies on sales to China and Brazil in the 1991-92 crop year and concluded that they resulted in “significant diversion of Canadian wheat that would have been destined for those markets instead of the U.S. market.”
Haley also concludes that wheat imports from Canada have not had a negative effect on the operation of U.S. wheat income and price support programs, contrary to the July 1994 findings of the U.S. International Trade Commission which led to the imposition of a cap on Canadian wheat imports.
#The 29-page paper was published in February by the International Agricultural Trade Research Consortium, an informal association of university and government economists interested in agriculture. The consortium is financed by the USDA, Agriculture Canada and participating universities.
