Western Producer staff
A chance Toronto airport meeting with Saskatchewan Conservative Senator Len Gustafson last week brought some unsolicited advice for agriculture minister Ralph Goodale in his battle with the U.S. over appropriate levels of Canadian grain exports south.
“He has to be firm,” said Gustafson. “We have a free trade deal. Let it work. He shouldn’t make any concessions.”
Easy for Gustafson to say from his Senate sinecure, now that his party is out of government and all but out of sight.
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Goodale himself has insisted repeatedly he will not sign a deal that is bad for Canada. But throughout the negotiation with the Americans over how much access they should have to Canada’s dairy, poultry and egg markets and how much access Canada should have to their grain, sugar and peanut butter markets, a key question has remained unanswered:
How much power does Canada really have to say no?
Prime minister Jean ChrŽtien already has said Canada’s foreign policy boils down to being willing to push around small countries with demands that they change domestic policy if they want to trade, but being unwilling to be a “big shot” when dealing with bigger countries like China.
For Canada, they don’t come much bigger than the U.S.
So does Goodale really have any power to stand up to the U.S. bully tactics?
On the grains issue, at least, the Canadian consensus seems to be a resounding ‘yes.’ While the Americans could inflict some short-term pain by imposing quotas or tariffs against Canadian grain imports, the longer-term outlook is that Canada would win trade-dispute panel decisions.
Canadian farm groups have been advising the government to stand tough in demands for continued access to the American grain market, on the basis that Canada is a fair trader and can defend that position under international trade law. The reason, says Manitoba agricultural economist Daryl Kraft, is the General Agreement on Tariffs and Trade (GATT), which takes effect next year.
Even if the U.S. used existing American law to impose an import quota on Canadian grain, that quota would have to be converted to a tariff under the GATT deal and Kraft said trade law would not allow the U.S. tariff to be very high.
Under GATT rules, tariffs are supposed to be the difference between a high domestic price and a low import price, he said. “Often, usually, the American durum price is as high or higher than the Canadian price so they could hardly justify a high tariff.”
In the short term, he said, Canada could lose sales worth $100 million or more if the Americans retaliate with restrictions on exports this year. But by appealing to GATT rules, rather than relying on the free-trade deal that simply requires the Americans to administer their own trade laws fairly, Kraft said Canada should be able to protect long-term access to the lucrative American market.
“If there wasn’t a GATT agreement we would have less to stand on, but there was,” said Kraft. “I don’t think Goodale should feel under pressure to compromise when we probably can win.”
