Western Producer staff
It is almost impossible to overstate the threat that is facing one of the most stable and profitable sectors of Canadian agriculture. The very future of much of Canada’s supply-managed sector, more than 30,000 farmers who produce more than $5 billion worth of commodity each year, is at risk this winter.
And for once, the much-touted political clout of the dairy industry will have no role to play. It is a legal battle in which little-known government lawyers will argue arcane points of law for the benefit of trade law experts who are supposed to be anonymous.
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The result will be a trade panel ruling, expected late next winter, on a legalistic but politically and economically potent trade-law question:
Under trade deals that Canada has signed, what tariff protection can dairy, poultry and egg industries (and other import-sensitive commodities like margarine) be given?
A five-member panel of trade experts begins work this month to decide if Canada’s wall of protective agricultural tariffs, established earlier this year in accordance with new world trade rules, are legal.
The high protective tariffs replaced volume import controls outlawed by the new General Agreement on Tariffs and Trade.
The Americans have challenged the tariffs, insisting the 1988 free-trade deal, updated later to include Mexico, prohibits new tariffs.
At its core, the question is simple enough. Which trade agreement has precedence – the General Agreement on Tariffs and Trade or the North American Free Trade Agreement?
If the GATT rules prevail, Canada’s tariff protection for competition-sensitive sectors remains at high levels into the foreseeable future, falling only an average 36 percent during the next six years.
On the other hand, if NAFTA rules prevail, tariff protection could disappear by 1998.
It is, in many ways, a winner-take-all gamble. With the strong support of affected farm groups, the government refused to even contemplate offering American companies greater access to Canadian markets through a political negotiation.
It insists that Canada’s legal case is strong.
But if it loses, Canada will have little leverage to bargain for time and a gradual lowering of tariff barriers. American companies will be lined up to claim their slice of the Canadian market.
Supply management leaders say a loss would be devastating. The nervous supply management sector has commissioned a report which will warn of the dire consequences should Canada lose its gamble.
In the face of a flood of imports, farmgate prices would fall.
In the absence of control over imports and supply, the essence of supply management would collapse.
Farmers would have as little as three years to prepare.
For the record, Canada sounds confident it will win. Down on the farm, that confidence is properly tempered by real dread and uncertainty over troubling “what if” questions.
