Trade distortions must be cut - Opinion

Friesen is president of the Canadian Federation of Agriculture.

Here’s a little experiment you can try. Get a tarp. Stretch it out tight, suspended between some wooden stakes.

Throw some tennis balls on there. They’ll roll around on the tarp a bit, but they won’t weigh it down.Now drop a bowling ball in the middle of the tarp. See how the bowling ball pulls down the tarp.See how all the little tennis balls roll down into the distortion.

What you have just witnessed is a metaphor for the effect of U.S. agricultural subsidies. The tarp is the market – the prices we get for our commodities.

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The tennis balls are us, Canadian farmers and other farmers around the world. When the bowling ball – the U.S. subsidies – hits the tarp, prices go down and we go down with them.

That is what is being debated at the World Trade Organization; how much countries like the United States can distort world trade and pit U.S. treasuries against the pocketbooks of Canadian farmers.

It is imperative that Canada achieves real reductions in U.S. subsidies at the WTO.

Through its trade distorting Loan Deficiency Payments, counter-cyclical and target price programs for grains and oilseeds, the U.S. has created massive overproduction of crop commodities and suppressed world prices.

Its benefits include stability and income support for crop producers but also reduced prices and an implicit cross-subsidization of livestock producers, meat industries, ethanol and other value added industries.

In its last submission to the WTO, the U.S. reported $72 billion in total domestic support, equivalent to 36 percent of its total value of production. In contrast, Canada’s support totalled $3 billion Cdn or 14 percent of its value of production.

The U.S. farm bill payments distort the competitiveness of all sectors within North America and, as Canada’s largest trading partner, significantly affect Canadian producers’ ability to be competitive and earn a fair income from the marketplace.

At the WTO, the negotiation for domestic support is developing a formula for reductions where the larger subsidized nations must make the largest cuts.

The problem is that the cuts come to what countries are “allowed” to spend, not what they are actually spending.

The latest negotiating position of the U.S. was a 60 cent cut from overall trade distorting support limits.

While this may seem large, according to projections from the USDA and calculations from the government of Canada, current U.S. overall distorting support limit is $48 billion per year and even a 60 percent cut in allowable spending would not cut into current trade distorting spending in the U.S.

Basically the US promises not to drop another bowling ball on the tarp. But they won’t take away the first one.

As things stand, what do the current WTO negotiations in domestic support mean for Canadian producers? Despite already significantly reducing our programs since the Uruguay Round, the Doha Round will mean more reductions in real spending for Canadian farmers.

However, U.S. farmers will face no real changes in their spending. On June 20, U.S. politicians in the House of Representatives agriculture subcommittee voted unanimously to extend U.S. farm bill subsidies for another five years.

This means the trade distortions affecting Canadian producers in the marketplace for grains and livestock will continue and possibly even get worse.

The Doha Round of the WTO must achieve real cuts in trade distorting domestic support. Canadian producers deserve a fair and level marketplace.