As if dryness, weak grain prices and high freight rates were not enough, Canadian farmers are also faced with the threat of a renewed U.S.-Europe export subsidy war.
Like one schoolyard bully taunting another, Europe seems irrationally intent upon provoking the United States to retaliation.
Not only did the European Union unleash subsidies of $80 to $100 a tonne on barley exports this spring, but it targeted one subsidized grain shipment for export to California.
The Americans can be belligerent enough when they see (or even imagine) subsidized competition in export markets. When the subsidized grain is headed toward their own domestic market, they are capable of an extreme response.
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Predictably, they are talking about resuming their Export Enhancement Program, the program that depressed world grain prices in the late 1980s.
As federal agriculture minister Lyle Vanclief has noted, such subsidies and counter-subsidies “can be a dangerous slippery slope.”
When the dust clears, neither Europe nor the U.S. may have any substantial increase in market share. But their taxpayers will have spent many millions of dollars to make it cheaper for consuming countries to import wheat. And Canadian grain producers, among others, will have been hit with even lower prices.
The last round of world trade talks was supposed to have been the beginning of the end for such subsidies. Instead of trade-distorting direct export subsidies, nations were supposed to move toward more general, trade-neutral forms of support for farmers. Thus the E.U. subsidizes its producers by an average $169 an acre, while the U.S. has unconditional support programs that total close to $1 for every bushel of wheat produced.
That philosophy was also part of the rationale for prairie farmers losing the Crow Benefit rail subsidy.
But instead of ending direct export subsidies, both the E.U. and U.S. seem bent on reviving them.
Canadian producers can only hope that Vanclief was not being overly optimistic last week when he predicted there would be no trade war. Many other nations, he said, have warned the U.S. and Europe against such action.
But if he is wrong and another export-subsidy war breaks out, the federal government should be ready to support farmers.
Canadian farmers have shown themselves able to cope with all sorts of economic and technological challenges, but they cannot stand alone against the treasuries of the United States and the European Union.
