Farmscape Article 2119  April 22, 2006

Canadian livestock producers are calling on the federal and provincial governments to assume a leadership role in addressing the types of problems that prompted Canadian corn growers to initiate countervail and antidumping actions against imported U.S. product.

Canadian Trade Action Against U.S. Corn Dismissed

Earlier this week investigations into allegations that unfairly subsidized corn produced in the U.S. was being dumped into Canada ended when the Canadian International Trade Tribunal (CITT) ruled the imported product did not harm and does not threaten to harm the Canadian corn industry.

The investigations were conducted by the Canada Border Services Agency (CBSA) and the CITT in response to complaints filed in August by the Canadian Corn Growers (CCG), which includes the Ontario Corn Producers’ Association, the Manitoba Corn Growers Association, and La Fédération des producteurs de cultures commerciales du Québec (FPCCQ). In its complaint the growers group alleged unfairly subsidized corn being dumped into Canada at prices below its cost of production was causing harm to Canadian corn producers.

In its preliminary determination, issued in mid-November, the CITT ruled it had found reasonable evidence that unprocessed U.S. grain corn imported into Canada may be causing harm to domestic corn producers.

In mid-December, in its preliminary determination, the CBSA ruled there was evidence that U.S. corn was being sold into Canada at prices below its cost of production and imposed provisional antidumping and countervail duties totaling US$1.65 per bushel on unprocessed grain corn imported from the U.S. into Canada. That ruling, which was upheld, when the CBSA issued its final determination in mid-March, set the stage for CITT's April 18 final injury determination.

Final Injury Determination Quashes Investigation

In a statement posted to its internet web site, the CITT indicated, “Pursuant to subsection 43(1) of the Special Import Measures Act, the Canadian International Trade Tribunal hereby finds that the dumping and subsidizing of the aforementioned product [unprocessed grain corn, excluding seed corn (for reproductive purposes), sweet corn and popping corn] originating in or exported from the United States of America have not caused injury and are not threatening to cause injury to the domestic industry.”

As a result of the decision, the collection of duties will end and those already collected will be refunded. The tribunal is expected to release its reasons May 2nd.

Livestock Producers Express Relief

Canadian livestock producers are calling the ruling the right decision.

“It’s very important,” states Canadian Pork Council first vice-president Edouard Asnong. “We are competing in a global market and, to be able to compete on a global market, we also need access to inputs that are competitive priced with our counterparts from all over the world. To have an artificial higher price because of a dumping rate or a countervail duty, that will just put us on the side and out of business.”

“If our input costs are artificially raised,” Asnong warns, “It’s very dangerous, not just for producers, it’s dangerous for the whole value added, or value chain, that we are working with; packers, processors and all those people who are depending on the product we produce.”

Decision Eases Livestock Industry Concern

Canadian Cattlemen’s Association director Ian McKillop notes, “From a beef industry perspective we had some very serious concerns about the long term implications to our industry if in fact there was a countervail placed on U.S. imports of corn.”

He admits, “It’s difficult to say just what the impact [of the provisional duty] has been so far except that it created a great deal of uncertainty in the industry. We have seen an increase in the number of feeder cattle that are being exported to the U.S. over the last several months and some of that may be based upon the uncertainty related to the corn countervail issue. We are currently exporting about 9,000 head of feeder cattle per week out of Canada to the U.S. and that compares to about 4,300 per week during our last normal five year average prior to BSE. Our feeder imports are up but, again, I can’t really say how much of that is related to the corn countervail but that was our concern with corn countervail.”

Animal Nutrition Association of Canada general manager Kathleen Sullivan observes, “This has wreaked just tremendous havoc on the livestock sector and the feed industry even as we were going through this challenge. Industries can't live with uncertainty.”

Corn Duties Described as Unsustainable

Manitoba Pork Council chairman Karl Kynoch agrees, “When we look at the level of duty that we were being faced with, of $1.75 a bushel [Canadian] for corn, it was completely unsustainable for us in the livestock industry for it was going to make us very uncompetitive with the world markets.”

He adds, “It was very concerning to us as we [hog producers] were already running red ink and this was just going to add to the losses in our industry.”

Long Term Solutions Still Needed.

Despite their sense of relief with the CITT ruling, livestock operators are quick to acknowledge solutions to the underlying problems that prompted the corn growers to initiate their action in the first place need to be found.

“I think what we have to realize is that the depressed grain prices actually need to be dealt with globally for that’s something that’s affecting more than just the corn producers. It’s affecting all of the agricultural industry,” Kynoch explains.

He stresses, “We are very sympathetic with the whole agricultural industry. Especially the grains industry has taken a real hit and all of the other commodities have also. It has a lot to do with the Canadian dollar, has taken a lot out of the price of our commodities so I think there’s a bigger picture here. We need to group together as an ag industry and work together at finding a solution to our problem.”

Ineffective Domestic Farm Policy to Blame

Sask Pork general manager Neil Ketilson suggests, “This is really part of a bigger subset of a Canadian farm policy that really isn’t doing what it needs to do in terms of equalizing the United States farm policy with what Canadian farm policy is.”

He suggests, “What they’re [corn growers] concerned about is the differentiation between the subsidies and the prices of the U.S. versus Canadian corn so it’s really part of a much larger picture that needs to be addressed by the provincial and federal governments.”

Ketilson observes, “The United States has a basic philosophy whereby their policy is based on having their producers grow a very cheap product and subsidizing them to do that and that cheap product provides an input into the value added sectors.”

“Back in the 1950s they developed an agricultural policy that basically supported very, very cheap agricultural primary production, grain and oilseeds. So they produce very cheap corn, but what they do with that corn, even though it’s subsidized to the corn producers, they use that corn to feed into the value added industries and then they don’t subsidize the rest of the value added chain. They just do it right at the very base and then they’re done.”

Ketilson argues, “We don’t have that situation in Canada. We expect our producers to export their products at whatever the world market price is and then we will somehow try and stabilize the price after the fact. They’re quite inconsistent in terms of the approaches and the objectives and the end result of what those policies are doing and the implications to the entire western economy.”

Duties Not the Answer

Sullivan notes, “Duties may make sense to some people in the short run but ultimately they only hurt all of agriculture. We understand that our corn producers are going through some financial challenges, as is the rest of the grain and oilseed sector, but making it more costly for your customers to buy your product hurts you in the end if those customers can’t compete in their markets which happen to be global.”

Kynoch believes the situation can be resolved through cooperation. “I think what we’d like to do here in the future is we need to work together with other commodity groups and see what solutions we can come up with to solve these problems in some other manner.”

Government Action Needed

Sullivan maintains, “The Canadian government really needs to take a look at what is going on in world markets, what other countries are doing to support their agricultural sectors and we need to match that support.”

She agrees, “In the longer term we can look at bilateral trade agreements, we can look at the WTO, we can try to get a more level playing field around the world but, until that takes place, then we really do have to stand behind our agricultural groups and ensure that they’ve got the support that their competitors do.”

McKillop echoes the notion, “Certainly it would be nice to see government support similar to that in other countries. At the same time, perhaps what needs to be done is we need to get some resolutions through the WTO to have reduced subsidies worldwide.”

He admits, “That process could take quite a long time to accomplish and, in the absence of that happening quickly, then it is imperative that the government step forward and ensure that we do operate on a level playing field with our foreign competitors.”

Time to End Division

Although the CITT final determination could still be appealed, Sullivan maintains, “We are much better off putting this behind us and trying to sit down together and work constructively as industry and also with government to find solutions. The only way for agriculture to survive in Canada is if we work together and we can’t afford more divisive issues like this one.”

Staff Farmscape.Ca