The Importance of the WTO Negotiations

Agriculture, Frontier Centre, Publications, Rural, Uncategorized

Introduction – Who Are the Grain Growers of Canada

The Grain Growers of Canada is a national organization comprised of major grain and oilseed commodity groups that stretch across the country. We are devoted to representing grain and oilseed producer interests in national policy development.

Our member organizations, which represent every region of the country, are:

  • Alberta Barley Commission
  • Atlantic Grains Council
  • British Columbia Grain Producers Association
  • Canadian Canola Growers Association
  • Fédération des Producteurs de Cultures Commerciales du Québec
  • Manitoba Corn Growers Association
  • Ontario Corn Producers’ Association
  • Ontario Soybean Growers
  • Ontario Wheat Producers Marketing Board
  • Western Canadian Wheat Growers Association
  • The GGC’s principles, as developed by farmers, are to:

  • Pursue a grower-driven, competitive agricultural trading environment based on comparative advantage and open markets
  • Act with integrity
  • Promote government policies that are transparent, non-distorting, and subject to periodic review, if government involvement is warranted
  • Advocate policies that will attract investment in a competitive value-added processing industry and stimulate innovative research and development
  • Advocate policies that cultivate consumer confidence through an agricultural industry that is environmentally sustainable, fosters responsible stewardship, and utilizes rigorous science to continue to provide a safe food supply.
  • The Importance of Trade to Canadian and Manitoba Agriculture

    90% of Canadian farmers depend upon the world market for the determination of their price and marketing opportunities. The importance of international markets is not restricted to any single commodity or region of the country.

    For example:

  • 60% of Canadian canola production is exported.
  • Over 75% of the wheat and durum produced in Canada is exported.
  • Exports of Canadian special crops range from 68% of dry pea production to 98% of canary seed production.
  • Over 50% of Canada’s pork production is sold on the export market.
  • Normally over 60% of Canadian cattle and beef production is exported
  • The importance of trade can be shown in other ways:

  • Canadian Canola – without canola exports Canada wouldn’t need the production from 30,000 producers or 3 million acres. Canada could close the equivalent of 6 oilseed crushing plants.
  • Canadian Wheat – without wheat exports, Canada would require 21,000 fewer producers and 19,000,000 fewer acres in wheat production. There would also be no need for 4 milling facilities.
  • Canadian Pork – without pork exports there would be no need for the production from 7,000 producers, and the equivalent of 19 packing plants, accounting for 8,600 jobs would not be required, and 4 million tonnes of feed grains would not be required.
  • Canadian Beef – It is clear that the BSE crisis has had a devastating impact on our beef industry, but it is also clear that one of the critical components of the strategy for the sector is expanded and diversified trade. If Canada didn’t export beef, our country would require 37,000 fewer beef producers. We would need 13 fewer packing plants – representing over 5,500 jobs, and there would be no demand for 3.6 million tonnes of feed grains.
  • Agriculture and international trade are also very important to Manitoba. Exports of agriculture and food products from Manitoba totalled over $2.5 billion in 2002 – about 10% of Canada’s total agriculture and agri-food exports.

    Agricultural producers, processors and exporters in Manitoba are dependent on the international marketplace, but it is a market place that is highly distorted by market access barriers like tariffs, tariff rate quotas and non-tariff barriers, by export subsidies, and trade distorting domestic support. This needs to change if this key Manitoba industry is going to grow and prosper in the future. This needs to change if we are going to see increased job growth and development in our rural communities.

    What are the Benefits of Liberalization?

    It has been estimated that European Union United States subsidy regimes cost Canadian grains and oilseed farmers at least $1.3 billion every year.

    These subsides hurt all grains and oilseed farmers. For example, even a farmer who sells feed grain to his neighbour is negatively impacted by foreign interference in world markets because the price he receives is determined on the world market.

    The impact of interference in world markets extends beyond subsidy programs.

    Studies have concluded that the elimination of foreign tariffs on our export products over the next 10 years would bring another $422 million annually to Canadian wheat producers, $236 million annually to barley producers and almost $80 million annually to corn producers.

    Tariff parity for canola and its products, with soybean and its products in Korea and India, could add an additional $270 million to the Canadian canola industry.

    Tariff barriers on our value added products are preventing the expansion of the Canadian agri-food processing industry and costing Canadian jobs, especially jobs in rural Canada.

    For example, flour milling was once a very strong export sector in Canada. However, we no longer participate to any extent in the international market place. Canada was totally displaced by subsidized flour exports from the European Union.

    India, the world’s largest importer of edible oil, provides another example of the potential benefits from trade liberalization for Canada and Manitoba in particular. India places an 85% tariff on canola oil imports. This has effectively cut off Canadian exporters from helping to supply this lucrative and growing market.

    Tariff escalation in Japan – the practice of applying higher tariffs on processed products over raw seed – results in additional lost opportunities of about $250 million annually.

    These are just a few examples of current trade restrictions that are restricting the growth of both the Canadian and Manitoba economy. Tariff barriers, subsides, and other restrictions are not only taking money out of the hands of farmers, they are taking jobs away from our rural communities.

    I firmly believe that one of the greatest rural development plans that the federal government could implement would be an aggressive stance for trade liberalization at the WTO.

    The Doha Round – Continuing the Reform

    The Grain Growers of Canada are strongly supportive of Canada’s decision to sign on to the framework that was agreed to by the WTO’s General Council on July 31, 2004. We believe that the framework will allow us to accomplish many of our trade goals. Specifically this framework will allow for:

  • the negotiation of an end to all forms of export subsidies, including the subsidy elements of export credits and food aid;
  • substantial reductions in trade distorting domestic support with the assurances that the highest subsidizers will face the greatest cuts;
  • increases in market access for grains, oilseeds, and their value added products;
  • a curtailment of the practice of charging higher tariffs on processed products (tariff escalation); and
  • better definitions and independent monitoring of programs that are supposed to be non-distorting (“green” programs).
  • The GGC notes that this framework agreement is not perfect. For example, we would have preferred to see “blue box” provisions eliminated entirely along with more coherent and aggressive guidelines in the area of market access that affect grains and oilseeds. However, despite the imperfections, we support the Government of Canada’s decision to use this framework as the basis of future negotiations.

    The Challenge Ahead

    The July framework agreement is not an end to the WTO negotiations. We must now begin the difficult task of negotiating the specific modalities that will fulfil the WTO mandate.

    Canadian agriculture will only realize the full benefits outlined above, if there is true global free trade. That is not a realistic goal for this round of negotiations. Remember it took eight rounds of GATT negotiations over 50 years to bring industrial tariffs to their current low levels.

    Agriculture has only been part of the global trade agreement for one round. However, it is absolutely critical that the process of reform started in the Uruguay Round be continued.

    The real results of the round cannot be quantified until countries agree on the numbers – the size of cuts to tariffs and domestic subsidies and the degree of expansion of tariff rate quotas, as well as the time frame for implementation of the cuts and export subsidy elimination.

    Negotiators will begin work on the “modalities” or real numbers this autumn. It is hoped that there will be an agreement by the next WTO Ministerial meeting in December, 2005.

    Conclusion

    Canadian agriculture is a highly trade dependent sector in a very highly trade dependent country. Without the international market place, there would be no market for millions of tonnes of production, and no future for tens of thousands of producers, or for many hundreds of thousands of Canadians who currently rely on the agriculture and food industry for employment.

    Being forced to operate in a global marketplace where the activities and policies of governments, rather than market forces, dictate success, keeps the Canadian industry from realizing its full potential. Even more seriously, it has depressed farm incomes, reduced investment and decimated the Canadian rural landscape.

    It is clear that the way to global wealth and prosperity is through open trade, where countries and sectors can compete based on their comparative and competitive advantages in a market place that is not artificially distorted by subsidies and access barriers.

    The current round of international trade negotiations on agriculture is the world’s opportunity to take substantial steps towards realizing the benefits that will be created for the world’s economies, developed and developing alike, by continuing the process of liberalization. As the Uruguay Round built the foundation for real reductions in support and protectionism, the framework developed in July builds the foundation for substantial steps forward in the Doha Round.

    It is absolutely critical that Canada resist demands, both from internal as well as external sources, to retrench into protectionism. Instead Canada must move forward alone and with international allies to lead the reform process.

    And here is where I leave a challenge. Even if you have not thought about it, the ongoing WTO negotiations matter a great deal to everyone in this room. Our governments, both federally and provincially, need to know this fact. Politicians need to hear support for trade liberalization directly from their constituents.

    If this does not happen politicians will only hear from those who say “stop”. Canada could very well be left behind as a result. That would be a large loss for the national economy and for all the citizens of Manitoba.