Hog Rulings Show Free Trade Works

Commentary, Trade, Rolf Penner

Opponents of free trade and more flexible borders consistently claim that, in such an environment, Canada will always get the short end of the stick. They argue that our commitment to a more expansive social safety net makes us incapable of competing as the lowest cost producer of goods without significant subsidies or protections from multiple levels of government . Recent developments on the agricultural front, for hogs and canola, show that this line of thinking is incorrect.

On April 7, 2005, the U.S. International Trade Commission (ITC) made its final ruling as to whether imports of Canadian hogs were negatively impacting their American counterparts. The unanimous decision was a resounding “No,” that imported live Canadian swine does not injure the American industry.

The ITC’s determination repeals the antidumping duties on imported live Canadian slaughter hogs, weanling pigs and feeder pigs in effect since last summer. It also reconfirms the results of last August’s U.S. Department of Commerce (DOC) investigation, which looked at 22 government programs and found no illegal subsidies. The DOC declared that farm support payments for the Canadian swine industry are fully in compliance with both U.S. law and international trade rules.

Canada’s pork producers will now receive refunds in the range of $25 million, roughly the value of duties already collected. Manitoba, which exports 53 percent of Canada’s hogs, will see the most relief. The tariffs were affecting a third of the farm gate receipts generated by Manitoba hogs, out of a total value of exports to the U.S. in 2003 of just over $257 million dollars.

The positive rulings are not an accident, a fluke or some sort of aberration. They are the result of a lot of hard work by Canada’s hog farmers and a genuine shift in their thinking. Since the mid 1980s, when they realized that the only way the industry could be sustainable was through unfettered access to the marketplace, they did everything in their power to achieve this. Twenty years later, all of that hard work has paid off. The impact of the trade action brought against them was minimal and, based on the evidence, quickly overturned.

Our country’s canola growers have similarly embraced the free market as the road to success and sustainability. That story is rarely told because it lacks controversy and does not create flashy headlines. Canola crushing plants in the U.S. process about 750,000 tonnes of the crop into oil annually, with over 150,000 tonnes imported from Canada. On top of this, Americans import about 650,000 tonnes of Canadian canola oil every year. Growers in northern states truck in about 185,000 tonnes of their crop to Canadian crushing plants like the one located in Altona, Manitoba.

All of this has happened without a hiccup. The two sectors provide a perfect example of how free trade should and could be like between the two countries when politics, politicians, and special interest groups stay out of the way. Canadian disenchantment with free-trade stems from the inappropriately named North America Free Trade agreement (NAFTA). NAFTA has made trade freer on our continent, but it was never intended to create actual free trade. Instead, it set up a system for judging whether trade in each commodity conformed with a set of principles, and for negotiating each case. It was a classic case of bait and switch by our leaders and each adverse ruling, on both sides of the border, has unfairly made the concept of free trade a whipping boy for real and imagined trade woes.

Hog and canola producers have shown us is that, regardless of what our politicians claim and do, when Canadians stick to the actual principle of free trade they can win in the international arena. They’ve done it without being a burden to their fellow countrymen by begging for subsidies and border protection. More groups in our country should learn from and follow their example.