DINOSAURS live. Two have been roaming the Canadian prairies and parts of Australia, respectively, for decades, and are still at it: the two countries’ legally enforced wheat-export monopolies. But till when? American farmers think it is time they were extinct. They came under fire at this month’s World Trade Organisation talks in China, and if its new trade round is to live, the two most probably must die.
American farmers have no objection to rigged markets. They love their own subsidies and protection. But recent weeks brought them bad news on both. George Bush spoke openly of cutting American farm subsidies if the European Union (EU) would do so too. It was no secret that both must cut, if the WTO round is to succeed, but this still shocked the prairies. And an American wheat tariff that has hit imports from Canada since 2003 was denounced by a North American Free Trade Agreement (NAFTA) panel. After that double whammy, both foreign wheat monopolies were obvious targets for retaliation.
The two bodies, between them controlling about one-third of the world’s annual 100m-plus-tonnes of wheat exports, are certainly oddities in these days of free trade. In 1935, Canada’s wheat-growers were going bust. So a state-run but voluntary body was set up to market their crops collectively and get better prices. In wartime 1943 it became compulsory. Today, the Canadian Wheat Board (CWB) is still compulsory, still state-controlled, and still has a monopoly of all west-Canadian wheat (and barley) exports. In some years, it is the biggest grain-exporting body in the world. And America is fed up with it.
In 2003, after repeatedly attacking CWB’s monopoly and alleged state subsidies, the Americans, seeing it take 20-25% of their own demand for hard red spring wheat and durum (pasta wheat), slapped on duties of 4%, later raised to 14%. That killed the trade. Meanwhile the Americans had also denounced the CWB to the WTO.
They got a surprising answer: like it or not, the CWB’s monopoly did not break WTO rules. Canada hit back, calling first for a WTO probe of the American duties, then backing off to one by NAFTA. But last July the WTO called for new restraints on all farm monopolies such as the CWB. The EU too is hostile: it made plain in China that if it is to cut export subsidies, others must end export monopolies.
Less predictably, some west-Canadian farmers are hostile, too. Why should they be forced to sell their grain for export—and inside Canada, if for human use—to a single agency, on its terms, at its “pool” price? The CWB is still state-run, which also rankles, although growers now elect ten of its 15 directors. It claims that it gets a premium price, but critics say they could do better themselves. If others want to sell through it, fine—but let all be free to choose.
Australia’s “wheat board” is odder still. Officially, it no longer exists. Set up in 1939, it was privatised in 1999 and, as plain AWB, is now quoted on the stockmarket. Yet it still has a legal monopoly of all but the smallest exports. And, just by the way, in 2003 it bought Australia’s largest supplier of farm inputs and handler of 20% of the wool clip and livestock trade.
It faces little criticism from Australia’s 40,000 wheat growers. They want more information on AWB’s supply-chain costs, so they can judge alternatives better. But they firmly support its bulk-export monopoly, reckoning its pool prices earn them more than they would get from the world’s mighty commercial traders.
They may be right. As AWB proclaims, it ensures “that Australian growers are not played off against each other” and that “the price for Australian wheat cannot be bargained down”. To “Australian” add “Canadian” and that, say their critics, is precisely what’s wrong with AWB and the CWB: they do what monopolies are meant to—they enrich sellers, at buyers’ expense.
But by how much? In the world market, they are but two among many sellers. They are no more monopolists, argue supporters, than Toyota is in a car market with plenty of rivals. The real free-market case against them may be the opposite: their power inside the two countries, especially Canada, as dominant buyers.
