BUSINESS

Fertilizer trade wars

THERESA TEDESCO March 9 1987
BUSINESS

Fertilizer trade wars

THERESA TEDESCO March 9 1987

Fertilizer trade wars

For years Saskatchewan politicians hinged their hopes for economic diversity on the province’s vast deposits of potash. Indeed, the province’s Crown-owned Potash Corp. of Saskatchewan (PCS) is the world’s second-largest producer—after the Soviet Union—of the pinkish mineral used in fertilizer. But a global agriculture recession and a serious oversupply problem have dampened the mineral’s promise. This week Saskatchewan’s potash producers face another challenge when the U.S. International Trade Commission (ITC) begins an inquiry in Washington into allegations that Canadian producers are selling potash in U.S. markets at less than fair market prices. American producers have requested that the U.S. trade authorities impose a 43-per-cent punitive duty on Canadian imports to make up the difference.

In a petition filed last month with the U.S. commerce department and the ITC, two of the five major U.S. potash producers charged that Canada is selling potash in the United States at unfairly low rates. The Canadian share of the U.S. potash market increased to 91 per cent in 1986 from 82 per cent in 1982. Last year Canada exported seven million tons of potash worth about $450 million to U.S. markets. Ninety per cent of that total was produced by seven Saskatchewan companies. U.S. producers claim that they are unable to compete with cheaper Canadian potash.

In their petition, Lundberg Industries Ltd. and New Mexico Potash Corp., who

together represent almost 50 per cent of U.S. domestic production, cite a 1986 U.S. Bureau of Mines study which estimated that the average selling price of a ton of Saskatchewan potash in the U.S. during the first nine months of 1986, at $70.49, was $15.96 less than production and transport costs.

For their part, Canadian federal and provincial government officials last week rejected the allegations at a meeting in Regina, where they agreed to share information to fight off the U.S. tariff. Paul Schoenhals, chairman of PCS, which accounted for 49 per cent of Saskatchewan’s potash production capacity last year, said that the Americans will be hard-pressed to prove that cheaper Canadian potash imports injure or threaten U.S. producers, because the worldwide oversupply problem has forced most producers, not only Canada, to lower their prices. The Americans were angered in 1976 when Saskatchewan nationalized the first in a series of postash mines. And two years ago the U.S. potash industry lost an antidumping case it filed against the Soviet Union. And in 1984 the same U.S. companies lost a countervail petition when the ITC ruled that the Israeli government was not unfairly subsidizing its potash exports. Said Schoenhals, citing the recent softwood lumber dispute settlement: “We don’t believe there is a place for a negotiated settlement.”

—THERESA TEDESCO with correspondents’ reports