CANADA

The war over subsidies

ARY JANIGAN June 1 1987
CANADA

The war over subsidies

ARY JANIGAN June 1 1987

The war over subsidies

When French President François Mitterrand steps down from his luxurious Air France Concorde in Regina this week, his hosts intend to take him to a nearby grain farm for a whirlwind tour. There, Saskatchewan Premier Grant Devine will likely chat about this year’s catastrophic drop of 15 to 25 per cent in grain prices—to their lowest levels since the Depression. Devine will also stress how the European Community’s (EC) massive agricultural subsidies have encouraged overproduction—and plummeting worldwide prices.

And as he steers the dignified Mitterrand among the dusty grain fields and the aromatic barns, the premier planned to plead for an end to the subsidy wars. As Devine predicted last week: “I think I can show him what farmers face here. When he sees how young farmers are going broke because of international politics, I think he will get the message.”

The Mitterrand tour is another step in Canada’s campaign to end the crippling spiral of international agricultural support payments. In mid-May Canada and its 23 partners in the Organization for Economic Co-operation and Development (OECD) called for a truce in the $100-billion subsidy war that now involves Japan, the EC and the United States. Last weekend Canada and 13 other agricultural exporting nations that form the so-called Cairns Group fully endorsed the proposed armistice at a meeting in Ottawa. And Canada and the United States are expected to push at next week’s Venice Economic Summit for a commitment to reach agreement on agricultural subsidies by the fall of 1988 at the General Agreement on Tariffs and Trade (GATT) talks. “These international meetings are like a set of building blocks,” a senior Ottawa bureaucrat told Maclean's. “There is a game plan to this—even though most farmers would not understand.”

According to the game plan, Canada wants to build international momentum toward a formal GATT agreement to end the subsidies. That campaign, launched at the Tokyo Economic Summit in May, 1986, gathered speed on May 14 with the OECD announcement. The 24 industrialized nations agreed to stop dumping sur-

plus produce at highly subsidized prices. They also decided to direct support programs toward farmers rather than production and to stop erecting new import barriers. Although the OECD agreement did not clamp an immediate freeze on subsidies, International Trade Minister Pat Carney said, “We really have turned the corner toward a more rational and sane agricultural policy.” Carney added that Canada had “been

leading the push” to end the agricultural subsidy wars.

Despite Carney’s optimism, Canada’s agricultural problems are far from solved. Instead, as a senior federal official ruefully told Maclean's, the EC is now considering a new import tax on fats and oils. That tax would hurt Canadian oil seed producers. As the senior official warned, “We are going to set ourselves up for a fall.” With a new EC import tax on oils, he predicted, “it is certain that the United States will retaliate and all hell will break loose.”

To strengthen the OECD accord, the Cairns Group, representing 25 per cent of the world’s agricultural exports, is expected to end its two-day meeting with a hearty endorsement. Prime Minister Brian Mulroney, in turn, will convey the Cairns message to Canada’s partners in the Big Seven group of major industrial countries. Meanwhile, both Canada and the United States will push for a summit commitment to instruct trade ministers to work to-

ward an agreement on agricultural trade at the GATT negotiations—as a signal of their high priority. They will also ask the Big Seven to reach a settlement of the issue by the fall of 1988—the so-called “early harvest” strategy. As one official said, “If the political will is there, things can move very fast.” But John Hosemann, senior economist for the Chicago-based American Farm Bureau Federation, cautioned that world agricultural subsidies will not be quickly eliminated. Said Hosemann: “You’ve got to eat an elephant one bite at a time. The fact is that politicians have been at it for

50 years. You’re not going to weed subsidies out overnight.”

While statesmen struggle with the subsidy problem, the West’s farmers face more hard times. This year, for the first time in Canadian history, income from federal assistance will be almost as high as total revenue from grain sales— an estimated $4 billion. Provincial governments and farm groups are pressing Ottawa to add another $1 billion to the current $3 billion in federal aid—if most of Canada’s 145,000 grain farmers are going to survive another season. Last week, in a rare note of caution, Carney addressed both the West’s needs and its impatience. “It took a long time for us to get into this particular swamp,” she warned. “And it will take a long time to dig our way out of it.” That grim message hangs like a dust cloud over the Prairies.

ARY JANIGAN

MADELAINE DROHAN

DALE EISLER

IAN AUSTEN