BUSINESS

FARMERS UNDER FIRE

GATT THREATENS CANADA’S AGRICULTURAL POLICY

DEIRDRE McMURDY December 20 1993
BUSINESS

FARMERS UNDER FIRE

GATT THREATENS CANADA’S AGRICULTURAL POLICY

DEIRDRE McMURDY December 20 1993

FARMERS UNDER FIRE

BUSINESS

GATT THREATENS CANADA’S AGRICULTURAL POLICY

For Ralph Goodale, the honeymoon has been brief. Just four weeks after he was appointed federal agriculture minister, Goodale faces the prospect of dismantling the core of Canada’s agricultural policy and enraging thousands of farmers in the process.

Under the current system, the government strictly limits agricultural imports and restricts the domestic production

of chicken, milk, eggs and other commodities to maintain high, stable prices for farmers. But pressured by the other 115 member nations of the General Agreement on Tariffs and Trade (GATT) at last week’s meetings in Brussels and Geneva, Goodale was finally forced to make a concession that trade experts have long anticipated: the abandonment of Canada’s elaborate supply-management practices. While consumer groups and food processors applauded the prospect of lower food prices, Canadian farmers were grim. Said Jack Wilkinson, president of the Ottawa-based Canadian Federation of Agriculture: “None of us are exactly getting rich farming. People focus on cheaper food but they forget that supply-managed products have much more stable prices.” However, with a deadline of Dec. 15 looming for the conclusion of

the long-delayed Uruguay Round of GATT talks, the European Community (EC) and the United States formed a bilateral axis that left little room at the negotiating table for Canada’s lone stand against the replacement of existing agricultural import quotas with tariffs. That means that Canadian farmers, who have long been sheltered from competition, could face a free-market system where low-

cost foreign commodities gain entrance to Canada. Another potential threat lies in GATT’s proposed prohibition of “subnational” subsidies, such as provincially funded aid programs. Last week, Canadian officials tried to salvage those programs with a special “Canada clause” that takes provincial powers into account.

Although there were several other issues under discussion at the GATT meetings, few have been as consistently contentious as agriculture. In fact, when GATT was formed in 1947, the standoff over agriculture resulted in special exemptions that allowed nations to retain export subsidies and import quotas on farm products. As a result, GATT has been plagued throughout its history with frequent and destructive agricultural trade wars. In addition, entrenched national positions on agricultural trade, especially in France and the United States, have been the principal impediment to the successful conclusion of the Uruguay Round that began in 1986. As a result, last week’s hard-won agricultural agreement between the EC and the United States was considered to be a critical turning point. Still, Canadian farmers clearly intend to make their concerns heard. Some groups took out full-page newspaper advertisements protesting the proposed changes last week and, before returning to Geneva last week, Goodale was confronted in Quebec City by irate members of the Union des producteurs agricoles. Said George Brinkman,

chairman of the department of agricultural economics and business at the University of Guelph in Ontario: “Of course they are resisting this—import quotas offer much more precise protection than tariffs.” Canadian food processors and consumer advocates insist, however, that it is time for those changes to take place. According to their figures, a basket of food produced under supply management in Canada now costs about 75 per cent more than the identical basket of goods in the United States. Studies also show that Canadian prices are double the world average for milk, 20 per cent higher for eggs and 20 to 50 per cent higher for chickens. In fact, such national restaurant chains as Toronto-based Pizza Pizza Ltd. claim that they could save as much as $2 million a year if they were allowed to use imported mozzarella cheese. Noted Sandra

4 chronology of the on-again, off-again negotiations by 116 members of the General Agreement on Tariffs and Trade (GATT):

September, 1986 The Uruguay Round of GATT starts in Montevideo, Jruguay, to liberalize world trade and eliminate protectionism.

)ecember, 1990 A GATT summit breaks up after the United States tnd the European Community (EC) fail to agree on agricultural reform.

)ecember, 1991 Arthur Dunkel, director general of GATT, develops a imposai that includes cutting all agricultural subsidies by 20 per cent by 999, converting farm quotas into tariffs and eventually cutting them by !6 per cent. The EC rejects the Dunkel plan.

lovember, 1992 After months of escalating trade tension, the EC md the United States strike a deal, known as the Blair House accord, i/hich cuts the EC’s subsidized farm exports by 21 per cent over six ears. France objects to those terms.

'ebruary, 1993 U.S. President Bill Clinton gets a “fast-track” extension rom Congress to Dec. 15 to complete the GATT deal.

December, 1993 A last-ditch effort to complete the Uruguay Round by )ec. 15 brings 116 trade negotiators to Brussels and Geneva for talks.

Banks, senior vice-president of government affairs for the Grocery Products Manufacturers of Canada, a group that represents the second largest domestic manufacturing sector: “Canada’s whole supply-management system is out of date for an age when the competitive response to customer needs is paramount. Free, open trade is a global reality—whether farmers like it or not.”

While there were limited details last week about the protection levels that would be offered by the proposed tariffs or the length of the period over which they would be phased out, it is expected that initial tariff protection will be as high as 300 per cent for some products, dropping by an average of six per cent over six years.

Some observers, however, suggest that Canada’s farmers are being so resolutely negative—despite the gradual nature of the changes— because they are hoping for financial compensation from the federal government. In particular, established dairy, egg and poultry producers are anxious to secure a buy-out of the production quota permits that they have purchased from commodity marketing boards. According to Guelph’s Brinkman, the current value of those quotas for dairy producers ranges from $200,000 to $400,000 per farm. In total, some 37,000 Canadian farmers are directly under supply management.

To soothe farmer’s fears and to avoid political backlash, the Conservative government made considerable concessions in free trade negotiations with the United States, to preserve supply management. Now, the need to limit domestic fallout at a time when regional splits are deeper than ever led to the lobbying for the Canada clause at GATT talks. Said Ted Cohn, an agricultural trade policy

expert at Simon Fraser University in Burnaby, B.C.: “Governments have long been terrified of tampering with agricultural interests. That’s why there’s no backup strategy in place now.” But even among Canadian farmers, there is solid support for changes in GATT. For one, Hubert Esquirol, a Saskatchewan wheat farmer and the president of the Western Canadian Wheat Growers Association, says that supply management is obsolete. “Canada’s taxpayers,” he says, “don’t have enough money to support those who can’t compete in the real world.” For the embattled agriculture minister, whose new government is committed to aggressively reducing the deficit, those were sweet words of support DEIRDRE McMURDY