THE JOYS OF PUCK FEVER

SHOCKER: OUR WHEAT WINS

How the World Trade Organization, in a surprise decision, sided with Canada

MaryJanigan May 3 2004
THE JOYS OF PUCK FEVER

SHOCKER: OUR WHEAT WINS

How the World Trade Organization, in a surprise decision, sided with Canada

MaryJanigan May 3 2004

SHOCKER: OUR WHEAT WINS

How the World Trade Organization, in a surprise decision, sided with Canada

MaryJanigan

ON THE ISSUES

THE HUGE WORRY about trade deals is that they can act like cookie cutters, forcing nations into identical moulds, dismantling institutions and disrupting traditions. So we have much reason to applaud this month’s World Trade Organization ruling on the export habits of the venerable Canadian Wheat Board. Founded in the depths of the Depression in 1935, the board is the sole marketer for Prairie grain destined for export or for human consumption in Canada. The U.S. had complained to the WTO that the board, as a so-called “state trading enterprise,” did not behave like a commercial firm, exploiting its monopoly to the detriment of farmers in other nations. In other words, we undercut them because we have unfair advantage as a single seller.

To the surprise of many trade experts, the WTO panel, in its extraordinary April 6 ruling, supported the wheat board’s export practices. It was not a blanket endorsement: the panel set out strict criteria for evaluating the commercial habits of state-trading enterprises. But it gave hope to state enterprises everywhere, including provincial utilities that export power: there is room in trade deals to do things differently. Our system for grain export does not have to function exactly like U.S. private firms in order to comply with trade rules.

“To the anti-globalization people, this says the WTO is not some big, monolithic organization that attacks government policies,” notes Cassels Brock trade lawyer Lawrence Herman. “These entities do not have to behave exactly like private sector actors in order to exist. The ruling takes some wind out of the sails of the WTO’s opponents.”

The decision marks the first time that a panel has looked in detail at the rights and duties of state trading enterprises. Its dry, 231-page pronouncement revolves around what constitutes “commercial” conduct. The wheat board’s structure passed the panel’s test. Farmers elect the majority of its 15-member board of directors; the federal government does not control or interfere in day-to-day operations. Ottawa, for example, cannot tell the board to sell cheap wheat to a nation for political considerations.

U ‘To the antiglobalization people, this ruling says the WTO is not some big, monolithic organization that attacks government policies’

The panel then turned to how the board operates. Its mission is to sell at “reasonable” prices with the object of “promoting the sale of grain.” The U.S. pounced on this, arguing that the board sells at prices that are lower than the best possible price to promote Canadian grain. The panel retorted that the board does not have to maximize profit to be a commercial agency: WTO rules do not insist the board “conduct itself in the marketplace exactly like privately held, profitmaximizing, share-capital corporations.” It can handle exports—as long as it acts for commercial reasons.

It is too early for celebrations. The U.S. could still appeal—although it did win its contention that Canada’s insistence on import permits for U.S. grain discriminates against American products. And Canada is still awaiting the result of its WTO complaint about U.S. duties of 14.2 per cent on our exports of hard red spring wheat. But the ruling underlines the need that less powerful nations have for the WTO—at a time when the U.S. is questioning the usefulness of its trade deals and stalling the next round of WTO talks. The wheat board’s very survival, after 13 U.S. challenges, is testament to the fact that we need fair, rules-based global bodies. Without them, the larger partner always holds all the cards. lí1]

Mary Janigan is a political and policy writer. mary.janigan@macleans.rogers.com