September 2005 Editorial

Interpretations of Convenience

Interpretations of trade agreements have become a convenient means of rejecting initiatives designed by Ontario grain and oilseed producers to be of benefit. Farmers developed the proposed Risk Management Program (RMP) as a replacement for the Market Revenue Insurance (MRI) program cancelled by the provincial government. The excuse given for canceling MRI was that it did not comply with trade agreement commitments. Specifically, MRI provided income support, was commodity specific, and was triggered by price. Because of these elements, government officials did not consider MRI "green" under WTO trade agreement definitions. Not "green"? Had to go! The provincial government says the RMP is also unacceptable because it provides income support, is commodity specific, and triggered by price. Not "green"? Can't have!

That is an interpretation of convenience because the same provincial Ag Ministry bureaucrats, advisors, and Minister who turfed MRI in February 2005 then proceeded to introduce the Ethanol Growth Fund (EGF) in June 2005 to provide commodity specific income support to ethanol producers that is triggered by price. Operating grants under the EGF provide additional income per litre of ethanol output (regardless of the source of corn) with payments triggered by a formula combining the price of gasoline, ethanol, and grain corn. When the cost of grain corn goes up, operating grants go up. Let us be clear. We support ethanol produced in Ontario using corn grown in Ontario; however, there is an issue here concerning trade agreement interpretations. How is it that the same Ministry dismisses help for Ontario grain and oilseed producers by rejecting income support programs that are commodity specific and triggered by price; but introduces those same elements in a program for Ontario ethanol producers, and they don't even have to purchase Ontario grown corn to get that income support?

Amazing, disappointing, but convenient.

We have been pressing the Federal Minister of Agriculture to include our RMP as a necessary addition to the CAIS program to make the latter meet the needs of grain and oilseed producers. The "not green" argument is once again trotted out. How is it that this same Federal Minister can reject our RMP as "not green" while refusing to take action against U.S. subsidy programs that have been judged by the WTO to be "not green"? The Brazilian WTO upland cotton complaint victory clearly identified the same U.S. subsidy programs that afflict Ontario corn producers as not being in compliance with the U.S.'s WTO obligations. Yet the Canadian government has never taken action against successive U.S. Farm Bills that are undermining Canadian grain and oilseed producers. By not using the tools available to it under international agreements, the Canadian government is, by default, saying that U.S. subsidy programs are acceptable to it, and are therefore, by default, considered "green". The reality is that support programs are "green" until proven otherwise through legal challenge. If you don't challenge, you accept. In other words, the Canadian government accepts such programs for U.S. corn producers, but refuses to accept them for Ontario producers.

Once again, rejection of our RMP is an interpretation of convenience.
And there's more.

International trade agreements such as the WTO do not say a country cannot employ income support programs that are commodity specific and triggered by price. What the agreements say is that there are limits on the amount of spending a country can devote through such "amber" programs. For example, the latest data Canada has provided on agricultural support to WTO are for the year 2000. In that year, Canada declared $2.3 billion in support spending as "green" - no cap or reduction commitment for green box support. Canada declared $848.2 million in support as "amber"; but the maximum allowable Aggregate Measure of Support (AMS) commitment level for the year 2000 for Canada was $4.3 billion. The spending cap was more than 5 times our actual "amber" spending!! Tons of spending room. Canada is permitted non-specific "amber" and de minimis support (legal term meaning minimum level below which no reductions are mandated) spending each as 5% of the value of production; but Canada reported total de mininimis spending of 3.8% and "amber" spending of 2.7%, both well under trade agreement commitments. In other words, the "not green" trade argument doesn't hold water because there is more than ample room to increase "non-green" program spending in current and anticipated trade agreements. And remember, program spending is self-declared. The U.S. simply declares the vast bulk of its spending "green". Unless someone (such as Canada?) contests that claim, "green" it remains.

But so what? Our number one trading partner, the U.S., simply refuses to comply with rules and rulings it doesn't like anyway.

Several WTO panels and NAFTA panels all have found against U.S. actions in the ongoing softwood lumber dispute. As the Toronto Star stated, "legally, the U.S. should cease collecting punitive duties on Canadian shipments of softwood lumber and at the same time return some $5 billion, plus interest, in money it has illegally collected from Canadian lumber companies. The Americans have said they plan to do neither." The WTO found against U.S. Farm Bill subsidies for cotton, a WTO appeal court supported the original finding and laid down a deadline for action. That deadline came and went with no Congressional action to repeal the offending programs, and none planned.

The bottom line is this. Rejecting safety net programs designed by farmers on the grounds that they are not trade compliant simply doesn't wash. The rules permit such programs and our governments construct such programs where convenient, our competitors continue to employ such programs, our own government doesn't take action against such programs in other jurisdictions, and there is more than ample spending room in trade agreements to permit such programs. Interpretations of convenience no longer suffice.