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U.S. trade rep should appeal ruling in WTO Wheat dispute
The North Dakota Wheat Commission is urging the Office of the U.S. Trade Representative to appeal findings of a World Trade Organization dispute panel related to monopolistic and unfair practices of the Canadian Wheat Board. The market development organization for North Dakota hard red spring Wheat and durum farmers also asked the USTR to "offer a strong defense of any appeal by Canada of panel findings that Canada has acted inconsistently with its WTO obligations by treating Canadian grain more favorably than imported U.S. grain, and that Canada's rail transportation measure know as the 'rail revenue cap' discriminates against imported grain." The panel's report, made public yesterday, calls for removal of two significant pillars of the CWB's ability to manipulate and distort Wheat trade.
"This ruling ultimately will be helpful to American farmers and elevators that may at times want to ship Wheat west on the Canadian rail system. Canadian railways will have to haul U.S. Wheat for the same price as Canadian wheat," says NDWC Administrator Neal Fisher. "The WTO determination will also force Canada to remove regulatory hurdles that have been imposed on imports of U.S. Wheat and may open a few opportunities for our farmers to sell Wheat into niche markets in Canada."
While these aspects of the ruling are positive, the North Dakota Wheat Commission is greatly frustrated with the panel's interpretation of an all-important provision of the WTO agreement. Article XVII requires state trading enterprises such as Canada's government Wheat monopoly to make "purchases or sales solely in accordance with commercial considerations." Fisher says the WTO's simplistic view of commercial considerations "gives STEs a green light to engage in harmful market-distorting behavior." The panel, on one hand, suggests sales based on nationality, government policies, or the "national (economic or political) interest of the STE" are not in accordance with commercial considerations, and thus would be impermissible. On the other hand, the panel indicates that STEs may be used to carry out governmental policies that diverge from profit-maximizing commercial behavior.
In what Fisher calls "an affront to WTO goals," the panel's report states, "We note, however, that an export STE might, for instance, want to charge a lower price than the market would bear in order to deter competitors from entering the market. In our view, such sales might be considered to be based on commercial considerations."
"Such inconsistencies in the panel report rob the clause in the WTO agreement that deals with state trading enterprises of any meaning and preclude member countries from having any viable manner of ensuring that STEs operate in a non-discriminatory manner," Fisher notes. USTR Robert Zoellick said, "The finding regarding the Canadian Wheat Board demonstrates the need to strengthen rules on state trading enterprises in the WTO. The United States will continue through the WTO negotiations to aggressively pursue reform of the WTO rules in an effort to create an effective regime to address the unfair monopolistic practices of state trading enterprises like the Canadian Wheat Board."
"While we agree with Ambassador Zoellick about the need to put teeth in the WTO agreement and applaud the USTR's effort in ongoing negotiations, the WTO dispute panel ruling must be appealed," Fisher explains. In the last six months, the Canadian Wheat Board announced a U.S. $65 million deficit for the 2002 Wheat crop. While not part of the WTO review, it is an example of the CWB failing to recoup sufficient value for the Wheat it sells.
Date: 4/22/04
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