By Keesia Wirt

DTN Commodities Editor

DES MOINES (DTN)--A World Trade Organization panel April 6 announced it agreed with the United States on three points in a case regarding Canada's grain distribution system, but did not agree with U.S. claims about the Canadian Wheat Board.

The WTO panel sided with the United States in the claim that Canada's grain handling system and rail transportation measure (rail revenue cap), discriminate against foreign grain because it results in lower rail transportation rates for grain shipped by the Canadian Wheat Board (CWB) than for imported grain.

It also agreed Canada's mandatory authorization requirements for foreign grain entering Canadian grain elevators violate WTO national treatment principles. The panel also found that Canada's prohibition on mixing foreign grain with Eastern Canadian grain violates those treatment principles.

The national treatment principles basically say a country can't make regulatory demands on foreign grain that it does not make on domestic grain.

This ruling is consistent with past WTO rulings that have stated countries cannot place additional regulatory hurdles on foreign products only, according to a press release from the Office of the U.S. Trade Representative.

"This is a win for American farmers," said U.S. Trade Representative Robert Zoellick. "The WTO found that Canada unfairly discriminates against American Wheat and grains."

The U.S. has successfully won other WTO cases against Canada concerning similar unfair practices relating to U.S. dairy and lumber products.

However, April 6 the WTO panel also found against the U.S. in regards to the claim that the CWB was engaging in unfair practices. The panel said WTO rules do not prevent state trading enterprises like the CWB from using their monopolistic privileges to the disadvantage of commercial actors, according to the USTR press release.

The CWB is the largest Wheat and barley marketer in the world and sells grain to more than 70 countries. All sales revenue, less marketing costs, is returned to the farmers who control the CWB.

"This report provides ample evidence that the charges leveled against the CWB were baseless," said CWB Chairman Ken Ritter, in a press release. Ritter said he would send a letter to all WTO member-countries to highlight the panel's findings.

The WTO panel said the CWB's regulatory structure, which gives Western Canadian producers control over the CWB, gives it incentive to maximize returns to the producers whose products it markets. That includes utilizing transportation and marketing breaks provided by the Canadian government. The WTO panel said it was not convinced the CWB would make sales that were not commercially wise, i.e. would not benefit its producers.

The U.S. maintained that the finding 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," Zoellick said in the release.

An example of what the U.S. sees as unfair privileges granted to the CWB was the recent announcement by the CWB that it had overpaid Canadian farmers $65 million for their 2002 Wheat crop. According to the USTR press release, the Canadian government agreed to pay the CWB to make up for the shortfall. The USTR said actions like that make it difficult for the private sector to compete on a level playing field with the CWB.

Both the U.S. and Canada can appeal the WTO's findings. According to the USTR, the U.S. is currently reviewing its options. If neither country appeals, the report could be adopted by the WTO.

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