The results of the Canadian Wheat Board’s plebiscite over the Conservative government’s plan to end the CWB’s single-desk-selling monopoly for wheat and barley isn’t likely to change things.
According to the CWB, a majority of farmers oppose dismantling the board. But Agriculture Minister Gerry Ritz said earlier it’s full steam ahead no matter the vote.
While controversy will continue over whether Parliament has authority to change the Canadian Wheat Board Act without majority farmer approval, there are important international implications to be considered.
Under both the World Trade Organization Agreement and the North American Free Trade Agreement, the CWB is recognized as a “state enterprise.” Canada can legally maintain and operate it as such, provided it acts in a non-discriminatory manner when it buys and sells grain in the marketplace.
When the CWB’s operations were challenged by the Americans in the WTO a few years back, the case was thrown out. A dispute settlement panel and the WTO appellate body said the board was acting fully in accordance with Canada’s WTO obligations.
What happens if changes are made to the CWB’s powers so the market is opened up to other commercial players? Well, liberalizing trade is what the WTO (and its predecessor, the General Agreement on Tariffs and Trade) is all about, so there’s no impediment to Canada’s unilaterally removing or reducing the board’s monopoly powers and freeing up the market for private operators.
The question is, why should Canada make these changes unilaterally, largely to the benefit of international grain companies and to the applause of U.S. politicians, without negotiating some quid pro quo with the Americans? Why voluntarily give up a valuable bargaining chip that can be used with the U.S. and other trading partners without securing something in return to benefit Canadian farmers?
The U.S. agriculture sector is so rife with internal government support and market-access barriers that there could be important gains in improving Canadian farmers’ and agri-food producers’ access to that market by skillfully playing the Wheat Board card. Whether this can be done under NAFTA without Mexico is a question, but some kind of reciprocal access arrangement should be possible.
As well, we’re in the middle of negotiating a major trade deal with the European Union. Rather than announcing in advance our intentions to unilaterally dismantle the Wheat Board, a clever strategy would have been to use the Wheat Board card as part of the negotiations to secure better Canadian agricultural access to the EU market.
There’s another issue to be faced down the road, should any future federal government decide to change direction and restore some of the CWB’s lost powers.
Under the WTO agreement, legal problems arise when governments try to re-establish monopoly powers of state enterprises that were previously given up. It’s simply not clear how much governments can add to or restore these kinds of powers once they’re relinquished.
As well, once foreign-based commercial operators enter the Canadian marketplace, they acquire investment protection rights, not just under NAFTA but under an array of Canada’s bilateral foreign investment protection agreements with other countries.
While this may not seem like a big deal now, any attempt by future governments to put Humpty Dumpty back on the wall will be faced with claims for substantial investor compensation under Canada’s treaty obligations. The dollars involved are significant. The CWB’s latest annual report shows $5.2-billion in export sales for the 2009-2010 crop year.
Because all of this involves significant changes and lots of money, dealing away the Wheat Board’s powers should be looked at through this prism. Nothing stops the Conservative government from proceeding down this road unilaterally. But any changes or modifications to this policy by future governments will face significant roadblocks.
There’s no question the Harper government’s policy is welcomed in Washington and by U.S. farm groups and large grain companies. But getting nothing in return from the Americans and from our major trading partners is an abandonment of our international negotiating leverage.
Lawrence Herman is a trade lawyer at Cassels Brock & Blackwell LLP in Toronto.