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Canada's homegrown cartel needs rethinking Add to ...

Whatever the outcome - or the merits - of the BHP Billiton bid for Potash Corp. of Saskatchewan Inc., Canadian policy-makers should reconsider the status of Canpotex International Pte. Limited and any other international Canadian cartels that may exist, once the dust has settled.

Most Canadians have long taken an unfavourable view of one cartel, the Organization of Petroleum Exporting Countries. Moreover, the Canadian government is generally opposed to international cartels, as a matter of policy and principle.

To be consistent, Canadians and their government should at least feel uneasy about a fertilizer cartel based in their own country. Fertilizer that is used in the production of food - a necessity of life in poor and rich countries alike - is not less vital or important than petroleum.

Canpotex is an alliance of Potash Corp., Agrium Inc. and The Mosaic Company (the one American firm in the threesome) to market potash, which the companies produce separately. Thus it makes joint decisions to limit supply in order to keep prices comparatively high.

It describes itself as a competitive world supplier, but OPEC could do likewise, because it does not include all petroleum producers. For that matter, there is a competing potash cartel in the former Soviet Union, called the Belarussian Potash Company, a sales alliance of Uralkali (a Russian firm) and Belaruskali, two potash miners.

This does not always work for the companies in Canpotex, or for Canada. In 2009, a belief that Canpotex and BPC were being greedy depressed small-p potash prices and large-P Potash Corp. shares. But food prices seem to be rising again.

The members of Canpotex comply with the domestic competition laws of the Canada and the United States that prohibit internal cartels, so Canpotex (working from Vancouver and Singapore) particularly affects developing countries. Canada's Competition Act makes it an offence to obey a "foreign directive" to implement a cartel, but there is no provision against the converse: implementing a Canadian directive to enforce a cartel abroad.

As a member of the World Trade Organization, Canada worked in favour of a European Union proposal for negotiations toward an international co-operation agreement on competition, which would have combatted international cartels, especially to assist developing countries. Likewise, Canada's Competition Bureau actively investigates and opposes such cartels. But when it comes to homegrown combinations in restraint of trade, Canada stands back, condoning upward pressures toward a potential food crisis. Even the Chinese are still very poor per capita; of course, individuals, not companies, are the ones who eat food.

In practice, unwinding Canpotex would be no simple matter. Moreover it would be a drastic measure to legislate to prohibit an existing entity of this kind. But Canadians should ask themselves whether they are being hypocritical in opposing foreign cartels, while taking for granted one of their own.

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