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Depository Services Program

Parliamentary Research Branch


PRB 98-2E


Prepared by:
Sonya Dakers, Science and Technology Division
Jean-Denis Fréchette, Economics Division
      September 1998

When two countries trade nearly a billion dollars worth of goods and services of all sorts between themselves everyday, frictions are bound to arise from time to time. The agri-food business is no exception to this rule, and the grains sector in particular has seen more than its share of disputes for some years. Since a picture is worth a thousand words, we present the following graph, which shows clearly why the Americans have been attacking on this front.

Especially high exports of Canadian wheat in 1993-94 exacerbated these attacks to the point where the two countries signed a trade agreement in August 1994 placing limits on Canadian exports. That one-year agreement allowed Canada to export a total of 300,000 tonnes of durum wheat at a minimum tariff of U.S.$3.08 per tonne, which was the then prevailing NAFTA tariff. It was also agreed to reduce this tariff to U.S.$2.31 in 1995. For exports within a band of 300,000 to 450,000 tonnes, the agreement called for a tariff of U.S.$23, and all exports in excess of that band were to be subject to a prohibitive tariff of U.S.$50 per tonne. That agreement also provided that, for all other categories of wheat, the minimum NAFTA would apply for exports up to 1.05 million tonnes: beyond that threshold, a prohibitive tariff of U.S.$50 per tonne would come into effect.

In 1996-97, when the Americans found that the pace of Canadian wheat exports was following essentially the same trend as in 1993-94, they again demanded that limits be imposed. This reaction would seem to indicate that, even though the 1994 agreement was supposed to apply for only one year, it has set a precedent that the Americans are taking as a point of reference. In the end, no measures were taken, because the rate of exports declined towards the end of the 1996-97 crop year, leaving total wheat exports for that year as a whole at about 1.6 million tonnes.

In July 1995, in the wake of the trade agreement, the then Minister of Agriculture and Agri-Food Canada, Mr. Ralph Goodale, set up a committee to conduct an exhaustive examination of issues relating to the marketing of Western grains. In its report, published a year later, the Western Grains Marketing Committee issued a series of recommendations that were on the whole well received by the grain industry. (Agriculture Canada) Although that report was drawn upon heavily in preparing Bill C-72, An Act to amend the Canadian Wheat Board Act, that bill received a much cooler reception than the Committee’s report itself, suggesting that the drafters of the bill had not gone as far in restructuring the CWB and the marketing of wheat in general as the industry would have liked. The bill died on the order paper when the thirty-fifth Parliament was dissolved.

Its successor, Bill C-4, received Royal Assent on 11 June 1998. Though, under the bill, the "new" CWB would no longer be a Crown corporation, it is safe to assume that this new status will not be in itself enough to stop American criticism.

The U.S. government’s grain export program (Export Enhancement Program) often leads to domestic shortages; Canadian wheat can then be imported without harming the American market. Even though the imported Canadian wheat is only responding to normal demand, some Americans consider it to be the result of a Canadian plot to displace American wheat. Thus, American politicians representing the border States regularly denounce Canadian imports of wheat and, as a result, commercial relations between the two countries are strained.