I was just waiting for Stephen Harper to say "marketing freedom", and he didn't disappoint. The surprise was that he responded at all to a question about the future of the Canadian Wheat Board on the opening day of the new parliamentary session. Apparently Prime Minister Harper doesn't normally answer questions on Mondays, and he certainly doesn't respond to questions from anyone other than the other party leaders.
The national media has started to pay attention to this story. (I've written about it here : http://foodmatters-petrie.blogspot.com/2011/06/canadian-wheat-board-and-free-markets.html ) Earlier this month Western Canadian grain farmers voted in a a plebiscite to keep the Wheat Board's monopoly to market wheat and barley, but the Conservatives say they don't need the permission of farmers to move ahead, and that's just what they plan to do. "In this so-called plebiscite, not only did a significant portion vote against the Wheat Board, it didn't include those tens of thousands of farmers who have walked away from that institution," Harper went on to say. "The Wheat Board gets to pick its own voters, and I guess if they could do that over there, the Liberal Party could even win an election in the West," he added. "The fact of the matter is, western farmers voted for marketing freedom, that's what they're going to get."
Apparently, according to Harper, farmers who decided that there was more opportunity growing canola, soybeans, bird seed, mustard, etc. did so so they wouldn't come under the heavy hand of the wheat board, not that they simply wanted to grow another crop. There might be farmers who did that (don't forget the dairy farmers who decided to produce pork instead when supply management was brought in in the 1970's), but in my mind that's the kind of "marketing freedom" farmers deserve and already have.
There were a couple of commentaries on the Wheat Board story that capture how heavy handed this is, even for "free marketers" who blame the government for ideological stubbornness (crime bill ring a bell), rather than business smarts. It will take another five years before westerners can "vote" again on this, and by that time private companies will have invested millions to take advantage of the changes, and the toothpaste will be long out of the tube (a genie implies something good has happened).
Playing the Wheat Board card
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.
In the West, dismantling the Wheat Board will leave mighty grudges
I’m an exiled city girl. For the past seven years, I’ve lived in a farm town. I don’t farm, curl, vote Conservative or attend church, which makes me a bit of an oddity.
I’m no Margaret Mead but, after long hours spent observing the local rituals from the fringes, I “get” sodbusters. It takes more than a Rider Pride truck flag and a Saskatchewan driver’s licence to gain admittance to the fold.
That’s why I’m so puzzled that Stephen Harper, a city boy who’s gained acceptance among Western Canadian farmers, would risk alienating this hard-won base. So which Tory MP had the bright idea to dismantle the monopolistic Canadian Wheat Board?
In the heartland, the gun registry debate is mere cocktail chatter compared to the CWB. Grain producers, currently overwhelmed with harvest, will soon be expected to play the salesman Herb Tarlek, too.
In a recent plebiscite, 62 per cent of farmers voted to retain the Wheat Board’s “single desk” structure. That’s far more popular support than Mr. Harper received in the last election (39.7 per cent). Like the contentious potash issue, watch for Saskatchewan Premier Brad Wall to weigh in next. This populist politician, who will face his largely rural electorate on Nov. 7, will side with the producers or risk losing massive voter support.
Mr. Harper apparently feels secure enough to demolish a Canadian institution. But this is just more ideological claptrap from a rigid government that favours unbridled capitalism over “socialist” grain co-operatives.
Since 1935, the CWB has successfully matched up grain producers with global markets. Without CWB support, how will one individual farmer cope with that daunting task?
Rural Saskatchewan is not known for its marketing savvy. Primitive plywood signs line our bumpy highways. You have to crane your neck to read them from your vehicle because they’re mounted sideways. Motorists must slow down to decipher the tiny hand-scrawled signs that read: Rottweiler Puppies for Sale.
When I’m farm-gating for local food, I often find a harried producer at the other end of the phone, a person who doesn’t have an answering machine or even high-speed Internet. I’ve driven down many a bumpy road in search of fresh carrots or organic potatoes. But are large European grain buyers prepared to go looking for the family farmer?
The Harper government’s CWB decision will put many fragile family farms out of business. Only the massive corporate farms will have the necessary reach to sell their products to international markets.
Commodity analysts say prices will drop in a deregulated market. That’s the logical impact of thousands of farm operators flooding the marketplace with come-ons. As a freelance writer, I face stiff competition every day in a crowded and shifting marketplace, a factor that only drives rates down. Some editors even ask me to forgo payment. They tell me, “A byline is good for self-promotion.” “No thanks,” I reply, then quote Samuel Johnson: “No man but a blockhead ever wrote, except for money.”
Like me, grain and barley producers just want a fair price for their product. They shouldn’t have to go door to door like a knife salesman to get it.
Mr. Harper will pay dearly for this policy shift. Prairie people hold mighty grudges, and they have long memories. Take it from this ex-urbanite: Dismantle the Wheat Board at your peril. You’ll be shunned at the post office, at the local curling rink and, most noticeably, at the polls.
Patricia Dawn Robertson is a Saskatchewan freelance journalist.