Tuesday, 11 February 2014

Don't Like It... Too Bad

Despite two agonizingly long negotiated trade deals with the U.S. (U.S. FTA, and NAFTA), Canada continues to wrestle with trade restrictions when selling to our biggest trading partner, especially the farming sector.  Country of Origin Labeling (COOL) is the latest effort to slow down the movement of live and processed hogs and cattle into the U.S.  CBC's hard nosed Washington correspondent Neil MacDonald has a good piece on what this means, and the continued multi-billion dollar support for U.S. farmers, something that impacts directly on Canadian farmers who must sell in a North American price environment.... it's just that the U.S. farmers is getting that extra income in the mail.


New U.S. farm bill coddles farmers, ignores Canada's plea

Among the many myths Americans entertain about themselves is the belief they're self-made; that any success they might enjoy is in spite, rather than with the help, of government.
As Ronald Reagan once said, to a great chorus of cheers, "government isn't the solution to our problem, government IS the problem."
Nowhere is that notion more fiercely beloved than in the vast spaces between this nation's cities; in gun-toting, Republican-voting, tall-standing, rural America.
It's a delusion, of course. U.S. farmers are practically wards of the American nanny state.
But it's a delusion the legislators who represent rural America — both Republican and Democrat — are willing to pay to maintain.
Big time, in fact: propping up delusions wins elections.
Take the outrageous story of Washington's hush money to Brazil. It's not one that's widely known in the U.S., probably because it cuts against Reagan's government-is-the-problem narrative.
But it beautifully illustrates the lengths to which Congress will go to coddle and protect certain American businesses, even as Washington accuses other countries, like China or even Canada, of unfair trading when they do the same thing.

Brazil's hush money

The Brazil story goes back to 2002 when the government of Brazil lodged a complaint against the U.S. government for unfairly subsidizing American cotton farmers.
The Brazilians had an excellent case; Washington has for decades been paying farmers cash whether they grow crops or not.
Some U.S. legislators tried to end tobacco subsidies fully in the new farm bill but didn't succeed. (Reuters)
But U.S. cotton producers are a powerful lobby. They account for most of the world's cotton exports, and employ 200,000 people in 17 states.
Between 1995 and 2012, the U.S. government has paid its cotton producers $32.9 billion, giving them a crushing advantage over farmers in other countries, particularly those struggling along in poor nations like Mali.
So, Brazil took the U.S. to the World Trade Organization for arbitration, and Brazil won.
The Americans appealed, and the Brazilians won again. And again.
Finally, in 2010, with the WTO's approval, Brazil began compiling a list of retaliatory tariffs against American goods, in effect threatening a trade war.
It was at that point that someone in Washington came up with the idea of simply bribing the Brazilians.
As a strategy, it was very effective. For $147 million a year, the Brazilian cotton growers agreed to shut up and let the Americans keep subsidizing their cotton growers.
Voters in the 17 cotton-producing states would continue to send (mostly) Republicans to Congress, and Ronald Reagan's small-government delusion would remain intact.
"Wow," said a Canadian official I know, when told about the sweet Brazilian deal. "Our beef producers would love some of that action."

Not so COOL

For livestock producers, country-of-origin labelling is currently Canada's biggest beef, so to speak, with the Americans.

Since 2002, largely as a result of the mad cow scare in Britain, the U.S. has required meat producers to segregate and label animals from abroad, which makes it more expensive to sell Canadian beef here, and therefore injures Canadian meat exports. They've dropped by about half since 2008.
The Canadian government regards county-of-origin labelling, or COOL, as a legal gimmick where the real intent is to protect the American beef industry from competition. (The beef in both countries is genetically identical, and the herds are for all intents and purposes integrated.)
So Canada, like Brazil, took the U.S. to the WTO and won its case.
But the Americans came up with a legal workaround that just made matters worse for Canadian farmers. And the recent farm bill from Congress failed to make the change Ottawa asked for, so the Canadian government is now  threatening to go back to the WTO.
 For all the good that will do.
As Canada has learned during its many years of struggling with the Americans over softwood lumber exports, taking on the protectionist American behemoth (which believes itself to be a fair trader) can be self-defeating.

Big vs. small

"It's not a matter of right and wrong, or fair and unfair, it's a matter of bigger and smaller," says Peter Clark, a former trade negotiator who runs a consultancy in Ottawa. "The Americans have enough economic clout to do what they want, and Canada has to keep looking over its shoulder."
COMMONS 20121130
Agriculture Minister Gerry Ritz had been hoping the U.S. Congress would change the country-of-origin labelling rules when it passed the new farm bill. But it didn't and now, he says, Canada might go back to the WTO to see trade redress. (Canadian Press)
Take that massive farm bill just passed by Congress.
It will spend a trillion dollars over 10 years, much more than President Barack Obama's stimulus spending that Republicans railed against so angrily, and yet it has gone largely unreported in U.S. media.
The bill is a cornucopia of government subsidies and largesse — to satisfy Democrats, a lot of it actually goes to food-stamp programs in urban areas.
But it is also a massive crutch for American agribusiness, mostly courtesy of congressional Republicans, who are supposed to stand for lower spending and less government.
The irony here is that Canada, regarded by American conservatives as some kind of socialist co-operative, has actually been doing the opposite: reducing farm subsidies and making farmers more responsible for their own losses, while the U.S. Congress keeps the public teat open.
And all the while, says Peter Clark, "Americans actually don't think they are subsidized."
That's not to say there aren't angry conservative voices here. The Wall Street Journal called the farm bill a raid on taxpayers: "Handouts to agribusiness and millionaires? Continued trade protectionism for the sugar industry? It's all still there."
Brazil wasn't terribly impressed, either. Last fall, after the arbitrary cuts to government spending known as "the sequester" put an end to Washington's millions in hush money to Brazilian cotton producers, the Brazilian government once again began readying barriers against a wide range of U.S. goods.
A trade war could be under way by the end of this month. Unless, that is, Washington figures out some new way to protect its protectionism.

No comments:

Post a Comment