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Canadian Federation of Agriculture Trade Policy Statement

Introduction

Canadian agriculture is an essential part of the economic, political and social fabric of Canada. It is the backbone of many rural communities and contributes significantly to the well-being of Canadians in both rural and urban Canada. The future of these communities is tightly intertwined with the future of the Canadian agricultural sector.

Canadian agriculture is a major generator of jobs in both rural and urban Canada through employment on farms, in the production of agricultural inputs, in the processing of farm products and in the service sector.

Primary agriculture is not just another industrial sector. Unlike other primary industries, agricultural production is not carried out by large corporations. It is done by a large number of individual farms. Canadian agriculture occupies a significant portion of Canada's land resource and must carry the responsibilities of the stewardship of this resource.

The continued health and development of a successful and diverse agricultural sector requires that federal policies recognize, on the one hand, the global environment in which the industry operates, and on the other, the domestic requirements for a healthy and vigourous industry. The Canadian Federation of Agriculture believes that Canada's agricultural trade policies must reflect the requirements arising from the unique characteristics of this sector.

Basic Trade Policy Goals

The increasing interdependence of national economies and the growing and competitive global marketplace have reinforced the importance of export market opportunities and the importance of fair and effective trade rules.

Canada must approach trade negotiations with the objective of achieving positive results for Canadian farmers. Clear and effective rules governing international trade should result in a better functioning of international and domestic markets and contribute to the improvement of Canadian farm incomes.

The range of processes, initiatives and options on Canada's current trade policy agenda is very large (e.g. WTO, NAFTA, Canada/ Chile bilateral, Canada/Israel bilateral, APEC, Quad, G-7, OECD, FTAA etc.). The breadth of this agenda provides opportunities, but also poses risks.

The CFA has asserted, and continues to assert, the Canadian Government's trade policy must:

• identify the WTO as the principal vehicle for the establishment of fair and effective trade rules and improved export opportunities.
• approach all trade negotiations in a coordinated fashion that ensures trade agreements and initiatives complement each other.
• give high priority to the review of the effect of existing trade agreements and give high priority to the achievement of full implementation of existing commitments in the consideration of future action.
• achieve the maximum possible access for agricultural exports, but also respect the domestic interests of Canadian farmers.
• preserve its right to enable Canadian farmers to design and operate marketing systems, including orderly marketing, and preserve those measures necessary for the stability and profitability of Canadian agriculture.
• Ensure that farmers' marketing structures are not subject to stricter international trade rules than other corporate structures and private enterprises.
• Ensure that government involvement in marketing structures and state trading enterprises remains transparent and is fully notified to all WTO members.
• recognize that change is negotiated on a reciprocal basis, but insist that the results establish clear and effective rules and standards that apply equally to all countries.
• ensure a continuing commitment not to allow one commodity to be traded off to enhance the interest of another commodity nor to trade off agriculture in general for another industry sector.

Next Round of WTO negotiations

In order to achieve meaningful and comprehensive results, Canada should endeavour to have the next round of agricultural negotiations carried out in the context of a comprehensive round of WTO negotiations. The next round of trade negotiations must focus at the onset on:

• Reaching an agreement to eliminate all export subsidies
• Reaching an agreement which contains precise and enforceable rules which apply equally to all members, and thereby rectifies the disparity in the level of commitments which resulted from the Uruguay Round (e.g. minimum access).

Agricultural Specific Issues

Export Subsidies

Canada is eliminating all export subsidies. Further action is required to ensure that Canadian producers are not forced to compete in an international market that is distorted by export subsidies provided by others. Canadian goals should include:

• Eliminating the use of export subsidies.
• Establishing effective WTO rules governing the use of government export credit programs. These rules should :
  • Limit the repayment period of a loan to period approximating the life of the product being sold ,
  • Prohibit the subsidization of interest rates,
  • Require premiums (reflecting cost of risk involved) for credit guarantees and insurance, but also
  • Allow governments to provide direct credit as well as guarantees and insurance.

• Establishing clear and enforceable WTO rules to govern the use of export promotion programs and food aid to ensure that these programs are not disguised export subsidies.
  Ensuring that the definitions of export subsidies do not undermine the effectiveness of Canadian agricultural marketing bodies or Canadian exporters.

Export Restrictions

The use of quantitative export restrictions and/or export taxes can in effect subsidize the export of processed products and can undermine the confidence of importing countries, in the security of imported food supplies. Canadian negotiating goals should include:

• Establishing effective WTO rules governing the use of quantitative export restrictions and export taxes. These rules should :
  • Clearly define the circumstances when quantitative export restrictions or prohibitions are allowed, and the allowed duration of such a measure.
  • Require that a restriction or prohibition shall not reduce the proportion of exports, to the domestic supply of the product, to a level below the average proportion of exports to the domestic supply in a recent representative period.
  • Prohibit the use of export taxes to isolate domestic prices from increases in international prices.

Market Access

CFA believes the fundamental market access goal should be to achieve the maximum possible access for agricultural exports, with due regard for the need to maintain our domestic interests and orderly marketing structures.

• Canada should pursue full equivalency of minimum access levels based on clear and precise rules.
• Canada should continuously pursue maximum market access opportunities for Canadian agricultural sectors with strong export interests.
• As a first priority, the Uruguay Round goal of 5% minimum access must be provided for all agricultural products for which non-tariff barriers were converted into tariff equivalents.
• Agriculture sectors which already offer access greater than the common minimum access agreed upon at WTO should not be required to offer additional access.
• Minimum access commitments should be established on the basis of:
  • Tariff Rate Quotas (TRQs) being established on a product group basis such as pork, beef, dairy, wheat, barley and oilseeds, and be available to all products within each product group. The product groups, for which separate minimum access calculations and provisions are required, should be defined in a specific list.
  • Over-quota tariffs being maintained at a level that ensures no more access than the intended level of the TRQ.
  • In-quota tariffs being reduced to zero.
  • Transparent, effective and binding rules governing TRQ administration in order to ensure that the committed level of minimum access is available and achievable, including:
    • the elimination of country-specific allocations; and
    • The right for Canada to designate the market sectors that receive imports, provided it does not impede the level of committed minimum access, and provided the TRQ administration is transparent and non-discriminatory within the sector.
    • TRQ administration in support of the objective of equivalent and achievable market access should be guided by the following principles:
      
      a) Administration measures must be fully transparent and predictable to importers and exporters, and be applied equally to all WTO Members;
      b) Administrative burdens on importers and exporters should be minimised; and
      c) State Trading Enterprises (STEs) must be recognized as legitimate structures of administering TRQs, provided that they are in compliance with WTO commitments.
      
• In principle, all current access above the minimum access level must be maintained. However there is a bilateral (Canada/US) anomaly that must be resolved. The current access provided by Canada for hatching eggs and chicks exceeds the base period access volume, while the access provided by the US for Canadian refined sugar is well below historic access levels.
• Notwithstanding the above position on in-quota and over-quota tariffs, Canada should pursue the maximum reduction of all other tariffs.
• For grains, oilseeds, pork and their products:
  • Canada should seek parity of access/tariffs for competing products. For example, canola should enjoy access/tariffs equivalent to that of soybeans.
  • The practice of Atariff escalation where progressively higher tariffs are applied as the product moves farther up the processing chain, should be prohibited. Primary and processed forms of a product should enjoy parity of tariff treatment.
• Canada should continue to pursue "0" for "0" agreements for products of interest to specific Canadian sectors.

Non-Tariff Barriers

Canada must recognize that for some sectors, the elimination of sanitary, phytosanitary and other barriers without technical merit require as much priority as the further elimination of tariffs.

In general, the SPS Agreement is working well and does not need to be renegotiated. However, if it is opened up, Canada should seek to achieve:

• WTO provisions that require countries to accept international pesticide registration and residue standards.
• Clearer language on equivalency that will make it more incumbent on countries to allow imports where the food safety protection afforded by exporting countries' inspection programs is at least equivalent to that of the importer, even if the modus operandi is different in certain respects.
• Provisions that would ensure timely resolution of problems with unjustified sanitary and phytosanitary measures.

In addition, priority should be given to:

Measures which will ensure that science is the basis on which countries assess the acceptability of GMO products and that labelling requirements not constitute a non-tariff barrier to trade.

Achieving a WTO Agreement on Arbitration and Licensing that will ensure that shippers of fresh fruits and vegetables will have access to an effective and comparable dispute resolution system in all markets.

Measures which will help ensure that import regulations and other trade restrictions are administered and enforced uniformly for all exporters shipping into a country.

Recognizing that an increasing number of agricultural products, developed through biotechnology, are commercialized and enter into international trade, Canada shall seek to establish a working party on biotechnology in the WTO to assess potential trade implications and to determine the adequacy of existing rules and to report to the steering body for the negotiations on whether negotiations are required within the WTO in this area.

In negotiations regarding technical regulations, Canada must recognize the importance of maintaining its bulk container and consignment selling rules which are consistent with WTO national treatment requirements.

Domestic Support

The domestic support priority should be to resolve problems arising from the existing WTO Agreement on Agriculture while seeking further, progressive reductions in trade distorting domestic support. There is a need t

• Improve the clarity and equity of the definitions and rules governing domestic support programs by:
  • Clarifying the "green box criteria" for weather and income related safety net programs (paragraphs 7 & 8, Annex 2) in order to provide more realistic options for these programs.
  • Tightening the definitions of green programs to reduce the possibility of trade distorting programs being provided within the green category.
  • Eliminating special consideration for specific types of amber programs (para.5, Article 6, WTO agreement on Agriculture, "blue box").
  • Clarifying the definitions of green programs.
  • Permanently exempting green programs from countervail action.
  • Reviewing the calculation methodology of the aggregate measure of support (AMS).
  • Establishing a WTO system for the prior determination of the green status of a specific domestic program.
• Ensure that the calculation of the AMS reflects the application of the differential between the domestic price support level and the international price only on the volume of products that benefit from price support.
• Harmonize Canada's domestic agricultural policy and Canada's position on the definition of "green programs.
• Achieve greater discipline governing domestic support and seek the imposition of a cap on total domestic support including amber, blue, green programs, measured as a % of total value of production, in order to ensure that reductions of amber support are not simply compensated for through increases in government support provided in other categories.
• Maintain the de minimis exemption for amber box programs.

Recognizing that non-trade concerns shall be taken into account during the next round of negotiations, Canada should seek to:

1. clarify the concept of "non-trade concerns" and the concept of "multifunctionality", and the extent to which these two concepts are interchangeable;
2. minimize any trade distortions associated with the multifunctional character of agriculture;
3. ensure that any expenditures related to the financing of these concepts are made through the existing domestic support categories and are subject to a cap imposed on the total support based on a percentage of the total production.

The Government of Canada must be prepared to match the level of green support given to our competitors in other countries; particularly in the areas of research, infrastructure, pesticide regulation, resolution of environmental problems, and maintenance of standards and inspection.

Marketing Structures

The suitable form of marketing structures varies between commodities and over time. However, one of the most important tools available to Canadian farmers is the Canadian agricultural marketing legislative framework.

Under this legislative framework, the federal government and the provinces have established agricultural marketing boards, agencies and commissions that, without distorting trade, permit farmers to deal effectively with their buyers and give farmers the leverage to successfully meet the challenges of a competitive market place. At the same time, they have provided fair prices to consumers and ensured strong national industries. They must not be traded away. Canada should:

• Not only defend its right to enable producers to establish and maintain effective marketing structures, but seek allies and vigorously promote WTO rules that clearly confirm the right of countries to grant producer supported marketing bodies (such as Canadian supply management systems) the power to regulate the volume of domestic product marketed, to operate a central desk selling agency and to pool returns in a fashion that does not distort international trade.
• Ensure that any international agreement on the application of competition policy respects Canadian provisos that exempt specific aspects of federal and provincial agricultural marketing structures from the provisions of competition legislation.

Trade Remedy Measures

The use of countervail, antidumping and safeguard measures is a double-edged sword; necessary at times to protect the legitimate interests of Canadian producers, but also at times unfairly damaging to Canadian export interests.

In a less-than-perfect trade environment, Canada needs to :

• Ensure we maintain trade remedy legislation that permits farmers to effectively counteract unfairly damaging trade practices.
• Resolve the problems with existing rules so that effective safeguard action can be taken in critical circumstances affecting perishable product.
• Seek, in the WTO and NAFTA, provisions that will effectively curb the misuse of trade remedy measures.

CFA believes a long-term trade goal should be the establishment of a multinational trade remedy/dispute settlement system that cannot be manipulated by any one country.

Under this process, one common set of rules governing antidumping and countervail action would replace existing national legislation. Investigations and decisions, concerning all complaints, would be made by one multinational body. A regional agreement such as NAFTA may eventually provide the first opportunity to pursue this goal.

Antidumping Measures and Competition Policy

The Canadian government does not believe antidumping measures should be used in "free trade" areas. It believes competition law is the appropriate measure for dealing with unfair pricing in free trade areas.

Its priority is the elimination of antidumping action in Canada/US trade. There is no realistic possibility of achieving this in the foreseeable future, but Canada has negotiated such a provision for Canada-Chile trade.

• CFA has very serious concerns about the government's approach to this issue. In the current trading environment, antidumping action is an essential tool. Antidumping action has been necessary to prevent damage to Canadian farmers from unfairly priced US imports. There are currently no trade rules governing the use of competition laws. Shifting attention from antidumping to competition law may trigger a new round of protectionist barriers in the form of anticompetition actions. In reality, current Canadian competition legislation is not capable of effectively dealing with problems associated with imports or the unfair pricing problems that antidumping action addresses.

CFA believes that:

• Any further consideration of the elimination of antidumping action should be put in abeyance until there is a clear understanding of the role of competition policy in the new global trading environment and until it is clear that there are effective safeguard mechanisms against predatory pricing practises or dumping by other countries that can prevent damage from the unfair pricing of exports (e.g. the US sugar re-export program).

Trade and the Environment

CFA recognizes the importance of measures to resolve environmental problems. While the WTO is not equipped to resolve environmental problems, there is an interaction between trade and environmental issues. There is potential for legitimate environmental concerns to be used as an excuse to introduce disguised trade barriers. Neither international trade nor the environment would benefit from such action. CFA believes that:

• The Committee on Trade and Environment should be a permanent WTO body.
• Eco-labelling and other applications of environmental standards should be subject to WTO disciplines, no less rigorous than the disciplines placed on the application of other standards.
• Trade provisions in international environmental agreements should be subject to full WTO discipline. If it is deemed necessary to give special consideration to any environmentally related trade measures, clear WTO rules should be developed to prevent misuse in the cause of protectionism.

Trade and Labour Standards

The liberalization of international trade has increased awareness of the lack of core labour standards in some countries. While CFA believes that:

• The primary responsibility for dealing with labour standards should lie with the International Labour Organization, and
• Trade barriers should not be used to impose or enforce labour standards,

It recognizes that one of the functions of the WTO is to cooperate with international organizations "with a view to achieving a greater coherence in global economic policy-making" (Article III, Paragraph 5 of the Marrakesh Agreement). There is a need for a strong and transparent consultative link between the World Trade Organization and the International Labour Organization.

Dispute Settlement

Canada must seek to improve the transparency of the WTO and in particular, the WTO Dispute Settlement Understanding through:

• Allowing producer organizations, commodity and trade associations affected by a panel ruling to observe the proceedings of the Dispute Settlement Body in a manner that does not affect the proceedings themselves;
• Ensuring that adequate proceedings are made available to the public, while respecting any confidential information;
• Ensuring that the WTO panel and Appellate Body submissions are made publicly available on a timely basis.

Regional and Bilateral Trade Negotiations

Agriculture specific issues

Market access:

Canada's approach should be the same as in other regional trade agreements. Canada should seek the elimination (or reduction when elimination is not possible), on a reciprocal basis, of all agricultural tariffs except for over-quota tariffs for supply managed products. Any considerations related to the size of supply managed TRQs or over-quota tariffs should be reserved for WTO negotiations.

Domestic support:

Limitations on domestic support expenditures is an issue which can most effectively be dealt with in the context of the WTO. Canada should oppose any efforts to go beyond WTO domestic support commitments.

Export subsidies:

Canada should seek the elimination of the use of export subsidies. The CUSTA provision, which prohibited export of agricultural product by government entities at a price below acquisition costs, should not be duplicated in these trade agreements.

Other agricultural questions

Canada should oppose any efforts to establish new rules governing the activities of state trading enterprises. Issues relating to state trading enterprises should be dealt with in the WTO.

If the opportunity occurs, Canada should seek specific rules regarding the specificity, of agricultural programs for the purpose of determining if a program is countervailable. The goal should be to establish rules that make programs, which are generally available to agriculture, non-countervailable.

Investment

Canada should endeavor to insure that investment provisions, which may be included in these agreements, do not inadvertently conflict with Canadian agricultural policies, programs and/or regulated marketing systems. CFA asks that Canada's investment negotiators consult with CFA during the development of any investment provisions.

Competition policy

Canada should endeavor to insure that any competition policy provisions are compatible with the manner in which Canada applies competition law to agricultural marketing bodies.

Trade Remedies

Anti-dumping action:

It may be useful to seek more effective rules governing the use of anti-dumping action, however Canada should not seek the elimination of the use of anti-dumping action (particularly in the case of horticultural products.)

Countervailing duties:

If possible Canada should seek rules which govern the determination of the specificity of agricultural subsidies for the purpose of countervail action (see comments above under Other agricultural questions.)

Safeguard action:

There is a need to develop measures that address the problems which the producers of perishable horticultural products suffer from surges of low priced imports. CFA requests that they be consulted regarding any possible provisions related to safeguard measures.

Intellectual property rights

The question of whether a country should be required to allow the patenting of plants and animals is an issue which should be dealt with in the WTO. Canada should oppose any patent provisions in these regional agreements which would limit Canada's options regarding the patenting of life forms or which would limit the conditions Canada might place on a patent of a plant or animal.

Conclusion

CFA supports the development of a coordinated and equitable agriculture trade policy for Canada. In the development of Canadian agriculture trade policy, the Government of Canada needs to take into account the special nature of agriculture and its positive contribution to the rural and regional economies in Canada. CFA must be fully involved and consulted from the outset during all trade negotiations, not only on the specific issues, but also on the direction and focus of Canada's agricultural trade policy.

Annex 1

Recommendations for revision
of
Green Criteria in Annex 2 of WTO Agreement on Agriculture

Section A: Proposed wording for green box criteria for weather and income related safety net programs

Paragraph 7: Income and income safety-net programs

• Income may be determined on a "net income", "gross income " basis, or combination thereof, but only one methodology may be used for the program. Negative numbers may be included in the calculations, provided that they are used in both the calculation of average income and the calculation of current income.
• Income from the same or similar schemes shall not be included in the calculation of the average income.
• The representative period for determining average income shall be not less than the preceding 3 years and no greater than the preceding 10 years. Once the length of the period has been determined, it shall be used consistently for the life of the program.

• The annual government contribution to each account does not exceed 6% of the value of the producer's annual sales of agricultural products.
• Producers must enter into a contract to participate in the program and the contract requires the producer to provide at least one third of contributions to his or her account.
• Payments are limited to funds in producer accounts by joint producer and government contributions.
• The total payments from a jointly funded program, and any other program under this paragraph, shall be less than 100% of the individuals total loss.

Paragraph 8. Payments (made either directly or by way of government financial participation in crop insurance schemes) for relief from natural disasters

Section B: Proposals for tightening the definitions of green programs to reduce the possibility of trade distorting programs being provided within the green category

General Services

Paragraph 4. Domestic food aid:

(Example: US Food Stamps and US School Lunch Programs) Add the requirement that food purchases shall not be limited to domestically produced product (i.e. imported product shall receive national treatment in regard to domestic food aid purchases.)

Direct payments

Direct payments is the form of support which is most likely to produce trade distorting effects. CFA believes no direct payment program should be green unless it conforms with a purpose which is clearly defined in the green criteria. If a country has a new type of program it wishes to introduce under the green category, there should be a mechanism for determining if this type of program meets the green goals and determining what specific rules should apply to the program.

CFA also believes that the definitions must contain provisions which prevent support in excess of the level necessary to achieve the defined goals of green programs and which prevent a level of support that will become trade distorting. The criteria, for each type of green direct payment, should provide specific limits to the level of payments that can be provided under that type of program.

SPECIFIC RECOMMENDATIONS:

Paragraphs 5 - 13:

Each paragraph relating to direct payment should be reviewed and revised if necessary to insure that:

• The paragraph clearly defines a type of decoupled non-trade distorting program which is compatible with the goals of the green category, and clearly defines the acceptable application of the program.
• The paragraph contains limits which prevent payments in excess of the amount necessary to achieve the intent of the defined program.

In addition to the steps identified above, CFA also believes that the following revisions should be made:

Paragraph 5. Direct payments to producers:

The last sentence of the existing paragraph should be deleted in order to eliminate the provision for direct payment programs which do not meet the specific criteria for the individual types of direct payment identified in the green definitions.

Paragraph 6. Decoupled income support:

This paragraph should be revised so that the provision is limited to temporary compensation for policy change with criteria such as:

• Payments can only be made to compensate for the elimination of an agricultural support program which provided readily definable financial benefits to producers.
• The payment in the first year shall be no greater that the average annual benefits which a producer received from the terminated program.
• The annual payments shall be progressively reduced and phased out over five years. In each year, after the first, the annual payments shall be reduced by 20% of the first year's payment.
• The producer shall not be entitled to any further compensation in the sixth and subsequent years.

Paragraph 11. Structural adjustment assistance provided through investment aids:

This paragraph should be revised to clearly indicate that programs for beginning farmers are included under this paragraph provided that there is a definite limit to how long an individual can be considered a beginning farmer.