The North Dakota Wheat Commission has asked the U.S. Special Trade Representative to begin an investigation into what the commission says are "unreasonable and unjustifiable" discriminatory pricing activities by the Canadian Wheat Board.
Such charges are nothing new for the CWB, the organization that markets Canadian wheat internationally. The National Association of Wheat Growers and U.S. Wheat Associates, the marketing arm of the U.S. wheat industry, have said for years that the CWB engages in unfair trading practices.
This time, however, the U.S. organizations may be able to use the request, actually a filing of a Section 301 petition under the Trade Act of 1974, to force Canada to end the government-supported monopoly of the CWB through the ongoing World Trade Organization negotiations.
Under the Section 301 petition, the U.S. Trade Representative has 45 days to decide whether to conduct a full and formal investigation into the North Dakota Wheat Commission complaint. If the USTR says the complaint has merit, the president will be asked to take action to offset the discriminatory pricing by Canada in third country export markets.
The North Dakota Wheat Commission is also seeking immediate relief for U.S. growers through import restrictions on Canadian spring and durum wheat shipments into the United States through quotas or voluntary restraints.
While Canadian wheat does not compete directly with the soft red winter wheat grown in the southern United States, reduced sales of U.S. wheat that does can have an adverse impact on U.S. wheat prices overall.
U.S. Wheat Associates said it first began noticing declines in U.S. shipments of hard red winter wheat to South America earlier this summer.
"Crop quality was good, prices were right. So, we asked our South American customers what was going on," said a Wheat Associates spokesman. "The answer came back that the Canadians are back in South America, undercutting prices set by a free and open market and giving protein away."
The spokesman acknowledged that the Canadian Wheat Board has long maintained that the CWB does not undercut prices. But, the U.S. Wheat Associates knows those claims are "hogwash," he noted.
"Even though they sell spring wheat at a higher guaranteed protein, which is often higher when delivered, cleaned at no charge, shipped farther, for less than U.S. offers for hard red winter wheat, that's not undercutting," she said. "Canadian university economics classes must use their own specialized definitions these days."
In a news release, the Canadian Wheat Board said that eight U.S. investigations in the past decade have found that all CWB trade activities meet North American Free Trade Agreement and international standards.
"What Canadian Wheat Board officials don't say is that U.S. General Accounting Office (GAO) studies and other trade reviews have hardly exonerated it," said Neal Fisher, administrator of the North Dakota Wheat Commission. "Just because the CWB hasn't always been found guilty does not make it innocent."
In the most recent case, a 1998 GAO study could not determine whether the Canadian Wheat Board was complying with existing trade laws because of the lack of information that the CWB provides on its sales contracts.
"U.S. Wheat Associates experts, who are developing wheat markets around the world, are in constant contact with the world's wheat buyers," said Bruce Hamnes, the USWA chairman. "They know what is going on in the marketplace, and while it is often difficult to document, they know that Canadian sales personnel regularly offer wheat at well-below cost for U.S. wheat that meets the same specifications."
He said the information gathered by his organization shows a clear pattern of unjustifiable and systemic anti-competitive activities. "However, the wheat industry is not Interpol. The next level of investigation must come from the U.S. government."
The North Dakota Wheat Commission's Fisher said the petition is not aimed at Canadian farmers.
Studies have shown that Canadian wheat farmers receive 50 to 75 cents per bushel less than U.S. farmers, primarily because of Canada's higher-cost grain-handling system and other hidden costs.
"Our concerns are with the Canadian Wheat Board," said Fisher, "including its federally mandated monopoly, government-guaranteed initial payments, price-pooling system and lack of transparency that makes its price-discounting practices possible.
"The ability of Canadian farmers to endure this stifling situation is none of our business," he said. "But CWB discriminatory practices are robbing U.S. farmers of marketshare and depressing our spring wheat and durum prices. That is our business."