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Government of Canada Opposes Further Harassment of Canadian Wheat Board.

Business Editors

OTTAWA--(BUSINESS WIRE)--Sept. 8, 2000

The Government of Canada is very disappointed by the announcement of yet another American trade action against Canadian farmers.

The North Dakota Wheat Commission announced that it intends next week to petition the U.S. government to initiate an investigation under U.S. Trade Act Section 301 against Canadian trade practices and the Canadian Wheat Board (CWB) in particular.

The Commission is seeking to have the U.S. government impose unwarranted barriers to Canada's market access to the U.S. Canada is making it clear it will hold the U.S. to its obligations under the WTO and NAFTA.

Canadian Wheat Board Minister Ralph Goodale, International Trade Minister Pierre Pettigrew and Agriculture and Agri-Food Minister Lyle Vanclief affirmed that the Canadian government will aggressively defend Canada's trade agreement rights. They condemned the plan calling it a counter-productive attempt to interfere with the flow of market-driven trade between Canada and the U.S.

"This opportunistic and groundless call for a trade action is clearly an attempt by the Commission to sling mud at the CWB," said Mr. Goodale. "It will fail, as eight others have failed in the past, because the CWB is not attempting to capture more market share by undercutting prices or dumping grain in the international market."

"We are disappointed by the North Dakota Wheat Commission's attempts to discredit a trading agency that has been proven time and again to be operating above board and within international trading rules," said Minister Pettigrew. In a recent WTO Panel proceeding, the U.S. affirmed it would not act under Section 301 in a way that would be inconsistent with its WTO obligations."

"It is really hard to believe that some in North Dakota cannot see that trade actions, like those called for by the Commission, don't help anyone and, in fact, cause more harm than good by turning attention away from the real causes for low prices," said Mr. Vanclief. "We should be working together within the WTO negotiations on agriculture to solve the fundamental market access and subsidy problems, rather than blaming each other for current low prices."

Once a petition has been filed, the United States Trade Representative (USTR) has 45 days to decide whether to launch an investigation.

Section 301 of the Trade Act of 1974 provides authority for the U.S. Trade Representative (USTR) to take action against foreign trade practices alleged to be 1) inconsistent with a trade agreement with the U.S. or 2) an unjustifiable burden or restriction on U.S. commerce. A Section 301 investigation may be initiated after receipt of a petition by an interested person or may be self-initiated by the USTR. Once an investigation is initiated, the USTR requests consultations with the foreign government involved.

Eight separate U.S. investigations and audits since 1990 have confirmed that the CWB operates in compliance with international trade rules.

BACKGROUNDER

List of Investigations of the Canadian Wheat Board

(1) A U.S. Section 332 International Trade Commission (ITC) investigation entitled Durum Wheat: Conditions of Competition Between the U.S. and Canadian Industries (June,1990). Regarding market prices, the ITC declared that "... it is not apparent ... that prices paid for Canadian durum are significantly different than prices paid for U.S. durum." Also, with respect to freight rates, the ITC stated that "the subsidized portion of the Canadian rates, while reflecting a decreased cost to the producer shipping the grain, does not appear to have a significant effect on the delivered price of Canadian durum in the United States." It should be noted that subsidized freight rates were eliminated in 1995.

(2) A General Accounting Office (GAO) Report on marketing boards (June, 1992). The report titled Canada and Australia Rely Heavily on Wheat Boards to Market Grain failed to find evidence of unfair trade practices as alleged by some U.S. trade officials.

(3) A dispute settlement panel with respect to Free Trade Agreement (FTA) Article 701.3 and durum wheat sales (February, 1993) agreed with Canada's interpretation of the Article regarding the definition of "acquisition price" and the costs to be included in determining this price. The Panel concluded that "... the acquisition price of the goods referred to in Article 701.3 includes only the initial payment; or, in the event of an upward adjustment, the acquisition price for goods sold after the adjustment is the initial payment plus such adjustment."

(4) Pursuant to the recommendations of the Dispute Settlement Panel in (3), an audit of CWB durum wheat sales to the U.S. cleared the CWB of wrongdoing (January, 1994). The first audit covering the period January, 1989 to July 31, 1992 found that, except for three contracts in violation during the FTA transition period (January - July 1989), the CWB has complied in all material respects with Article 701.3 of the FTA.

(5) An ITC Section 22 investigation was held to determine whether imports of Canadian wheat, wheat flour and semolina undermined the operation of the U.S. farm program for wheat. As well, the U.S. decided to initiate action under General Agreement on Tariffs and Trade (GATT) Article XXVIII (July, 1994). This GATT action, after a 90-day consultation period, would have allowed the U.S. to impose a tariff rate quota for wheat and barley imports. Discussions in 1994 lead to the Memorandum of Understanding on Wheat. The report of the Joint Commission on Grains (September, 1995) included recommendations to facilitate trade and assist governments in resolving existing problems in the grains sector.

(6) A GAO Report on the Potential Ability of Agricultural State Trading Enterprises to Distort Trade (June, 1996) reviewed the Canadian Wheat Board, the Australian Wheat Board and the New Zealand Dairy Board. The study does not allege the CWB or Canada violates international trade rules. The GAO also recognized that the CWB is unlikely to cross-subsidize wheat export sales from domestic sales due to the relatively small domestic market.

(7) A GAO Report on U.S. Agricultural Trade, Canadian Wheat Issues (October, 1998) found no evidence that Canada or the CWB violated any international agreement. It noted the CWB operates like other private sector grain companies that also do not reveal their sales prices and that by revealing contractual data, the CWB would violate its confidentiality agreement with customers.

(8) In December, 1998, a petition by a U.S. lobby group, R-CALF, regarding Canadian beef/cattle exports to the U.S. included allegations the CWB pricing policies for feed barley constituted a subsidy to Canadian cattle producers. The U.S. Department of Commerce conducted an exhaustive investigation and determined that the allegation was not founded.
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