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Competition for Third-Country Markets

The United States remains the world’s leading wheat exporter, with for- eign sales averaging about $3.5 billion, representing about 24 percent of total world exports during 1998–2002.36 Over the same period, Canada was also a major wheat exporter, with exports averaging $2.4 billion, ac- counting for about 16 percent of total world exports. Canada is a particu- larly keen competitor of the United States in wheat sales to developing countries. Anecdotes suggest the strength of Canadian competition. Be- tween 1991 and 1996, for example, Moroccan imports of US wheat de- clined from over 60 percent of total Moroccan wheat imports to less than 20 percent; meanwhile, Moroccan imports of Canadian wheat increased from close to zero to about 20 percent of the market.37 Faced with such episodes, the US wheat industry, led by the North Dakota Wheat Com- mission, has raised alarms over declining US wheat exports to eight key developing-country markets: Algeria, Brazil, Colombia, Guatemala, Peru, Philippines, South Africa, and Venezuela (table 5.7).

Wheat Industry Concerns about Pricing

The CWB handles about 18 percent of the world wheat and barley trade.38 The United States claims that CWB export pricing practices lack trans- parency.39 Of course the same can be said of the pricing practices of large private grain companies. Both private companies and state trading enter- prises, like the CWB, deliberately keep their transaction prices a secret to facilitate price discrimination between customers. The key question is whether state trading enterprises should be held to a higher standard than large private grain traders. If the answer is “yes,” then the United States has grounds to complain. If the answer is “no,” then the complaint loses force. The main rationale for “yes” is that state trading enterprises imple- ment public policy while also operating as commercial firms. The inherent dilemma is that the government policy component cannot be easily sepa-

36. These data are based on USDA Foreign Agricultural Service (FATUS) database, 2004; and UN Food and Agriculture Organization FAOSTAT database, 2004.

37. See “North Dakota Files Section 301 to Lure Canada to Negotiating Table,” Inside US Trade, September 15, 2000.

38. Data are based on Statistics Canada database, www.statcan.ca(accessed in May 2004); conversation with Sergio Novelli, market analyst at Agriculture and Agri-Food Canada, April 2003; and Edward Alden and Ken Warn, “US Seeks to Dismantle Canada Wheat Sales,” Financial Times, December 18, 2002.

39. The CWB “posted” wheat prices are based on export deals that have already been ne- gotiated. The CWB uses the Minneapolis Grain Exchange for guidance to establish its own prices. See Gardner (2000). See also “Wheat Industry Letter,” Inside US Trade, March 30, 2001.

AGRICULTURE

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