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gram entails excessive regulation, making it costly for Canadian elevator operators to buy US grain through the program. 52

Differences between Canada and the United States dominate NAFTA wheat disputes.53 The crux of the current wheat dispute centers on differ- ent government policies and marketing strategies used by Canada and the United States. After the CUSFTA was implemented in 1989, all wheat trade barriers were eliminated, causing a surge in US imports of Canadian wheat. The US Congress then requested the US International Trade Commission (USITC) to investigate the “conditions of competition” between Canadian and US durum wheat. The USITC determined that the CWB had not sold durum wheat below its acquisition cost. In the terminology of trade remedy law, Canadian durum wheat sales were neither dumped nor subsidized.

Following this decision, the United States requested a binational panel under CUSFTA Chapter 18; the panel’s final decision in 1993 concurred with the USITC determination.54 The binational panel determined there was “no compelling evidence” of CWB dumping but suggested that a bi- lateral working group be established to audit the CWB. Audits of sales dur- ing 1989–92 revealed that only three durum wheat contracts out of 105 were sold below acquisition price, thereby violating the CUSFTA (GAO 1998).

In 1994, yet another USITC investigation in the wheat dispute led to a three-way split decision. The final negotiated settlement, also referenced

52. In a recent USITC survey, major US wheat exporters complained that exports to Cana- dian mill elevators are “difficult, burdensome, and infrequent.” An example of successful bi- lateral efforts to facilitate wheat trade is the US-Canada in-transit program (1999), which uses Canadian railroads to ship US grains through Canada to final destinations in the United States. See Paddock, Destorel, and Short (2000).

53. Mexico is the third largest export destination for both Canadian and US wheat producers (Mexico imports about a third of its wheat needs). Recently, US wheat producers edged ahead of their Canadian competitors in Mexico’s wheat market. In 2001, US wheat exports (3 million bushels) to Mexico were twice those of Canada. Under NAFTA, Canada has no restrictions on imports of Mexican wheat, but the United States imposes a declining schedule of tariff rates on durum wheat. Mexican nondurum wheat exports to the United States are tariff-free, but Mex- ican durum wheat exports face declining US tariffs starting at 0.77 cents per kilogram. Mexico phased out its wheat tariffs on US and Canadian wheat exports from 15 percent in 1994 to zero in 2004. See USDA World Agricultural Supply and Demand Estimates Report on Grains (March 2003) and Canadian Grain Commission (2003). See also NAFTA Provisions, Chapter 7a on Agri- culture, available at www.sice.oas.org/summary/nafta/nafta7a. asp (accessed in May 2003).

54. The CUSFTA binational panel used the definition of “acquisition cost” provided by Ann Veneman, USDA deputy secretary, and Clayton Yeutter, US Trade Representative. Both offi- cials defined “acquisition cost” as the CWB’s initial payment. In 1988, when Veneman and Yeutter testified before the US House Subcommittee on Trade and the Senate Finance Com- mittee, respectively, both officials confirmed that the CWB only made initial payments, and the measure of Canadian “acquisition cost” should not include final payments made after the crop is marketed. See Carter and Loyns (1998); see also the final report of the CUSFTA binational panel decision on “The Interpretation of and Canada’s Compliance with Article 701.3 with Respect to Durum Wheat Sales,” CDA-92-1807-01, February 8, 1993, available at www.nafta-sec-alena.org/app/DocRepository/1/Dispute/english/FTA_Chapter_18/ Canada/cc92010e.pdf (accessed in September 2004).



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