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tiations focus on stronger discipline in the operations of state trading enterprises. 64

In a separate case, the North Dakota Wheat Commission asked the US government to impose countervailing duties (CVDs) and AD duties up to $500 million on Canadian wheat imports.65 While the commission could not provide evidence on actual CWB prices, it argued that Canadian ex- ports of durum and hard red spring wheat are suppressing domestic US wheat prices.66 Moreover, according to US wheat producers, the Cana- dian government and the CWB provide direct export subsidies on Cana- dian wheat ranging from 14.7 to 25.5 percent, plus indirect transportation and financial subsidies. Following the USITC’s preliminary determina- tion of material injury to domestic wheat farmers, the US Department of Commerce imposed preliminary CVD rates at around 4 percent on Cana-

64. Bob Friesen of the Canadian Farmers Association argues that the CWB is a necessary sup- ply management mechanism that stabilizes rural infrastructure by directly subsidizing Cana- dian farmers to the extent of about $130 million per year. Bill Kerr of the University of Saskatchewan argues that if the CWB is eliminated, companies like Cargill, which can easily move grains from North Dakota to Canada, and vice versa, could dominate Canada’s wheat market. Third parties to the WTO wheat dispute, including Australia, the European Union, and China, concur that the US proposal to limit state trading enterprises puts their countries at a competitive disadvantage compared with countries like the United States that historically have relied on private grain firms. Kerr points out that when the United States succeeded in elimi- nating Canadian government transportation subsidies, Canadian agricultural exports into the US market actually increased. In other words, revamping the CWB might lead to greater dom- inance by US marketing firms but more Canadian exports to the United States. Based on Kerr’s presentation at the North American Committee Conference on Agriculture, Washington, March 21, 2003. See also Pruzin, Yerkey, and Menyasz (2004); “Appellate Body Rejects US Appeal of WTO Wheat Board Decision,” Inside US Trade, September 3, 2004; and WTO (2004b).

65. For its part, the North Dakota Wheat Commission filed a Section 301 petition to pressure the USTR to investigate whether the CWB violated a trade agreement. In response to com- plaints from US wheat producers, the US Department of Commerce and US International Trade Commission launched investigations to determine whether Canadian wheat was dumped or subsidized in the US market. See Steven Chase and Barrie McKenna, “US Targets Wheat Board, Files Challenge at WTO over ‘Monopoly,’ ” Toronto Globe and Mail, December 18, 2002; Peter Morton, Tony Seskus, and Ian Jack, “US Moves to Dismantle Wheat Board,” Financial Post, De- cember 18, 2002; “USA: US Commerce Department Delays Canada Wheat Duty Ruling,” Reuters, January 31, 2003; Joel Baglole, “The Economy: US-Canada Trade Dispute Erupts over Sales of Wheat,” Wall Street Journal, October 1, 2002; “North Dakota Files Section 301 to Lure Canada to Negotiating Table,” Inside US Trade, September 15, 2000; and “Canada May Contest Final US Finding on Wheat in NAFTA Panel,” Inside US Trade, May 9, 2003.

66. Pressured by North Dakota farmers led by the North Dakota Wheat Commission, the US government initiated a WTO dispute. A preliminary WTO ruling dismissed the US com- plaint against the CWB but allowed the United States to bring a second panel request if it provided more specific arguments. By August 2005, the US Department of Commerce issued a redetermination that imposed a combined AD and CVDs of 11.4 percent. See “Commerce Launches Cases on Canadian Durum, Hard Spring Wheat,” Inside US Trade, October 25, 2002. See North Dakota Wheat Commission, “Commerce Department Reaffirms Canadian Subsidization of Wheat Sales to US Market,” August 9, 2005.

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NAFTA REVISITED: ACHIEVEMENTS AND CHALLENGES

Institute for International Economics | www.iie.com

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