Farm Progress

Why Trump is playing tariff hardball with Canada

Tariff-rate quotas and grain export restrictions effectively kill sales of U.S. products to our northern neighbors.

Gary Baise 1

June 19, 2018

4 Min Read
Chip Somodevilla/GettyImages

Last week I wrote about Canada’s 270% tariff on certain U.S. dairy products. During the week, many of you saw Prime Minister Justin Trudeau attempting to blame the entire tariff issue on President Trump. He said his job was to stand up for Canadians, as he should. The media, of course, completely bought his story and portrayed our president as being wrong and harming the relationship between Canada and the United States.

As a result, I reviewed a report prepared by our U.S. embassies and the U.S. Commercial Service of the U.S. Department of Commerce. I suspect no one in the media or even in the agriculture media has bothered to examine what an official U.S. document states about Canada’s tariffs and trade barriers. I will list just a few.

On August 14, 2017, a summary was published entitled Canada – Import Tariffs. The Department of Commerce Commercial Service states that Canada has been good in eliminating tariffs on many industrial and agricultural products; however, it points out that  “…tariff-rate quotas (TRQs) remain in place for dairy and poultry.”

A TRQ is a trade policy tool used to protect a domestically-produced commodity or product from competitive imports. The document states what we already know -- dairy products exported to Canada “…are subject to high tariffs (e.g., 245% for cheese, 298% for butter).”

Grain export restrictions

Another Canadian trick involves restrictions on U.S. grain exports. Canada’s tariff policies do not allow U.S. wheat and barley exporters to receive a premium grade to allow the grain products to be used for human use, but can only be used for feed use. Apparently, the Canadian Grain and Seeds Act requires this restriction.

These barriers assigned to U.S. grain products creates price discounting for high quality U.S. grain. Of course, Mr. Trudeau never discussed this problem.

Wine, beer and other spirits face interesting barriers which Mr. Trudeau did not discuss. The Commerce report states, “Most Canadian provinces restrict the sale of wine, beer, and spirits through province-run liquor control boards which are the sole authorized sellers of wine, beer, and spirits in those provinces.” British Columbia, for example, only allows British Columbia wines to be sold on its grocery store shelves. Any imported U.S. wine must be sold within a special store within a grocery store and have a separate cash register. Ontario, another Canadian province, declared in 2016 that wine sales in its grocery stores would be restricted to selling Ontario Vintners Quality Alliance wines. The Commerce Department report said this requirement may allow for discrimination against imported wines.

Fed up?

Even Canadian consumers seem to be fed up with the Canadian government’s tariffs, which drive up the cost for Canadian consumers. Canada has a personal duty exemption when its residents come across the border into the U.S. to purchase products. If a Canadian spends more than 24 hours outside of Canada, he or she may bring back duty free $200 (Canadian) worth of goods. If the Canadian citizen spends more than 48 hours in the U.S. he or she may bring back up to $800 worth of goods. However, if a Canadian citizen is in the U.S. for less than 24 hours, there is no duty exemption for what is purchased.   

On May 11, 2018, The Globe and Mail, a Canadian newspaper, published a story on a Canadian Senate report which blamed the Canadian Finance department for keeping Canada’s tariffs in place. The newspaper report claimed Canada’s tariffs on mainly agricultural products generated at least $3.6 billion (Canadian) in revenues in 2010-2011. The newspaper column also declares “Canadian consumers have been subsidizing the dairy industry since the 1970’s through supply management, a complex system that relies on high tariffs to ensure rich and stable revenues to dairy farmers…”.

The Globe and Mailstates “…there is a 299-per-cent tariff on butter, a 246-per-cent tariff on cheese, and a 241-per-cent tariff on milk.” These tariffs apply once a TRQ is met.

Canadian consumers complain bitterly about the prices they must pay in their home country compared to what they pay when traveling in the United States. By some estimates, over 3.5 million Canadians drive into U.S. border states every month. It is estimated by The Globe and Mail Canadians make more than 40 million trips into the U.S. annually.  An economist for a Canadian consulting firm estimates that Canadian cross border shopping takes more than $20 billion from the Canadian economy because of Canada’s high tariffs.

Again, as I stated last week, our president is attempting to level the playing field. It would be refreshing to see some of our media stand up for the facts and the president.

The opinions of the author are not necessarily those of Farm Futures or Farm Progress.

About the Author(s)

Gary Baise 1

Environmental Lawyer/Blogger

Gary H. Baise is an Illinois farmer and trial attorney at the law firm Olsson Frank Weeda Terman Matz PC specializing in agricultural and environmental trial issues in state and federal courts. He also serves as outside General Counsel for the U.S. Grains Council, Agricultural Retailers Association, National Sorghum Producers and counsel to the American Soybean Association.

 

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