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Trade conflicts remain along 49th parallel

In a light-hearted debate about trade issues between Canada and the United States, two economists pointed out what they termed, the "silliness" between the two countries at the North American Agricultural Finance Conference in Winnipeg, Manitoba, Canada.

So, which country has the advantages when it comes to agricultural trade? Was it Canada or the United States that first began the squabbles over the Canadian Wheat Board, livestock exports, producer subsidies, or transportation subsidies? The answer to those questions, and more, depend on whom you ask.

Larry Martin, chief executive officer of the George Morris Center in Guelph, Ontario, Canada, is of the belief that producer subsidy equivalents are much higher in the United States than in Canada. "There is an attitude in the United States that if you are exporting to the United States you must be subsidized, because you certainly couldn't compete with the U.S.," he says.

Barry Flinchbaugh, professor and Extension state leader of agricultural economics at Kansas State University in Manhattan, Kan., disagrees saying, "The United States doesn't hold a candle to Canada when you look at producer subsidy equivalents, overall." Flinchbaugh does agree with Martin that, in general, corn subsidies in the United States may be higher than those paid to Canadian farmers.

As a professor, Flinchbaugh says, he would give the 1996 Freedom to Farm program an "A" grade. That doesn't mean, he says, that an improvement in the current farm program isn't needed during times of low commodity prices. "I would like to take a look at farm income each October and set an income standard. Then, I want the U.S. government to write a check to every farmer to make up the difference between the two levels of income. That's how we'd get competitive with other countries."

While Flinchbaugh and Martin disagree on many agricultural trade issues, they are in agreement that the United States' dispute over Canadian transportation subsidies was not well thought out in advance.

Martin says the forced elimination of the Canadian transportation subsidy is the best thing that has ever happened to western Canadian agriculture. "This is the best case of Canadian roulette I've ever seen. It transformed western Canada into a growing engine of value-added commodities, and it increased exports of grain, livestock and meat to the United States."

"I'm in complete agreement," Flinchbaugh says. "The U.S. dispute was downright stupid. What amazes me is how long it took Canada to figure that out. I want you (Canada) to put that transportation subsidy back on and stop using our subsidies to transport your products down the Mississippi River."

Another trade dispute between the two countries centers around the Canadian Wheat Board. The United States wheat industry contends that the Canadian Wheat Board engages in unfair trading practices and is trying to put an end to the government-supported board through ongoing World Trade Organization negotiations.

According to Martin, the United States has filed eight complaints against the Canadian Wheat Board in less than 10 years. "These complaints have yielded nothing, except proving that Canada hasn't done anything wrong," he says.

Martin calls the United States' concerns about the Canadian Wheat Board, "a reaction of fear and envy. If the U.S. ever achieves its purpose and gets rid of the Canadian Wheat Board, has the United States thought about what would replace it? What you would have instead of the Canadian Wheat Board is a much more competitive entity," he says.

"It's clearly a monopoly," Flinchbaugh counters. "You (Canada) are a state trader and we may convince you to change that. However, I know what will replace the Canadian Wheat Board will be farmers and agribusinesses that are just as skilled at marketing as those in the United States. That's competition. I welcome competition when necessary, but not when not necessary."

Flinchbaugh adds, "We both lose when we engage in this kind of folly."

Competition for agricultural exports may soon heat up in other areas, according to Flinchbaugh and Martin. "Overall, we've both been gaining export trade, but who is gaining the most? Obviously, the answer is Canada," Flinchbaugh says.

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