The U.S. vs. Canada Corn Dispute Research Paper

Introduction

Robust trade is the lifeline for any nation’s economy. In this era of globalization, aspects of national trade and economy are intricately connected with the trade practices of other countries in the world. To ensure that all signatory nations have equal opportunities to prosper economically and trade their goods and produce fairly, the World Trade Organization has through its statutory body, promulgated trade dispute mechanisms. Despite a promulgated arbitration timeline, resolution of cases may extend anything from 15 months to years. The US-Canada Corn dispute is one such case for which the Canadian government has approached the WTO to adjudicate. This case is fairly recent, initiated by Canada on 8 January 2007 and has been accepted by the WTO as Dispute Settlement Case 357 (DS 357). While the case has still not reached the adjudicator’s panel, it has great geostrategic importance in addition to the bilateral aspects. This essay aims to explain the dispute, reactions of the involved parties including outside agencies, its possible ramifications and the possible end results.

The Genesis

In 2005, The Canadian Corn Producers(CCP) association had complained to the Canadian government on the unfair trade practices being followed by the American government in providing huge subsidies to their farmers. They wanted the Canadian government to invoke anti-dumping laws and in their opening remarks of a presentation to the Canadian House of Commons Standing Committee on Agriculture and Agri-food stated that:

“ Trade injury caused by US subsidies has meant that Canadian corn producers now face the difficult choice of continuing to produce corn at less than the cost of production for years on end, or not producing corn at all. Canadian corn producers cannot continue under the current situation. This will be the last year for many of our producers if no relief from the harmful effects of US subsidies and dumping is obtained”(CCP, 3).

Subsequent to that complaint, a case of Antidumping (AD) and Countervailing (CV) duty was filed by the CCP in Canada’s International Trade Tribunal (CITT) whose preliminary findings indicated possibilities of dumping by the US. Using this ‘preliminary’ assessment, The Canadian Border Services Agency (CBSA) ordered a levy of $1.65 per bushel as tariff on US imported corn. This arbitrary action resulted in a US request for WTO dispute settlement on 17 March 2006. Faced with a legally difficult situation, the CITT chose to give a final verdict on April 18, 2006, in favour of the United States. “However, Canadian corn producers continued to press their concerns with the Canadian government about perceived unfair subsidization of US Corn” (Schnepf, 2). Whether the perceptions were real or not, the reality of the uncompetitive nature of the Canadian corn produce was evident. Canada’s average annual production of 8.7 million metric tons (MMT) since 2000, is minuscule in comparison to the U.S. figures of nearly 262 MMT. Canadian import of US corn had risen to 2.8 MMT per year and was significantly cheaper. “Corn farmers argued that American subsidies depressed Canadian corn prices by about 14 percent” (New York Times, 2007) leading to serious financial losses and closure of some corn producers. The issue soon became a domestic political battleground with political parties, media and NGOs raising the spectre of ‘economic imperialism’ by the United States’.

The WTO Update on the Dispute

Careful study of the US-Canada corn dispute case from the WTO official website reveals some interesting developments. The actual title of the dispute is “Subsidies and Other Domestic Support for Corn and Other Agricultural Products”. Thus it challenges a whole range of products not just corn. After Canada requested for consultations on 8 January 2007, Australia put in its request on 18 January 2007 to join the consultations. This was followed by Argentina, Brazil, the European Communities, Guatemala, Nicaragua and Thailand requests. On 22 January 2007, Uruguay requested to join the consultations. Thereafter, the US informed the Dispute Settlement Body (DSB) that “they had accepted the requests of Argentina, Australia, Brazil, the European Communities, Guatemala, Nicaragua, Thailand and Uruguay to join the consultations” (WTO, 2008). With domestic support for the issue growing and the presence of other countries who felt similarly disadvantaged by American ‘protectionist measures’, Canada on 7 June 2007 requested for the establishment of a panel vide WTO document WT/DS357/11 dated 8 June 2007, (WTO, 2008), which was deferred by the DSB. Brazil too joined in on 11 July 2007 requesting for consultations with the United States on “two distinct categories of US agricultural measures:

• domestic support for agricultural products,
• export credit guarantees for agricultural products” (WTO, 2008).

This led to yet another request for establishment of the panel by both Canada and Brazil resulting in a DSB panel being set up in 2007. Sensing that this particular case had wider geopolitical ramifications, Argentina, Australia, Chile, China, the European Communities, India, Japan, Mexico, New Zealand, Nicaragua, South Africa, Chinese Taipei, Turkey, Uruguay and Thailand reserved their third-party rights to join the consultations. As in 2008, the WTO update on the case shows that though the panel has been established, the DSB report has not yet been circulated.

This delay requires examination because as per the WTO dispute settlement guidelines after a panel is formed, the final panel report is supposed to be tabled to the concerned parties within six months, thereafter three weeks for the panel to be deliberated by the WTO members and then one month for the DSB to adopt the report. If either party goes in for an appeal, a period of 60 to 90 days is allowed after which the DSB can take a maximum of one month to consider the appeal and then deliver the final decision. In other words, going by the DSB timeline, this dispute should be resolved by November 2008. However, since the first step after establishment of the panel, i.e. tabling the report has not yet been done; this case like other WTO cases is heading for a long drawn out settlement process. The credibility of the WTO dispute settlement process is also in question as Sanford reports that “Between 2002 and 2005, the level of dispute settlement activity dropped from around 35 cases a year to around 10” (3). Therefore, there are considerable stakes in seeing this case through its logical end. The ‘foot dragging’ on this issue maybe because the US-Canada corn dispute has many domestic and global geopolitical implications.

Implications for Canada

The early processing and a decision in favour of Canada are vital for Canadian agricultural sector. While corn has been an emotive issue, the dispute covers the entire range of agri- products and hence the whole sector is affected by non-resolution. The Canadian corn producers association is an influential lobby in Canada and their cause is finding resonance with NGOs, peace activists and social interest groups. A table of NGO participation prepared by Wolfe on the US-Canada corn dispute shows the presence of 9 NGO from the Agri-group and 5 from the non-Agri group (20). Canadian corn producers association even used the services of professional lobbyist, McMillan Binch Mendelsohn to influence their case with the Canadian government (Wolfe, 23). Thus, disputes such as these serve to increase the power of lobbies, NGOs and special interest groups in Canada, a trend mirroring the situation in Washington D.C. On the bilateral side, the US may decide that this dispute to be a ‘hostile act’ warranting retaliatory measures on other aspects of US-Canada trade.

Implications for the US

For the United States, the implications of a negative verdict in this dispute bring in far greater domestic ramifications and unravelling of many domestic policies. Schnepf very accurately puts it that “If successfully litigated, this case could affect all U.S. agricultural policy since the charges against the U.S. export credit guarantee and direct payment programs extend beyond corn to all major program crops”(2). The US government would be forced to take the issue with the congress and the entire farm bill would then have to be reviewed. Such a precipitous action would surely affect thousands of US citizens involved in the agricultural sector. It would involve realignment and rationalization of agricultural subsidies, a key demand by developing nations who have a great stake in seeing this particular dispute end favourably to Canada’s advantage. Any major rationalization of US farm subsidies would be deeply unpopular across the political spectrum with lobbies, special interest groups and NGOs pitching in to make the situation difficult. Thus from the US point of view, the best way forward on the ‘Corn’ dispute is a bilateral resolution outside the ambit of WTO.

Global Implications

The global implications of the US – Canada corn dispute are indeed dramatic. The entry of China into the WTO prompted the US to undertake a congressional hearing to study the impact, which is encapsulated by the following statement that “China’s rapid growth and dramatic technologic trajectory pose challenges to the United States. Like any economic relationship mediated through the market, the relationship has elements of competition and rivalry, as well as cooperation” (Naughton, 22). As far back as 2005, the G-20 developing countries have been striving to ensure that developed countries play fairly in the global economic markets. The various failures of the Doha round of talks have been attributed to this mismatch in policies. At the Cancun summit, “ the G-20 even managed to demand successfully that the EU and the United States go back to the drawing board and come back with improved offers on agricultural subsidies and trade barriers” (Bhagwati, 2005). Thus, any dispute between developed countries is earnestly sought out by the developing countries to leverage their case for better deal for their products and produce. Castle and Landler (2008) commenting on the latest development of the Doha round accurately summed up the sentiment, “World trade talks collapsed here on Tuesday after seven years of on-again, off-again negotiations, in the latest sign of India’s and China’s growing might on the world stage and the decreasing ability of the United States to impose its will globally” (1). Thus the US-Canada corn dispute has the potential of further unravelling the complex dynamics of the global geopolitical structure. The dispute may provide China the leverage to use its trade surplus with the US for strategic purposes as also ensure a precedence for lowering subsidies by the developed world thus firmly shifting the balance of trade power firmly from the West to the East.

Works Cited

Bhagwati, Jagdish. December 2005. “From Seattle to Hong Kong”. Foreign Affairs online – WTO Special Edition. 2008. Web.

Canadian Corn Producers. 2005. “Corn Trade with US”. Web.

Castle, Stephen & Landler Mark. 2008. “Protecting Livelihoods”. BBC news online website. Web.

Naughton, Barry. 2004. “China’s Economic Growth and Technology Development: International Linkages and Implications for the U.S.” Statement recorded in the Hearing before the US- China Economic and Security Review Commission of the One Hundred Eighth Congress, Second session 12-13. 2008. Web.

New York Times online website. 2007. “Canada Seeks W.T.O. Panel to Settle Dispute”. Web.

Sanford, Lain. 2007. “ The Importance of Transparency in WTO Dispute Settlement”. Web.

Schnepf, Randy. 2007. “U.S.-Canada WTO Corn Trade Dispute”. Web.

Wolfe, Robert. 2007. “ Harvesting Public Policy? Private Influences on Agricultural Trade Policy in Canada”. Web.

WTO official Website. 2008. “Dispute Settlement: Dispute DS 357; United States — Subsidies and Other Domestic Support for Corn and Other Agricultural Products”. Web.