Little to trade
Assessing the last round of world trade negotiations is no easy task. For the most part, rules established in 1993 have been either forgotten, fudged, flouted or followed with religious fervour.Five years after the GATT was struck in Geneva, the merits of the deal are still open for debate. But with a new round of trade talks scheduled to get underway later this year, trade negotiators are trying to figure out whether they'll be building on the success of the last round, or trying to fix a failure.
Professor Stefan Tangermann, a European Union trade specialist with the Institute of Agricultural Economics at Germany's University of Göttingen, says despite its failings the Uruguay Round was a success. While some countries have been more anxious than others to cut subsidies, many countries resorted to political grandstanding and frivolous trade actions to protect their domestic markets. Sound like the same old game? Not according to Tangermann.
In the European Union's case, Tangermann points to the impact world trade rules are having on the EU's Common Agricultural Policy reform. He says CAP reforms, also known as the Agenda 2000 proposals, are being driven by the World Trade Organization. Reforms include cutting price guarantees to the dairy sector by 15 per cent, slashing beef prices by 30 per cent and reducing price guarantees to the grain sector by 20 per cent.
This course was determined "by what EU agricultural policies can and cannot do under the EU's WTO commitments," he says. If the reforms are adopted next month as expected, the EU will have a strong negotiating position in the next round. If they fail, the EU will again draw on the community's heft to clog up the negotiation process.
Tangermann, speaking to a trade conference at the University of Guelph last month, said much has been made of the Uruguay Round's inability to entrench more liberalized farm trade. But if trade rules can convince a trading block such as the EU to so radically overhaul farm policy rich in subsidies, "then the WTO agreement on agriculture has achieved a lot."
On this side of the pond, Canadian farmers who've watched helplessly over the last five years as the federal government dismantled the Crow Rate, cut the dairy subsidy and pulled wads of cash out of safety net programs, are wondering why their government was in such a hurry to do what the Europeans are only now contemplating.
According to figures released by the Canadian Federation of Agriculture, in 1995, the last year for which figures are available, Canada's total Amber support - trade distorting programs subject to reduction such as NISA, crop insurance and the dairy subsidy - was only $777 million or 15 per cent of its WTO spending limit. The U.S. had spent 27 per cent of the allowable limit; the EU, 60 per cent; and Japan, a whopping 73 per cent.
Canada did not make use of any allowable Blue Box spending, which pays direct support to farmers required to limit production: The U.S. offered support equal to 30 per cent of its amber limit, while the EU spent more than 26 per cent.
The federal government, of course, was busy squirreling away the money it saved on farm programs to eliminate the deficit.
The feds will spend the next six months trying to determine their negotiating stance for the next round. With import-sensitive markets and export interests to represent, the so-called balanced position - trying to safeguard supply management and gain market access for exporters- is the only option, politically.
But one wonders what Canadian government negotiators can realistically achieve when they sit down at the bargaining table this time around. "What the Europeans can live with, and what the Americans want" usually sets the boundary for the debate, says OMAFRA trade policy analyst George McCaw.
Canada's negotiating chips, GATT's Article XI and subsidies that characterized Canadian agriculture in the pre-Uruguay round era, have all been cashed in.
The federal government, in its haste to reduce spending, has not only left farmers vulnerable in trying economic times; it must now resort to bluffing its way through a high stakes trade game. - Bernard Tobin
© copyright 1999 Agricultural Publishing Company Limited.
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Big 'if' in income relief
There still seemed to be more questions than answers as forms for the Ontario whole farm relief program began to appear in producers' mailboxes earlier this month."The whole thing is an if," says accountant Howard Famme CA, Famme and Co., who is in the midst of processing "hundreds of applications" from producers who deal with the company's offices in Stratford, St. Marys and London. Famme says bureaucrats scurrying to get the program in place simply didn't have time to cover all bases.
Some categories on the forms "are open to some fairly aggressive questioning," Famme points out. For example, he describes item No. 5 on the form that deals with changes in business structure "as fairly crucial."
He says government officials have conceded that they will consider the impact of such changes on gross margins. Another weakness is a requirement that opening inventory at the beginning of the year be valued at the same level as inventory on hand at year-end when pork prices were at an all-time low.
When contacted by Farm & Country, Famme was filling out a form for an operation that increased from 1,200 finishing pigs to 2,000 in 1996. According to the formula, that client won't qualify, Famme says: "Their gross margin as they were building it up for 1995-1995 was low, so then they don't have a high based gross margin to start from."
On the other hand, some of his clients are qualifying for the maximum amounts, which in the case of a corporation is $200,000 and an individual $40,000.
Provincial monies will represent 40 per cent of the total expected, if the joint federal provincial program works as hoped, Famme concludes. "The people who set up the program have done their best, but they need to make some adjustments," warns John Nyenhuis, president of the Perth County Pork Producers Association.
Nyenhuis concedes he still hasn't seen enough examples to be able to comment fully, but he maintains the program favours "the ones who haven't changed anything in a few years." When the program was launched, Perth county directors had an accountant sample four typical operations to see which would qualify.
Only one did. It was a long-established, high-equity operation. Nyenhuis is urging producers to fill out the forms whether or not they appear to qualify and then to make their MPPs aware of program deficiencies. Producer John Donkers, Monkton, is waiting for what he expects will be a sizable cheque. Donkers, who should be one of the first to see any money, says his application forms arrived in the mail a few days after his accountant Harry Denhaan, Seaforth, had sent in a completed one for him from a supply he had on hand.
Three years ago, Donkers, who has been farming since 1988, added a new 1,100-head finishing barn. Last year he replaced his existing breeding gestation barn.
Donkers seems to be an exception to the category of improving farmer who Nyenhuis fears won't collect anything. He also appears to shatter another perception making the rounds, that land-based farmers won't collect anything.
"I grow a fair chunk of my feed," notes Donkers. "I have a silo full of corn, which is probably the biggest reason I'm still farming." Donkers concludes a producer's accountant has more to do with whether he qualifies than anything else. - Robert Irwin
© copyright 1999 Agricultural Publishing Company Limited.
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Changes would help farmers
Covering negative margins would not break the bankroll of federal and provincial farm income aid programs, says Ontario Federation of Agriculture vice-president Ken Kelly.Kelly told an OFA board of directors meeting last month that estimates from several sources indicate it would cost between $75 and $100 million to cover negative margins, or income losses, across Canada.
The Ontario Whole Farm Relief Program will assist farmers who have seen their 1998 gross margins slip below 70 per cent of the previous three-year average, but not below zero. Details of the federal share of the expected $1.5-billion aid package will be finalized this month.
Eligibility criteria for the federal portion is expected to be the same as the provincial program.
"With a disaster, we get negative margins, and if a disaster program doesn't cover negative margins, we have a problem," Kelly said. With the province expected to cut the first relief cheques this month, the OFA is hoping its lobbying efforts will be reflected in final provincial and federal payments.
OFA maintains that aid should have no link to Net Income Stabilization Accounts. "NISA is a program developed to cover those year-to-year ups and downs," Kelly said. Farmers who have invested in NISA "should have the ability to prop up from the 70-per cent gross margin level to what they need to pay the bills."
The OFA would also like to see labour costs, including wages paid to family members, excluded from operating expense calculations and ensure that non-farm interests are ineligible for assistance. The farm lobby wants to "make sure that the money gets to families," said Kelly.
At the OFA meeting, several directors argued that governments should be covering a higher percentage of gross margins. But OFA president Ed Segsworth told directors that governments couldn't increase the coverage level and keep the program "GATT green" to avoid countervail action. - Bernard Tobin
© copyright 1999 Agricultural Publishing Company Limited.
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Quality settlement boosts prices
Pork prices nudged up slightly on the last Thursday in January, as word reached futures traders in the Chicago pits that workers at Toronto's Quality Meat Packers Ltd., would vote the following day on a return to work. No one would suggest that the plant's reopening the first week of February had a big impact on prices.Still, the return to active duty of Quality's 25,000 hogs per week facility, with its throughput of about one per cent of the North American hog run, was just what the doctor ordered for Ontario pork producers, who "have suffered more than any other in North America," says Ontario Pork chairman Will Nap.
Nap says it will be a few weeks before the pork board will know exactly how much the strike cost. Insiders estimate Quality's demand for product means at least 40 cents per hundredweight extra for North American pork producers.
Ontario benefits most from the return to work: Hogs from the province no longer have to be shipped to plants as far away as Alberta and New Brunswick.
Workers voted 68 per cent in favour of the company's latest offer, ending a strike that lasted eight weeks. "We're just glad it's over. We have a lot of rebuilding to do, with employees, customers and suppliers," explained Don Collis, Quality vice-president and general manager, following the ballot count.
The final vote was 447 in favour of returning to work, 205 against and one spoiled ballot. About 100 eligible workers abstained from voting. During the strike, the U.S. National Pork Producers Council repeatedly warned pork board officials to stop the extra shipments to the U.S. The Canadian Pork Council issued a plea as well.
Quality workers had rejected Jan. 12 an enhanced offer by the company. At that time, the company had increased its original contract offer by $3.6 million, $2.5 million of which would have been paid to employees in the first year of the contract.
The offer included a freeze of wages at the higher level for 12 weeks, a $1,000 bonus for current employees working through December 3, 1999, a reduction in the hours worked before overtime would be paid, a $150 bonus for low absentee time and preferred status over part-time employees for overtime. The offer that was accepted set the freeze at 10 weeks. The $1,000 bonus due in December will be brought forward to June 1, 1999.
Workers have agreed to accept wage roll-backs demanded by the company when the strike began. Duration of the new agreement is just under six years. - Robert Irwin
© copyright 1999 Agricultural Publishing Company Limited.
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Regulations lagging science
When it comes to the burgeoning field of biotechnology, world regulators are playing catch-up as science streaks ahead, says Canadian grain guru Doug Mutch."Science, production and trade have gotten ahead of the agreements," Mutch, chief lobbyist for Canadian grain shippers, told an OMAFRA meeting in Guelph mid-January.
Charles Riemenschneider, North American director for the Food and Agriculture Organization (FAO) of the United Nations, said global transgenic acreage has rocketed from 1.7 million hectaresin 1996 to 27.8 million in 1998, with soybeans comprising one-half, and corn one-third. By 1998, almost half of Canadian canola acreage was biotech-derived. Cornell University projects that up to 25 countries will be planting commercial transgenic crops by next year, Riemenschneider said.
Countries, meanwhile, scramble to cobble together a coherent policy on biotechnology. Riemenschneider said the World Trade Organization, scheduled to start a new round this year, does not list biotechnology as a "defined risk" under the Sanitary and Phytosanitary agreement.
WTO instead relies on FAO bodies such as the food standard setting Codex Alimentarius, which has already found that in general biotech products are nutritionally similar to conventional products and don't need further labels. WTO does, however, allow countries to impose more stringent standards "based on sound scientific evidence," Riemenschneider said. The WTO's Sanitary and Phytosanitary agreement "hasn't been tailored to fit these realities," said Mutch, executive director of the Canada Grains Council.
Mutch despairs of the world ever reaching consensus on a so-called "biosafety protocol" - safe shipping standards for "LMOs," Living Modified Organisms, or GMOs that can propagate, such as seed. As part of the 171-country "Biosafety Working Group," Mutch said the "waters are very much being muddied," and cited "a discomfort level with these products in some societies."
After five meetings, with a final one scheduled for Cartagena, Columbia, this month, "to date, I've seen no negotiations," said Mutch. Definitions that are reached are riddled with parentheses. At the 11th hour of one eight-day meeting the Ethiopians put an entire draft definition in brackets. "If we decide we have to analyze everything, we're going to have total gridlock." The U.S., Canada's largest trading partner, with more than 20 million hectares of transgenic crops, isn't even expected to sign the final agreement, said Mutch.
Still, Canada's 25-million-tonne grain exports hang in the balance, he said. If commodities are included as LMOs, Canada could need approval to export grain every time a new variety hit the market. "The potential is there to basically shut down the trade," said Mutch. - John Muggeridge
© copyright 1999 Agricultural Publishing Company Limited.
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'99 CFFO executive
Three new directors and one incumbent will join president Bob Bedggood on the Christian Farmers Federation of Ontario executive board. Sid Ryzebol, an Orangeville beef and cash crop farmer, is the returnee.Newly elected are Jenny Denhartog, a broiler producer from Arthur; John Werkema, a Woodstock dairyman; and Peter VanderZaag, an Alliston potato grower and breeder. - Staff
© copyright 1999 Agricultural Publishing Company Limited.
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