Understanding
Canada’s Notifications to the WTO on Domestic Support
Are
the federal and provincial governments doing enough about the crisis in
agriculture? The time has come for farmers to educate themselves on how
their government is handling and reporting domestic support payments at
home and at the WTO. The issues are complicated but farmers have to
understand the basics of how domestic support calculations are made. The
following article will explain as simply as possible where federal and
provincial transfers to agriculture actually end up. Canadian farmers will
then be able to see for themselves whether or not the support given to
agriculture is adequate. The federal government is required to give yearly
notification to the WTO on all domestic support given to Canadian farmers.
They are far behind in their commitments and as of Feb 1st, 2005 the
notifications have only been completed to 1999.
The
Uruguay Round of international trade negotiations of the General Agreement
on Tariffs and Trade (GATT) was completed in 1994 and implemented in 1995.
The Monetary Measurement of the amount of trade distorting support that
each country is allowed is called the Aggregate Measurement of Support (AMS).
Canada’s commitment level was taken on the basis of a Base Total AMS
using the base period of 1986-1988 when Canada’s monetary commitment to
agriculture was the highest. The negotiations stated that a developed
country member was committed to reducing its total AMS 20% over a six-year
period and then the commitment would remain at 80% of the base total AMS
after that. This worked out for Canada to be $5.1 billion dollars in 1995
and then after allowing for 6 years of gradual decline, to hold steady at
$4.3 billion. The $4.3 billion dollars is our ceiling as of 2004. No
country can exceed its commitment level.
Canada’s
calculations of Current Total AMS for 1999 is as follows:
|
($
Millions) |
| (A) Exempt
“Green Box” AMS |
$1,748.9
not included |
| (B) Product
Specific AMS |
$1,108.2 |
| (C) Less:
Product-Specific AMS |
|
| support
excluded as de minimis |
$169.1
de minimis |
| (D) Non-product-specific
AMS |
|
| (excluded
if de minimis) |
$932.6
de minimis |
| Current
Total AMS =(B-C) |
$939.1 |
Since
our commitment level in1999 was $4.3 billion, this left $3.5 billion
dollars in unused allowable support for agriculture. Canada
only used 21% of its available support level to assist its farmers. The
following shows the years from 1995-1999.
|
($
Millions)
CHART
#12 |
| 1995
Current Total AMS |
$777
15% of available support level of $5,197 |
| 1996
Current Total AMS |
$618
12% of available support level of $5,017 |
| 1997
Current Total AMS |
$522
11% of available support level of $4,838 |
| 1998
Current Total AMS |
$789
17% of available support level of $4,659 |
| 1999
Current Total AMS |
$939
21% of available support level of $4,480 |
Is
it any wonder why agriculture is in the state that it is. Both the federal
and provincial governments have basically deserted our farmers in all
areas except supply-management and the ASRA program.
Here
is the breakdown of the Notifications:
(A)
Exempt
“green box” support
is calculated but not included in current total AMS. Research, pest
and disease control, training services, extension, inspection, marketing,
and promotional services, infrastructure and general services, domestic
food aid, income insurance and income safety-net programs such as AIDA,
CFIP, FIDP etc. are some of the “green box” programs exempt from the
reduction commitment. In the future CAIS will qualify for this category. (The
numbers in my attached spreadsheets are taken directly out of Canada’s
Notification to the WTO on Domestic Support to Agriculture for 1999.)
If
you study the attached Spreadsheet
#1 called “Green Box” Support you will see that out of the
total $1.7 billion dollars spent by both the federal and provincial
governments, only $430 million actually provides revenue-enhancing support
to farmers. Revenue enhancing support to farmers makes up only 25% of
“Green Box” dollars.
(B)
Product-Specific
AMS
is calculated on each individual commodity. (Support to Quebec’s ASRA
program falls under these calculations.) The attached
spreadsheet #2 called Product-Specific AMS shows
domestic support given individual commodities.
In 1999, total product-specific AMS added up to
$1,108,200,000. Of this amount Quebec’s ASRA program accounted for
$377,700,000 which works out to 34% of the total product-specific AMS
notified. The Dairy subsidy and market support for butter and skim milk
powder amounted to $531,600,000 which works out to 48% of the total
product-specific AMS notified. When you add the two together they make up
$909,300,000 which works out to 82% of the total product-specific AMS
notified. This should start to give readers an indication of where the
majority of support to agriculture is going. CHART
#10 &
CHART
#11
The
last three columns in spreadsheet
#2 contain:
- Total
Value of Production of each commodity:
- Current
Total AMS as a percentage of the Value of Production:
- The
de minimis exemption when it applies.
These
last three columns pertain to the following paragraph. (C).
(C)
This
calculation subtracts Product-Specific AMS on any commodity
excluded as de minimis. The de minimis exemption is the “farmers
friend”. This is an extremely important term that describes
policy support below a certain percentage of the value of production that
is exempt from discipline. Simply put, this means that
government support given a product-specific commodity is exempt from being
included in current total AMS if it is below 5% of the total production
value of that commodity. Here is an example: In 1999 the total value
of production of wheat across Canada was notified at $3.2 billion
dollars. Canada notified direct support to wheat of $61.3 million dollars
but because the $61.3 million was only 2% of the dollar value of
production, wheat was exempt from being included in total AMS under
the de minimis exemption. See
attached spreadsheet #2. This exemption could be a way
of beefing up provincial programs without penalty and our provincial
governments (with the exception of Quebec) are not taking advantage of it.
(D)
Non-Product-Specific
AMS
is calculated on programs such as Crop Insurance, NISA, cost shared
programs and most provincial programs. The de minimis exemption is
also extended to Non-Product Specific AMS. In this category the
total value of production is taken on all commodities combined. Here is an
example. In 1999 the total value of production on all commodities
across Canada was notified to the WTO at $28.6 billion dollars. Canada
notified all non-product-specific AMS at $932.5 million dollars but
because this amount was only 3% of the total value of production
on all commodities combined across Canada it was excluded from total
AMS under the de minimis exemption. What this means is that Canada
had the option of beefing up its crop insurance program or other cost
shared programs another $516 million dollars without it being included in
total AMS.
Spreadsheet
#3
shows the programs that are considered non-product-specific. I would like
to draw your attention to crop insurance. Despite all the press coverage
given to the hundreds of millions of dollars paid out by crop insurance
every year you can see for yourself that only a small portion is actually
derived from federal and provincial coffers. Crop insurance is an
insurance program funded by the farmers that take part in it. I would also
like to draw your attention to the fact that out of the total $932.5
million dollars notified as non-product–specific support, the federal
government only picked up 39% of the tab while the provincial governments
picked up 61%.
This
information should be a wake-up call to farmers. The federal and
provincial governments have done a snow-job on producers by pretending
that all our problems in agriculture stem from the subsidies provided to
farmers in other countries. The truth of the matter is that other
countries have refused to abandon their farmers the way that Canada has.
The United States has never gone over its commitment level of support
according to its notification to the WTO. Our government’s agenda is
simple. They have decided not to fund certain parts of agriculture. As you
can see from spreadsheet
#2, supply-management & the ASRA program are well
funded but all other areas are left high and dry. If the federal
government were willing to make the commitment to other areas of
agriculture that it has made to supply-management and ASRA, there would be
plenty of room for improvement in most of the programs that now exist.
Canada
notifies very little of the market price support dollars given to
supply-managed areas of agriculture. (CHART
#14) They notify market support given to butter &
skim milk powder and the direct dairy subsidy given to farmers but close
to a billion dollars in market support for fluid & industrial milk,
chicken, turkey & eggs is suspiciously absent. In 1999 the total of
federal & provincial revenue enhancing government regulatory transfers
was $1.2 billion dollars. Of that amount only $440 million was notified. I
contacted the lady responsible for the notifications to the WTO and I was
told that in regards to milk this is because the Canadian Dairy Commission
(a federal crown corporation) only sets the support price of butter and
skim milk powder, while the provincial marketing boards set the support
price of fluid and industrial milk. The federal government insists that
because provincial marketing boards set milk prices they do not have to
notify market support for that product. I do not agree. Here is my
argument.
The
Canadian Dairy Commission is a crown corporation accountable to parliament
through the minister of Agriculture and Agri-Food. The statutory
objectives of the CDC are to provide efficient Canadian producers of milk
and cream with the opportunity of obtaining a fair return for their labour
and investment, and to provide consumers of dairy products with a
continuous and adequate supply of dairy products of high quality. The CDC
advises the minister of Agriculture on matters relating to dairy policy;
determines domestic requirements for industrial milk and cream for the
purpose of establishing the market sharing quota; establishes the
target price for milk based on cost of production data and sets
support prices for butter and skim milk powder and offers to purchase and
sell products at these prices. It also administers the governments monthly
payment to producers on eligible milk and cream shipments, calculates the
levy amount to be collected from producers by the provinces to cover costs
associated with the marketing of dairy products by the CDC, exports dairy
products not needed for domestic consumption and administers other
marketing and promotion services.
What
this boils down to is that once the CDC sets the support price of butter
and skim milk powder each year it immediately triggers the provincial
marketing boards to raise the price of industrial milk accordingly. In
eastern Canada an increase in fluid milk prices is also triggered when the
CDC sets the support price of butter and skim milk powder. The CDC
therefore has a direct bearing in the pricing of fluid & industrial
milk.
I
believe that the problem Canada has with including the support given to
supply-management in its notification to the WTO is that supporting these
products to the degree it does is not sustainable under the current WTO
rules. Canada total AMS commitment level is $4.3 billion dollars and this
will probably decrease with the new agreement that is about to be put in
place. To keep supply-management fully funded, Canada has to keep
increasing the market support to cover cost of production. As we all know
input costs have sky-rocketed so the market support price has increased
accordingly. If you review spreadsheet
#2 you will see that Current total AMS for the ASRA
program, market support for butter & skim milk powder & the dairy
subsidy make up 82% of the Product-Specific AMS notified already. If the
rest of the support given to supply management is notified it will leave
very little room for any other sectors of agriculture.
CHART
1
& CHART 2
Statistics
show that while Canada was slashing its support programs to grain,
oilseeds, pork and beef it was making room to increase its support to
supply-management and Quebec’s ASRA program. Canada is hypocritical at
best when discussing decreases in domestic support with other countries.
Our government talks the talk but does not walk the walk on these issues
and farmers had better start speaking out or agriculture as we know it
will cease to exist.
See
Also: Agriculture's French Connection
OECD
The Organization for Economic Co-operation and Development (OECD) is a
forum where the governments of 30 market democracies work together to
address the economic, social, environmental and governance
challenges of the globalized world economy. Canada is a member of the OECD.
The Organization provides a setting where governments can compare
policy experiences, seek answers to common problems, identify good
practice and work to co-ordinate domestic and international policies. For
more than 40 years, the OECD has been one of the world’s largest and
most reliable sources of comparable statistical, economic and social
data. Much of the research and analysis is published.
The OECD producer support estimate (PSE) measures market price support
in all cases where domestic price is maintained higher than the border
price with the help of tariffs (eg. poultry meat, eggs & all milk),
not just when an administered price is applied (as in the case of butter
& skim milk powder).
Charts:
Spreadsheets:
|
