Canada's WTO COOL Complaint Hypocritical in Light of Millions in Subsidies to Its Domestic Cattle Industry
January 28, 2010 Washington, D.C. – In a letter sent today to the U.S. Department of Agriculture (USDA) and the U.S. Trade Representative (USTR), R-CALF USA explained that although Canada claims as an entitlement access to the U.S. market for its cattle and beef without country-of-origin labeling (COOL), Canada continues to subsidize its cattle and beef sector in order to anticompetitively penetrate the U.S. market.
"We believe Canada's subsidies on beef and cattle constitute an artificial propping-up of a Canadian cattle industry that is unsustainable at its present size but for those government subsidies, and further we believe that Canada's subsidies are inconsistent with the very World Trade Organization (WTO) agreements that Canada claims the U.S. has violated vis-à-vis COOL," explained R-CALF USA CEO Bill Bullard.
"USTR and USDA should not tolerate the Government of Canada's ongoing practice of using the Canadian treasury to manipulate the U.S. cattle market by subsidizing Canadian cattle supplies and beef production at levels above what a competitive market can support. This practice is particularly appalling given the Government of Canada is trying to undermine the United States' constitutionally passed COOL law – which is widely supported by U.S. cattle producers and consumers – while simultaneously using its treasury to out-compete independent U.S. cattle producers, whose prices are depressed because Canada is unjustly and artificially propping-up its cattle supplies beyond what the available market can bear…" the letter states, in part.
The letter encourages USTR and USDA to review the Canadian subsidies (a partial list is below), which are designed to anticompetitively penetrate the U.S. market and simultaneously undermine the United States' pro-competition COOL law. R-CALF USA believes the Canadian subsidies not only negate any standing that Canada may have at the WTO to file a complaint against our domestic COOL law, but also, that these subsidies warrant immediate corrective action by USTR and USDA to protect the hundreds of thousands of remaining independent U.S. cattle produces whose markets are being severely depressed by Canada's artificial maintenance of excessive cattle supplies.
"Despite the worldwide reduction in demand for Canadian cattle and beef due to its significant problems with bovine spongiform encephalopathy (BSE), Canada continues to subsidize its cattle industry, thereby promoting excessive cattle supplies that must be unloaded or dumped into export markets," Bullard pointed out. "Canada is particularly reliant on the U.S. market to unload or dump its excess supplies and Canada is now trying to further penetrate the U.S. market by destroying COOL – an action that would allow Canada to effectively hide from U.S. consumers the origin of beef derived from Canadian cattle."
Examples of Canada's subsidies on cattle and beef include:
* BSE Recovery Loans: Through March 31, 2008, the Manitoba Agricultural Services Corporation (MASC) provided "BSE Recovery Loans" to Manitoba cattle producers that experienced financial hardships due to BSE. The MASC states "Even now, after most disputes have subsided and the borders have reopened, Manitoba producers still suffer through the disease's financial aftershocks." The BSE Recovery Loans were divided into two parts, with interest on Part 1 loans set at 3.25 percent and lower, and interest on Part 2 loans set at 1.5 percent below MASC's prevailing one-year rate. Beginning Feb. 21, 2008, the MASC granted a 3-year deferral on principal payments for Part 2 BSE Recovery Loans, thereby making these loans an ongoing subsidy.
Loans. These are loans. They are to be repaid. The interest on these loans is still being charged, and is not that different from commercial rates.
* Stocker Loans: The MASC also provides guaranteed "Stocker Loans" to Canadian cattle producers for the purchase of steer calves, heifer calves, and feeder cows, as well as for cash advances to producers that already own stocker animals. The MASC explains that these loans are intended to address fluctuations in international livestock markets: "Manitoba's livestock producers raise some of Canada's best beef cattle, but fluctuations in international livestock markets can cause even the best producers to experience temporary cash flow problems." The maximum guarantee for these Stocker Loans is $250,000 with interest set at a one-year term rate.
LOANS. These are loans. They are to be repaid. When these cattle are sold, every penny that comes from the sale goes back to the government first, and the entire loan is paid back before the producer ever sees a cent.
* Alberta Feeder Association Guarantee Programs: Under the Inspection/Investigation Branch, Regulatory Services Division, Alberta Agriculture and Rural Development, the provincial government may guarantee repayment of loans made to feeder associations to finance the acquisition of livestock by the members of those feeder associations. In 1999, the U.S. Department of Commerce found that "these loan guarantees are countervailable subsidies to the extent that they lower the cost of borrowing within the meaning of section 771(5) of the Act [Tariff Act of 1930, as amended by the Uruguay Round Agreement Act].
LOANS. AKA DEBT. The fact is that when a feeder association is set up, the members contribute a percentage of the value of their cattle to a fund that is held in trust in case someone defaults on a loan. If someone comes up short, their deposit is used to cover it. If that is not enough, the deposits of the other members kick in to cover it. The government guarantee is to cover any shortfall after that. BTW, the government has not had to pay out any money yet as far as I have heard.
Agriculture and Agri-Food Canada has compiled a list of measures implemented by the Canadian government that provided the Canadian cattle industry with financial assistance while the government worked to reopen borders and restore market operations. This assistance included:
* SE Recovery Program: Total program funding was $520 million. "The program helped to keep the domestic market moving and provided improved returns to feedlots and processors in light of severely depressed prices."
Never heard of it
* Work Sharing Program: Agreements valued at more than $9.4 million were signed with two Canadian meat packers to assist them in overcoming the financial problems associated with BSE.
Canadian cattle producers saw nothing of this, in fact a bunch of it probably made it's way to Cargill's head office in the U.S.
* Producer Assistance 2003: The Government of Canada advanced business risk management funding to certain producers.
Canada's risk management programs were designed from the start to be neutral according to WTO standards, exactly for the reason we are reading in this piece of nonsense.
* Canadian Agricultural Income Stabilization (CAIS) program: The program is intended to assist producers who experienced a loss of income as a result of BSE and other factors, helping producers protect their farming operations from both small and large drops in income.
CAIS is a joke. It was designed to fail, in order that the public got the impression our government was standing behind us, when in fact they do not. This is a margin based program that pays a percentage of the average of past years. 70% of nothing is still nothing.
* Cull Animal Program: Total funding for this program is expected to be $200 million. It was intended to allow payment to producers for cull animals prior to slaughter.
Didn't get a cent.
* Transitional Industry Support Program: The Government of Canada announced $930 million for this program that included direct payments to producers of cattle and other ruminant animals.
This was a big one. I think it kept us in groceries for a couple of weeks.
* Provision of the Income Tax Act: The Canada Revenue Agency was given authority to cancel or waive penalties and interest to those unable to meet their obligations due to extraordinary circumstances, including BSE.
Big whoop. No penalties and interest on unpaid income taxes from people who have no income. You'd have to look a long long way to find anyone who this applied to.
"The Canadian government is supporting its live cattle industry in ways we never dreamed of here in the United States, just so they may maintain access to our over-supplied marketplace," observed R-CALF USA President/Region VI Director Max Thornsberry. "Does USDA intend to let Canada become the 51st state?"
