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U.S. wins key points Canadian wheat dispute, loses CWB argument

U.S. wins key points Canadian wheat dispute, loses CWB argument

   A World Trade Organization panel report this week found Canada’s grain distribution system is unfair to U.S. wheat producers and violates Canada’s international trade obligations.

   In specific, the WTO panel report stated:

   * Canada’s mandatory authorization requirements for foreign grain entering Canadian grain elevators violate national treatment principles.

   * Canada’s “rail revenue cap,” which may result in lower rail transportation rates for the Canadian Wheat Board than for imported grain, violates national treatment principles.

   * Canada’s prohibition on mixing foreign grain with Eastern Canadian grain violates national treatment principles.

   However, the WTO panel did not find the Canadian Wheat Board export regime in violation of Canada’s obligations under General Agreement on Tariffs and Trade (GATT) Article XVII governing the behavior of state trading enterprises. This is considered a setback for many U.S. grain lobbies that seek to abolish the Canadian Wheat Board and related entities in other countries.

   U.S. trade representative Robert Zoellick said this aspect of the WTO panel’s finding “demonstrates the need to strengthen rules on state trading enterprises in the WTO.”

   In the last six months, the Canadian Wheat Board said it had overpaid Canadian farmers for their 2002 wheat crop by $65 million, which the Canadian government will reimburse to the board. While not part of the WTO panel report, the United States pointed out that this is another example why it’s difficult for private-sector wheat producers to complete on a level playing field with the Canadian Wheat Board.

   “The United States will continue through the WTO negotiations to aggressively pursue reform of the WTO rules in an effort to create an effective regime to address the unfair monopolistic practices of state trading enterprises like the Canadian Wheat Board,” Zoellick said.

   Both the United States and Canada may appeal the report. Zoellick said the United States is reviewing its options regarding appeal. If neither party appeals, the report could be adopted by the WTO.

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