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Over-quota tariffs seen as key to maintaining milk prices in new trade dealCanada hopes that its proposal that developed countries open access to dairy markets to a minimum of five per cent will ease pressure against our tariffs. But other possible threats to supply management loomby DON STONEMANCanadian dairy farmers likely won't be able to maintain the prices that they currently get for milk if over-quota tariffs are reduced at the end of the current round of trade talks, says Bruce Saunders, vice-chair of Dairy Farmers of Ontario.That's why Canada is touting its own position in the hope that it might satisfy demands to open borders to trade while keeping supply management intact. The Canadian position is that developed countries should open access to their dairy markets to a minimum of five per cent. Currently, the United States offers 3.2 per cent of its market to imports, while the European Union offers only 2.75 per cent. (Canada currently allows imports to take 3.5 per cent .) Exporting nations should find this concept more advantageous than simply reducing over-quota tariffs, says Saunders. Simply lowering those tariffs won't guarantee access to markets. Fluctuations in world dairy prices and also currencies will open and close trade doors, as was the case of Canada's situation with butter several years ago. In 2002, world dairy prices were so low that imports nearly breached the tariff wall, Saunders says. Prices have risen considerably, but so has the Canadian dollar, which tends to attract imports. If dairy prices fell to 2002 levels, butter would certainly enter the country and producers here would likely have to reduce the price that they get for milk in order to maintain market share. But don't expect the United States to back up the Canadian position any time soon. The Americans are strong proponents of lowering over-quota tariffs. There are some other issues that can have a powerful effect on the dairy industry. One of them is the strong opposition to so-called "state trading enterprises." Saunders says the Canadian Wheat Board is clearly being targeted by the United States. The Canadian Dairy Commission doesn't appear to be at risk and it trades only about 1.5 per cent of the dairy products produced in Canada now anyway. But the definition of a state trading enterprise remains uncertain, Saunders acknowledges, and that may put supply management in jeopardy. Are provincial dairy marketing boards state trading enterprises. "I have heard people indicate that we have to watch that as well," Saunders says. Dairy might suffer collateral damage because other industries are targeted. Another problem area is so-called "sensitive industries." Some countries are lobbying for trade agreement exemptions for these sensitive industries. Saunders points out that not only supply-managed commodities are considered "sensitive." The beef industry may fit in that category as well. Why? Canada's beef industry uses over-quota tariffs to limit cheaper imports from New Zealand, Australia Argentina and Ireland. Because of those import limitations, beef might be labelled a sensitive product too. Saunders says the goal of the negotiators is to be ready with a deal by next Dec. 13-14, when a World Trade Organization (WTO) Ministerial Conference meeting is planned to take place in Hong Kong. "The general feeling of a lot of people is that it is a little bit ambitious, but who knows?" Saunders says.
The WTO's Ministerial Conference is the top decision-making body of the WTO and must meet at least every two years. It brings together all members of the WTO, all of which are countries or customs unions. The Ministerial Conference can take decisions on all matters under any of the multilateral trade agreements. BF
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