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U.S. corn trade war inches closer

Subsidies south of the border could force Ottawa to impose final tariffs

OTTAWA -- Ottawa moved closer yesterday to a trade war with Washington over U.S. farm subsidies that could see long-term tariffs on grain corn imports -- a measure opponents warn could drive up the cost of everything from tortilla chips to livestock feed.

Critics caution it could prompt a backlash from the U.S. government and lead to retaliatory tariffs on Canadian products.

Yesterday the Canadian Border Services Agency rendered a final decision on imports of U.S. corn, saying its probe found unprocessed grain corn is being subsidized and dumped in Canada at cut-rate prices.

Hearings begin Monday in Ottawa on whether Canadian corn growers are being injured by U.S. imports. They will determine, by mid-April, whether Ottawa moves ahead with the trade conflict.

Canadian hog and cattle farmers could be among those hit hardest if Ottawa doesn't change course.

Hog farmer Suzanne van Bommel raises 1,300 animals in the southwestern Ontario town of Belmont. She says pork producers have estimated the measure could add as much as $8 to the cost of raising each animal.

"This is really going to hurt farmers," Ms. van Bommel says. "The primary ingredient in feed is corn. That's your No. 1 cost in livestock operations."

Livestock farmers say the tariffs could force them to export young animals to the United States -- to avoid the cost of feeding them -- or even move operations south of the Canada-U.S border.

"You could see long-term investment into hog feeding and hog processing centring in the United States," said Clare Schlegel, president of the Canadian Pork Council.

Ms. van Bommel says Canadians have no choice but to rely on U.S. corn. "We do not grow enough corn in Canada to fulfill our processing and livestock needs."

Canada imposed preliminary duties of $1.65 (U.S.) per bushel on U.S. corn last December while it probed allegations from Canadian growers that imports were unfairly injuring their livelihood. The levy amounted to about 75 per cent of the Ontario prices for corn.

The Canadian Border Services Agency did not say yesterday what the final duty rate for U.S. corn would be, but in a letter to importers warned it could be $1.47 a bushel. That amounts to a duty rate exceeding 60 per cent of corn price fetched in recent months.

Anthony Eyton, a former Canadian trade regulator and now a spokesman for an informal coalition of industrial corn users, warned that the duty could drive up the cost of many products from meat to alcohol to snack foods.

"It would have to be passed on to consumers," said Mr. Eyton, a former chairman of the Canadian International Trade Tribunal. "The ethanol industry would be crippled by it."

He said soft drink and corn chip makers would also take a hit. "It will be companies like Frito Lay that produce tortilla chips," Mr. Eyton said.

Ottawa is responding to a plea for protection from Canadian corn producers who had blamed unfair U.S. imports for a dramatic price slide in recent years.

But opponents of tariffs say the strengthening of the Canadian dollar over its U.S. counterpart in recent years is to blame.

Canadian corn growers welcomed yesterday's ruling, saying preliminary duties Ottawa imposed last December have already helped shore up prices.

Brian Doidge, general manager of the Ontario Corn Producers Association, said his industry's target is U.S. subsidies, not Canadian corn users. He said his sector would prefer government support over tariffs on American producers. "Governments have got to come to the plate and introduce meaningful support programs," he said. "We would rather see support."

Mr. Eyton warned Ottawa could trigger a conflict with Washington if it keeps duties on American corn. "If we take this dramatic action against U.S. corn farmers, they represent a very powerful lobby in Washington. You can imagine there is going to be talk about retaliation."

Corn war casualties

$135

THE TOTAL COST OF RAISING A PIG FROM BIRTH TO SLAUGHTER.

$8

THE ESTIMATED ADDITIONAL COST FOR RAISING THE SAME PIG, SHOULD A CORN TARIFF BE LEVIED, AN INCREASE OF 6%.

Pop, chips and beer

If Ottawa places long-term tariffs on U.S. grain corn, it could drive up the prices of a slew of products, including corn chips, soda pop, beer, pork and beef. Grain corn is also used to feed cattle, make sweeteners and cornstarch. U.S. grain corn imports account for more than one-fifth of Canadian supply. Both farm and industrial grain corn users say if Ottawa is going to slap long-term duties on U.S. grain corn, they will have to decide whether to shut down or curb production

© The Globe and Mail

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