February 13, 2012
As a condition of its entry, the National Pork Producers Council (NPPC) demands Canada's renouncement of all federal and provincial-level subsidies to the Canadian pork industry.
In comments submitted to the Office of the US Trade Representative on January 13, NPPC flagged 21 federal and provincial-level support programmes for the Canadian pork industry which they argue cause "significant distortions" in the North American hog market to the detriment of US producers.
"Canada's entrance into the TPP negotiations should be contingent upon its renunciation of all countervail able subsidies and elimination of these egregious provincial programmes," NPPC said in the comments, which were submitted by the Kelley Drye & Warren law firm, the group's legal counsel.
The submission says two provincial subsidy programmes offered by Ontario and Quebec violate US law as well as World Trade Organisation rules. But a representative for the Canadian pork industry said it likely be difficult to prove that government support for the Canadian hog producers injure US producers or threaten to injure them in the context of a countervailing duty (CVD) case.
This is because Canada's hog output has actually decreased by nearly 22% from 2005-10, according to the agriculture division of Statistics Canada. Production of Canadian hogs rebounded in 2011 by 0.9% from 2010, which lagged behind the US industry's 2% growth over the same period.
The Canadian industry source said the NPPC was likely taking issue with Canadian pork subsidies within the context of the TPP because it has no recourse through litigation given that it is unlikely to make the injury hurdle.
A US agricultural source expressed surprise that the US pork industry would oppose Canada's potential entry into the TPP talks given the industry's dependence on exports. NPPC's opposition represents a departure from the vast majority of agricultural groups which are export dependent and therefore rarely oppose a trade deal outright.
The US pork industry has a history of challenging Canadian pork subsidies, although two past CVD orders on Canadian pork products based on its petitions were removed in the 1990s. One was removed as a result of a Commerce sunset review and the other because of a successful challenge under the North American Free Trade Agreement.
The Canadian pork industry supports the Ottawa government's position that Canada should not have preconditions set on its entry into the TPP and that every issue will be on the table for negotiation once it is allowed into the talks, according to the Canadian pork industry source.
NPPC's submission focuses its attack on two programmes: Ontario's Risk Management Programme (RMP), which was unveiled in March, and the longstanding Quebec programme known by the French acronym ASRA.
The RMP is administered by Ontario and provides income stabilisation insurance for Canadian hog producers. According to the NPPC submission, producers receive a "guaranteed return" for their production in that if the market price of hogs falls below a predefined support level, the RMP pays out 40% of the difference between those two numbers.
The NPPC referred to cited criticism of the RMP by current Canadian Agriculture Minister Gerry Ritz, who described the provincial programme as "completely countervail able," according to the comments. Ritz said the Canadian government "will never put farmers at risk by making programmes that are countervail able," according to the submission.
Since the RMP is a relatively new programme without a significant amount of historical data, the NPPC cited a study from the Ontario Agricultural Sustainability Coalition which charted the potential payout of the RMP based on Canadian production from 2005-09.
Using these extrapolations, the NPPC estimated that within the next five years, the RMP would result in the loss of US$73.2 million worth of US hog production and 585 US jobs. Over 10 years, NPPC projected a loss of US$162 million worth of hogs and 1,299 US jobs.
