Canada Releases Initial WTO Agriculture Position; Refiners and Producers Issue Joint Statement on the WTO; U.S. Sugar Program Under Pressure

On August 19, 1999, Canada released its initial position for the upcoming WTO agriculture negotiations. The position attempts to straddle a fine line between seeking "substantial improvements in market access" for Canada's value-added agri-food exports and maintaining protection for sensitive agricultural sectors.

The Alliance of Agri-Food Exporters, which represents export oriented producers and primary processors, responded saying that Canada must take a much stronger position on market access. While welcoming some elements of the position, such as an end to export subsidies, the Alliance said that seeking 5% minimum access "conflicts with the progressive and positive stand the government has taken in most other areas. Agricultural trade is currently limited by prohibitively high tariffs, limited and aggregated in-quota access, and by a lack of discipline on how access is administered. To expand and grow our agri-food sector, Canada must address all of these areas so that real gains in access can be obtained."

Canada's sugar industry, which lost access to the U.S. in both the NAFTA and the WTO, has also been pressing for improvements in access for value-added refined sugar and sugar containing products. This includes aggressively pursuing access that reduces the disparity between primary (e.g. raw materials) and processed products (value-added food products). For example, the U.S. meets its WTO commitment almost entirely by importing raw sugar for its own sugar refining industry while allowing negligible imports of refined sugar. Seeking 5% minimum access for "sugar" in aggregate will not address this disparity.

Refiners and Producers Issue Joint Statement on the WTO

The Canadian Sugar Institute and Canadian Sugar Beet Producers' Association have issued a joint statement on the industry's goals for the WTO agriculture negotiations. The industry is collectively seeking "significant export market expansion" recognizing that both the NAFTA and WTO resulted in decreased, not increased access to the U.S. market.

The position specifically calls for:

• The phased elimination of all tariff and non-tariff barriers to Canadian exports of refined sugar and sugar containing products (SCP's)
• Elimination of all sugar and SCP export subsidies and other trade distorting export support
• The phased elimination of sugar-specific commodity price support
• Transparent and predictable border administration to eliminate practices that undermine access commitments.

The overall goal is to increase Canadian exports of refined cane and beet sugar and SCP's well-beyond current access levels provided by U.S. restrictive quotas.

U.S. Sugar Program Under Pressure

Low world raw sugar prices and high U.S. sugar production continue to put pressure on the U.S. sugar program. Mexico's preferential treatment under the NAFTA is of particular concern given that tariff rates on Mexican sugar continue to decline spurring sugar imports in excess of expected U.S. quota limitations. These tariffs will continue to decline until 2008 when all tariffs for Mexico are eliminated.

Another claimed source of pressure is imports of sugar- molasses syrup (commonly referred to as "stuffed molasses" in the U.S.). The product is made by a company in Windsor Ontario from a combination of imported raw sugar and molasses which is dissolved in water to produce a brown sugar syrup. The syrup is refined in the U.S. to produce a refined liquid sugar. U.S. Customs has proposed to reclassify this product so it is covered by the tariff rate quota for refined sugars and syrups. Customs reports that after importation, the molasses is extracted from the sugar syrup and some of the recovered molasses is returned to Canada. They argue that "there are no commercial identities or commercial uses for the syrups as imported" and effectively the syrup is circumventing the tariff rate quota provisions. Unfortunately, Customs reasoning appears to depart from internationally accepted tariff reclassification rules to solve the circumvention problem. Contrary to recent media reports, the sugar syrup does not contain "Canadian sugar" nor is it produced at Canadian sugar refineries.