Industry Leaders Look to Remove Trade Barriers

North America’s potato industries are continuing processes started years ago to even out the playing field and assure fair trade for all parties involved. Ministerial exemptions, anti-dumping laws and marketing orders all are being brought into the discussion on the Canadian side and U.S. side.

Our goal is to have trade with Canada conducted based on a harmonized and uniform set of rules and regulations,” said John Keeling, executive vice president of the National Potato Council (NPC). “We’re, in essence, shipments move north and south subject to the same set of constraints.”

Keeling, in particular, is referring to packaging laws and ministerial exemptions. Canada’s packaging laws set requirements for the importation of fruits and vegetables. Bulk shipments of potatoes greater than 110 pounds (50 kilograms) for processing or for repackaging from the United States, Keeling said, are prohibited. However, bulk shipments from Canada into the United States are free from restrictions as long as they meet the requirements of the marketing order, Section 8-E.

“Bulk potatoes being shipped to the U.S. for the fresh market have to meet our marketing order requirement, which is a quality requirement,” Keeling said. “Canadian potatoes typically are packed to Canadian No. 1 standard, which is higher than the U.S. No. 1 standard.”

Keeling said the complaints about the U.S. marketing order from the Canadian potato industry arise because of the cost of inspections used to determine quality. However, he said, the costs are determined by the Canadian government not the United States.

There is a ministerial exemption process set up in the Canadian system to allow U.S. bulk potato shipments. This process requires the Canadian Food Inspection Agency to determine that Canadian-grown potatoes are in short supply.

“In essence, U.S. sellers of bulk potatoes for processing into Canada have to ask permission of Canadian potato growers before they can make that shipment,” Keeling said. “And we think that’s wrong.”

This year potato growers in North Carolina and Virginia, who had contracts to ship to Canada, were not given ministerial exemptions and lost $4 million of potatoes that they had to plow under, Keeling said.

“That’s a trade barrier of the worst kind,” he said.

However, according to an open letter from Wayne Dorsey, chairman of the Canadian Horticultural Council Potato Committee, Canadian and U.S. leaders agreed on both the marketing order and ministerial exemptions at a 1999 meeting.

“We both acknowledged the value of marketing orders in the United States and the Canadian ministerial exemption process,” Dorsey wrote. “We agreed that the systems should remain in place as long as they are not, in the case of marketing orders, made more restrictive and, in the case of ministerial exemptions, used as a barrier to trade.

“This joint position was reviewed and reaffirmed in 2002.”

Dorsey could not be reached for direct comment.

Representatives from the Canadian and U.S. potato industries meet each November to discuss issues of trade and issues affecting North America’s industry as a whole. So why is this issue getting so much attention from growers and processors now?

“I think that’s because the U.S. growers are mad and they’re not going to take it anymore,” Keeling said. “I think that the tolerance within the world community for measures that blatantly restrict trade is diminishing.”

NPC has requested the office of the U.S. Trade Representative enter into negotiations with Canadian officials to repeal the ministerial exemptions. And though the U.S. industry has long sought changes in ministerial exemptions, this time Canadian processors are getting involved.

“There is opposition within Canada from the processing sector to the existence of these exemptions,” Keeling said. “There are times when growers within the Canadian system are disadvantaged by this. If someone in Manitoba wants to ship to Ontario, somebody in Alberta can block that shipment.

“It can’t help but create procurement inefficiencies for the processors that are problematic, and that can have an impact on their long-term planning.”

Regardless, Dorsey wrote the complaints of the U.S. industry are based on false allegations and are a waste of time for both countries’ industries.

“… the Canadian industry has been accused of an unfair regulatory system, of unfair subsidies, of unfair dumping duties and even for influencing Canada’s monetary policy to facilitate trade,” Dorsey wrote. “All of these allegations are false.”

“Despite the fact that the U.S. industry continues (as recently as November’s U.S./Canada Potato Meeting) to provide direct and credible evidence that Canada is using unfair and some illegal trade barriers to block our potatoes from going up there, Wayne Dorsey and his Canadian Hort Council colleagues continue to be in denial,” said Pat Boss, executive director of Washington State Potato Commission. “Many of the leaders of the Canadian potato industry like that fact that they can block U.S. potatoes at will and don’t really have any motivation to resolve these trade inequities… The U.S. industry continues to reach out to the Canadian industry to try to resolve some of these issues, and they continue to drag their feet on making any meaningful changes.”

Anti-Dumping Laws

Ministerial exemptions and marketing orders aren’t the only items fueling the fire between the Canadian and U.S. potato industries. Anti-dumping duties also are creating tension, particularly for growers in the Pacific Northwest and California.

According to information from Boss, Canada uses trade rules that allow it to claim the United States is dumping potatoes. British Columbia potato growers are considered a “regional industry” by the Canadian government. This means the industry is not able to compete in quality or price with Pacific Northwest growers meaning American growers are made to pay dumping duties because they are causing “material injury” to British Columbia’s industry, WSPC information said.

This is creating an uneven trade balance for Pacific Northwest growers, as Canadian anti-dumping laws state the normal value of these imported potatoes is the price “in the ordinary course of trade when destined for domestic consumption.”

However, WSPC wrote, the laws don’t account for the lowered costs of production from increased yields and higher pack-outs, advances in variety cultivations, technology improvements and packaging changes.

“Periodically they have to review the order,” Keeling said. “We argued the order shouldn’t be in place, and certainly conditions do not exist for it.

“Anti-dumping duties laws are supposed to be short-term, and this thing gets put back into place every five years.”

WSPC is working to get these laws modified to allow for more fair trade. WSPC has hired an attorney to oversee this issue and work with getting these laws changed.

Working for Change

In its efforts to change trading practices with Canada, the U.S. potato industry also has worked with members of Congress. More than 30 members of the U.S. Congress signed on to a letter to express their “concern regarding unfair trade restrictions on fresh fruits and vegetables shipped from the United States and Canada.”

This letter stated that Canadian ministerial exemptions place a burden on both the buyers and sellers on both sides of the border.

“The significant trading relationship between the United States and Canada resulted in a $441.5 billion trade relationship in goods and services in 2003 alone,” the letter stated. “The continued success of this trading relationship must be based on the elimination of barriers that inhibit fair trade.”

Through work with the Canadian government and potato industry, NPC and other U.S. potato groups will continue to work toward equal and fair trade with Canada.

“This situation dramatically disadvantages U.S. growers and the whole potato industry,” Keeling said. “And we need to get it fixed.”