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December 16, 2004 Canadian Wheat Board Studied by NDSU Researchers Elimination of the Canadian Wheat Board (CWB) could result in an increase in Canadian wheat exports to the United States, according to a study by North Dakota State University researchers. “If the CWB were eliminated, individual producers in Canada could increase their grain exports to the United States to obtain higher prices,” says Won Koo, NDSU professor of agricultural economics and director of the Center for Agricultural Policy and Trade Studies. The study was prepared at the request of U.S. Sen. Kent Conrad. The CWB is a state trading enterprise (STE) that acts as the sole exporter of western Canadian wheat, durum and barley. The practices of the CWB have become an issue in U.S. – Canada trade disputes and World Trade Organization negotiations. Three pillars provide the basis of CWB operations: single-desk selling, price pooling and government guarantees. As a single-desk seller, western Canadian wheat and barley producers sell as one. Producers get an initial payment when they deliver their grain and the government guarantees the payment, covering CWB losses if it fails to capture the initial prices. The government also provides guarantees on the CWB’s borrowing. The study analyzed the CWB’s effect on U.S producers by reviewing findings from previous research and developing models to analyze CWB wheat exports to the United States and the competitive structure of Canadian wheat exports in the world market. “U.S. grain producers could benefit from the removal of the CWB as the United States could become more competitive in export markets,” Koo says. “However, elimination of the CWB could also result in an increase in Canadian wheat exports to the United States because Canadian producers near the border could sell directly to the United States to take advantage of market opportunities. The net effect is difficult to quantify.” The net benefits may be significant in the short run, Koo says, but reduced significantly in the long run. Similarly, if Canada reforms its wheat board by eliminating trade-distorting subsidies, the United States may increase its exports to offshore markets and Canadian exports to the United States may be controlled through negotiations with the CWB. “The most benefits would be achieved if Canada would reform its wheat board by eliminating trade-distorting subsidies,” Koo says. “The net benefits from reform could be greater than those from eliminating the CWB. Since the U.S. competes with several STEs in offshore markets, the overall benefits for the U.S. would be greatest if all STEs were eliminated because they have elements distorting trade flows.” ### Source:
Won Koo, (701) 231-7448, wkoo@ndsuext.nodak.edu |
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North Dakota State University |
