The facts of the case are simple enough: Canada is slapping special duties on U.S. grain corn, amounting to a costly $1.65 extra per bushel. The Canadians claim that American corn is unfairly subsidized by our federal government and then dumped onto their market at artificially low prices.
I’ll skip over the bureaucratic rigmarole, except to note that this tariff has survived several hearings in Canada and is on track to be made permanent on April 18.
It’s an inappropriate sanction. Although nobody denies that Canadian farmers are hurting from lower corn prices, their plight has almost nothing to do with imports from the United States. After all, if American corn were scandalously cheap, wouldn’t Canadian buyers be snapping it up? In reality, the amount of U.S. grain corn entering Canada actually has declined by 49 percent over the last two years.
This is a classic case of what economists call a negative correlation: When one variable decreases, the other increases. In this case, as American corn imports go down, the complaints of Canadian farmers go up.
Don’t get me wrong: Canadian farmers definitely have something to complain about, because the price of their corn really has fallen. But the culprits aren’t corn producers in the United States or even American farm policies. Instead, the main offender is the weather in western Canada, which has been so lousy for wheat and barley growers over the last two years that they’ve been forced to downgrade much of their harvest as suitable for animal feed rather than human food. This creates a supply problem for corn grain, whose prices suffer.
As the U.S. Corn Coalition noted in a submission to the Canadian International Trade Tribunal in February, “U.S. grain corn imports are not the cause of the alleged injury; in the Canadian feed grain market, U.S. grain corn imports have just been along for the ride.”
There are other factors as well, such as a Canadian dollar that recently has grown stronger in comparison to the U.S. dollar. This phenomenon has made American products, including corn, relatively more affordable. But the reason for this is a dynamic exchange rate, not a nefarious plot by the United States to “dump” its grain corn on Canada.
The bottom line is that too many influential Canadian politicians and bureaucrats are willing to make the United States a scapegoat. Only hockey is more popular as a national pastime. As John Bartlett Brebner, a Canadian writer, has observed, “Americans are benevolently ignorant about Canada, while Canadians are malevolently well-informed about the United States.”
It’s certainly true that Americans know much less about Canada than Canadians do about America. Yet there’s something that we in the United States should learn from this ongoing spat: It will cost citizens on both sides of the border a bundle of money before it’s over, and it highlights the perils of protectionism–something everybody should keep in mind if popular opinion turns against free trade, as possibly is happening right now in Congress.
Whenever a new tariff goes up, the global economy loses an opportunity. Our dispute with Canada is a perfect example of this. And whenever an old tariff goes down or is eliminated, the global economy gains an opportunity. Just last week, for instance, South Korea received the first-ever boatload of U.S.-grown rice destined for its own consumer market. This is a historic achievement that demonstrates what can happen when we pry open markets that have been closed to us, creating more winners than losers.
Tim Burrack raises corn and soybeans in partnership with his brother on their NE Iowa family farm. Tim is a Board Member of Truth About Trade and Technology (www.truthabouttrade.org) a national grassroots advocacy group based in Des Moines, IA formed and led by farmers in support of freer trade and biotechnology.