The threat of U. S. trade action has come back to haunt Ottawa as it mulls a recovery program for Canada’s financially devastated hog farmers.
American pork producers have given notice they may seek trade retaliation if they perceive a bailout package to be an unfair subsidy.
That could plunge Canada’s hog industry into something it fears the most – a trade war with the U. S. – just as producers seek a way out of their worst economic crisis in recent memory.
A July 20 statement by the U. S. National Pork Producers Council (NPPC) warned an emergency aid program for Canadian hog farmers could have a “lethal impact” on U. S. producers.
The NPPC signalled it would not stand idly by if it perceives any program as a subsidy which negatively affects U. S. prices.
“NPPC is keeping all options open to address this issue,” said president Don Butler, a North Carolina producer.
Canadian hog producers have long been gun shy about periodic U. S. trade threats. The industry defeated a U. S. trade challenge in 2005 but it was long, costly and disruptive while it happened.
NPPC’s main concern this time is a loan program proposed by the Canadian Pork Council as part of a three-point recovery plan for financially troubled producers.
The so-called H1N1 recovery plan proposal would lend producers money until market prices recover to pre-H1N1 levels. (The H1N1, or “swine flu,” outbreak created negative consumer impressions of pork and caused already-depressed prices to fall even lower.)
Payments would amount to $30 for each market hog shipped during the first quarter of 2009. They would continue based on a formula after that. Loans would be repayable over 10 to 15 years.
Butler said the proposed program is “really a cash bailout” and would have “a lethal impact on U. S. pork producers.”
NPPC says an Iowa State University economist estimates the proposal would artificially prop up Canadian pork production and depress U. S. live hog prices by seven per cent.
Nick Giordano, NPPC’s vice-president and counsel for international trade policy, said American producers don’t begrudge their Canadian counterparts but don’t want support programs to affect U. S. markets.
“It’s just a matter of what they’re going to do, and is it going to spill over into our backyard? That’s the concern, that financial pain is exported south of the border,” Giordano said from Washington.
The Canadian Pork Council called NPPC’s claims that Canadian actions will hurt U. S. prices “galling.”
“On the contrary, Canadian pig prices have been in large part artificially depressed by such things as U. S. country-of-origin labelling (COOL) rules,” said Jurgen Preugschas, CPC chair, in a statement.
Preugschas, an Alberta producer, said Canada’s sow herd has declined by six per cent in the past year and nearly 12 per cent since 2007. By contrast, U. S. production has decreased by less than two per cent in the last two years, a third of the Canadian rate.
He called the slower U. S. decline “quite surprising and disappointing” in light of NPPC’s remarks.
CPC’s recovery proposal to Ottawa also calls for adjustments to the advance payments program and a transition program to help producers exit the industry.
Federal Agriculture Minister Gerry Ritz has repeatedly promised quick action on CPC’s plan.
But a spokesperson for Ritz said Monday the minister was in national caucus meetings this week and no announcement would be forthcoming until next week at the earliest. [email protected]