National Post, February 4, 2000

Canada's farm crisis: the culprit is free trade

by David Orchard

There has been a good deal of attention paid to Canada's current farm crisis, yet strikingly little analysis of its causes. We are repeatedly told that grain prices are low because Europe and the United States subsidize their farmers, then dump cheap grain on the world market reducing the price for Canadian farmers.

If Europe would dismantle its agricultural policy, world prices and Canadian farm incomes would rise, goes the line. Meanwhile provincial governments and farm organizations call for a federal bailout while the federal government vows to use its voice at world trade forums to demand Europe and the U.S. "stop subsidizing."

Ottawa, after creating the worst crisis in Canadian agriculture since the 1930s, appears to expect Europe to follow its advice to lay waste to its own agricultural sector.

In reality factors that have nothing to do with Europe underlie the recent devastation of western Canadian agriculture. In 1987, as part of the Canada-U.S. free trade negotiations, Canada scrapped its two-price system for wheat -- a policy by which farmers received a higher price for wheat destined for domestic consumers than they did for exported wheat. This change means an annual income loss of up to $200 million for wheat producers.

Secondly, both the Canada-U.S. Free Trade Agreement (FTA) and NAFTA targeted the Crow's Nest Pass freight rate as a subsidy. These freight rates, which John Diefenbaker called "the Magna Carta of the western farmer," had been guaranteed to western farmers "in perpetuity" in the 1890s, in return for huge grants of cash and public land given to the railways.

In 1995, to make CN Rail more attractive to foreign investors, perpetuity came to an end. The Liberals abruptly abolished these statutory freight rates on shipments of western grain to port and sold CN on the New York stock exchange -- for a fraction of its value. Farmers lost their Crow rate; the railways kept their public land. The historic railway, so vital to the nation and western agriculture, is now two thirds U.S. owned -- a figure that will rise if the Burlington takeover proceeds.

Within a year freight rates to Saskatchewan farmers soared over 300%, an added yearly cost of $15,000 per average grain farm, in total more than $720 million in extra costs to Prairie farmers.

With these two steps the government removed almost $1-billion annually from western farmers' hands and destroyed much of its existing agricultural policy in the West. At the same time it slashed our world-class agricultural research and food-safety inspection systems, handing large parts directly to U.S. agribusiness giants.

During the Canada-U.S. free trade negotiations Canadians were repeatedly assured that agriculture was "not on the table." When the agreement finally appeared, agriculture was its longest chapter -- 55 pages -- containing more than 100 commitments to harmonize Canada's agriculture industry with that of the U.S. A decade later, the results are in for all to see.

At the signing of the agreement loud promises were made of bigger markets, higher prices and "secure access" to the U.S. Three years later, one out of every three farms in Saskatchewan was in trouble, many facing foreclosure. A long list of U.S. trade actions had been taken against Canada. Canada's minister of agriculture of the day, Don Mazankowski, said: "With the advent of the free trade agreement with the United States we expected fewer hassles, not more!"

Since the FTA took effect in 1989, Canadian farmers net incomes, adjusted for inflation, have dropped more than 50%. The Saskatchewan figures are even more dramatic. Agriculture Canada's 1999 forecast for total realized net income for Saskatchewan's farmers is $59-million -- $1,000 per farm! This is 6% of what it was in 1989.

During the decade the Americanization of agriculture (like the rest of the economy) skyrocketed. Virtually the entire flour milling industry went from Canadian to U.S. hands. U.S. companies now completely dominate the western Canadian beef processing industry and have taken effective control of the United Grain Growers. U.S. genetic engineering companies have swept the canola industry, creating a harvest fewer and fewer want to buy. The Canadian Wheat Board, the sole remaining institution preventing complete U.S. takeover of the western Canadian grain industry, is under siege.

As Canada continues to dismantle its infrastructure, its research and transportation, turning over control of whole sectors of the economy to U.S. interests under the terms of the FTA and NAFTA, we will see a deepening of the crisis, not to mention the loss of our sovereignty.

Meanwhile, Canada's overall access to the U.S. market -- for agricultural as for lumber and all other products -- is less than when we conducted our trade with the U.S. under GATT rules.

It was a leading Liberal politician, Wilfred Laurier, who hoped the 20th century would belong to Canada. "I want to... build a nation that will be foremost amongst the great powers of the world," he said.

Do his successors in Ottawa today believe a nation can achieve that goal by giving its railways, corporations and its agriculture into foreign hands and turning a dignified people into beggars squabbling for handouts?

On the living room mantel of my home is a plaque honouring the heritage of our farm, founded before Saskatchewan became a province and operated by the family ever since. Since 1985 I have predicted the impact a Canada-U.S. agreement would have upon Canadian sovereignty, its environment and its key industries, including agriculture, and in 1995, I publicly refused to accept the federal government Crow buy-out cheque of $15,000 for my farm, stating that the Crow was not for sale and that its loss would devastate western farmers.

It is increasingly difficult to listen to politicians and farm leaders, who tolerated or advocated the very policies currently destroying our agricultural economy, now demand that Europeans also dismantle their farm policies and present this as a solution to Canadian farmers.

It is not European or American farmers, fighting for their own survival, who are to blame for the problems of Canadian agriculture.

The problems of Canada's agriculture system have been created at home and it is here we can solve them. Madcap schemes for Western separation -- as if Quebec or Ontario farmers are the problem -- will not.

Nor will ad hoc government bailouts designed only to quiet the clamour.

The Liberals understood what was necessary when they rode to power in 1993 promising "an end to the Mulroney sell-outs" and "renegotiation or cancellation" of the FTA and NAFTA. Both of these agreements can be terminated with a simple six months notice. Vital infrastructure can then be restored.

Instead, the Liberals have betrayed their promise and are systematically dismantling the nation built with such vision and sacrifice.

John A. Macdonald and George-Étienne Cartier warned repeatedly that no great nation can arise without control of its own economy. They fought their entire lives to prevent Canada's railways and its industries from falling into U.S. hands. They had a reason for doing so. Perhaps we should rediscover what it was while there still is time.

David Orchard is the author of The Fight for Canada - Four Centuries of Resistance to American Expansionism and was runner-up to Joe Clark in the 1998 federal Progressive Conservative Party leadership contest. He farms in Borden, SK and can be reached at tel (306) 664-8443 and by e-mail at davidorchard@sasktel.net

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