• antidumping and countervailing duty actions against Canadian cattle
• countervailing duty action against Canadian live swine
• "safeguards" action against lamb
• US state blockades (now suspended) of trucks with Canadian grains and livestock
• friction over durum wheat and barley sold through the Canadian Wheat Board
• US Government complaint against Canada’s milk marketing system
• pending US Government economic study of the grains, dairy, and livestock sectors, and in the not too distant past, a fact-finding study of Canadian potatoes and action against Canadian and Mexican tomatoes.

South Dakota, North Dakota and Montana blockaded or increased inspections of Canadian trucks with imports of beef, hogs, and grain for two weeks in September 1998. These states claimed that this restriction on imports from Canada was necessary to determine if the imported cattle and meat from Canada were free of specified diseases and drugs and that grain was not infected with Karnal bunt or mixed with wild oats (Friesen 1998). The blockade received significant attention by the media and was effective in highlighting tensions in US-Canadian cattle and beef trade. On October 13, 1999, the US Department of Commerce announced its final determinations in the antidumping and countervailing duty investigations of live cattle from Canada. In the antidumping case, Commerce determined that the imports are being sold at less than fair value; however, the countervailing duty investigation was negative (de minimis). All the US process has found is that North American cattle prices last year were not covering costs of production, which is no surprise to cattle producers on both sides of the border. It is surprising to find that the Canadian cattle are responsible for low prices in the US when the US industry is eight times larger than Canada.

The blockade disrupted trade has lead to delays and increased transportation costs, and redirected the efforts of government officials and commodity groups away from resolving the underlying issues to crisis management. Other events also reflect tension in the US-Canadian cattle and beef market. R-CALF (Ranchers-Cattlemen Action Legal Fund), a group of US cattlemen, filed anti-dumping and countervailing duty cases on Canadian imports with the US Department of Commerce and the International Trade Commission. In 1993 and 1997 the US International Trade Commission responded to congressional requests by conducting investigations of the impact of Canadian policies and imports on the US beef industry (USITC 1993; USITC 1997). "The National Cattlemen’s Beef Association" has not officially endorsed the antidumping and countervailing duty cases by R-CALF. This high level of tension is partially due to the fact that the Canadian and US cattle and beef markets largely have free trade but are still in transition to a truly single market. For the most part, tariffs and quotas restricting trade in agricultural goods between Canada and the US have been removed and trade has increased. US agricultural exports to Canada increased from US$1,542 million in 1986 to US$6,795 million in 1997, a more than fourfold increase. Canadian agricultural exports to the US increased threefold over the same time period, from US$2,017 million to US$6,787 million. However, it is argued that the removal of tariffs and quotas is relatively easy compared to the removal of remaining technical and sanitary barriers to trade. Equally important is the need for producers and their commodity groups on both sides of the border to realize that their home market is no longer defined by national boundaries. Technical barriers include measures that prevent entry of products that fail to meet the health, quality, safety, compatibility, or environmental standards of importing countries. Sanitary (for animals and animal products) and phy

When the Canada-US Free Trade Agreement (CUSTA) was implemented in 1989, tariffs on both live cattle and beef were reduced and within a few years were mostly eliminated. It is likely that changes in the tariffs were not extremely important in determining trade levels, as tariffs were already quite small at the beginning of the CUSTA. In 1988, the US tariff on live cattle imports from Canada was 2.2 US cents/kilogram, just 1.4 % of the import value. Before the CUSTA, each country restricted imports under their domestic meat import laws. With the CUSTA, these quotas were eliminated for trade between the US and Canada. However, while the imposition of quotas disrupted Canadian-US trade, they were not imposed frequently enough to be an important trade barrier (Kerr, Cullen, and Sommerville 1986). Hayes and Kerr (1997) note that although tariffs and quotas had not been significant obstacles to trade, nontariff barriers did create obstacles to the creation of a single market, including sanitary barriers and consumer regulations.

In 1997, the US imported 1.4 million head of slaughter and feeder cattle from Canada, a fivefold increase in the number of cattle imported prior to CUSTA in 1987. However, live cattle imports are still extremely small compared to the US market, with imports of live cattle in 1997 constituting around 4 % of US cattle slaughter. The US exported 41,189 head of live cattle to Canada in 1997, less than 1 % of 1997 Canadian cow inventories. US imports of beef and veal from Canada increased from 241 million pounds in 1985 to 711 million pounds in 1997. Even with this increase, imports of beef from Canada equaled just 3.3 % of 1997 US meat production. The US is a much more important market for Canada than vice versa, with the vast majority of Canada's beef exports destined to the US in 1997, but only 13 % of US beef exports destined to Canada. In 1997, 33 % of Canada's beef production was exported, and imports equaled 23 % of production. Measured in terms of beef production, the US industry is ten times larger than Canada’s and is less dependent on trade. In 1997, only 8.4 % of US production were exported, while total beef imports represented 9.2 % of US production. As impediments to trade between Canada and the US were removed, north-south trade increased. Live cattle have been exported from the western provinces of Canada, particularly Alberta, to otherwise underutilized feedlots and packing plants in the western US. Leading destinations included the states of Washington, Colorado, and Utah (US International Trade Commission 1997). As the feedlot and packing industries in Alberta expand, it has been anticipated that fewer Canadian slaughter cattle will be exported to the US. In fact, it has been predicted that some US feeder cattle may be exported to Alberta, and this occurred in 1997 and 1998, although the numbers were small. As Canada exports fewer cattle, more Canadian beef is likely to be exported to the US and to the Pacific Rim, also a major exports market for the US. Beef is expo

The Reduction of Sanitary Barriers: The North West Cattle Pilot Project

The North West Pilot Project reduces the sanitary regulations for feeder cattle imports by Canada and the US (Young and Marsh 1998). The project was first proposed at the North West Livestock Health conference in Spokane, Washington, in May 1995. Representatives from industry and government in the four northwestern states of the US and the western provinces of Canada used the conference as a forum to reduce regional barriers to trade. The Canadian Cattlemen’s Association (CCA) worked with the National Cattlemen’s Beef Association (NCBA) and the Montana Stockgrowers Association (MSGA) on a proposal to reduce sanitary regulations for imports for each country, anticipating that a proposal based on reciprocity would garner the most support. The main elements of the original proposal were as follows:

• Canada would eliminate testing for anaplasmosis, brucellosis, and tuberculosis for feeder cattle from Montana and Washington imported into Canada for the period October 1 through March 31, 1995. There would be strict identification requirements for feeder cattle imported under the pilot program, and these cattle could not commingle with the Canadian herd.
• Cattle entering the US from Canada are subject to both federal requirements and additional requirements that vary by state. Under the pilot project, the Animal and Plant Health Inspection Services (APHIS) of the US Department of Agriculture was to waive test requirements for brucellosis and tuberculosis for Canadian cattle entering Montana, and the state of Montana would eliminate vaccination requirements for brucellosis for imported cattle. A description of the difficulties facing the proposal and the final outcome follows. However, it is first important to understand the criteria specified in international agreements that currently motivate and constrain changes in sanitary and phytosanitary barriers to trade.

Sanitary and phytosanitary measures are measures adopted by countries to protect human, animal and plant life and health from certain enumerated biological and chemical risks. The Sanitary and Phytosanitary Agreement of the URA and NAFTA are roughly similar (Roberts 1998) and introduce criteria for regulations affecting trade. The URA agreement has two potentially conflicting goals: it provides incentives for countries to adopt internationally recognized standards, while at the same time allowing countries to develop standards that reflect their risk preferences but differ from international standards.

If a country adopts standards that differ from international standards (where they exist), those standards can be challenged through the World Trade Organization's Dispute Settlement Process. In that case, the country must demonstrate that their standards are based on science, meaning that an assessment is made of the actual risks involved, including available scientific evidence, relevant inspection, sampling and testing, prevalence of specific diseases or pests, and the existence of pest- or disease- free areas. In assessing the risk to animal or plant life or health, the country must take into account relevant economic factors, including the cost effectiveness of alternative approaches, and choose the alternative that is least trade distorting. Two other criteria are specified for sanitary and phytosanitary regulations. Regulations must be consistent, which means that where similar conditions for disease prevail, regulations cannot be more restrictive for imports than the home country or more restrictive for some countries than for others. Finally, regulations and the decision-making process behind them must be transparent, or made easily available to the public. These are the criteria that the US and Canada agreed to as members of the World Trade Organization.

Several aspects of the pilot project made it difficult and costly for industry groups to conduct negotiations, to gain regulatory approval, and to monitor implementation of the North West Pilot Project.

1. Many players were involved in the process. Due to the reciprocal nature of the project, negotiations involved many government agencies. On the US side, several state governments were initially involved as well as APHIS. On the Canadian side, the Alberta provincial government and the Canadian Food Inspection Agency (CFIA) were involved. Customs agencies were also consulted. Commodity groups at federal, state, and provincial levels were represented. In the final stages of negotiations one meeting involved around 40 people representing 13 industry groups and agencies.
2. Requirements to change regulations were different for Canada than for the US. The approval processes for the project varied substantially between the countries in terms of complexity and time required. On the US side, APHIS needed to grant a federal waiver for the test requirements for brucellosis and tuberculosis, and APHIS had the power to do so without consultation with Congress. The state of Montana needed to waive a state statue requiring brucellosis vaccinations for imported Canadian cattle. The Canadian approval process was much lengthier. Beginning with approval of the concept by Cabinet, the legislation had to be drafted and published in the Gazette with a period for public comment. Then legislation was forwarded to the minister for approval, then to Cabinet, and then was published for a second time as law.
3. Agencies held conflicting objectives. On the Canadian side progress was slowed due to the cost recovery objective of CFIA. The cost recovery objective required employing fees to pay for both the risk analysis and the provision of any services associated with the implementation of the project. A major obstacle to the negotiation of the project was the Regionalization Docket released by APHIS in April 1996. The purpose of the docket was to update sanitary requirements for US imports so that they were consistent with the new criteria embedded in the URA and NAFTA, as discussed earlier. Historically, disease risk was assessed on the basis of national boundaries, and if the disease was present within a country, imports were banned. The Regionalization Docket proposed to recognize disease-free areas within countries and to allow imports from those regions. The contradiction for the North West Pilot Project did not lie in the concept of regionalization, but in the health classification given to the Canadian herd. If the Regionalization Docket had been adopted as originally proposed, requirements for importing Canadian cattle would have been significantly increased, defeating the purpose of the pilot project. The health classification for tuberculosis, for example, was interpreted to mean that Canadian cattle would be held at the border for 72 hours for administration of a test (Hopf 1997; Ducksworthl998). However, APHIS did not publish information on what the classifications would mean for US-Canadian border requirements. Officials of the Canadian government protested strongly, and the health status of the Canadian herd was changed before adoption of the docket. The new classification resulted in the removal of federal requirements to test for brucellosis for any feeder cattle entering the US, not just those destined for states involved in the North West Pilot Project. This action angered some US industry groups, who felt that the unilateral change in regulations would remove Canada's incentive to fo
4. Industry groups from both countries insisted that the reductions to sanitary regulations be reciprocal in nature. Although reciprocity is a useful tactic for amassing political support, it is not necessarily an appropriate goal for changes in sanitary regulations, which may differ for scientifically sound reasons and may be necessitated by a country's trade agreements. Differences in the approval processes also created tensions due to uncertainty about the timing of changes and worries that one country would give away too much too early.
5. Risk assessments are difficult and costly. APHIS adopted risk assessment methodologies quite recently. Risk assessment can be described as a vehicle for interpreting and characterizing scientific evidence, involving hazard identification, estimation of the likelihood of a hazard, and evaluation of the consequences of the hazard should it appear (Roberts 1998, p. 24). However, risk assessments are difficult due to "large and irreducible uncertainties in predicting the effects of biological stressors" (Roberts 1998, p. 26). Evidence bearing on risk assessments can be complicated and contradictory, as is evidenced by the hormone dispute brought by Canada and the US against the European Union. In addition, APHIS clearly states that geography and science should be the determinants of regulations, not politics (APHIS 1996). However, their abrupt change in the health classification of the Canadian cattle herd calls into question the criteria used for their risk assessment before and after public outcry over the original Regionalization Docket.

In October 1997 regulations were in place to allow the importation of untested feeder cattle from the states of Montana and Washington into approved Canadian feedlots. However, less than 1,000 head were imported under the project due to restrictions placed on the movement of cattle imported into Canada under the pilot project as well as a lack of economic incentives. Changes in the protocols for implementation were negotiated, evaluated, and approved. The Canadian Food Inspection Agency amended the regulations in August 1998 to reduce the movement restrictions placed on imported cattle. About 2,000 Montana calves are set for delivery to Alberta under the project. These were sold in the September 11^th Canadian Satellite Livestock Auction, and another 4,000 calves are booked for the September 25^th auction (Ducksworth 1998). The implementation of the pilot project is likely to have a small but positive impact on the US and Canadian beef industry. It will facilitate the ability of packers in Alberta to procure animals within a least cost distance of their plants. A reduction in net US imports of live cattle from Canada due to Canadian feedlot and packing expansion would also mitigate the demands for protection in the US.

Negotiations for the North West Pilot Project took longer than those for the entire Canada-US Free Trade Agreement. Hayes and Kerr (1997) state that the removal of technical barriers to trade in the Canadian and US cattle and beef markets since 1989 has been disappointing. They argue that there are high transaction costs associated with the removal of technical barriers to trade. Likening trade agreements to complex transactions, Hayes and Kerr draw on tenets of the New Institutional Economics to show that transactions do not occur in the frictionless economic environment assumed in standard neoclassical economics. They discuss the information, negotiation, and monitoring activities required to remove non-tariff barriers. Technical barriers to trade are not usually identified in a trade agreement. Thus groups desiring the benefits of a single market must undertake these costly activities with the expectation that the future gains will be greater than the cost. Information costs include identifying trade-inhibiting regulations and estimating the benefit from their removal, finding out which agencies administer the regulations and how to change them, and finally, what allies can be enlisted to create political support for change. This political support is necessary because often these agencies have priorities other than trade liberalization. Negotiation costs include lobbying, commissioning of studies and risk analysis, and presenting input into public and private hearings. Once the regulatory change is undertaken, monitoring costs exist to ensure that the change has been effectively implemented (Hayes and Kerr 1997, p. 166-167). The transactions costs identified by Hayes and Kerr are all evident in the evolution of the North West Pilot Project. In addition to the costs recognized by Hayes and Kerr, a few other aspects make the removal of sanitary barriers problematic. It may be difficult for an industry group to estimate accurately the economic benefit of the removal of a trade barrier

An outstanding issue of some consequence for US - Canadian trade in beef and cattle is recognition of the equivalency of the two countries’ grading standards. Since Canada unilaterally changed its grading standards in 1996, Canada and the US have been using the same methods for grading beef quality (Hayes and Kerr 1997). The economic costs due to lack of official recognition of grade equivalency are well documented (Kerr 1992; Hayes, Hayenga, and Melton 1995). Canadian packers are forced to sell beef at greatly reduced prices in the US, commonly called "no-roll" prices, due to the lack of a USDA stamp. Canadian carcasses can be imported into the US, processed, and receive USDA grades; however, doing so adds to Canadian industry costs by about 3 % of total carcass value. The same is true for US packers exporting to Canada. As US beef cannot be sold into eastern Canada without a large reduction in price, the US beef industry is deprived of a lucrative outlet for the lean beef that is preferred in eastern Canada. It has been estimated that this cost is equivalent to a 5 % tax on US beef that is exported to Canada (Hayes, Hayenga, and Melton 1995). Despite the potential economic benefits, to date little progress has been made in convincing US producers that grade equivalency would benefit them.

The NCBA has proposed and lobbied for legislation that would require country-of-origin labeling of beef sold at the retail level. Imported beef and beef produced from cattle imported into the country less than ten days before slaughter would be covered by the labeling requirements. In September of 1998, a joint House/Senate committee of the US Congress rejected the legislation but mandated that the US Department of Agriculture undertake a study to examine the issue. As the NCBA has indicated that they intend to continue to fight for this measure, it is likely to remain a factor in Canadian-US agricultural trade relations for some time. If passed, this legislation would introduce a technical barrier to imports of Canadian cattle and beef. The Uruguay Round Agreement contains an Agreement on Technical Barriers to Trade. Article 2.1 of the Agreement on Technical Barriers states that "Members shall ensure that in respect of technical regulations, products imported from the territory of any Member shall be accorded treatment no less favorable than that accorded to products of national origin" (GATT Secretariate 1994), echoing the national treatment clause that has been the cornerstone of the General Agreement on Tariffs and Trade since its inception. Article 2.2 goes on to detail that "Members shall ensure that technical regulations are not prepared, adopted or applied with a view to or with the effect of creating unnecessary obstacles to international trade. For this purpose, technical regulations shall not be more trade restrictive than necessary to fulfill a legitimate objective. Such legitimate objectives are, inter alia: national security requirements; the prevention of deceptive practices; protection of human health or safety, animal or plant life or health or the environment." The country-of-origin labeling requirements appear to violate the Agreement on Technical Barriers as stated above, as they would create an obstacle to trade without fulfilling one of the legitimate

IMPACT OF COUNTERVAILING DUTY

• Tariff results may force more cattle to be slaughtered in Canada with more beef available for export. Canadian cattle imports rose sharply in 1998, reflecting higher imports from the US under the Northwest Cattle Project (NWCP). Over the 1998-99 season, a total of 51,009 head were imported under the Project. Despite falling inventories since 1997, cattle slaughter continues to rise in Canada. Recent expansions of slaughter facilities in western Canada have led to higher domestic slaughter and fewer cattle available for export. The pace of slaughter expansion is nonetheless expected to slow in 1999, rising 1.5 % to 3.8 million head. (Source

• Beef production is expected to rise less than 1 % in 1999 and decline in 2000 with lower slaughter. Beef exports rose sharply in the first part of 1999. Exports to the US, Canada's leading market (93 %), showed the largest increase in absolute terms, but shipments also rose sharply to South Korea and Mexico. Canadian exports to the US are likely to increase next year because of tightening US supplies and higher beef prices. However, should the US antidumping investigation against Canadian live cattle exports prove in favor of the petitioners, Canadian beef exports may increase further. Canadian beef imports are expected to rise modestly in 1999-2000 due to increased imports of frozen boneless beef, mostly from Australia. This trend is expected to continue as supplies tighten in Canada. Beef imports from the US have weakened, reflecting continuing efforts by Canadian beef packers to displace US beef in eastern Canada. The Canadian Cattle Identification Agency, a private agency, is working to have a mandatory bovine tagging system in place by December 31, 2000. The system being geared for potential disease outbreaks or food safety related issues. US feeder cattle imports will be required to be tagged with an official Canadian tag once the program is implemented.

• These countervail and anti-dumping investigations have come under severe criticism from many circle since they were initiated on the basis of a petition by a handful of cattlemen — less than a half of one-per cent of US cattle producers not even by the National Cattlemen's Beef Association.
• The rules applied in anti-dumping cases make it very difficult for exporters to defend themselves. Canadian cattle producers sell their cattle competitively to the highest bidder and find it incomprehensible that they are at any fault when they are simply accepting the best price for their product.
• After an exhaustive investigation involving more than 30 Canadian programs and at great cost to American taxpayers, the US Department of Commerce has preliminarily determined what we knew from the outset. Any subsidies are de minimis. One of the main programs being investigated is NISA, the Net Income Stabilization Account (NISA). But this basic farm income support program was already thoroughly investigated by the same US agency in the swine cases and determined not to be a subsidy program.
• In the dumping investigation Commerce has made a preliminary determination that North American cattle prices last year were below cost of production and assessed a penalty duty of nearly 5 % on future shipments of Canadian cattle using a methodology that includes a usual margin of profit. The US National Cattlemen's Beef Association has remained neutral in this investigation recognizing that low prices did not result from Canadian imports. It is encouraging that industry meetings earlier this month have resulted in apparent consensus that anti-dumping laws need to be changed to take into consideration industry cycles. An example of bad trade policy is meat labeling and meat grading proposals currently under consideration in the US Congress. Proposals that would require beef to be labeled as imported even if the calf was born in Montana, fed in Alberta and slaughtered in Nebraska.
• Protectionism in the guise of consumer information and a clear violation of US trade obligations. Another example of bad policy is arbitrary and politicized Customs determinations. This can be seen with the proposed ruling by US Customs which, if implemented, would shut down a small company, Heartland By-Products, in Taylor, Michigan - 60 Americans would be unemployed because US Customs, an agency of the US Government, is proposing to reverse a ruling it gave the company in 1995 and cut-off the supply of sugar syrup that it imports from Canada by increasing the tariffs the company would pay by more than 7000%.

In terms of types of action, US-Canada agricultural disputes fall into two general categories: national measures on the one hand, and bilateral or multilateral dispute settlement mechanisms on the other. Both the US and Canada have national trade measures within their legal arsenals and have used them against the other's imports. As a practical matter, however, the US has typically fueled the disputes and Canadian imports have been the targets. In that regard, seven sets of US trade laws have been key:

1. Antidumping actions, such as the current US case against Live Cattle from Canada and Mexico. In antidumping cases, which are authorized by section 731 of the Tariff Act of 1930, an aggrieved domestic industry charges that imports are unfairly priced because they are too cheap relative to home market prices, and that these cheap imports are hurting US producers. The remedy is special antidumping duties placed on imports, in addition to regular customs duties, usually for at least three years and sometimes much longer.
2. Countervailing duty actions, such as the long-running case against Live Swine from Canada. This kind of action arises under section 701 of the Tariff Act and involves a complaint by a domestic industry that imports have been unfairly subsidized by the exporting government or governments and that the imports are injuring the US producers. The remedy here is special countervailing duties on imports, again usually for a minimum of three years and again in addition to regular customs duties.
3. A safeguard or escape clause action, such as the recent action on Wheat Gluten. Safeguard actions, under section 201 of the Trade Act of 1974, allow domestic producers to claim that the sheer increase in number of imports has injured the industry and warrants temporary relief while adjustments to the new competitive conditions can be made. The remedy can be duties, a tariff-rate quota (in which increasing rates of duties are tied to increasing volumes of imports), or other import measures, for up to eight years.
4. So-called "section 301" actions, which are unique to the US. Section 301 of the Trade Act of 1974 gives the US Government extremely wide authority to enforce US rights under trade agreements and to take action against "unreasonable" or "discriminatory" foreign government practices that interfere with US export opportunities. When the offending practice violates a trade agreement section 301 requires that an effort be made to resolve the dispute under the dispute settlement mechanism of the agreement. Thus, what starts as a national action under section 301 can end as a bilateral or multilateral negotiation and dispute settlement. The current litigation at the WTO over Canada’s supply management system for milk, for example, stems from a section 301 complaint by US dairy producers.
5. Former "section 22" measures, which are no longer permitted against Canada or other WTO members. Section 22 of the US Agricultural Adjustment Act permits fees or quotas to be imposed on any imports found to interfere with US agricultural programs. Formerly section 22 fees or quotas were imposed on a over a dozen products including dairy, wheat, and barley.
6. An odd US measure relating only to cheese - section 702 of the Trade Agreements Act of 1979. Section 702 essentially sets up special countervailing duty provisions applicable to allegedly subsidized cheese that interferes with agreed-upon quotas on imports of cheese into the US. A section 702 action against cheese was terminated without a penalty against Canada in 1996. And finally, a fact-finding investigation authorized by section 332 of the Tariff Act. Section 332 studies are not actually trade actions and do not provide remedies against imports; they are fact-finding studies that provide information about industry conditions. They signal the existence of interest in particular sectors, though, and also provide information that can become the basis of a petition by a domestic industry for trade action. Hence, they may be loosely categorized as a "trade" law.

These various unilateral remedies have certain common features. In general they are instigated by industry groups that target one or more exporting countries. They involve written industry petitions that lay out the concerns and trigger intensive and intrusive government fact-finding investigations of the practices. They are characterised by continuing domestic and foreign industry participation and monitoring, with significant attendant legal costs and apply standards that are so narrowly focused as to be one-sided. For example, in antidumping and countervailing duty cases, factors such as whether any allegedly unfair pricing is really at market levels, or whether government subsidies are really a response to unfair trade practices on the other side of the border. These acts normally follow very short deadlines that can significantly hamper a defense, particularly when the deadlines apply to the investigating authorities’ sometimes overwhelming requests for information. They typically result in the assessment of additional duties or other import measures on imports as soon as 3 to 6 months after a petition requesting the duties has been filed with the national authorities, and can result in retroactive duties. The normall impact of these actions are duty levels and other import restraints at levels greater than a truly objective and fair consideration of the issue as a whole and the level of domestic injury would arguably warrant.

A negotiated resolution, by contrast, offers a quite different process. Under the NAFTA, special dispute resolution procedures in Chapter 20 apply to any matter involving the interpretation or application of the substantive NAFTA provisions. NAFTA substantive provisions include special rules applicable to the manner in which trade in a variety of agricultural products will be conducted. In addition, NAFTA provisions on sanitary and phytosanitary requirements, on import and export restrictions, and on the application of global safeguard actions to NAFTA Parties, apply to trade in any agricultural commodity. Hence, the Chapter 20 procedures can be applied to resolve a very wide range of agricultural trade irritants. The procedures involve a request for consultations by the aggrieved country, followed by an open-ended period for a government-to-government negotiated resolution.

The Free Trade Commission may assist the consulting parties in reaching a mutually satisfactory resolution. If consultations do not resolve the problem, either party may request that a panel be established to examine the matter. Panelists are drawn from a roster pre-approved by the parties - a legalistic panel process including submissions of arguments of the disputants. Fact findings are based on the submissions and do not stem from any independent examination by the panelists outside of the submissions. There is no direct involvement by outside counsel. Agreement by the parties are made within one month of the final panel report on how its recommendations will be implemented. A graduated enforcement process is involved in the event the losing party does not implement the panel’s recommendations. This allows the complaining party to suspend trade benefits for the period of non-implementation but subject to the possibility of the non-conforming country’s request for a panel to examine whether the level of benefits to be suspended is excessive.

The WTO dispute resolution process is similar in that it also relies on consultation, conciliation, and a relatively flexible implementation process for any change required in a government practice or action. It applies to issues arising under all of the substantive WTO agreements. These include the agreements specific to agricultural trade -- the Agreement on Agriculture and Agreement on Sanitary and Phytosanitary Measures -- as well as the agreements relating to trade in goods in general, which would include agriculture.

The basic steps of WTO dispute settlement are:

• a request for consultations by the aggrieved country
• followed by up to two months of government-to-government meetings to discuss and try to resolve the issue bilaterally
• by mutual consent, the WTO Director-General may mediate;
• at the aggrieved country's request, the establishment of a panel to examine the case, with panelists drawn from the WTO membership
• a legalistic panel examination, involving meetings with the parties and written submissions, but with all key facts stated by the parties and no independent fact-finding investigation by the panelists
• no direct involvement (to date) in the actual meeting and hearing processes by outside counsel
• if a country is found to be in violation of its WTO commitments, a relatively flexible process in which to implement changes, starting with a 30-day period to state the intended implementation, and setting of a "reasonable period of time" for actual compliance
• no immediate retaliation even if compliance does not take place within the stated period.

• negotiations over a mutually acceptable compensation must take place, with further arbitration possible if the country that is out of WTO compliance objects to the level of compensation

Thus, by several measures, the government-to-government processes offer a significantly more balanced and orderly remedy for bilateral trade disputes than do national trade actions. The distinctions between these unilateral versus negotiated proceedings go to the heart of what seems to be changing in US-Canada agricultural trade disputes.

This overview brings us to the current list of agricultural trade disputes between US and Canada. The main claims are these:

1. live cattle: the Canadians are selling too much too cheaply in the US because of too much Canadian Government subsidies; the cattle also contain unacceptably risky hormones;
2. lamb: imports of lamb meat from Canada and elsewhere are causing serious injury to the US industry;
3. milk: Canadian milk marketing boards sell milk too dearly in Canada and by that means allow cheap sales to the US;
4. barley: the Canadian Wheat Board sells too little barley to the US and by restricting exports causes barley to be sold too cheaply in Canada to cattle producers;
5. durum wheat: the Canadian Wheat Board sells too much durum wheat too cheaply to the US, and the wheat is also tainted by oats and a fungus;
6. meat labeling: Canada must abide by new US rules on country of origin markings; and,
7. live swine: Canada has subsidized exports of pork and live swine through countervailable subsidies.

On the face of it, these issues cross several major food groups and all possible legal weapons, including the antidumping law (live cattle), countervailing duty law (live cattle, live swine), safeguard action (lamb), section 301 (dairy), WTO actions (dairy), and NAFTA (meat labeling). Peering behind these superficial observations, however, uncovers very active use of government-to-government dispute settlement by both the US and Canada and a de-emphasis on unilateral national action. Live cattle producers in Canada will not feel that national actions have been de-emphasized, because they are suffering very active present litigation. Otherwise, however, the most active disputes are either being addressed bilaterally through NAFTA and the WTO, or Canadian imports are otherwise likely to be rescued by NAFTA. To return to the list:

1. lamb: Canada is technically involved in a current global safeguard action, and should qualify for exclusion from any remedy under NAFTA safeguard standards.
2. milk: what began as a section 301 action on the petition of three major US dairy organizations has triggered WTO dispute settlement on the core US claim that Canada violates its WTO trade obligations by providing an export subsidy to industrial milk. It is never safe to predict what the US Government will do in any given instance, but the agency involved -- the US Trade Representative's Office -- has unofficially voiced an intent not to exercise unilateral section 301 authority post-Uruguay Round.
3. wheat: wheat is perhaps the most remarkable instance to date in avoiding national trade action. A NAFTA panel in 1993 found in favor of Canada on US charges that its durum wheat pricing violated Canada’s CFTA undertakings. Despite continuing political skirmishing since then, the US Government and industry have not resorted to antidumping, or countervailing duty, or safeguard action. The State of South Dakota earlier this fall took matters into its own hands and blocked Canadian trucks carrying wheat and livestock from entering the state. According to public press reports, that blockade was suspended after Canada launched NAFTA and WTO complaints and engaged the US in negotiations on these and a range of other agricultural issues.
4. meat labeling: Canada has taken the US to the NAFTA over a meat labeling provision in a Senate bill that would require beef sold at retail to carry an "imported" label if not a product of livestock entirely raised, slaughtered, and processed in the US. Canada's claim is that this requirement would violate NAFTA rules on country-of-origin marking.

Thus, in the most prominent current US-Canada agricultural disputes, NAFTA and WTO consultations, dispute settlement, and other NAFTA and WTO provisions have so far succeeded in diverting the US from unilateral trade attack. There are many reasons why the NAFTA and WTO agreements have not moved all agricultural trade disputes into an international forum. Four reasons come to mind. The first is that none of those agreements has actually done away with the core trade laws, and as long as a private right of action is on the books, governments cannot legally prevent companies and industries from bringing suit. Second, trade restrictions in the agricultural sector have been long-running and intractable and bilateral and multilateral attempts to bring those restrictions under control have only been relatively recent -- in less than the last decade. Despite the CFTA, NAFTA, and WTO agreements, unresolved issues remain. The third factor is that agricultural trade is now in the period in which quotas have been turned into high tariffs and as such are starting to come down. Experience on the manufacturing side suggests that this process can be bumpy, in part because with declining tariff protection, countries resort to more subtle non-tariff trade barriers -- the "squeezing the balloon" phenomenon. On that point, though, other WTO agreements that apply generally to goods or particularly to agricultural goods should help constrain all but the most creative non-tariff barriers. Finally, any new set of legal rules prompts skirmishing and testing over what they mean, what exceptions there will be, and how they will fit or not to particular circumstances. The complexity of the economics governing agricultural trade will exacerbate that natural tendency.

Animal and Plant Health Safety Inspection Service (APHIS). 1996. Realizing the Future

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(Source Canada (http://www.fas.usda.gov/dlp/circular/1999/99-10LP/beef.htm) )

• Canadian inventories stood at 12.9 million head at the beginning of 1999, and are expected to drop 2 % over the year. While heifer slaughter remains high in 1999, an increase in heifer retention for breeding in 2000 is expected from this year’s calf crop. During 2000 or 2001, cattle inventories are expected to reach their cyclical low.
• Feeder cattle prices are expected to be supported by low feed prices and a smaller calf crop, and tighter supplies will strengthen slaughter cattle prices.
• Live cattle exports were down sharply in the first half of 1999, and total shipments for the year are expected to be 28 % lower than 1998 exports. Lower exports are related to reduced inventories, higher slaughter rates, and good pasture conditions. The trend indicates declining cattle exports to the US but rising beef exports.

R-CALF: The Ranchers-Cattlemen Action Legal Fund (R-CALF) is a US producer group formed for the purpose of launching a trade action against the Canadian cattle industry. It is not the official representative of US cattle producers. (The National Cattlemen's Beef Association - NCBA - officially represents US producers. The NCBA did not take part in the trade actions.) In 1998 prices for finished cattle in both the US and Canada were lower than many in the cattle industry had anticipated. Some cattle producers in the north-western US blamed Canadian cattle imports for their plight. They formed the R-CALF organization and launched anti-dumping and countervailing duty cases against the Canadian industry.

What Did Cause Lower Prices in 1998? Low feed costs, relatively high replacement prices and a bullish futures market encouraged feedlot operators to feed cattle to heavier than normal weights, increasing total US beef supplies by approx. 1 billion pounds, or the equivalent of 1.4 million extra slaughter cattle. Pork production in the US rose by 9%, or 1.6 billion pounds over 1997, further impacting total meat supplies. The Asian financial crisis lowered the value of US fed cattle by approx. $30.00 per head as Asia is a major market for US hides and offal.

October 1, 1998: R-CALF first files petitions with US Department of Commerce (DOC) requesting anti-dumping and countervailing duty trade investigations.

December 2, 1998: Canadian government representatives, Canadian Cattlemen's Association and legal counsel present Canada's case before the US International Trade Commission (ITC) in Washington D.C.

December 22, 1998 DOC rules that R-CALF represents sufficient US cattle production for cases to proceed (DOC normally requires that 25% of an industry, and 50% of an industry that is taking a position, are in support of a petition; this decision may be challenged once the cases reach completion.)

January 20, 1999: ITC votes 4 to 2 to continue the investigations against Canadian live cattle.

May 4, 1999 DOC decides not to apply preliminary countervailing duties on Canadian exports of live cattle, as impacts from Canadian subsidies are too low to affect the US market.

July 1, 1999 DOC votes to apply preliminary anti-dumping duties of 4.73% of value of live cattle exported to the US The DOC reached this decision by examining cost of production and sales records of six Canadian exporters; 5 had low individual rates applied and one was exonerated. The industry duty is an average of the 5 individual rates.