GATT Talks Worry Canadian Farmers

A PROPOSAL by the General Agreement on Tariffs and Trade (GATT) to liberalize world agricultural trading rules is drawing mixed reviews from Canada's 270,000 farmers.

Grain growers are leaning toward it because they desperately need a reduction in European and United States export subsidies which have driven grain prices to near-record lows. But dairy and poultry producers warn that they could be forced out of business if Canadian import controls are eliminated.

The quandary reflects the economic, linguistic, and regional challenges that already confront Canada.

The proposal by Arthur Dunkel, director general of GATT, would lower European and US export subsidies by 36 percent over the next eight years, starting in 1993. It would also convert all Canadian import restrictions to tariffs (called "tariffication") and reduce them by an average of 36 percent over six years.

Mr. Dunkel's proposal is a last-ditch effort to save the five-year-old GATT talks which have stalled over the issue of agriculture. Member nations have an April deadline to finish negotiations. Current proposal better than alternatives

Canadian advocates say the deal, although far from perfect, could be a boost to Western Canada's 140,000 grain farmers, many of whom have been driven to the brink of financial ruin by the subsidy war between the US and Europe. "If we turn our backs on it, the downside is much worse," says Harvey McEwen, past president of the Western Canadian Wheat Growers Association.

Yet opponents argue that tariffication would be damaging for Canada's 37,000 dairy and poultry farmers whose industries depend on production quotas and import controls. "We remain convinced that the Dunkel proposal will be disastrous, spelling the end for any hope of a viable dairy, egg, or poultry industry in Canada," says Louis Balcaen, a Manitoba milk producer and president of the 32,000-member Dairy Farmers of Canada.

In Canada, milk, eggs, chicken, and turkeys are "supply managed" commodities. Production quotas are established on the basis of domestic consumption and portioned out to the provinces through national marketing boards.

Supply management was instituted in the 1970s to halt domestic overproduction and interprovincial price wars. In return for matching production with demand, farmers receive a guaranteed return based on a cost-of-production formula.

The system is popular with participating farmers, especially Canada's dairy producers. They compare themselves favorably with their counterparts in the US, where overproduction has caused milk prices to fall drastically over the last two years. Supermarket shoppers unhappy

Consumer organizations claim the system inflates retail prices for dairy and poultry products.

The success of supply management depends largely on limiting imports of dairy and poultry products. Such restrictions are permitted under GATT's Article 11. Without these controls, cheap imports would flood the Canadian market, prices and quota values would fall, and farmers would be forced out of business, according to officials. In the case of chicken, foreign imports are so cheap that, even with tariffs, the domestic industry could be quickly wiped out, says Albert Chambers, of the Canadian Chicken Ma rketing Agency.

The Canadian government calls for a stronger Article 11 that would enable it to maintain supply management. But it also wants the elimination of price-depressing export subsidies. This dual position has drawn criticism from the US and other members of a group of nations that export farm goods, known as the Cairns group, who charge that Canada is trying to have it both ways.

The issue takes on added political overtones because of Quebec, currently reevaluating its relationship with the rest of Canada. Supply management is vital for Quebec agriculture. Nearly one-third of Quebec's 45,000 farmers operate within the national system. Forty-five percent of the province's farm income comes from dairy and poultry production.