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June 7, 2000 - International Trade News

Canada Ready to Fght U.S. Sugar Restrictions

WINDSOR -- International Trade Minister Pierre Pettigrew has told the U.S. to back off a proposed sugar import licensing program or face NAFTA and WTO challenges, top trade sources said yesterday.

In a meeting with deputy U.S. trade representative Richard Fisher in Darwin, Australia, Mr. Pettigrew reportedly threatened to rekindle a challenge of U.S. import restrictions on sugar, which had been withdrawn in 1997, if the U.S. proceeds with proposed legislation to license companies to import Canadian sugar or products containing sugar. Mr. Pettigrew and Mr. Fisher held the bilateral meetings as part of a larger gathering of APEC trade ministers.

Canada, which dropped its challenge under the North American Free Trade Agreement in return for 92.2 per cent of the 66,000-tonne tariff-rate quota, said the new measure is discriminatory and unilaterally makes fundamental changes to the existing arrangement.

"Canada fundamentally opposes the proposed rule as a discriminatory, arbitrary and unjustified measure that would be inconsistent with U.S. bilateral and international trade commitments,'' Canada wrote in its official submission to the U.S. government's consultation process. "If implemented, it would undermine the stability that has prevailed in bilateral SCP (sugar-containing products) trade in recent years and call into question the continued viability of the 1997 bilateral understanding on trade in refined sugar and SCPs.''

The potential damage of the measure to the 20 Canadian companies that share the current quota, including Associated Brands, Lantic Sugar, Kingsmill Foods, Kraft General Foods Canada and Robin Hood Multifoods, is estimated at more than $50 million. The quota, which is allocated by Canada to the Canadian firms based on historical use, would almost certainly be redistributed under the U.S. licensing scheme, creating the potential of significant fluctuations in the companies' revenues.

The U.S. Department of Agriculture proposal, which was drafted at the urging of a consortium of sugar repackagers, has also come under considerable fire from a number of well-known food and candy producers, including Hershey, Mars and Kraft, who purchase a portion of their sugar from Canada.

"The issue was raised with deputy USTR Fisher at the APEC ministerial in Darwin and it was agreed that it would be followed up at the level of officials,'' was the only official statement the Department of International Trade officials would make.

Canadian officials said that by not proposing a similar measure for Mexico, which enjoys considerably greater access to the U.S. market under a bilateral agreement of their own, the U.S. is discriminating against Canadian exporters.

The U.S. has a long history of using the import quota system to protect sugar, peanut and tobacco producers. For years, as a way of protecting sugar producers in southern states, known colloquially as Big Sugar, Washington has restricted sugar imports as a means of keeping domestic sugar prices artificially high, with the price-per-pound often double that of the world price. The controls, which protect an estimated 50,000 jobs, are estimated to cost U.S. consumers $1.4 billion U.S. per year in higher costs for soft drinks, baked goods and other SCPs.

PUBLICATION The Ottawa Citizen
DATE Wed 07 Jun 2000
BYLINE James Baxter