Previous GAO Reports on STEs

We have already published a number of reports on state trading issues, including (1) a July 1995 report that provides a brief summary of trade remedy laws available to investigate and respond to activities of entities trading with the United States, including STEs; (2) an August 1995 report on the General Agreement on Tariffs and Trade/World Trade Organization (WTO) practices that apply to STEs and the effectiveness of those disciplines to date; and (3) a June 1996 report that focuses on the activities of three STEs, including the CWB, and their potential capabilities to distort trade in their respective commodity markets. In addition, the U.S. Trade Representative (USTR) remains concerned that the CWB may be using its monopoly to undercut U.S. wheat prices and that U.S. farmers continue to be hurt by increased Canadian wheat imports. We reviewed the following: (1) CWB operations, government assistance to the CWB and the Canadian farmer, and ongoing changes to the environment in which the CWB operates; (2) the availability of data to ascertain CWB pricing practices, and efforts to increase the amount of data available; and (3) the nature of trade remedies available to address the operations of STEs, and the frequency with which these remedies have been applied to STEs. 4). The government of Canada interprets these changes differently. Canadian Government Assistance to the Wheat and Barley Producers

The Canadian government also provides other subsidies to the grain sector through income support policies, income and crop insurance, and provision of railroad hopper cars. The CWB official in charge of U.S. marketing explained that at the same time the end of the rail subsidies made the United States a more attractive market, the decline of U.S. usage of the USDA’s Export Enhancement Program was working in an offsetting fashion, making the United States a less attractive market. However, the CWB declines to reveal other important information, such as the actual contract prices for its sales to foreign grain buyers. A Canadian grain company confirmed that sales to Canadian consumers are based on the MGE prices. USDA and Customs officials are discussing the possibility of collecting more detailed price information on Canadian wheat imports. U.S. officials believe that the new questionnaire does not go far enough in increasing the pricing transparency of the CWB and other STEs. In these countries, such as China or Russia, public information on their STEs is not always readily available. CWB and Other STE Involvement in Trade Remedy Actions

The CWB and other STEs have been involved in investigations under U.S. trade law, and their activities have been the subject of formal disputes under international trade agreements. The ITC conducted two investigations involving U.S. imports of Canadian grain, and USTR reported one CFTA dispute settlement action about CWB export pricing.
Why GAO Did This Study

Pursuant to a congressional request, GAO provided information on Canadian grain exports to the United States, focusing on the operations of the Canadian Wheat Board (CWB) and the trade remedies applicable to the activities of state trading enterprises (STE).

What GAO Found

GAO noted that: (1) the CWB is a STE with a monopoly on certain Canadian grain sales and receives Canadian government subsidies in a number of direct and indirect ways; (2) the Canadian government also provides other assistance to its wheat and barley farmers; (3) the CWB's operating environment is undergoing changes, some of which are expected to make the United States a more attractive market for Canadian grain; (4) at the same time, there is a greater presence of U.S. grain companies operating in Canada, and the CWB is dealing more frequently with private companies in the sale of Canadian grain; (5) little information on actual CWB contracts is publicly available; (6) although U.S. Customs Service and the Department of Agriculture collect a great deal of information on imports of Canadian grain into the United States, these data cannot be used to ascertain CWB export prices; (7) the format that countries use to report on their STEs' activities to the World Trade Organization has recently been revised; (8) however, U.S. officials are concerned that it does not go far enough to increase the openness of the pricing practices of certain STEs, such as the CWB; (9) trade remedies to combat disruptive or trade-distorting imports under U.S. trade laws do not treat STEs any differently from other entities involved in international trade; (10) these U.S. trade laws can address trade issues such as dumping, actionable subsidies, and surges in imports; (11) in addition, STE activities may be subject to dispute settlement provisions under international trade agreements if the activities are inconsistent with an obligation agreed to by the government of the STE; and (12) relatively few trade remedy actions have been taken involving STEs.