Nobody can light a fire under an issue like President Donald Trump, even if he openly admits he doesn’t understand it.
Speaking in Fargo, North Dakota, on Wednesday night, the president was given some speaking points on the issue of how U.S. wheat is graded in Canada — one of the few agriculture trade irritants outside of dairy that the U.S. is looking to resolve with Canada in the current NAFTA negotiations. His lack of prep certainly showed, as he told the audience “I don’t know what the hell this means,” but the fact the president of the United States mentioned wheat grading raised awareness and spurred discussion about how U.S. wheat is treated in Canada.
Here is the wheat grading portion of the speech:
Immediately after the rally, farmers on both sides of the border took to Twitter asking why the wheat trade irritant was not being fixed.
Despite the president not being familiar with the issue, U.S. Wheat Associates and the National Association of Wheat Growers have lobbied for changes to Canada’s wheat grading rules for a long time. But in the context of steel tariffs, auto rules-of-origin, a sunset clause, and the other contentious issues in NAFTA talks, the wheat grading issue Trump referred to is easily resolved. Any over-the-top rhetoric about it is just that.
First of all, it’s more optics than anything. Yes, U.S. wheat is automatically graded as feed under Canada’s grain classification system when it enters the country, but that doesn’t stop Canadian buyers from pricing it the same as equivalent quality wheat grown in Canada. Price is dependent on quality, not just grade, as Elwin Hermanson, former chief commissioner of the Canadian Grain Commission tweeted (below). Keep in mind the lower value of the Canadian dollar is generally a much larger disincentive for U.S. wheat to flow north.
It isn’t Canada’s responsibility to set up a grading system for US wheat varieties not grown in Canada. However the important fact is that American farmers can freely sell their wheat in our country at whatever price they can negotiate based on value and demand. https://t.co/lvT1t6wfHP
— Elwin Hermanson (@ElwinHermanson) June 28, 2018
Second, key players in the Canadian wheat industry share the same view as their U.S. wheat industry counterparts. Cereals Canada, the Alberta Wheat Commission, and Western Canadian Wheat Growers Association are all in favour changing the rules to grade U.S. wheat the same as Canadian wheat, as long as it’s a variety that’s registered in Canada. They supported the former Conservative government when it introduced Bill C-48, which would have addressed U.S. wheat industry’s concerns. (The legislation was not passed before the Conservatives lost the federal election in 2015.)
In the past, there have been concerns that U.S. imports would negatively affect the quality of Canadian wheat exports, but changes to Canada’s variety registration system mean Canadian farmers are already growing U.S. varieties. Whether Faller or Prosper wheat delivered to a Canadian elevator is grown north or south of the border won’t make a difference in terms of quality.
Canada has already taken several major steps toward opening up the border to U.S. wheat, including the removal of Kernel Visual Distinguishability (KVD) in 2008 (which made it difficult for U.S. varieties to be registered in Canada), the end of the Canadian Wheat Board’s single desk in 2012, and changes to the variety registration and classification system to accommodate U.S. varieties.
The main reason the grading issue hasn’t been fixed is a lack of political will in Ottawa. It wasn’t a sexy topic for the Conservatives to prioritize during the election campaign in 2015, and it hasn’t been made a priority by the Liberal government since, but there’s no question a fix could easily be tucked into any NAFTA 2.0-related legislation.
In terms of areas of dispute in NAFTA negotiations, wheat grade harmonization a pretty easy concession to make. It’s certainly a card Canada can try to trade for something, and President Trump’s speechwriters and lawmakers in northern states might try to make it sound like a major issue, but it will not be a hindrance to concluding a new NAFTA deal.