RESTRICTED
WORLD TRADE G/STR/W/24
3May1996
ORGANIZATION(96-1722)
Original: English Working Party onState Trading Enterprises
REPLIES TO
QUESTIONS POSED BY
AUSTRALIA1TOCANADA2
CONCERNING THE LATTER 'SNOTIFICATION ONARTICLE XVII
Thefollowing communication, dated 26April 1996, hasbeenreceived from thePermanent
Mission ofCanada.
_______________
1. DoestheCanadian Wheat Board underwrite salesofwheat and,ifso,under whatcircumstances
doesthisoccur?
Weareunsure ofwhatAustralia means bytheterm"underwrite" inthisquestion. Assuming
Australia isreferring totheCWB initial payment guarantee, theGovernment ofCanada guarantees
CWB pooldeficits, which occur when finalreturns tothepoolaccount arelessthantheinitial payment
plusoperating expenses andCWB administration costs. Itshould benoted thatpooldeficits arequite
infrequent andhaveaccounted foronly1.1percentofthetotalsalesvalue ofwheat, durum wheat,
feedbarley, malting barley andoatssince theinception oftheprogramme over50years ago.
2. Withregard totheCanadian Dairy Commission (CDC), what istheMarket Sharing Quota
andhowdoesitoperate?
Thelevelofdomestic requirements forindustrial milkandcream isdetermined bytheCanadian
Milk Supply Management Committee (CMSMC).
TheCMSMCoverseestheapplicationoftheNationalMilkMarketingPlan,thefederal-provincial
agreementthatgovernsmilksupplymanagementinCanada.ChairedbytheCanadianDairyCommission
(CDC), theCMSMC hasrepresentation from theproducers andgovernments oftheparticipating
provinces.
TheCMSMCmeetseverytwomonthstoreviewandconsiderthemajoreconomicandmarketing
factors affecting thedairy sector. These include trends indomestic consumption andproduction of
milkanddairy products, thelevelofskimmilkpowder andbutter stocks heldbytheCommission and
thetrade andexport market activities.
1G/STR/W/8.
2G/STR/N/1/CAN +Add.1.
./.G/STR/W/24
Page2
Eachyear, theCMSMC setsthenational industrial milkproduction target orMarket Sharing
Quota (MSQ). TheNational MSQ ismade upofestimated requirements fordomestic consumption,
plusa"sleeve" amount (which actsasabuffer tomeet unanticipated increases indemand), plusan
amount forspecific export activities. Thistarget isconstantly monitored andadjusted when necessary
toreflect changes indemand forindustrial milkproducts suchasbutter andcheese, asmeasured in
terms ofbutterfat. TheCMSMC applies theterms oftheNational MilkMarketing Plantoestablish
theprovincial shares oftheMSQ. Each province allocates itsshare oftheMSQ toitsrespective
producers according toitsownpolicies.
3. Does theCanadian Government provide anyfinancial support totheoperations oftheCDC
orguarantee anyminimum levelofpayment toproducers? Ifso,howarethese functions
determined?
TheCanadian Government funds certain domestic administrative expenses oftheCommission
(fiscal year1995/1996 -$2,493,000) andstudies oncostofproduction anddairy policy (fiscal year
1995/1996 -$361,000). Allcosts related tomarketing activities arefinanced through returns from
themarketplace.
TheCanadianGovernmentalsoprovidesfundingtotheCommissionfordirectsupportpayments
toproducers ofindustrial milkandcream onshipments produced tomeetdomestic requirements. Direct
support payments inthe1994-1995 dairy yearamounted to$221.8 million.
Therateofthedirect payment iscurrently $4.62 perstandard hectolitre (containing 3.6kg
butterfat) andwillbereduced to$3.80 perstandard hectolitre on1August 1996. TheGovernment
announced initsMarch 1996 budget thatthesubsidy would bephased outinfiveannual reductions
of$0.76 perhlstarting August 1997. Thiswillendthedirect support payment completely asof
August 2001.
Loans areavailable fromtheGovernment ofCanada, toamaximum of$300million, tofinance
operations. Individual loans arerepayable within oneyearofthedatetheloanismade. Interest is
charged onoutstanding loansatthenormal ratesestablished bytheGovernment forCrown corporations.
Allinterest charges areborne bydairy producers.