RESTRICTED
WORLD TRADE G/STR/W/23
2May1996
ORGANIZATION(96-1716)
Original: English Working Party onState Trading Enterprises
REPLIES TO
QUESTIONS POSED BY
THE UNITED STATES1TOCANADA2
CONCERNING THE LATTER 'SNOTIFICATION ONARTICLE XVII
Thefollowing communication, dated 26April 1996, hasbeenreceived from thePermanent
Mission ofCanada.
_______________
1. WenotethatCanadadidnotincludetheOntarioWheatProducersinitsArticleXVIInotification.
Weunderstand thatthisentity enjoys "special orexclusive rights orprivileges" inthemeaning
oftheUnderstanding ontheInterpretation ofArticle XVIIoftheGATT 1994.
Could Canada explain whythisentity wasnotincluded inthenotification?
Canada doesnotconsider thattheOntario Wheat Producers 'Marketing Board (OWPMB) meets
theworkingdefinitionofanotifiableentityundertheUnderstandingontheInterpretationofArticleXVII
oftheGATT 1994.
While theOWPMB operates asingle-desk selling system forOntario wheat indomestic markets,
itsoperations withrespect toexports areundertaken under theauthority oftheCanadian Wheat Board
(CWB). TheOWPMB isnotinvolved inimports ofwheat.
Ontario wheat forexport must bepurchased from theOWPMB byprivate firms accredited
asexporters ofOntario wheat bytheCWB. Inorder tobeexported, Ontario wheat musthaveanexport
licence from theCWB.
2. Canada reported under Description oftheFunctioning oftheEnterprise, part3ofthe1960
Questionnaire, thattheCanadian Dairy Commission (CDC) "...determined thatimports were
necessary torelieve atemporary market shortage".
Could Canada explain howtheCDC makes thisdetermination, aswellaswhatcriteria ituses
foradvising theGovernment ofCanada ondomestic requirements forindustrial milkandcream?
Thelevelofdomestic requirements forindustrial milkandcream isdetermined bytheCanadian
Milk Supply Management Committee (CMSMC).
1G/STR/W/10.
2G/STR/N/1/CAN +Add.1.G/STR/W/23
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TheCMSMCoverseestheapplicationoftheNationalMilkMarketingPlan,thefederal-provincial
agreementthatgovernsmilksupplymanagementinCanada.ChairedbytheCanadianDairyCommission
(CDC), theCMSMC hasrepresentation from theproducers andgovernments oftheparticipating
provinces.
TheCMSMC meets every 2months toreview andconsider themajor economic andmarketing
factors affecting thedairy sector. These include trends indomestic consumption andproduction of
milkanddairy products, thelevelofskimmilkpowder andbutter stocks heldbytheCommission and
thetrade andexport market activities. TheCMSMC could determine thatimports addition tothose
required tofulfil Canada 'sWTO access commitments werenecessary torelieve amarket shortage if
therewereapossibility ofCDC stocks falling tozero,withnoprospect ofreplenishment fromdomestic
butter manufacturers. Theresponsible Minister would thenconsider issuing asupplemental import
permit toallow importation ofthenecessary supplies atthein-quota rateofduty.
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. Canada reported under Description oftheFunctioning oftheEnterprise, part3ofthe1960
Questionnaire, thattheProvincial Liquor Control Authorities "...purchase orpermit the
purchase ofalcoholic beverages inlinewithmarket needs asrelated tosuchcommercial
considerations asprice, quality, availability, marketability, transportation andotherconditions
ofpurchase orsale".
Could Canada explain howtheLiquor Control Authorities make these determinations?
While specific policies andprocedures related tolisting andde-listing ofwines andspirits vary
from oneprovincial liquor board toanother, theiroverall objective istoensure thatdecisions are
primarily market driven, based ontheneedtoprovide customers withvariety andchoice consistent
withanappropriate level ofprofit. Domestic andimported products aretreated onthesame basis
inaccordance withCanada 'sinternational trade obligations.
Provincialliquorboardsrequirethatvendorsfilealistingapplicationforeachproduct,including
aproduct profile andmarketing plan. ForOntario, which accounts forabout one-third ofCanadian
wines andspirits sales, themarketing planmustinclude thefollowing: current salesinother provinces
andother countries, product uniqueness andattributes, pricing strategy andcomparison toproducts
identified asmain competitors, results ofanymarket research, description oftarget market and
advertising/promotional programmes insupport oftheproduct.
Ineachprovincial jurisdiction, acommittee hasbeenappointed toreview applications andmake
recommendations forlisting andde-listing products. Thedecision tolistnewproducts isbased on
theevaluation ofcommercial criteria thatinclude some orallofthefollowing: quality (taste), price
versus quality, merchandising andmarketing support, salesprojections andlocalmarket tastes, ability
toobtain theproduct atreasonable andstable costs, unique characteristics, fitwithexisting product
range, containers andpackaging. Products arerequired tomeetannual salesobjectives. However,
liquor boards maypurchase special products onatrialbasistotestthemarket orsatisfy unique seasonal
orethnic appeal. Salesaremonitored toensure thatpurchases areconsistent withthemarket. DecisionsG/STR/W/23
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tode-list products aretypically based onfailure tomeetestablished salesobjectives andaresubject
toappeal. Committee decisions aretransparent, requiring written notification tovendors.
4. Canada reported under Description oftheFunctioning oftheEnterprise, question 3ofthe1960
Questionnaire, that"...theCDCalsosellsskimmilkandwhole milkpowders andevaporated
milkdirectly toexport markets".
Could Canada report iftheCDC exports cheese?
With theexception oftwosmall transactions (1,500 tonnes ofcheddar cheese in1992 and
200tonnes ofcheddar in1991), theCommission hasnotexported cheese.
5. Weunderstand thatCanada hasinstituted anewOptional Export Programme fordairy.
Could Canada provide information ontheoperations oftheprogramme, suchashowpermits
areallocated andhowprices aredetermined?
Thisprogramme wasimplemented inAugust 1995toallow theadditional production ofmilk
fornewexport market opportunities identified byexporters. Todate,nomilkhasbeenproduced under
thisprogramme.
Under thisprogramme, provinces mayproduce anadditional quantity ofmilkofuptofive
percent(5%) ofthetotaloftheprovincial fluidmilkquota andtheprovincial share ofthenational
Market Sharing Quota, andindividual producers mayproduce additional production ofuptotenper
cent(10%) oftheir totalquota production, forapproved Optional Export Programme contracts.
Provincial boards andagencies areresponsible fordetermining whether ornottheprogramme will
beoffered within aprovince, forestablishing theguidelines under which applications willbereceived
fromprocessors andexporters, andfordetermining themethod bywhich therequired production will
besupplied iftheapplication isultimately approved byaSupervisory Committee.
Tobeeligible forthisprogramme, aproposed project mustintroduce anewexport initiative
andaddtotheexport activity ofthedairy industry without disrupting milksupplies forthedomestic
market ortheregular export marketing activities oftheCDC.
6. Weunderstand thatCanada hasinstituted anewsystem of"special classes" fordairy products.
Could Canada please provide information onhowtheCDC operates theprogramme, in
particular thevolume andmethod forallocating special class permits, andthevolume and
price forproducts exported under thevarious sub-classes?
Provincial milkmarketing agencies inCanada havepriced milkaccording toendusethrough
asystem ofmilkprice classes formany years. Effective 1August 1995, anewclasswasintroduced,
inaddition totheclassprices forfluidmilkanddomestic industrial milkproducts (classes 1to4)that
already existed. Class 5milkisusedtomanufacture dairy products forexport andtoprovide milk
ingredients forfurther processing forthedomestic orexport markets.
There are5sub-classes within Class 5:
Class 5(a): Cheese ingredients forfurther processing forthedomestic andexport markets.
Class 5(b): Allother dairy products forfurther processing forthedomestic andexport
markets.G/STR/W/23
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Class 5(c): Domestic andexport activities oftheconfectionery sector.
Class 5(d): Specific negotiated exports including cheese under quota destined for
UnitedStatesandUnitedKingdommarkets,evaporatedmilk,wholemilkpower
andniche markets.
Class 5(e): Surplus removal.
Special classutilization from 1August 1995 to31January 1996 was:
Class 5(a): 0.5221 Million hl
Class 5(b): 0.7995 Million hl
Class 5(c): 0.3487 Million hl
Class 5(d): 1.1069 Million hl
Class 5(e): 0.5046 Million hl
Themilkprovided under thenewsystem issoldtoprocessors bytheirrespective provincial
milkboard oragency. Each eligible further processor orexporter isprovided withapermit number
which must bequoted when ordering dairy ingredients. Alistofvalid Special Milk Class permit
numbers isprovided totheprovincial milkmarketing boards andagencies bytheCDC. Aspartof
theirmilkutilization audits, auditors working fortheprovincial boards willensure thatinvoices are
available tosupport Special Class transactions reported bytheprocessing plants.
Theprices offinished dairy products made withspecial classmilkareestablished bytheprivate
traders andexporters involved.
7. Canada reported under Description oftheFunctioning oftheEnterprise, part3ofthe1960
Questionnaire, thattheCanadian Wheat Board "...makes salesofwheat andbarley forexport
inlinewithmarket needs asrelated tosuchcommercial considerations asprice, quality,
availability, marketability, transportation andother conditions ofpurchase orsale".
Could Canada explain hownon-commercial considerations thatarenotavailable tonon-state
trading enterprises, suchasability tosetprices forproducers, effects prices received bythe
Canadian Wheat Board forexports?
TheCanadian Wheat Board makes salesofwheat andbarley forexport solely inaccordance
withcommercial considerations suchasprice, availability, marketability, transportation andother
conditions ofpurchase orsale. Itendeavours toobtain thebestpossible prices foritsgrain in
international markets, given theconditions ofcompetition inthose markets. Price levels indifferent
markets varywith conditions ofsupply anddemand, andwithexport subsidies provided byother
exporting countries forsalestothose markets.
Prior tothebeginning ofthecropyear, theCanadian Government setsaninitial price which
maybeadjusted upwards during thecropyear. Theinitial price isbased onanticipated finalmarket
price levels. Producers receive theinitial price upon delivery ofwheat and/or barley toaprimary
elevator. Attheendofthemarketing yearthepoolaccount isclosed, operating expenses andCWB
administration costs arededucted, andthesurplus isdistributed toproducers inproportion totheir
individual deliveries intheformofafinalpayment. Theinitial priceisapartial payment ofanexpected
finalreturn andhasnoimpact oninternational prices received bytheCWB.