Editorial U.S. protectionism assaults potash

This country possesses the biggest and best potash deposit in the free world, and the biggest and best potash mines — period. With reserves in the billions and billions of tons of premium grade ore, Saskatchewan alone could meet the free world’s requirements for the next fifty years.

And because these mines are so big and so efficient, they render most others simply uncompetitive. But simply because of this they are being dumped upon. And, of all people, it is our friends to the south who are suddenly up i n arms. For acting on complaints from two U.S. potash producers in New Mexico who charged that Canada is selling potash in that country at less than the cost of production, the U.S. Commerce Department has imposed whopping new import duties on the output of these individual Saskatchewan mines, ranging all the way from 9.14% to 85.2% on Noranda Minerals’ Central Canada Potash operation. (Duty on U.S. sales of the provincially-owned Potash Corp. of Saskatchewan will be 53%.) Furthermore, if they want to continue selling any potash into the U.S. market, Canadian companies must now post bonds or cash deposits equal to these heavy preliminary duties which have been imposed on them.

Saskatchewan is the world’s largest exporter of potash, a mineral fertilizer vital to agriculture, especially the corn growers. And 60% of this goes directly to the U.S.

Potash is Saskatchewan’s third ranking industry, but big layoffs would appear to be inevitable — not to mention the sharp decline in the royalties that province receives — if these new duties are allowed to stick.

Understandably, Saskatchewan is not about to take this latest unfriendly move lying down. For it has already announced that it will raise the price of all potash it sells into the U.S. market to $93(US) per tonne from $58 — a 60% hike. Furthermore, it has just announced harsh new regulations empowering that government to control the output of every mine in the province in a unilateral bid to reduce production in an attempt to drive up the world price. (There are fines of up to $1 million for those who exceed the production limits to be imposed).

Admitting that this legislation, which gives the province complete control over this resource, is as strong as any we have seen in this country, Premier Grant Devine says he didn’t want to do it but was forced to. “Canada didn’t start this. We were backed into a corner. Those duties were the final straw. We are the big player in potash and are prepared to take that leadership role.”

Unquestionably this is a sad and serious state of affairs, coming as it does just at a time when we are striving to lower trade barriers between these two friendly countries Unless these latest duties are lifted (and there have been others of late as the U.S. seems to be on a hell-bent protectionist course of raising barriers, not lowering them).

Saskatchewan may have to abandon the United States as its major potash market, says Mr Devine.

Did the U.S. Commerce Department really think this particular move out? We think not, and so will the U.S. farmers on whom it will have a severe impact. They will certainly have to face up to paying a sharply higher price for this particular product — one that they simply can’t do without and for which there is no substitute. Furthermore, there is no way that those U.S. producers could fill the supply gap. And it is questionable if their demands could be met from other producing countries unless they turn to the Russians who are likewise big producers.

This country’s two new potash mines in New Brunswick are not directly affected by this tax imposition, which is being levied against the Saskatchewan producers, inasmuch as they sell their output into overseas markets. But if Saskatchewan’s move to raise the world price of potash is successful, some of the welcome benefits could well rub off on the eastern producers.