Federal Budget Offers Hope for Input Cost Competition

SASKATOON – Farmers of North America (FNA), a national farmers’ business alliance, congratulates the federal government on the U.S. Canada price discrimination commitment included in the February 11, 2014 budget, which reads as follows.

Commitment to Address US-Canadian Price Discrimination:
“The Government intends to introduce legislation to address price discrimination that is not justified by higher operating costs in Canada, and to empower the Commissioner of Competition to enforce the new framework. Details will be announced in the coming months.”

A classic example of where this would apply is in the crop protection industry. Canadian farmers struggle with paying too much for many pesticides compared with U.S. farmers, even though they operate mutually in a highly integrated industry.

“There is a long list of products where the price difference is huge,” says Bob Friesen, vice president of government affairs with FNA. “One specific example is the product Folicur. The price is six times higher in Canada than in the U.S. – same company, same product and manufactured at the same place.”

This kind of price discrimination has a significant negative impact on the cost competitiveness of Canadian farmers. The federal government recognizes it and plans to do something about it.

But it seems as if the Pest Management Regulatory Agency (PMRA), through Canadian pesticide regulation and policy, endorses this kind of market behaviour. Because rather than allowing farmers to use the Own Use Import (OUI) program, and rather than making generic registration more farmer friendly, the PMRA implemented a Grower Requested Own Use (GROU) policy that is contingent on co-operation from the very perpetrators of the gross price differences.

The undisputed irony of this, of course, is that permission must be granted to bring in the lower cost product from the company that’s getting away with the price discrimination in the first place. Furthermore, to be eligible to import under the GROU policy, products have to be identical and have to be registered and sold on the same side of the border by the same company. So not only does it not make a difference for products where it really counts, the PMRA appears to encourage anti-competitive behaviour by forcing farmers to buy from the same company if they want to try to save some money.

The federal budget talks about manufacturers charging higher prices beyond what could be justified by higher operating costs. The fact is, these products are manufactured in the same place regardless of which side of the border they’re sold, so there are no differences in operating costs.

Friesen says, “If there is a difference in the cost of delivering these products to market it is embedded in the regulatory process. Current regulation creates the opportunity for, and upholds significant price discrimination.”

Canada is still one of the most difficult countries in the world in which to register a generic product. This is why members of FNA have for so long urged the PMRA to clean up the generic registration process while not undermining fundamental protection for original registrants. This would level the playing field between Canada and the U.S.; it would drive down the cost of pesticides in Canada; and it would significantly reduce price discrimination.

The quickest way to eliminate the price differences—to do what the budget alludes to—does not require legislation. The PMRA simply needs to make it easier to register a generic product to provide more, lower cost options to products already in the market. This can be done easily and quickly without undermining investment security for original registrants and without creating a health and safety issue.

The government needs to firmly instruct the PMRA to act on their own policy guideline, which calls for: “…favourable conditions for generic pesticide producers to enter the pesticide market and to increase the selection of products available to the user.”

Despite the difficult generic pesticide environment, the PMRA seems intransigent to change. The federal government gets it. FNA Members wish the PMRA would as well.

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Farmers of North America is a member based farm business alliance with the single mission of “Maximizing Farm Profitability.” www.fna.ca

For more information contact:
Bob Friesen, VP Government Relations
Tel: (613) 230-2222
Cel: (613) 852-9711