Kai Xue is a corporate lawyer in Beijing. These views are his own.
Last month, Canada’s aid program left Malawi. Canada had announced: “all funding for country-to-country (bilateral) programs in Malawi will end and all existing project and contract work will be completed” with the exception of a maternity health program.
Canada’s decision to depart is especially disappointing. It had been a commendable development partner to Malawi. However, after clearing out, Canada will still lamentably remain in Malawi in a negative form. Canada’s presence is still felt through the effect of its legal cartel in the export of potash, a key fertilizer.
Through this lever of control, Canada inflates the price of potash while Malawi imports 20,000 tonnes of it annually.
This fertilizer is an ingredient of world food security and was until July 2013 controlled by a duopoly of cartels: Uralkali-Belaruskali, a Belarusian-Russian partnership, and Canpotex, the Canadian cartel formed by three potash companies mining in Saskatchewan.
The status quo was shaken in July by the collapse of the Uralkali-Belaruskali cartel, and a sharp drop of about a quarter of the price for potash followed, illustrating the price fixing power of the cartels.
The manipulation of a key input in growing food by a country as prosperous as Canada is worth moral evaluation for the hardship it inflicts on the global poor in Malawi, India, and China and the large number of countries that have not overcome food insecurity.
Despite the July breakup, this is not an issue settled in the past. The Canadian cartel is holding tight and layoffs ordered in December 2013 by Potash Corp, the largest Canpotex company, to shut down production and boost excess capacity signal a desire to lure the Eastern Europeans back into the fold.
Canada’s ignominious anticompetitive practice is one of the reasons why Africa consumes only one per cent of the world’s fertilizer — because it is too expensive. Lower prices however would encourage more subsistence farmers to finance a bag of fertilizer or allow their governments to subsidize fertilizer without straining the national budget as much.
Malawi is a prime example. After the disaster of a national food crisis, Malawi began a fertilizer subsidy program that contributed to better yields and greater food security.
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