AGRI Committee Meeting

STANDING COMMITTEE ON AGRICULTURE AND AGRI-FOOD

COMITÉ PERMANENT DE L'AGRICULTURE ET DE L'AGROALIMENTAIRE

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, April 28, 1998

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[English]

The Chairman (Mr. Joe McGuire (Egmont, Lib.): I call the meeting to order. Good morning, everyone. Pursuant to Standing Order 81(4) and the order of reference of the House of February 26, 1998, this is study of the main estimates for the fiscal year ending March 31, 1999, votes 1, 5, 10, 20 and 25 of part III—report on plans and priorities.

This morning we have witnesses from the Department of Agriculture and Agri-Food. Leading the delegation is Mr. Andrew Graham, assistant deputy minister, corporate services branch. We also have Mr. Doug Hedley, acting assistant deputy minister, policy branch; Mr. Brian Morrissey, assistant deputy minister, research branch; Mr. Mike Gifford, acting assistant deputy minister, market and industry services branch; and Dr. Bernie H. Sonntag, director general, prairie farm rehabilitation administration.

Welcome, gentlemen. I guess you know the routine.

Mr. Graham, you can tell us what you would like to do here by way of presentations and then we'll go to questions and answers on the estimates.

Mr. Andrew Graham (Assistant Deputy Minister, Corporate Services Branch, Department of Agriculture and Agri-Food): Thank you very much, Mr. Chairman. What we're proposing to do in a very brief period of time is describe the various business lines that we're representing. That will not take more than 15 to 20 minutes and then we'd certainly welcome any questions or discussions.

You've already introduced the people who are here, and I'd just like to repeat that very quickly to indicate which of the business lines they are representing.

Dr. Sonntag and Dr. Morrissey are the co-principals for the business line of innovating for a sustainable future. Dr. Sonntag will be speaking to that. Mr. Gifford is the principal of the expanding markets business line. Dr. Hedley is the principal of the business line for strong foundations for the sector and rural communities.

I'll be speaking at the end about what the corporate policies and services line of business does inside the department. Given the fact that this was raised last week when the minister appeared and has been an issue with some members, I'd like to speak very briefly about what business lines are and the performance framework, and why in fact the document that is under discussion today, the part III report on plans and priorities, is structured the way it is and why we are using this approach to manage the department. After I've finished, each one of the principals will give a short description of the business line he is responsible for leading.

When the minister appeared last week, he spoke of Agriculture and Agri-Food Canada's business lines as they're outlined in the Report on Plans and Priorities document. The RPP—as always, we seek acronyms here—document and the lines-of-business approach to management have taken root and flourished very well, for a number of very good reasons.

This new system has come about principally because parliamentarians have asked that we develop new and better ways of reporting what departments do to Parliament and have asked us to change the way that we report what we are doing on behalf of Parliament.

These changes have taken place over a number of years, over the last several Parliaments, centred principally around discussions at the public accounts committee, and under the heading you may be familiar with, “Improved Reporting to Parliament”. The reporting framework in this document is a key element of that.

We began to re-engineer Agriculture and Agri-Food Canada's reporting framework in 1996. If you take a look at the document from last year, it reports out for the first time what the business lines of the department are and, as you can see, it's well read. It even has genuine coffee marks on it. It reports out for the first time what the business lines are, so this is not new. It's an evolution.

The principal purpose for it is that rather than reporting bureaucratic structures, boxes and lines, it's intended to report the activities of the department, regardless of which particular branch is responsible for them. It's an orientation towards reporting to Parliament on the basis of managing for results. It meant that we needed to place a lot more emphasis on the impact of our activities and decisions on the people of Canada rather than just describing what they were and how they fitted into the bureaucracy. The key to measuring the effects of what we do has depended on our ability to better monitor performance. Certainly something that parliamentarians have been pressing is that we improve our capacity to monitor performance.

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As we are entering the first full year under the performance framework, which is what this is called, we are now beginning to find ways to get increasingly better information to you, better information to make sounder decisions internally, and finally to tell our story to Canadians and to the sector we're serving. In the fall, when we report our performance results to you, I think you'll see a major improvement in that area.

We built a performance framework for the department because we strongly believe it's a better way to manage. We want to be more accountable both to Parliament and to those we serve because at the end of the day it's going to help us manage better.

When the minister spoke last week of business lines, he mentioned the department's three operational business lines and the one supporting business line. As I've already said, the operational business lines are expanding markets, innovating for a sustainable future, and strong foundations for the sector. That's the sequence in which they're reflected in the report on plans and priorities. The corporate policies and services is a supporting business line and I'll be speaking about that at the end.

These business lines determine the department's activities and how these are reported as our key result areas. This is something you will hear more about from each one of us because we're going to describe those key result areas. You'll also see how we use our business lines as a road map to plan strategically over a three-year window and to integrate priorities across the branches of the department, which is an increasing challenge that we all contribute in some way to the various key result areas of the department.

I hope what you will hear over the next few minutes from my colleagues and myself will put some meat on the bones of the business lines performance. Now, Mr. Chairman, I would like to turn to Mr. Mike Gifford, who is the principal of the expanding markets business line, to begin his presentation.

Mr. Mike Gifford (Acting Assistant Deputy Minister, Market and Industry Services Branch, Agriculture and Agri-Food Canada): Good morning, Mr. Chairman and honourable members.

Basically the objectives of the expanding markets business line are to work with the industry and other partners to improve and secure market access, to assist the agrifood sector to capture market opportunities in both domestic and export markets with a focus on higher value agrifood products, and lastly to increase domestic and foreign investment in the sector.

Turning first to the area of market access, this is really all about creating and securing opportunities for the Canadian agrifood sector. In terms of market access, the department plays a crucial role, in close collaboration with our colleagues in other government departments, in improving and securing new access to markets for Canada's agriculture and agrifood products, including the maintenance of our access to what has become a major market in the United States.

At the same time, efforts are being focused on negotiations to improve and secure access to new markets, such as the accession of China and Taiwan to the World Trade Organization. We are currently in the midst of preparations for both regional negotiations, such as the free trade area of the Americas that was just launched in Chile a few weeks ago, and multilateral negotiations under the auspices of the World Trade Organization.

With respect to the WTO negotiations, we are consulting extensively with domestic stakeholders and the provinces in order to stimulate an informed debate on Canada's interests and goals for the next round of WTO negotiations. In this context, after helping to facilitate successful trade policy symposiums and workshops in Ontario and Saskatchewan recently, we will be contributing to similar events in Alberta and Quebec in 1998. This preparatory phase of getting ready for the next round of WTO negotiations will culminate with a national conference, a federal-provincial industry conference, on Canada's WTO position, which is slated to be held on the spring of 1999.

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In terms of its role of promoting a profitable growth, the department supports Canadian industry through the resolution or reduction of technical and other barriers to trade as conventional trade barriers, such as tariffs and import quotas, have come down. Increasingly, as these conventional barriers come down, we're beginning to discern a whole range of technical barriers, some of which are justified and some of which are not justified, that basically inhibit trade. So a lot of our day-to-day work is involved in trying to get a handle on reducing or resolving these technical barriers to trade.

We're also involved in trying to reduce interprovincial trade barriers. With respect to that, we're currently undertaking consultations with the provinces and with the industry on possible principles to be used to broaden the agricultural chapter of the Agreement on Internal Trade.

Turning next to market development, which is really about exploiting the opportunities that are being created by trade agreements, we're working very closely with the Canadian Agri-Food Marketing Council and the provinces in order to assist the industry in achieving its target. This is an industry target of 4% of world trade in agrifood products by the year 2005. This would represent in effect a doubling of current exports of around $21 billion to something approaching $40 billion by the year 2005.

Part of the industry's own goal is to in effect reverse the percentage of bulk commodities to higher-value products. Currently bulk commodities account for 60% of our exports and 40% are higher-value. The industry would like to see by 2005 those percentages being reversed so that we're exporting about 60% higher-value products and only 40% bulk commodities.

We're also committed to working with other federal departments, the provinces, and industry to implement a recently developed medium-term market development action plan for a list of identified priority markets. These are the United States, Japan, the European Union, China-Hong Kong, South Korea, Taiwan, Mexico, and Brazil. Those are the Canadian agrifood sector's eight priority markets.

We're also developing strategies for so-called emerging markets, such as Russia and a number of other growing markets in Asia and Latin America, where we expect important opportunities to arise in the coming years.

Success in export development will be measured in terms of the increase in our global value of exports, the increase in our global market share, and last but certainly not least, an increase in the proportion of the higher-value range of agrifood exports.

It's true that export markets are growing faster than our domestic market, but we must never forget that we cannot expect to be a successful global player unless we are also doing a first-rate job in servicing the Canadian market. After all, the domestic market still is our most important market, both for primary producers and for our food processing sector.

We are therefore working closely with the provinces and the industry to ensure we use our domestic market strengths as a springboard for capturing an increased share of the faster-growing world market.

Lastly I'll talk briefly about investment, and this is all about building our supply capacity. In order to take advantage of the new market opportunities out there, both at home and abroad, the industry will need to increase its supply of internationally competitive Canadian agrifood products. In order to do this, we need to increase both domestic and foreign direct investment in this sector.

To make the most effective use of federal and provincial government programs and services to enhance investment in Canada, the department has focused its efforts on developing, in close partnership with the provinces, a federal-provincial agrifood investment strategy, which will be presented to the federal and provincial Ministers of Agriculture at their annual meeting in July 1998.

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We are also developing programs to attract new investment, both domestic and foreign—and here I'm talking about processed food products. Basically, if the industry is to achieve its goal of increasing processed food exports from the current $9 billion to a target of roughly $24 billion by 2005, we're going to have to significantly increase the rate of adoption of new technology and increase the scale of many of our food processing plants. Therefore, by enhancing our investment climate and by making new efforts to attract investment, we are determined to maximize the competitiveness of Canadian agriculture and agrifood products so that we can continue to compete successfully at home as well as abroad.

Thank you very much, Mr. Chair.

The Chairman: Dr. Sonntag.

Dr. Bernie H. Sonntag (Director General, Prairie Farm Rehabilitation Administration, Department of Agriculture and Agri-Food): Thank you, and good morning. I'm here to speak a little bit about the “Innovating for a Sustainable Future” business line. The co-principal in that business line is Dr. Brian Morrissey.

The business line includes all activities aimed at supporting the sector's efforts to develop and produce competitive products and processes in an environmentally sustainable manner. Our research branch, the Prairie Farm Rehabilitation Administration, or PFRA, and our policy branch, specifically the environment bureau, are the three key organizations within the department that play major roles in delivering results for this business line.

With its network of 18 research centres in the research branch across Canada, and PFRA's 27 much smaller district and regional offices and three specialty centres, the business line is well placed to connect rural citizens, industry, and other partners across Canada. The business line focuses on research, development, and technology transfer activities that provide a high return to Canadians in public-good areas where the private sector working alone cannot make a profit.

We have identified three key result areas, which you might also refer to as objectives. They are three major areas in which the department has committed to have an impact in supporting the sector's efforts to develop and produce competitive product and processes in an environmentally sustainable manner.

The first key result area, innovation, is the largest part of this business line. It deals with increased development, availability and adoption of products, processes, and practices that contribute to competitiveness and environmental sustainability. It includes core research programs, alternative strategies such as the matching investment initiative and the agrifood innovation fund, in partnership with industry producer groups and provinces.

The second key result area is called sustainable resource use. It aims to increase adoption and utilization of sustainable land and water management systems that will afford greater economic security. This involves the use of programs such as the community pasture program, the rural water development program, or the national soil and water conservation program. It's undertaken in partnership with provincial governments, producer organizations, and in some cases community organizations.

The third key result area, integrated policies and decision-making, focuses on integration of environmental and economic considerations into departmental, sectoral, and community decision-making. This is more internal. It relates to getting our house in order, as well as to our commitments under national and international agreements on such things as greenhouse gases, biodiversity, and those kinds of things.

Over the coming planning period we will see a number of deliverables in this area, and I'll list a number of examples: completion and publication of a report on the health of our atmosphere—this is a companion report to one you've seen before called Health of our Soils; transfer of the Plant Gene Resources Centre to Saskatoon; registration of a high-protein soybean variety for eastern Canada with significant yield to improvement; registration of prairie spring wheat with significant improvement in protein content; development of new anaerobic digestion technology to handle manure in an environmentally sustainable manner; development of technologies to improve ruminant nutrition—this again has efficiency and waste reduction objectives; development of processes for extracting food or feed additives from various agricultural products; increased access to safe, reliable water supplies for rural areas; maintenance of biological diversity through sustainable management of federally controlled and private range lands; development of a prairie-wide assessment for land-based issues facing the agriculture and agrifood sector; implementation of the national soil and water conservation program; implementation of Agriculture and Agri-Food Canada's biodiversity strategy; determination of the environmental sustainability of the departmental policies and programs; periodic assessment and reporting of the progress in implementing the department's sustainable development strategy, which is essentially the implementation of the action plan under that strategy; and development and implementation of the department's hog environmental management strategy, HEMS.

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This business line will play a fundamental role in positioning the sector to meet the challenges of the future. By achieving the objectives of the “Innovating for a Sustainable Future” business line, the department can foster greater competitiveness in the agriculture and agrifood sector and promote resource sustainability and biodiversity in partnership with industry, producers, and other jurisdictions.

Thank you, Mr. Chairman.

Mr. Doug Hedley (Acting Assistant Deputy Minister, Policy Branch, Agriculture and Agri-Food Canada): Mr. Chairman and honourable members, I'm here to represent the business line called “Strong Foundation for the Sector in Rural Communities”. This is the business line that includes all activities aimed at enhancing the sector's economic viability while strengthening opportunities for rural communities and economic development as well as cooperatives.

The policy branch and the PFRA, the Prairie Farm Rehabilitation Administration, are the two organizations involved in this business line. More than most, this business line touches individuals directly, whether that's through safety nets, adaptation programming, or regulatory and policy frameworks related to virtually all sectors of agriculture and agrifood. It also increases federal visibility throughout the sector through the rural policy.

We've identified three key result areas. Let me very briefly identify them.

The first is a policy framework that deals with developing an agrifood policy that will enable the sector to respond to emerging opportunities in the international and domestic markets and adapt to a changing economy.

The second is the rural economy. This is to make rural Canada better equipped to achieve and exceed its current potential. This means using funding and technical support to assist in building rural infrastructure that will attract new and diversified business.

The third key result area is cooperatives. This focuses on achieving a federal policy framework that supports cooperatives throughout Canada.

We see a number of deliverables in the coming year or years in this area. Let me review some of them with you.

One is a renewed safety net program with the provinces. That is under way now in discussion with both industry and provinces.

There will be a renewed set of adaptation programs. That set of discussions with both the sector and the provinces is also under way.

There will be continued support for our supply management system in Canada.

There will be a follow-up to the Estey review of grain transportation, which hopefully will help us to ensure that this system better meets the needs of Canadian agriculture.

There will be the development of a rural lens as well as the rural dialogue that is getting under way in Canada.

There will be an increased level of community and regional infrastructure development through a water development program and other initiatives.

This business line will play a fundamental role in positioning the sector to meet the challenges of the future. By achieving the objectives of the strong foundation for the sector and rural communities, we think we can foster greater self-reliance in agriculture and the agrifood sector, promote resource sustainability, be an advocate for our market institutions, and be a catalyst for partnerships with sector stakeholders and other jurisdictions.

Thank you, Mr. Chairman.

Mr. Andrew Graham: Mr. Chairman, I'm very conscious of the time.

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The key result area of the corporate business line is well documented in the RP and P document as being sound management—management practices. That's the responsibility of all the department. We play a unique role in providing support to that, and many of the areas where you would expect the corporate support to be is what we're responsible for. That includes information, finance, administration, human resources, communications, review, audit, and legal affairs.

In terms of the types of activities we will be engaged in over the coming year to support that, probably the keys are the renewal of our human resources strategy and getting ready for the generational changes that are coming and making sure we have the right people working in the department with the right skills; dealing with the huge information challenges that come under the umbrella of year 2000; giving us a modern financial system, which is in the process of being implemented now—a financial materiel management system; and continuing to expand in the communications front in working with both the people of Canada and the sector, so that they not only have the information they need from us, but can increasingly have it in a way that's connected to the electronic capacities that are mushrooming out in the country.

Aside from that, there are a number of other activities, but I think I'll stop there. I'm very conscious of the time and your need to open up for questions.

The Chairman: Thank you very much.

Listening to you this morning, nobody has mentioned the problems with the environment as far as the struggle farmers are going through with the public on environmental concerns, or any plans the department may have to address those concerns. It's a very topical issue these days. If you could respond to that, then we'll go to Mr. Hoeppner.

Mr. Doug Hedley: Mr. Chairman, I might start and have Dr. Sonntag follow.

We are doing a number of things in the department through a number of the business lines in supporting sustainable development. It has been noted in my comments as well as Dr. Sonntag's, under the words “sustainable development”. The department is working very closely with the effort, for example, on climate change, in looking at agriculture's role in the greenhouse gas issue. We are also dealing with animal waste issues in terms of the environment through the HEM strategy that was announced I believe last night, and this morning in Toronto at the HEMS conference.

We have a major unit in the policy branch committed to following those issues and dealing with them through soil and water and other issues. The CARD fund also puts money into this. We can offer you details there as you wish. But with that start, out of the “strong foundations” business line, let me turn it over to Dr. Sonntag.

Dr. Bernie Sonntag: Thank you.

A number of programs in the department or under the various business lines address environmental issues. The national soil and water conservation program that I just mentioned a few minutes ago has a water quality focus in the prairies and elsewhere in the country. Also, some elements of that deal with manure management. The agrifood innovation fund in Saskatchewan is funding considerable activity in the environmental area. The research branch has a large percentage of its program devoted to the general area of soil and water conservation and the technology associated with that, and protection of their resource base. Dr. Morrissey can say more about that.

In the prairies as well, the PFRA has a considerable part of its core-funded activity in the area of soil and water conservation or management.

Mr. Brian Morrissey (Assistant Deputy Minister, Research Branch, Agriculture and Agri-Food Canada): Thank you, Chairman.

If you look at the purpose of much of the programs in Agriculture Canada, they've been defined as competitiveness and environment. That really is another way of saying Brundtland's term, sustainable development. In the research branch we got some money on the Green Plan a few years back, and when the Green Plan money phased down, we tended to continue the programs.

As was mentioned earlier this morning, we're trying to put within a set of covers a lot of the knowledge that was generated either by our own work or prompted by the Green Plan money. As was mentioned, we have published The Health of our Soils, which is about ten years of research, but rolled up by a lay editor so that it's an easy read. That was sufficiently well received in terms of scientific content but ease of readability that we are putting together The Health of our Air and The Health of our Water. Again, we're smaller players in terms of air and water. We have to work with other departments, but we have fairly tight links with them and probably by the end of this year we'll have the two companion documents on air and water.

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In addition, we're putting together, in cooperation with the other players at this table, environmental indicators that would give benchmarks in terms of how well we've done in this country on things like soil, water, and air and give ourselves some measurable indicators against which we collectively could measure how well or how not so well we're doing over the next few years. That should be ready in draft form maybe by September and in final form for publication at the beginning of the next financial year.

If you look at the generation of greenhouse gases, about 10% of it seems to come from agriculture. We're focusing on the areas where we may either be a contributor to greenhouse gases or be players in sinking the greenhouse gases. We're looking at things like conservation tillage, where this country is a world leader. These numbers are a little dated, but the orders of magnitude are probably right.

At one point in time we had about 30% of our lands in conservation tillage when the U.S. had about 20%. As I say, those numbers are dated. We've been going up very rapidly from there. Conservation tillage is a sink of greenhouse gases, and as Bernie has mentioned, it is an area where manure might be a generator of greenhouse gases, especially if we grow animal populations in the west. We're looking at what we can do to control poultry manure at Agassiz in B.C., cattle manure around the feedlots in Lethbridge, and hog and dairy manure down at Lennoxville in Quebec.

The last comment, if I could take just another second, is that we have worked very closely with the other natural resource departments—Fisheries and Oceans, forestry within NRCan, and Health Canada has just joined us—and we're working to do things where we overlap on each other, such as with Environment Canada. For example, we met in Summerland just last week. We had a meeting of our western directors but we had invited the people from those other departments to come in and meet with us because on the environmental files like The Health of our Soils and The Health of our Air, we're having to draw data from each other.

I'll stop there, Mr. Chairman.

The Chairman: Thank you very much. It's just that every year it seems to be getting worse and worse as far as soil erosion and fish habitat and everything. Maybe we'll come back to it later on.

Mr. Hoeppner.

Mr. Jake E. Hoeppner (Portage—Lisgar, Ref.): Thank you, Mr. Chairman.

The first thing I'd like to go into is what Mr. Hedley mentioned about the PFRA. I get some complaints from municipalities that once the amount is designated for PFRA funds, if they don't get their projects off the ground they have to go to the bottom of the list again in the coming year. Is that a fact, or is that just some sour grapes? I've heard that from individual farmers on wells and also from municipalities that are trying to put water into the rural areas.

Mr. Doug Hedley: I'd ask Dr. Sonntag to answer that as the head of PFRA.

Dr. Bernie Sonntag: I'm having a little trouble deciding how to answer that.

First of all, we've had a number of programs over the last few years that were funded by the Office of Western Economic Diversification. We have the partnership agreement on municipal water infrastructure in Manitoba and the partnership agreement on water-based economic development in Saskatchewan. Those two programs are essentially now terminating. The PAWBED one in Saskatchewan was terminated last year in the sense that the money ran out, and the one in Manitoba is terminating this year.

What we have left in our current budget is what is call the rural water development program, which is a $5 million program annually. We do mostly group-based water development activities at the moment. A lot of that is water pipelines. Much of that is leveraged with the provinces and with municipalities so that the federal government contribution in this is less than half. In many cases it's as little as 10%. In other words, we try to leverage other funding into that. That particular program is limited to $5 million now and that's really the extent of the infrastructure funding we have at the moment.

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Mr. Jake Hoeppner: So these people would then have to more or less try to lobby the provincial governments if they want to get on line for some grants. How does that work?

Dr. Bernie Sonntag: We have an application process for rural water development applications, and they are put in some priority order on the basis of some criteria. To the extent the funds will allow, we provide those services.

Less and less of the services are to individuals now, because we certainly have limited budgets. More and more of the funding is directed to group projects, many of which end up as co-ops who end up owning the water utility.

Mr. Jake Hoeppner: It's been municipalities lately that I've heard from, so I may be in touch with you personally to give me some background, because I couldn't answer their questions.

The other question I throw out to all of you gentlemen. I've just been looking across a few figures... I haven't done much work on the estimates, but I see that grants and subsidies and transfers to farmers are down about 75%. Still, I see that your personal costs are only reduced by 16% and that the department's total reduction in administration is only 10%. So if you aren't disbursing funds or grants to farmers or subsidies, what are you guys doing? Are you golfing? You must be putting in some time if your costs are not going up.

Mr. Andrew Graham: It might be a nice day to make that suggestion, but it wouldn't be a good day to try to do it.

First of all, the cost reductions that you see in grants and contributions are the result of announcements that were made coming out of the budgets of 1995-96. In other words, this is the final wind-down of those cost reductions. As such, they are reflected in the years that are here. I could go over those in more detail, but I think you're familiar with the major subsidy programs that were contained in the grants and contributions.

With respect to the reduction of the size of the department that took place earlier, while I don't have the numbers at hand, in fact the department has shrunk considerably. That happened very quickly right at that time, so it's not reflected here. What this reflects in fact is a stable base for the future. So it was really a matter that if we spent it over time you'd see a slightly different spread, as it were.

Mr. Jake Hoeppner: A bureaucrat always has the answer, they say.

Mr. Doug Hedley: If I could also respond, first of all, the safety envelope is set at about $600 million and runs throughout all of the years. What you will see, though, in the numbers is that only those programs that are currently listed as statutory are shown within the estimates in the out-year, the plan 2000-2001, but the full $600 million remains in the fiscal envelope. We will have to go back and pick that up and it will show in future years. There has been no change to the $600 million from that announced in the 1995 budget where we were coming down to $600 million and that's now flat-lined.

The second is that the CARD fund shows up for 1998-99 as about $60 million per year, and that also is a case that it was originally put in place for four years. The money is in the fiscal envelope. We have the processes under way now to go back and pick up that money from the fiscal system, and it will show again in future years at about $60 million, we expect. As a result, whereas your 1998-99 numbers are there, you will not see some of those numbers out in the out years. Cabinet and Treasury Board have not yet approved it, so we can't put it in as part of the estimates.

Mr. Jake Hoeppner: The next question goes back to former programs. I was still farming when the GRIP and the crop insurance programs were changed. I see now you have a $162 million write-down to the Saskatchewan government on crop insurance. If my memory is correct, they really bungled their insurance programs at that time. Is this still helping them to catch up with what they did wrong? I think there are a number of court cases on that crop insurance issue yet. I was surprised to see that they would get this kind of money now for a program that's probably dissolved.

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Mr. Doug Hedley: First of all, the write-down was against the reinsurance fund. They did get into difficulty with their reinsurance fund, their overall balances in crop insurance, and it's true not only of Saskatchewan but also New Brunswick.

Over the course of those years, 1995-96, and last year you will see in the estimates $165 million in correcting those imbalances in the Saskatchewan and New Brunswick reinsurance funds. That all shows up as expenditure in 1997-98 year.

The Chairman: Madam Alarie.

[Translation]

Ms. Hélène Alarie (Louis-Hébert, BQ): This morning at 9 o'clock we had a meeting of the Foreign Affairs committee. Even though I do keep abreast of things I was astonished to hear some of the things that were said.

My first question deals with food safety. Basically, what we've been told, is that CIDA no longer considers agriculture to be a very high priority in its policies. This is more or less what it amounts to, because the contribution of CIDA is diminishing, whereas a number of people suffering from lack of food safety is increasing.

First I will ask you who in the Department of Agriculture, is responsible for this matter. Are we in direct contact with the FAO and do we have a permanent contact with CIDA? I would also like you to tell me about the objectives which are being set. What is being done in the way of financial and technical assistance?

[English]

Mr. Mike Gifford: Mr. Chairman, CIDA is the agency responsible in the Canadian government for Canada's foreign aid program. I think it is fair to say that in the past, because of the importance of rural development in many developing countries, agriculture figured quite prominently. I think it is also fair to say that over the years there has been a declining emphasis on agricultural development in the CIDA budget, and this has been paralleled by the aid agencies, both bilateral and multilateral, around the world.

As I understand it, the message that the staff from the World Bank were bringing to you this morning is that they have now decided that perhaps they have gone too far in reducing the amount of money that is going into agricultural rural development and the cycle is starting to reverse. I think a number of NGOs in Canada and abroad have been making this very same point that agriculture development is absolutely critical to the economic development of developing countries and unless you get your agricultural and rural policies right in developing countries it is going to be very difficult to have sustained economic development.

These things do go in cycles, Mr. Chairman, but I think there is starting to be an increased recognition that there needs to be more of an emphasis on agricultural development in both the bilateral and multilateral programs.

I might add that food security is basically about a government's capacity to secure for its population adequate supplies of food. As an agricultural exporting country, it is Canada's position that importing countries need to have confidence in the international market. In the past there have been export embargoes and export restrictions, and this has in effect prompted some importing countries to argue that we cannot rely on the international market and therefore we should increase our domestic self-sufficiency.

I think exporting countries are increasingly beginning to realize that if they expect importing countries to progressively liberalize their import regimes it is going to be essential that the international market be prepared to provide greater assurances of supply, and that means accepting increased disciplines and the use of export restrictions and export taxes.

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Agricultural development in many developing countries has been impeded by the extensive use of export subsidies by many developed agricultural exporting countries. Basically, that's provided cheap food, yes, but it's also reduced the internal price in these developing countries, such that the agricultural producers can't make a living because of the use of direct export subsidies by many developed countries.

[Translation]

Ms. Hélène Alarie: In 1995 and 1996, in Rome, we did commit ourselves to providing basic technical aid. You must surely be consulted from time to time. I don't want to be prying, but how do you proceed? What kind of contact do you have with CIDA at the times when objectives are being defined?

[English]

Mr. Mike Gifford: Traditionally, Mr. Chairman, Agriculture Canada has been the chair of the interdepartmental FAO committee, even though agricultural development in developing countries is not a responsibility of the department. Because of historical reasons, we have chaired the interdepartmental committee.

The minister did represent the government at the FAO conference in Rome last year. And as part of the World Food Summit that was held a couple of years ago, Canada, like the other FAO countries, is committed to developing a plan of action to improve world food security, both at home and abroad.

To that end, there is a private sector advisory group that has been charged with developing a plan of action. In fact, Minister Vanclief just met with that group last week and they'll be coming up with a plan of action for the government's consideration.

The Chairman: Thank you very much.

How are the CIDA and ag projects? What's the assessment been? It's been reported recently that a lot of CIDA money never leaves Canada, that it really doesn't have much impact at all on where it's supposed to go. Has an assessment been done on the agricultural projects through CIDA?

Mr. Mike Gifford: I'm not an aid expert, Mr. Chairman. I will simply say that in the past Agriculture Canada has been an executing agent for certain CIDA projects and Agriculture Canada has provided primarily technical expertise in a number of projects in Asia and Africa. Dr. Hedley and Dr. Sonntag have both been involved in these CIDA projects, but I'd be reluctant to try to make generalizations about programs that I'm not intimately family with.

The Chairman: Dr. Hedley, do you have a comment?

Dr. Doug Hedley: Really, as an executing agency, I have nothing to add. I think your question goes to CIDA, not to the department.

The Chairman: Are they your dollars? Do you contribute to CIDA projects using agriculture department dollars?

Dr. Doug Hedley: Not for a number of years, at least from policy branch.

Bernie?

Dr. Bernie Sonntag: No, essentially not. In most of the CIDA projects where Agriculture Canada is the delivery agent, we're just contractors to CIDA and CIDA pays.

The Chairman: I see.

Mr. Parliamentary Secretary.

Mr. John Harvard (Charleswood—Assiniboine, Lib.): Thank you, Mr. Chairman.

I think most of my questions will be for Mr. Gifford.

Mike, you mentioned in your short remarks off the top that there's a need for an increase in investment in the area of agriculture and agrifood. I'm not too clear about whether you meant that to be foreign investment or whether we perhaps need an increase on both the domestic side and the foreign side.

I have two questions under that title. First, could you just give us a bit more expansion on why there is this need for increased investment? But perhaps the more important question is how do we do that? What does a federal government have to do to enhance—I think you used the word “enhance”—investment? How do we do that? I could think of some ways myself, but I'd like to hear it from you.

I have some other questions, but can you deal with those first?

Mr. Mike Gifford: Mr. Chairman, if the Canadian agrifood sector is going to achieve the goals that the industry has set for itself, that is, to double exports from today's $21 billion to roughly $40 billion by 2005, we have some constraints. And of course one of the constraints is our land. Our arable land is basically almost maxed out. Therefore, if we're going to increase supplies significantly, it's going to be through yield increases.

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If we're going to export $40 billion, we will have to convert a lot of those bulk commodities, primarily grains, into value-added products such as red meats and poultry. Therefore, instead of exporting feed barley, for example, I think most people would say today we'll be out of the feed barley market in a few years because we'll be feeding that feed barley in Canada to both cattle and hogs.

How do we increase our exports of value-added products? For example, today we're exporting $1 billion worth of live cattle and we're exporting three million head of live hogs to the United States. One way of increasing value added is to make sure those livestock are slaughtered in Canada and not just shipped to export markets as carcasses or primal cuts, but also to do further processing and capture as much of the value added as we can.

In order to do that, we need world-scale plans. To keep in the red meat sector for a second, we've always had a world-class, primary production sector for hogs and cattle, but it wasn't until the late 1980s that we had a world-class packing plant system for beef and it's only very recently that we've had world-class facilities for hogs. So if we want to be competitive in the world market, we need to put more investment into some of these plants.

Mr. John Harvard: But how do we do that, Mike? Are we supposed to lower taxes? Are we supposed to deregulate? How do we invite these people to bring their capital to this country so they can make money?

I would assume one of the other things is that all countries would like to get into the business of value added. All of them around the world would like to carry out the work at home so they can get the jobs, as opposed to exporting the jobs. So tell us, how do we do this?

Mr. Mike Gifford: If you want to attract either domestic investment or foreign investment in the agrifood sector in Canada, it has to be part of a general macro-economic environment that's favourable to people investing their money. Certainly today Canada is situated extremely well in terms of its debt management, its interest rates and its projections for economic growth. Therefore it is an attractive place to invest, generally speaking, particularly in the agrifood sector.

The food processing sector is Canada's third-largest manufacturing sector. It's well positioned as part of NAFTA to service a most affluent market of over 300 million people in North America. The federal and provincial governments have to sell Canada as a good place to invest. Unfortunately, in the past a lot of perceptions grew about certain countries, and a lot of people don't realize the tremendous changes that have occurred in the macro-economic environment in Canada that make Canada a very attractive place to invest.

Specifically, on the agricultural side there have been a number of studies conducted by a number of international organizations that have placed Canada in the top one to five categories of a place to invest for agrifood, whether it's a well-educated workforce or proximity to major markets. If you're located in Quebec or Ontario, you're less than 500 miles away from major markets like Philadelphia, New York, and Boston.

So for a number of reasons I think Canada today is seen as a very attractive place to invest. Part of the job of the department is to make sure the Canada story is told, not only to offshore investors who want to invest in Canada, but just as importantly to Canadians, to convince them there is a dollar to be made by investing their savings in the Canadian agrifood sector. The high-tech industries get all the glamour, but there are lots of opportunities to make money in the Canadian agrifood sector.

I think Dr. Morrissey might want to add a few comments.

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Mr. Brian Morrissey: Thank you, Chairman.

I'd preface the comment by bringing to the table a little information on some work done in the U.S., where a researcher called Solow found that between about 1909 and the mid-1940s, about seven-eighths of all growth in the United States came from innovation. It wasn't from increased labour; it wasn't from increased capital. That was the remaining one-eighth. It was finding a better way to skin a cat. So building on your comment, there is a return to investment by investing in new ways of doing things, not just in agriculture, but all across the economy.

Looking at agriculture for a second, building on that kind of thinking, we tried to look at what was the return to this country on research done in agriculture. If we were parliamentarians, we would have seen ourselves as the shareholders representing taxpayers in this country, and we might have asked, “What are you getting back for the money you're putting in?” So we copied a technique the Australians had used: we picked families of studies where we are the biggest player or a big player, so it was relatively easy to quantify what the costs were and what the benefits to the country were.

We did wheat first, and we found that for every year of about the last 20 years, all bills paid, this country got back a net profit of about $377 million for the investment it had made in ag research. Interestingly, most of that was loss avoidance; it was avoiding the attack of a disease, building protection into a crop against drought, for example.

Then we did potatoes and we found there was about $220 million a year annual net profits, based on federal research in potatoes.

Just in the last week we got the returns in on swine. It was done by the people at the University of Guelph. We paid for it, but it was done outside. The returns there were about $513 million a year each year for the last 20 years.

If you just add up those three sets of programs, they pretty well cover all of the department's costs, not just the research branch costs. So in a way they answer the question, “Are you getting a return on your investment?” On those three alone you're getting back about three times the amount you're putting into research.

The Chairman: Thank you very much, Mr. Morrissey.

Mr. Proctor and then Mr. Borotsik.

Mr. Dick Proctor (Palliser, NDP): Might I defer to Mr. Borotsik, who has to go to another meeting, if you'll come back to me?

The Chairman: Okay, go ahead.

Mr. Rick Borotsik (Brandon—Souris, PC): Thank you, Mr. Chairman, and I thank my honourable colleague for allowing me to go. I have to run.

First of all, I have to thank Mr. Gifford for describing Brandon as world-class. He did it maybe inadvertently, but with the world-class hog operation that is going to be developed there by Maple Leaf, obviously that takes the community into world-class. So thank you, Mr. Gifford, for that.

A voice:

[Inaudible—Editor].

Mr. Rick Borotsik: Yes, he did; that's exactly what he said.

And it's “skin a hog”, not “skin a cat”, okay? We do hogs here; we don't do cats.

Some hon. members: Oh, oh!

Mr. Rick Borotsik: By the way, it's an excellent business plan that you put forward, and it's a very ambitious plan for every part of the department. I speak to Mr. Gifford, particularly of the business plan where you indicate that by 2005 you're going to increase exports from $20 billion to $40 billion, which is a doubling of those exports to 4% of market share.

I then looked at the business plan that was put forward by Mr. Hedley, and I looked at one of the, I believe you referred to them as result areas, and one of the philosophies and policies: the continued support for supply management. Sometimes those are contradictory. When we have to look at the international trade systems that Mr. Gifford has to look at for a $20 billion increase in exports, we recognize that there are issues and problems out there in the World Trade Organization and the world marketplace with respect to the supply side management.

The question I have is, between the two departments, which one is going to win this battle, the supply side management that we're going to continue to support or in fact the world trade that we have to increase by two times?

Mr. Mike Gifford: Perhaps I can start off simply in recalling that back in the so-called good old days, which was back in the 1950s and 1960s, Canada used to export 40,000 to 50,000 tonnes of cheddar cheese to the United Kingdom. Basically the international dairy market got so screwed up and distorted that the industry decided to retrench and concentrate on servicing the domestic market. And its poultry sector was always concentrated on servicing the domestic market.

But I think it's fair to say that recently, in the last year or so, both the dairy sector and the poultry sector are increasingly recognizing that there are limits to the growth—in fact in some cases you have a stagnant market in Canada domestically—and that if they want to grow the industry, they're going to have to look to export markets.

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Certainly the marketing branch has been working with the provinces and with the industry, particularly on the dairy side, to develop an export development approach. Similarly, the stakeholders in the poultry sector are busily trying to figure out how to increase their participation in the world market. They're becoming, over time, much more export-oriented and—

Mr. Rick Borotsik: Mr. Gifford, I know all of that, and I appreciate it, because we've had you at this table before and you articulate that very well. But my question remains unanswered. I appreciate that we have to open up those world markets. As part of that world market opening up, there are other conditions that are placed on us, and that is with respect to conditions that are on the supply management side.

Mr. Hedley has indicated right here that there's continued support for supply management. You've indicated you're going to increase your market share by up to 4% at $40 billion. Who's going to win the battle on this one? We do recognize that there are going to be pressures placed on that supply management. Mr. Hedley, maybe you could answer the question.

Mr. Doug Hedley: First of all, I don't see it in quite as black and white terms as you do.

Mr. Rick Borotsik: Yes, well, I know, I'm pretty simplistic.

Mr. Doug Hedley: The one thing I would point out is that the supply management system in Canada that is being supported by government clearly has gone through a huge evolution itself over the last few years. It was indeed industry that led the evolution, starting back in 1992 and 1993, to have a look at how you pool milk across provincial boundaries. That pooling process is now under way with the P9 for industrial milk, P5 in eastern Canada and P4 in western Canada. These are huge evolutionary steps that the industry in fact has led, so I don't see it as a static system and diametrically opposed to a trading system.

The other event that's going on, which Mr. Gifford has referred to, is the strong interest in the industry, both producing and processing, getting at the export market in very measured ways to assure that you maintain the structure in your own domestic market while you do that. That's clearly within trade rules; they are proceeding with it, and the more power to them. It adds to the export balance that Mr. Gifford has suggested. It leads to continuing evolution in the industry in response to the evolution within the domestic market itself.

Mr. Rick Borotsik: Thank you.

I have one very quick question. Mr. Hedley, you also indicated that the rural economy was going to be a result area. What benchmarks are you using for the rural economy? That's very heady stuff, very fluffy. It's very nice to put on the table: By the way, our business plan is going to suggest that one of our major focuses is going to be on rural economy. What's your benchmark and what do you want to achieve with this business plan?

Mr. Doug Hedley: First of all, the basic approach here is really two or three things. One is that the rural economy, which we do not define as agriculture, but rural communities—it is rural, very large across Canada—is an effort across I think now some 20 or 21 departments, a true horizontal issue of government. It is trying to assure that rural Canadians, nine million of them strong, have access to the same services, access to the same features of Canada that all the rest of urban Canadians have.

In doing that, I think we're feeling our way along to figure out what best to do. We do know that throwing money at it is probably not the best way to do it—some money, yes, but not large amounts. The other is that the communities themselves are the best determiners of their own future.

As a result, we are going out with fairly substantial efforts this year in terms of getting a number of pilot projects under way, designed and created within communities. We'll be leveraging that money with communities and others on projects to try to strengthen the whole rural community atmosphere.

Mr. Rick Borotsik: How do you measure standard of living?

Mr. Doug Hedley: That's a tough one. We're working on it. The broad measure we are working toward is to assure that rural Canada has access to the same goods and services of governments as do urban Canadians and the same business and economic opportunities as you have in urban Canada.

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Mr. Rick Borotsik: Thank you, Mr. Chairman, Mr. Proctor.

Mr. Dick Proctor: You're welcome, Mr. Borotsik.

My questions are on the PFRA area. Mr. Graham, I was interested in your opening comment that you're responding on these new business lines to reporting to Parliament better. We're having a dickens of a time trying to figure out what has happened. I know the Auditor General said staff positions at PFRA were cut by 17%. Is that accurate, or is it because it got rolled into these two other programs that Dr. Sonntag talked about?

Dr. Bernie Sonntag: On the staff side, the reductions in PFRA are both similar to other parts of the department, in the order of 20% to 25% in terms of staff members.

Mr. Dick Proctor: I think I also heard that these cuts were announced earlier and they're sort of behind us now. Based on the P and P document from last year, though, it indicates that the money for PFRA is going up slightly this year and is then dropping dramatically for the next fiscal year. Is that also correct, and can you elaborate as to why that's evident?

Dr. Bernie Sonntag: That reflects some of the term funded programs that are delivered through PFRA. In the agriculture innovation fund in Saskatchewan, for example, the money flows through PFRA even though it's not in the PFRA core budget. Some of the dollars to you in PFRA reflect the fact that some of those funds are flowed through PFRA to those programs. The big chunk of the agriculture innovation fund money, for example, went out in the last fiscal year. That will show up in this fiscal year, and in the following years it will show a smaller amount.

Mr. Dick Proctor: How much of the steep decline that these numbers reveal is recovered by clawbacks from farmers, from producers? How much has that grown over the last few years?

Dr. Bernie Sonntag: We have a vote-netting arrangement for the community pastures, which is by far the biggest chunk of any revenue we're associated with. Where the community pasture program itself costs in the order of $13 million or $14 million, there's $10 million to $12 million in revenues that are returned through grazing fees, depending on the particular year. That's the vast majority. There are other small revenue recovery things on some of the small irrigation dams in southwestern Saskatchewan, but the bulk of it is the vote-netted arrangement with community pastures.

Mr. Dick Proctor: Is it the departmental projection that these clawbacks will continue to increase in the out years?

Dr. Bernie Sonntag: The revenue recovery will be at approximately the same level we have now within the community pastures program, except as costs increase there could be small fee increases in the future.

Mr. Andrew Graham: There will be no change in the fee structure.

Mr. Dick Proctor: There will not be.

Mr. Andrew Graham: No.

Mr. Dick Proctor: Thank you.

The Chairman: Mrs. Ur, then Mr. Steckle.

Mrs. Rose-Marie Ur (Lambton—Kent—Middlesex, Lib.): Thank you, Mr. Chair. I'll continue on the questioning of my colleague Mr. Borotsik.

Mr. Hedley, you said there are a number of rural projects on the way. We've seen this rural development package or title in the department for a bit now, but we never have examples. We just have all these projects, these probabilities. Is there anything of substance that's happened in the last little while to show that there is advancement in the rural sector within the department in terms of how we've achieved something instead of what our hopes and ideas and visions are? Is there anything concrete?

Mr. Doug Hedley: I think we're getting things under way to be able to provide you with—

Mrs. Rose-Marie Ur: How long has this been going on?

Mr. Doug Hedley: For about a year to a year and a half. We've been talking about getting this under way for some time. We now have funding this year to get out—

Mrs. Rose-Marie Ur: I find we've been spinning our feet for a little bit longer than I would have anticipated, with dollars going out but no accountability for those dollars. I guess I'm a bottom-line person who wants to know. I don't mind spending the dollars as long as I can see some productivity and positive results. I don't know, but I'm not seeing a lot.

Mr. Doug Hedley: We can keep you informed on this as we go through the year. This is the first year that we are going through these pilot projects. We hope to have many of them out and running by summer. We are watching them very, very closely as a technique or tool in the way in which we pursue rural development and rural affairs in Canada. As I say, as we go through this, we will be adjusting our programs as necessary to achieve those results you're talking about.

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Mrs. Rose-Marie Ur: I really think it's important. I was really quite pleased to see that finally we resolved the fact that we needed to have this rural development. But on the other hand, I'm not as excited since we made this great announcement. Enthusiasm is dying because we can't go out and say what we've really achieved. We created this sector, and I think the committee would be appreciative of any updates that would come along.

Someone spoke about market access and resolving domestic and international barriers. Could you tell me how far we've advanced within our own domestic area? Is there good productivity, or are we still battling the big battle there?

Mr. Mike Gifford: Mr. Chairman, on the question of the internal trade agreement, the agricultural chapter is currently under review. There's been some progress made on some of these so-called technical barriers with policy implications. For example, in the case of the grade for small potatoes, there has been an agreement on a grade, at least on an experimental basis, that would allow in effect the interprovincial shipment of small potatoes.

I think the bottom line is recognized and that the internal trade agreement only really covers technical barriers to interprovincial trade in Canada, leaving out other potential barriers, primarily policy barriers. That's currently the subject of a federal-provincial working group that will be making some recommendations to federal and provincial minister at the meeting in July of this year. This will be followed by about six months of consultations with the industry on the basis of a discussion document that was prepared jointly with the provinces. So hopefully, there will be something coming out of the federal-provincial meeting of agriculture ministers in July.

Mrs. Rose-Marie Ur: I have another question. We have to be global players, and I think Canada has certainly met or probably superseded the target compared to other countries. Of course, with negotiations starting up again, how far is Canada expected to bend to be a part of the program? I think we've gone beyond most country's limits. I'm hoping we will take a strong stand, because we've been there. We should play catch up now with the rest of the countries in coming to our end of the deal.

Mr. Mike Gifford: Mr. Chair, I think the most broadly based measure of the way governments support their agricultural sectors is the so-called producer subsidy equivalent that's been calculated by the OECD for all of the major developed countries. It's certainly true that over the last four or five years, Canada's level of support to the agricultural sector has dropped from roughly 40% down to 20%. That's to say that 20% of the income of a Canadian farmer can be attributed to government support either in terms of government money spent or the support provided by border protection.

So today, we're right at the same level as that of the United States and at about twice the level of that of Australia and New Zealand, but we're substantially below that of the European Union. If memory serves me right, their level is something in the order of 45%, and in the case of Japan and Switzerland, you're talking about support levels in the order of 60% or 70%.

So I guess what I would say is that we're at the same level as that of the United States and still substantially higher than that of Australia and New Zealand, but we believe that we have, over the last four or five years, reduced certainly the kind of trade-distorting support that other countries are interested in reducing.

This has been to our own advantage, as well. For example, I think anybody in western Canada today, notwithstanding what position they might have taken on the Crow five, ten, or fifteen years ago, will acknowledge today that the elimination of the Western Grain Transportation Act has resulted in more investment in western Canadian agriculture than any other single thing that any Canadian government has done for the last one hundred years.

The Chairman: Thank you.

Mr. Steckle.

Mr. Paul Steckle (Huron—Bruce, Lib.): Thank you, Mr. Chairman. Thank you, gentlemen.

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We have had many occasions in the past to discuss these matters. This morning I want to bring some questions to the table that may be asked by my rural counterparts. If some of my rural friends were here, they would probably ask you these questions.

Mr. Gifford, earlier this morning in your presentation you indicated that in 1999 you want to bring together a conference where you will give us an understanding of the direction in which we are going in terms of our position for the WTO. Leading up to that, what are you doing now to assure my rural friends that their interests are going to be represented and that their positions are going to be clearly stated and known in 1999 when this conference occurs?

Mr. Mike Gifford: Well, Mr. Chairman, as you are aware, the department has circulated a number of discussion papers—they're not position papers, they're discussion papers—that basically outline what the current situation is on market access, export subsidies, and domestic support internationally, and what some of the considerations will be in the next round.

We have also encouraged provinces and industry associations to have, perhaps as part of their regular annual meetings, a special section on what their interests are in the next round of WTO negotiations.

We have encouraged workshops. The most recent one, for example, was in Saskatoon last fall. It was a two-day workshop where there was a thorough examination of Canada's interests, goals, and what a new trade agreement could do for Canadian agriculture. We are going to be assisting the provinces of Alberta and Quebec in hosting similar workshops this fall.

We are telling any industry group that cares to listen that officials in Agriculture Canada and Foreign Affairs and International Trade are prepared to sit down at any time to discuss their interests. They can discuss how they see their vision of where they want to be in say 2005 or 2010, and how a new round of multilateral trade negotiations can, in effect, help them achieve their own business plans.

When the grains industry has a symposium, we are encouraging them to make sure that it is not just grain producers talking to grain producers, but that they invite their colleagues from the supply management sector and the red meat sector. Similarly, when the supply management industries have symposia or workshops, we are encouraging them to make sure that they invite their colleagues from the red meat, grain and oilseed sectors.

Obviously it is our hope that Canada can enter the next round of trade negotiations that will start in the late fall of 1999 with a national position. Obviously to the extent that negotiators have a solid national consensus behind them, it puts you in a stronger negotiating position. It would be extremely unfortunate if Canada went into the next round of negotiations with a fragmented negotiating position.

Mr. Paul Steckle: On the goals that you have set for 2005, I can remember that back in 1994-95 we set goals for the year 2000, something like $20 billion in exports. We have reached that target considerably ahead of our time. We have also perhaps done that on the strength that we had a 70¢ dollar, a very low dollar.

In your anticipation of the goals you hope to reach by 2005, are we actually going to be growing more wheat, producing more hogs to do that, or are we simply going to be value-adding based on a low dollar?

What if the dollar goes to 80¢? Where does that put our projects for the year 2005 in terms of the dollar value? It is one thing to have dollar value, but it is also one thing to have two bushels of apples instead of one bushel of apples. I would like to have you talk about that for a moment.

Mr. Mike Gifford: Certainly in order to achieve a target of $40 billion we are going to have to upgrade our export profile. As our private sector advisory group is saying, basically you have to reverse the percentage of value-added products to bulk. That does mean making sure of that by encouraging the industry to ensure that we do not export live cattle and live hogs. Even if you want to get it to $40 billion, we have to keep more and more of those live animals in Canada.

As I say, we have to upgrade what we are exporting in semi-processed form. Instead of exporting small amounts of say wheat flour, we have to do what Dare cookies, for example, are doing now, which is exporting biscuits to the United Kingdom.

I mean, for donkey's years we have been importing all kinds of biscuits and baked goods from the U.K. into Canada. Today we have Canadian firms exporting processed products to offshore markets.

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Canola has been the Cinderella story of Canadian agriculture. But until recently basically what we were doing was crushing a bit in Canada for the domestic market. Most of our exports were canola seed. Well, just take a look at our export figures today. You'll see the situation is almost even, where our exports of canola oil are almost as much as the value of our canola seed. So we are going to have to be doing more and more of this.

What about the bottom line? Obviously exchange rates have some impact, but if you're working in an open economy, if your currency depreciates, that means the cost of your purchased imports from abroad go up.

I don't know, but some economists will say that in an open economy as open as Canada, it's almost a wash. But certainly if you're a businessman, you say a favourable exchange rate might get me interested in the export market, but if the rates go up in the future, then basically how competitive I am will determine whether I stay in the export market.

I think we're going to see fluctuations in exchange rates, but the inherent strength in the Canadian agrifood sector is such that we can weather these fluctuations in exchange rates. If the rate goes up to 75¢ or 80¢, that doesn't mean we're going to lose great chunks of our export market.

The Chairman: Thank you very much.

Mr. Paul Steckle: I would like to have one more question; it's important.

The Chairman: Go ahead.

Mr. Paul Steckle: I share your enthusiasm for value-adding. I think that's important, and I think we ought to be doing and encouraging that. The primary producer is still the one. When you look at his gross sales relative to the line of margin of profits that he has now, compared to what he had ten years ago, that line is constantly coming down. There's going to be a crash point at some point where he can no longer produce, because he's simply out of business. The margins of profit... Well, we've worked on volumes for so long, but you can only do that for so long.

This morning we listened Mr. Serageldin from the World Bank. Let me read a few topical headlines from one of the documents circulated this morning:

Why are countries uncommitted if the agenda is so important?

Agriculture is viewed as a declining sector.

Falling real food prices over the last two decades have led to complacency.

That is absolutely true.

The rural poor have little political power.

And then:

Urban elites pursue policies which put the agricultural sector at a disadvantage.

Somehow, my feeling is that the rural community feels they have not really been hurt. Yes, we applaud them for the way they can economize. We talk about cost recoveries, and the PMRA is factored into this—and that would be another area we could get into this morning—but somehow the primary producer has to make a profit. If he does, then the expansion of that rural envelope, as we now consider it... We talk about rural strategies, rural initiatives, all of these things that are not directed at particular farm folk. They're directed at rural communities that happen to exist within the boundaries of rural areas, rural communities.

My question is what are we doing to ensure that the margin... Because cheap food is the answer to the problems of the world. Well, to a degree, but the farmers producing that cheap food won't be producing it if they don't get paid to produce it.

Mr. Brian Morrissey: Thank you, Andrew.

Mr. Chairman, I'm just going to comment on the issue of adding value. The advice we in the research community are getting from our own advisory bodies is to add value all through the chain, not just add it near the market end.

We're being told, for example, that in soil, produce corn you can grow in Quebec, and produce soya you can grow in Quebec, where traditionally these were not crops. We're being told that the value of your soil is a function of the wealth you can produce on it. In B.C., for example, produce late-maturing cherries so we can get into the market just after the B.C. crop is finished. That way it's a more valuable crop than if you're coming out when it's a commodity like everybody else's.

With animals, produce leaner meat. In food, for example, with eggs, get lysozyme out of them, so you can use it in the pharmaceutical market and you can still use your eggs.

So I just make the point, Mr. Chairman, that it's not just at the processing end that we should be trying to add value; it's all through the chain.

Thank you, Chairman.

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The Chairman: I think Paul's question was what happens, though, if the producer is not making enough? Your cheap food policy goes out the window, because there won't be anybody around to produce it cheaply.

Mr. Jake Hoeppner: You're not getting the total value being there—

The Chairman: I'd like your response to Mr. Steckle's question.

Mr. Mike Gifford: Mr. Chairman, clearly any person in the chain has to be making a buck in order to stay in business. Clearly, in many respects, the primary producer is at the bottom of the chain, and has the toughest row to hoe. In order to stay in business, he has to constantly continue to innovate. I mean, if you were a dairy farmer 30 years ago, you remember what kind of an operation you had then, compared to the kind of operation you have today.

The technology the average producer is dealing with... Somebody says it's not so much family farms as family farm businesses. What you have basically are family farm businesses that have more money tied up than most small businesses. On the commercial farm in Canada today you have capital in the order of a million dollars that is tied up. Basically you want to make sure that you can make a return on that million dollars comparable to investing it elsewhere, because that's your choice.

If the system doesn't allow the primary producer to make a dollar, then basically those producers are not going to stay in the business. So if we want to increase our supply and maintain our supply of both commodities that can get converted to red meats or further value-added products, the economic environment has to be such that it's attractive for somebody to stay in the business as a primary producer.

I think the commitment to the industry is out of the question. In the red meat sector, there is the Canada Pork International and the Beef Export Federation. Surprisingly, you might think the primary producers are doing the running in both those organization. They realize that it is in their long-term interest to have Canada move away from being primarily a domestic-oriented livestock sector, or a North America-oriented livestock sector, to being one that is sort of competing on a global basis. So primary producers are the ones that have provided the stimulus to the packers to get out there and start looking at new markets beyond those in the U.S.A.

The Chairman: We should go to Mr. Hoeppner and then Mr. Calder.

Mr. Jake Hoeppner: Thank you, Mr. Chairman.

I have a quick question for Mr. Hedley. On the $162 million to Saskatchewan, was that kind of a political goodwill gift, or were we on the hook for it? It sounds very much like Mr. Mulroney's billion dollar one when Saskatchewan was about ready to fold up. I'm sure Manitoba would love those kinds of payments too.

Mr. Doug Hedley: First, that money was created in the fiscal framework outside our existing safety net allotments, if you wish.

When you look at all these programs, I think basic questions have to be answered about the best way to deal with situations. When the Saskatchewan fund did get into difficulty, the easiest way was to put it back on a balanced basis, as most of the other provinces are—indeed all of them.

Mr. Jake Hoeppner: Wasn't that a Saskatchewan problem, though? It wasn't a federal problem.

Mr. Doug Hedley: Those programs, by and large, are joint in the creation of those programs. We did come through some very bad years that did hit Saskatchewan harder than almost any other province. In doing that, if you had to pay that off through the premiums, you're essentially putting a pretty heavy tax on the Saskatchewan farmers.

Mr. Jake Hoeppner: I agree with that. We'll leave it at that.

I want to go back to the value-added industry, and Mr. Gifford can maybe fill me in on this. As you know, the Senate is holding hearings on different issues of Bill C-4. On the value-added questioning I was astounded.

I picked up these minutes just yesterday. This is Mr. Geddes talking, who has been hired by the board to do some work on it. Talking of the mills, he says:

Again, we will trade or lock in the basis with them, sell them the basis, protect ourselves and them in the marketplace so that they have a very clear price discovery and risk-protection mechanisms that a lot of the mills in the United States may not be able to get as far as six months out.

Now, is he talking about us doing that for American mills?

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Mr. Mike Gifford: I think that quote is basically Mr. Geddes talking about promoting value-added industry in Canada and the willingness and ability of the Canadian Wheat Board to provide assurances of supply and prices to domestic mills. It is doing it in terms and conditions that perhaps aren't available to an American mill.

Mr. Jake Hoeppner: On reading that before and afterwards, I thought he was talking about American mills, but I'll ask him personally some day.

Then the next statement Mr. Hehn made was even more astounding. He said:

We are one of the largest players on the Minneapolis Grain Exchange, which might surprise some people around this table.

Mr. Geddes adds to that:

We will play about as much as they will let us, always being long with wheat stocks.

Now, for God's sake, they surely weren't long on the Minneapolis Grain Exchange for the last two years, because that could break us. I was always told that they weren't playing the market. If that's what's going on, that's mere speculation.

Mr. Mike Gifford: Mr. Chairman, perhaps I can ask Mr. Migie to comment on the specifics of the board's hedging operations. It's relatively new. I was aware that the Australian board, for example, had a long involvement with hedging on the American commodity markets, but I wasn't personally aware that the Canadian board was also engaged in hedging operations on the market.

Mr. Howard Migie (Director General, Adaptation and Grain Policy Directorate, Policy Branch, Agriculture and Agri-Food Canada): Maybe I can just add to that.

I was there when Lorne Hehn was before the Senate committee. He was explaining that in recent years, with the pricing arrangements they have had with the mills, the Canadian Wheat Board has been undertaking hedging. He has indicated that through those hedging arrangements, the Canadian Wheat Board has become a significant player on that particular exchange, and it didn't go beyond that.

In Bill C-4 there are provisions that spell out the board's authority to do hedging.

Mr. Jake Hoeppner: My next question is that I've tried... I live three miles from the U.S. border, and I've heard a lot of complaints from American farmers that we were not just influencing their cash prices, we were also speculating on the future prices, and with their magnificent power of the stocks, the Wheat Board was to blame for it.

I never would have believed that they would openly admit it like this. If they're the largest player in the Minneapolis market, they're big.

Mr. Howard Migie: I don't know if they're the largest, but he said they were a large player, and the point of view... They were hedging their operations, in his view, not speculating on the exchange.

Mr. Jake Hoeppner: The Wheat Board is supposed to sell grain, not buy grain. If they're long on the Minneapolis market, that's disastrous for us farmers.

I know enough about markets that I know what he's talking about. I've tried to find out through the estimates where this money they're using to hedge this grain is being designated, where it's showing up. It's sure not showing up in the Wheat Board books, and I can't find it in the estimates. So I'd like to know where those amounts are, and I want some documentation on how much is lost or made on those markets.

Mr. Howard Migie: Their hedging operations are really to break even, so that they can in fact provide the Canadian mills a guaranteed price that goes out into the future. It doesn't go beyond that. They're trying to break even on those operations. To the extent that they do, there wouldn't be any impact.

Mr. Jake Hoeppner: They wouldn't be the largest player if they were just hedging for the Canadian mills. They would only be a small player.

I just think there's something wrong that needs explaining. I'd sure like to have some documentation on where that money is coming from for the hedging. If it's coming out of the Wheat Board, that's coming out of farmers' pockets.

There is another thing I wanted to bring up. As you know, the Wheat Board always brags about developing milling industries abroad, and one place is Indonesia. I just heard recently that we gave them $250 million worth of wheat as an aid package. Now, what's the score here? First we build the mills, then we give them the wheat, then we protect them on the hedging market. It's no wonder we farmers are going broke.

Mr. Mike Gifford: Mr. Chairman, with respect to the export credit enhancement a few weeks ago on sales of wheat to Indonesia, that was an export credit guarantee. It was not a gift; it wasn't foreign aid.

Basically the Government of Indonesia has guaranteed that loan. The Canadian government was forced into a competitive situation once the United States started to offer export credits on grains into South Korea and Indonesia. Basically, we wanted to hold on to our share of the Indonesian market, which is primarily an Australian market but about a third of it is Canadian. We had to be competitive with the export credit guarantees being offered by both the United States and Australia.

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That's an export credit guarantee; it's not a transfer of money to Indonesia. It's the Government of Canada guaranteeing the proceeds from that sale.

The Chairman: Thank you.

Mr. Calder.

Mr. Murray Calder (Dufferin—Peel—Wellington—Grey, Lib.): Thank you very much, Mr. Chairman.

Mike, I was interested in your committee that's going to be coming up. When we go into negotiations on the WTO, would you be supporting the agrifood industry, agriculture, being negotiated by itself?

Mr. Mike Gifford: That is a good question.

If you're an agriculturalist and you have export interest, then you would say that if you just negotiated agriculture by itself, you're going to end up with a very small package, or a smaller package, because there are a certain countries—for example, Japan and Korea—that have absolutely no export interest whatsoever. All they see is import sensitivities. Therefore the size of the eventual outcome would be lower than if agriculture were part of a broader negotiation that included, for example, industrial tariffs and other parts of a broad negotiation.

There is still no consensus on how extensive the range of negotiations will be that start around the turn of the century. Right now, there's a built-in commitment on agriculture and services, but there's a large number of countries that are openly saying today that certainly industrial tariffs should be added, and perhaps some of the elements, for example the speculation that this proposed investment agreement might get sort of transferred into a WTO context.

The decision on what to include in the next round, whether it's going to be bigger than just agriculture and services, will be taken by the WTO ministers in the fall of 1999. There's going to be a main ministerial meeting this year at which ministers will direct officials to write up, in effect, a decision document so they can take a decision in the fall of 1999 on, in addition to agriculture and services, what other parts should be negotiated.

As an agriculturalist, my own view would be that obviously it's to our advantage to have more on the table than simply agriculture and services, because then there's a greater likelihood that we'll get more out of these import-sensitive markets such as Japan and Korea.

Mr. Murray Calder: It makes me nervous when we're lumped in with another industry or sector, however you want to put that, given the fact that the agrifood industry here in Canada is second only to the automotive industry as a base industry. So I see one reason right off the bat to stand alone.

Your previous comment was that a farmer may have a million dollars to tie it up in capital assets. Well, I can tell you that's a pretty small farmer. In my situation, and I look at our chicken farm as just average in size, we have three times that in capital assets, on which right now I'm having a hard time getting a 3% to 4% return.

In fact, a couple of weeks back I had people from the restaurant association out to our farm to tour it, because we had a reception a month or so ago, and basically I listened to them hammering supply and management. I said “Before you condemn it, come on out; I'll show you, and we'll sit down and talk.”

We found out that I'm getting about 3% to 4% return on my capital investment, and they're getting about 3% to 4% return on their capital investment. Somebody in between those two points is making one heck of a lot of money, and we'd like to find out who it is. That's the first thing.

Of course, how we're selling chicken is something else.

I went through this, and I see you have four points for your business plan. Those four points basically overlap. That's what I see. One is working into the other one, and so on and so forth. Yet you have a set amount of money attached to each one of these—anything from $147.5 million to $350 million, $873 million and $49 million. If these areas are not black and white and there are are grey areas, how are you going to allocate that money? For instance, how much money will actually be allocated to value added? How much money will actually be allocated to farm income protection programs?

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Mr. Andrew Graham: You are right, there are grey areas between them. I think the current buzzword is that there are horizontal issues too—the environment or value added, where everybody has to make a contribution. That doesn't necessarily mean spending money specifically, but we have to deal with those issues and allocate the amount of money we have as best we can.

It's a continuous process of identifying it. Those are moneys attributed to each of the four business lines, but in fact those moneys are managed by the branch heads, some of whom are here, in the various branches. So the way they are expended will depend on what they're operating. Then we aggregate those against the best ways we can measure.

We could at the moment, I imagine, give you a fairly good projection on what we spend on environment and a whole bunch of environmental areas. That doesn't mean we allocate air-tight moneys, because sometimes we have to move money back and forth if priorities come up. So there is a continuous management of the money over the year. I fully recognize that what you say is absolutely right. There are grey areas there, and there's some ebb and flow.

You used two examples, and I think it's interesting that the first example, value added, is not a program per se. There isn't a piece of legislation.

Mr. Murray Calder: But we're talking about it.

Mr. Andrew Graham: We're talking about it. We talked about it in research. We talked about it everywhere, so everybody in contributing to that. When we talk about income security, I assume you're talking there about safety nets.

Mr. Murray Calder: Yes.

Mr. Andrew Graham: That's much more discrete. That's a discrete box in which there are specific amounts of money. There are different meanings. It's not as easy as saying in that little box is that amount of money. In some cases it is—safety nets—and in other cases it isn't.

Mr. Murray Calder: I understand the safety nets area is going to be discrete, because if you take a look at the WTO description, NISA could fall into amber. The only reason we're not really being challenged by that is the fact that the United States has a similar type of protection, and why would it want to go after us knowing full well it could be challenged? Therefore it's been relatively left alone. But it's my understanding that still exists.

The other thing you're telling me is that each one of these figures, for instance $147.5 million for expanding markets and $873.8 million for strong foundation, is a ballpark figure and could fluctuate.

Mr. Andrew Graham: Those are the planned expenditures on the basis of what we're planning to do. That's the report on plans and priorities. Those amounts are what we are planning to allocate to those areas and are committing to. It doesn't mean that over the course of the year things won't move a little bit on the margins.

Mr. Murray Calder: I see a bit of a contradiction here. You're telling me these are the set figures of how much money will be spent, so you have something in a nice tight little box. Then you have the four points here of the business plan that you're telling me are grey. In other words, they overlap.

Mr. Andrew Graham: No. You're the one who's telling me they are grey areas, and I am agreeing with you, number one.

Mr. Murray Calder: Okay, you agreed with the fact they are grey.

Mr. Andrew Graham: Number two, we'll be coming back—

Mr. Murray Calder: How can you have a box and a non-box working together?

Mr. Andrew Graham: Well, that's the miracle of modern government. We'll be coming back to you in this whole planning cycle. We said that's the departmental expenditure plan. We will be reporting back against that expenditure plan, just as you see in the estimates we went back and said we forecasted and we planned and here's what happened to cause the variation. When you're talking about that amount of money, there's a bit of warp and woof in the whole thing.

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Mr. Murray Calder: I don't know if it's me, but I always start out at the beginning of this process and it's just as clear as mud. I'm at that point again right now.

The Chairman: Thank you.

Ms. Alarie will conclude.

[Translation]

Ms. Hélène Alarie: Mr. Chairman, I think that there are several subjects we'd like to look at more closely. Such as, for instance, the environment and the WHO just to mention those two. We could even hold special sittings for them.

Now I have two brief questions. First, I would like to know what the policy of the Department of Agriculture is regarding food irradiation. I would also like to know whether you are working on the traceability of meat. How are these progressing?

Thank you.

Mr. Brian Morrissey: Regarding irradiation most of the international agencies, such as Canadian and American ones, have approved food irradiation. The World Health Organization has established standards for food irradiation. Therefore, this is not a technical problem. Technically, most agencies agree that there is no danger.

The problem is, in the way the consumer accepts it. Consumers are worried. When a food product has been irradiated, it must be labelled as such. This means that the consumer is concerned.

On the other hand, in the United States, more recently, the irradiation of poultry and of red meat was approved. Will the consumer accept this? This is yet an unwritten chapter of history.

So, generally speaking, from a technical point of view, the agencies have determined that irradiation is not a health hazard. But the consumer, on the other hand, is still concerned.

Thank you Mr. Chairman.

Ms. Hélène Alarie: It is indeed the way the consumer sees it. Since the decision of the United States—I don't know if my colleagues have any questions regarding this—, there has been really a great deal of concern. We could also talk about milk. So, technically speaking, we are not on the front line in this position. We're rather waiting to see how things will develop.

Mr. Brian Morrissey: I have two comments, Mr. Chairman. In the United States, according to what I've read, irradiation is very little used, even though it has been legally accepted. And to the question about knowing whether an irradiated food product can be identified as such, we must say that it cannot be done. The only thing that might be detectable, for instance in the case of imported shrimp, is that it is sometimes so clean, so free of any kind of bacteria that we may wonder if nature could have really produced them as they are. There is no way of detecting whether a food product has been irradiated apart from its exceptional purity.

Ms. Hélène Alarie: My second question deals with the traceability of food products. Do we have a program to deal with this? And how is this progressing?

Mr. Brian Morrissey: There is no known method at this time, neither in this country or abroad, for retracing or identifying irradiated products.

Ms. Hélène Alarie: No, I am talking about the traceability of food in general, as it is practised in Scotland and in England, where they began to do it for beef.

Mr. Brian Morrissey: Ah! I can't make any comment about this. This is the Agency's mandate.

[English]

Mr. Doug Hedley: The beef cattle industry and the dairy industry are working toward animal identification from farm levels through to retail now. We are supporting that effort through our CARD program, or plan to. We're trying to add more species to that, so Canada can be assured of trace-back from farm levels through to retail at the earliest possible date.

The Chairman: We'll conclude now with Mr. Steckle.

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Mr. Paul Steckle: On the estimates, expanding markets, page 10, third bullet, I wonder if you could expand on what you're really saying there and what you really want to play into that where it says:

Orderly marketing facilitated through the increased use of advanced payment and price programs operated with reduced risks and liability.

Please explain that to me, because I think I know what we had, but I don't think I know what we might have in the future.

Mr. Mike Gifford: For example, Mr. Chairman, the Ontario Wheat Producers' Marketing Board basically uses a mechanism similar to the Canadian Wheat Board's in terms of initial payment so producers don't have to rush to sell their product. Once they get it off the combine, they can basically get an initial payment and then store it and get a better price later on in the year. That's essentially it, Mr. Chair.

Mr. Paul Steckle: You use the words “through the increased use”. The word “increased” is what has me wondering, because I see Ontario wheat producers going in another direction for their marketing plan, something western farmers also want. I see the farm community going in another direction, but you're saying we're increasing that intent.

Mr. Mike Gifford: Mr. Chairman, there are a number of commodities that could take advantage. Basically, a group could get together to in effect take advantage of the opportunity of borrowing money from the bank to make an initial payment and then sell the product over the course of the ensuing year. That's available to any commodity group if it's prepared to meet the terms and conditions of the program. It's basically up to producers to decide whether or not to avail themselves of this particular opportunity, whether they're maple syrup producers, corn producers, wheat producers, or whatever the crop might be.

Mr. Paul Steckle: Would you include the crop input advance money as being part of this? The notion of the current program we have on inputs is that moneys are being advanced for those costs. Do you see that as a continuing program? Western farmers and Ontario farmers have used that for a number of years, up to $50,000—

A voice: Cash advance?

Mr. Mike Gifford: Cash advance, yes.

Mr. Paul Steckle: Is this included?

Mr. Mike Gifford: Yes, indeed.

Mr. Paul Steckle: Thanks.

The Chairman: Mr. Harvard.

Mr. John Harvard: I have just one short question for Mr. Gifford.

Mr. Gifford, in your opening remarks you mentioned technical barriers to trade, internationally, and domestically, interprovincially. Without being esoteric, can you tell me about a technical barrier that is particularly vexatious to us and that is really harmful to our export opportunities or our opportunities to trade across provincial lines? Is there one that stands out?

Mr. Mike Gifford: There are a number of examples I could give, Mr. Chairman, but perhaps a couple will suffice. One example is our exports of pork to Australia. Basically because of the Australian concern about a number of hog diseases, they insist that the only pork we can sell be super-frozen and basically go into the processing sector only. We can't sell our pork for retail sale. It's certainly our view that technically speaking there is no risk of transmitting these diseases through meat. It's our view that the Australians are being more stringent than they need to be.

Mr. John Harvard: Do you question their motives? Perhaps the real reason is to keep competition out.

Mr. Mike Gifford: The bottom line on this, Mr. Chairman, is that there are very few black-and-whites. If you really think somebody's abusing a country's right to impose trade measures in support of legitimate health and sanitary measures, then you take that to dispute settlement. And both the NAFTA and the WTO provide us with an opportunity, where we think foreign government action is egregious, to have that taken to dispute settlement. For example, in the case of beef hormones in Europe, we and the United States took the European Union to a WTO panel—

Mr. John Harvard: And won.

Mr. Mike Gifford: —and won.

The Chairman: Mr. Hoeppner would like to have one “very small” question.

Mr. Jake Hoeppner: It's a very small question. I should be at the Senate hearings. I learn more over there than in our own hearings.

If I'm right, I see Mr. Migie sitting in the back.

The federal government is actually involved with the Ontario Wheat Producers' Marketing Board in a number of ways. The federal government guarantees initial payments, adjustment payments and marketing costs under the Agricultural Marketing Programs Act. It is very similar to what we do with the Canadian Wheat Board under the Wheat Board Act. Now, this is news to me. We were always told they guaranteed only the initial price.

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Mr. Mike Gifford: Mr. Gilles Lavoie.

Mr. Gilles Lavoie (Director General, Agricultural Industry Services, Market and Industry Services Branch, Agriculture and Agri-Food Canada): Thank you, Mr. Chairman.

Mr. Jake Hoeppner: Maybe I'm looking for an appointment, Mr. Chairman.

Some hon. members: Oh, oh.

Mr. Gilles Lavoie: The Ontario Wheat Producers' Marketing Board has been participating under what was up to last April the Agricultural Products Cooperative Marketing Act. That was replaced by the adoption of AMPA on April 25 of last year. It's sort of a price-putting program. In the program we do guarantee an initial payment plus additional marketing costs to those associations that do market under a co-operative plan. What we guarantee is a price minus additional marketing costs, and then they pay the difference as an initial payment to their producers.

Mr. Jake Hoeppner: So please give us the right to export our own grain to the U.S. We'll all be happy.

Voices: Oh, oh.

The Chairman: Thank you all very much.

I know this is a new process, and maybe over time it will become clearer than it may be right now.

The meeting is adjourned until 8.30 Thursday morning.