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, December 8, 1998

• 0904

[English]

The Chairman (Mr. John Harvard (Charleswood St. James—Assiniboia, Lib.)): Members, we'll bring this meeting to order. We have a quorum to hear witnesses.

Today we continue our hearings on the upcoming WTO negotiations. We have the honour of hearing from representatives from Quebec's UPA, including Laurent Pellerin, the president; Mr. Yvon Proulx, who is also with that organization. We also have with us André Pilon and Mr. Denis Levasseur. And from the Canadian Dehydrators Association, we have Garry Benoit and Bryan Davidson.

• 0905

We're going to start with the representatives of the UPA.

[Translation]

Mr. Laurent Pellerin (President, Union des producteurs agricoles du Québec): I am going to ask Yvon Proulx, Chief Economist with the UPA, to present our brief. I am available to answer any questions you may have regarding international trade.

Mr. Proulx.

Mr. Yvon Proulx (Economist, Research and Agricultural Policy, Union des producteurs agricoles du Québec): Thank you, Mr. Pellerin and Mr. Chairman. I am very pleased to be here this morning to make a presentation on international trade this time.

I am going to follow the text fairly closely and will read it slowly for the interpreter's sake, since I unfortunately did not send the text early enough to have it translated into English. However, I do have copies in French, and we can certainly provide those to you after the meeting.

With another full year ahead of us before the process to negotiate and sign a new international trade agreement begins, it probably is not yet time to present detailed positions on each of the issues to be addressed in these negotiations. I felt it would be more appropriate to comment briefly, given the time available to me, on a certain number of policy positions which the UPA believes the Canadian government should be guided by during the period leading up to the upcoming negotiations.

The first of these policy positions is that we must determine whether countries have adequately fulfilled their commitments. An important exercise must be undertaken in our view before we develop any position whatsoever: to assess whether all countries, and particularly Canada's major trading partners, have met their commitments since the last agreement was signed. Trade negotiations are intended to facilitate and enhance trade by reducing barriers to increased trade between countries. Before entering the negotiating process, a precise and rigorous assessment is needed, in our view, to determine what actions were taken by our major trading partners to fulfill the commitments they made the last time and how those actions compare with our own. Have we really gained access to their markets? Have we gained as much access as we have conceded others? The same kind of questioning and analysis is needed with respect to all categories of commitments made during the last round.

In fact, the first indications we have are that no other country has fulfilled its obligations as thoroughly as Canada has. That is what the data presented in the following tables suggest.

As regards market access, in particular, the first table presented, which you unfortunately do not have in front of you, shows that in 1997, Canada had already fulfilled 91% of its commitments, whereas the United States had not even given notification for 1997, and in 1996, it only fulfilled 54% of its commitments. The European Union did not provide notification either for 1997, but in 1996, it was at 72 per cent. As for Japan, it was at 71% in 1996, while the rest of the world was at only 63 per cent. I would remind you that Canada has fulfilled 91% of its commitments with respect to market access. So, Canada has kept its part of the bargain.

Those are the statistics on market access, but the situation is no different with respect to domestic support, as the two following tables show.

With respect to domestic support, in the two categories of programs that are supposed to be market-distorting—orange and blue—we note the following levels of domestic support: Canada had expenditures, as a percentage of the value of its production, of only 3%; the United States was at 7%, or a little more than double Canada's level; the European Union was at 33%, or 10 times more; and Japan was at 34%, which is also 10 times more. I would repeat that these percentages apply only to the orange and blue boxes. They represent domestic support by countries in categories deemed unacceptable from the standpoint of international trade rules.

• 0910

The following table shows that in terms of total support, in the orange, blue and green boxes, the latter representing allowable support, Canada was at 11% of production value in terms of expenditures, the United States was at 31%, the European Union, at 42%, and Japan, at 61 per cent.

These data clearly indicate that Canada has not only fulfilled its obligations, but it has also provided lower overall support, both allowed and disallowed, than other countries. In conclusion, Canada is providing less support than other countries. That is what the data we have reported show.

The other measure which most distorts international trade is export subsidies. Our brief also contains a table indicating that Canada has almost completely removed export subsidies. We know that just about everything we had in the way of subsidies was abolished, to the point where we were left with only $3.8 million worth of export subsidies in 1997. In the US, however, export subsidies amount to $121.5 million. As for the European Union, it has export subsidies worth $6.7 million. In summary, Canada has export subsidies of only $3.8 million, and we are realizing that both the Europeans and the Americans have quite a way to go in that area.

Last week or two weeks ago, when I came to make a presentation on farm income, I said that in light of the current income crisis, the US had increased its expenditures, particularly on export credits. That figure should actually be added to the ones that appear on this page.

For all those reasons, it is abundantly clear to us that before the Uruguay Round implementation period ends, a rigorous evaluation will need to be made of the behaviour of those countries we have named. If they fail to make more rapid progress towards meeting their commitments and continue to lag behind Canada in this regard, there would be no reason for Canada to make new commitments of any kind. If other countries are not able to fulfill their commitments, Canada should make no further commitment. That is our conclusion on this point.

Secondly, we think it's important to assess the impact of the commitments we have made. Some individuals fully subscribe to the idea of liberalizing trade and the philosophy behind it. We do not belong to that school of thought. As far as we're concerned, the whole point of trade talks is to make clear economic gains. The object of such negotiations is to allow our country to increase its wealth, increase employment and increase incomes. That, too, must be assessed. It is important to determine the gains or losses we have made as a result of the last round. We believe our answer to that question should shape the approach we take to the next round of talks. It should also suggest the areas we may wish to focus on in order to increase our net potential gains from appropriately conducted trade.

The third policy position I wish to comment on briefly has to do with maintaining the control we have gained over certain markets. The years immediately following the conclusion of the last round of trade negotiations were years of tremendous prosperity for the agricultural sector. Export demand for major agricultural commodities was strong, prices were favourable and farm income was attractive. We seemed to be entering a period of untroubled prosperity.

But suddenly, complications arose: a major economic crisis in Asia, the near-collapse of the Russian economy, resulting in a market decline in export demand, a sharp drop in the price of export-dependent commodities, a major farm income crisis in Canada and continued pressure on the government to add a missing component to the producer income protection system that had been dramatically dropped back when all was well.

• 0915

When market prospects were good back in 1995-96, as part of deficit cutting efforts, practically all the good income security programs were abolished, leaving us with only a few which are simply not adequate, as we explained the last time.

There is an important lesson to be drawn from this experience, from this complete economic reversal that we have witnessed. Free trade is great when all is well. It's not so great when markets are in a slump.

And here is another important conclusion: in sectors where we have managed to maintain an appropriate degree of control over markets, enough control so that they are not suffering the kind of disruption and fluctuations we see in the pork and grain industries at the present time, that control must be maintained. I am talking about collective marketing systems and supply management. As we see it, the lesson to be drawn from the economic reversal we have just witnessed and the major farm income crisis it lead to is very clear: in sectors where we have developed market controls, those controls must be maintained so that other areas of farm production in Canada do not become subject to the kind of disruption we are currently seeing in the pork and grain industries, whether it be tomorrow, the day after or 10 years down the road. We believe that to be an inescapable lesson. If we want to maintain the market protection systems that are not subject to fluctuations now, we must maintain those controls and not agree to concessions on tariff equivalents.

There is also another lesson to be drawn from this. It is important to avoid making any new commitments to reduce domestic support and be careful to maintain effective means of protecting farm producers' incomes. Otherwise, we will continually be caught in the kind of situation we are currently facing: being forced to hastily develop solutions to a crisis after the fact, which is what we are doing now. The other potential solution would be to decide, at the international level, to establish mechanisms that would allow us to maintain a better balance in markets that are currently subject to disruptions and fluctuations that create significant income problems, not only in Canada, but in other countries as well. We have seen the action taken by Europe and the United States to resolve this problem. In the wake of this economic reversal, we may want to consider developing market management mechanisms at the international level in order to avoid disruptions that are extremely costly, not only for Canada, but for all countries currently experiencing them.

The final principle we want to put forward involves the elimination of all export subsidies before there is any agreement to further open up markets. As we demonstrated earlier, Canada has abandoned that practice, but our major market competitors, the United States and the European Union, continue to make substantial use of subsidies—indeed, massive use of subsidies in the case of the European Union.

Given what we have just seen, our analysis suggests that there is no reason to take further steps to open up markets if the result is that we will be opening up our market to countries that continue to subsidize exports. That should be very clear: no new concessions in terms of greater market openness if countries do not stop subsidizing exports. That is absolutely essential.

That pretty well covers the points we wanted to raise with you today. In summary, we need to determine whether we have actually benefited from steps taken to open up markets the last time, during the Uruguay Round; we must maintain whatever controls are still in place so that the various production sectors will not be subject to the kind of disruption we are currently experiencing; we must avoid opening up our market to countries that continue to subsidize exports; and, finally, the Canadian government must move to become competitive with the governments of other countries in terms of support for the various agricultural industries.

• 0920

That is the message we wanted to deliver today. We are available to answer any questions you may have. Thank you, Mr. Chairman.

[English]

The Chairman: Thank you, Mr. Proulx. I can tell you that your presentations at any speed are always excellent.

Members, just before we turn to the representatives of the Canadian Dehydrators Association, a few minutes ago the staff was good enough to distribute copies of a paper containing information pursuant to a possible—and I underline the word “possible”—trip by this committee to Washington sometime in the future. As you probably know, the funding process is very complicated, and if we are to hope to get a funding request that is supported by the powers that be, the earlier we start it, the better.

There is a committee meeting of the so-called liaison committee today at 12.15 p.m., and the process goes like this: if we were to agree to a funding request, it would go from here to a subcommittee of the liaison committee, then to the full liaison committee, and then to the Board of Internal Economy. I would like to deal with this matter. To me, the only thing we have to agree to at this meeting is whether or not we simply kick-start the process. We can talk later about who we might go to see and so on.

The papers in front of you have a breakdown of the costs. What George put together was predicated on two nights and three days in Washington. I would think it should be three nights and four days. We could go down on a Monday morning and come back on a Thursday. If we're going to go to Washington, I think there are a lot of different politicians and other organizations we should see.

If you think we can deal with this very quickly, we can deal with it now. If not, then we'll deal with the witnesses and discuss it later. One way or the other, I'd like to decide this morning, so that we have a funding request to go to the liaison committee at 12.15 p.m. if we do wish to go.

Mr. Hilstrom.

Mr. Howard Hilstrom (Selkirk—Interlake, Ref.): I'm not too worried about the funding on this particular trip. We stand to lose some $20 billion in exports to the U.S., or whatever the exact figure is, so I think we have to get down there as soon as possible. I'm all in favour of this trip.

[Translation]

Mr. Denis Paradis (Brome—Missisquoi, Lib.): I move that you start the process to request funding for travel to Washington.

[English]

The Chairman: And would you suggest, Mr. Paradis, that it would be three nights and four days?

[Translation]

Mr. Denis Paradis: Yes.

[English]

The Chairman: Mr. Hilstrom, just for your edification, staying an extra night would add about $4,000 to the trip. I just think that if we go down on a Monday morning, we've lost half a day there before we do anything, and we have to come back Thursday night, so we're going to get only half a day's work in, if that, on Thursday. So basically, even if we have three nights, we're just going to have about three days' work—half a day on Monday, a full Tuesday, a full Wednesday, and half a day on Thursday. I think we should make a request based on three nights. Is that okay?

So I have a motion from Mr. Paradis in support of beginning the funding request, and Mr. Hilstrom seconds it.

(Motion agreed to)

The Chairman: I'm sorry, Mr. Davidson and Mr. Benoit. We just wanted to get that work done now since we have the full complement of committee members here. We'll now hear from you concerning the WTO negotiations. Welcome, as usual. We're looking forward to your presentation.

Mr. Bryan Davidson (President, Canadian Dehydrators Association): Thank you, Mr. Chairman. I'm pleased to have the opportunity to be in front of your committee today on behalf of CDA members across Canada.

I understand our full submission has been distributed to members of the committee. If I could briefly summarize what's in our submission, we basically have provided a short summary of the Canadian alfalfa processing industry, we have a page on a background to the EU subsidy situation, and we detail possible solutions to the European and international subsidy situation. Basically, that appears in our paper, and I would ask members to peruse that at their earliest opportunity.

• 0925

The Chairman: I should point out that since your paper is not in both languages, we can't distribute copies until the translation is completed.

Mr. Bryan Davidson: Yes, we'll do that.

I will use the time available to me, though, to emphasize the seriousness of the situation facing Canada's processed alfalfa industry as it stands today.

Basically, our association represents 29 plants, most of which are in Alberta and Saskatchewan, but we are represented in most of the other provinces. More than 80% of their production, as much as 90% of the western output, is exported. Annual exports have been as high as 700,000 tonnes, with a dollar value of close to $130 million.

Those plants are mainly on the periphery of the prairie growing region. They create more than 1,000 skilled labour jobs, with more than $13 million in direct wages. Indirect spinoff benefits are worth about another $67 million a year in rural communities. Often the dehy plants are widely held companies, owned by farmers, and are the only industry in town in many cases.

I'm here today to tell you as clearly as I possibly can that those jobs are now being reduced week by week. I can tell you in my own situation that last year we worked about nine and a half months. Already, on November 10 this year, we've shut down, with the likelihood of not starting up until some time in February, and a very short season after that.

Another of our members has three plants in southern Alberta. One has been taken out of production so far this year, with the possibility of more. Other plants have been forced to reduce their production of certain products.

So the rationalization in our industry has already begun. We'd like to emphasize highly that particular point.

The reason is that the international trade price is now below the Canadian cost of production, but our industry is the lowest-cost producer in the world, producing the best-quality products. As testimony to that, for a long time we were the only supplier of dehy pellets to Japan, because other countries found it tough to meet the quality standards that were imposed on the Canadian industry.

Why has this happened? The answer is clearly that highly subsidized EU alfalfa pellets have been sold into Japan and other Asian markets, and now other non-Asian markets, over the last year, forcing prices down. The price has dropped by more than $50 a tonne since last March.

I'd like members to think about that in the context of what we're hearing in the livestock and grain circles, but $50 a tonne is a very, very high figure in an industry like ours.

Directors of our association met with government officials and members of Parliament in March 1998. We reported then that prices were spiralling down. We said we would not be able to sustain sales against this market-wrecking competition for any length of time.

I'm here today to tell you that the market is virtually wrecked now.

Recent major sales of EU pellets have been made to our Japan customers. We also have reports of large sales to Puerto Rico, and offers continue to be made to all our traditional markets. It's important to understand that offers of sales keep markets distorted just as surely as sales themselves.

Since last March, the situation has continued to deteriorate. On at least three occasions since then we have kept the government informed, and we have said that a made-in-Canada solution is needed.

We applaud the government for now taking steps to address the disaster in agriculture. However, we have a growing concern that processed alfalfa, unquestionably one of the most adversely affected commodities, is in danger of not qualifying under a narrowly designed assistance program.

Dehy operations have many parallels with farming operations. For a three-year period after seeding, plants usually do all the field operations. We own and operate field equipment, we do all the processing, and we are responsible for shipping to export markets.

The plants, of course, do not have access to NISA accounts. Even growers with seed alfalfa, who then contract with the plants, have very limited access to NISA. Alfalfa only recently became eligible for NISA coverage, so alfalfa growers have very little in their NISA accounts.

• 0930

We appreciate that diplomatic representations, up to and including a recent démarche, have been made to the EU. So far they have failed to rectify the problem. We know from direct contact with representatives of both the EU and the European dehy industry that they are unreceptive to our government's efforts. It is important, therefore, to understand that the EU subsidy is unusual even in the context of European agriculture. It is paid directly to processors rather than farmers, and it is paid when the processed alfalfa is moved from the plant.

We thought that processor subsidies were going to be eliminated completely in the last GATT round. It is over and above European farm-level assistance. I think it's important to re-emphasize this, that it is a subsidy that is paid to processors above the farm-level assistance they receive. It is extremely distorting since it encourages production despite market conditions.

For example, over 10 years Spain has turned from a market of Canada's into a production that more than doubles our Canadian industry. Until the time that Spain became a member of the EU in 1986, it was a traditional customer of Canada's up to the tune of about 50,000 tonnes per year. Since 1986 they have expanded their industry through the use of subsidy to be twice the level of the Canadian industry. They've gone from basically a market for us of 50,000 tonnes to, next year, a purported 1.7 million tonnes of production. Other European countries have expanded their production as well. So we find this something that's quite unique and really emphasizes the distorting effect that the production subsidy can have.

This processing subsidy is at least equal to the Canadian price. It may even now be higher than the Canadian price in that prices are going down. Our export prices have dropped by about 30% this year. Is it any wonder dehy operations are hurting? We believe we could survive the so-called Asian flu, the general economic downturn, but we can't survive when the competition is giving a subsidy that is equal to or exceeds prices currently received at the Canadian processing plants.

Mr. Chairman, our submission details our long-term goals for the WTO negotiations. We favour immediate self-limitation of subsidized exports and favour the further tariff reductions. We favour the elimination of both processor and export subsidies. We want agriculture brought fully under the subsidy tax provisions.

Our problem is that we cannot wait for possible relief in the year 2004 or whenever a new trade agreement would be signed. We will not exist if the EU continues to undercut our markets. It's as simple as that, and we're seeing the rationalization process begin as we're here right now.

We would prefer a world without agricultural subsidies. Since the end of the Western Grain Transportation Act, we have been totally unsubsidized. This was a program specifically designed to compensate for the high cost of transporting exports long distances to port, a distinctive Canadian problem. The WGTA was the only subsidy program that effectively assisted the Canada alfalfa processing industry. Our European competitors are today trying to justify their subsidies by citing costs that they consider as a distinctly European problem.

We have always had recognition in government programs in the past through the WGTA, the special Canadian grains program, drought programs and other programs. The justification for inclusion today is equally persuasive. There is is no less need for it in the dire situation we're in right now. We think you will agree that a value-added industry that has been built over 25 years, which contributes significantly to the real agricultural economy, which the government has always held up as a model for value-added industries on the prairies and which adds to the Canadian trade performance, is worth saving.

Canada has reserved its right to introduce programs within the WTO rules. We have been saying for some time that a good case can be made for an offset program to the EU processor subsidy. As we understand it, the program currently being developed by the government offers the potential to cover our industry, but there's a real risk the opportunity will be missed. The alfalfa processing industry, which has many parallels with farming, is encountering hurt at maximum levels. It may not qualify unless this last-minute appeal is heard. Short-term assistance equal to even 25% of that European processors' subsidy would go a long way towards keeping our industry viable until the WTO negotiations produce some results.

• 0935

I'll conclude by reminding you and the other members that we first sounded the alarm a year ago. We have repeated it several times since. In the meantime, the extent of today's farm income crisis for others is becoming clear, just as it was becoming clear for us as much as a year ago. We're a relatively small player. We seem to be struggling to be heard. I appeal to all the members of this committee that jobs and other economic benefits are on the line, particularly in western Canada. We cannot survive this crisis throughout the upcoming trade negotiations without your help.

Mr. Chairman, those are my comments. Mr. Benoit and I are certainly open to take any of the members' questions, at your discretion. Thank you very much.

The Chairman: Thank you, Mr. Davidson.

Now we'll have again the first round of questioning, starting with Mr. Hilstrom for seven minutes.

Mr. Howard Hilstrom: Thank you, Mr. Chairman. Welcome, gentlemen.

I have a couple of questions here that will go through on the same—

The Chairman: I'm sorry, Mr. Hilstrom. I missed somebody. How did I do that? For some reason, Mr. Levasseur, I thought you belonged to the same group as Mr. Pellerin and Mr. Proulx. I'm very sorry. I guess we learn things as we go. I'm sorry, Mr. Hilstrom, but we will have to delay your questioning.

Are you, Mr. Levasseur, going to be the speaker?

[Translation]

Mr. Denis Levasseur (Director, Association québécoise des industries de nutrition animale et céréalière): Mr. Pilon will read our brief and after that, we are available to answer questions.

[English]

The Chairman: Okay. Thank you, and welcome, Mr. Pilon.

[Translation]

Mr. André Pilon (Executive President, Association québécoise des industries de nutrition animale et céréalière): Thank you, Mr. Chairman. You are right, we work closely with the Union des producteurs agricoles.

AQINAC stands for the Association québécoise des industries de nutrition animale et céréalière. We are a private sector group.

The 225 private enterprises that are members of the Association québécoise des industries de nutrition animale et céréalière have made a major contribution over nearly 50 years to the development of the Quebec agri-food industry. That contribution has been made in a variety of areas, including livestock and crop production, as well as processing and marketing, which are also an important part of their business. Our members generate almost 20,000 jobs in the agri-food industry.

Our brief, which we have not had translated unfortunately, but copies of which will be available to you for translation purposes, includes a list of our members.

As regards the WTO trade agreement and negotiations, AQINAC is directly affected because its members are pork, poultry and egg producers. Also, they buy grain on a daily basis to produce animal and poultry feed. But it is especially the clients of AQINAC members, the farm producers, who are affected.

In the context of globalization, agricultural producers, including AQINAC members, must have as their main objectives both efficiency and competitiveness. In most sectors, production costs will have to be lowered if we want to maintain and improve our market shares. We will also have to encourage the development of larger business enterprises, while ensuring that the latest technologies are appropriately applied and used. This increased productivity and the savings that flow from it will enable us to lower our production costs.

As regards agroenvironmental standards and quality assurance programs (HACCP), they will form the basis for marketing agri-food products on a global scale. We will have to be creative in implementing such programs in order to avoid generating additional costs and thereby making businesses non-competitive in world markets.

• 0940

We would now like to present our position on the supply- managed commodities, that is eggs, poultry and milk.

In order to achieve price stability, supply management and regulatory structures must continue to operate all across Canada. Excess provincial production, such as occurred in the chicken industry two years ago, must be avoided at all costs.

Also, regulations should foster business expansion with a view to improving efficiency and competitiveness. For example, dairy farms in Quebec are much smaller than in the rest of Canada and in the United States, which is our main competitor. We must give producers the tools they need to enhance exports. We will therefore have to consider introducing different quotas and prices for export products.

In non supply-managed commodities, such as pork, grains and other types of production, there is a need to improve universal income security programs and bring them into compliance with WTO regulations so that producers are encouraged to increase their production volumes and improve both genetics and technology, and so that our production costs are globally competitive. Furthermore, the federal government, as it now seems prepared to do, must establish a disaster relief fund for producers.

With respect to both supply-managed and non supply-managed commodities, there is a need to foster the development of universal—and we do mean "universal"—programs of financial assistance with a view to developing agroenvironmental measures that will allow us to meet future requirements. The goal is to maintain the competitiveness of farming enterprises while duly protecting the environment.

It is also important to provide timely support for the implementation of quality control programs. As well, there is the need to foster and support initiatives taken by individual processors not only to maintain their current market positions, but to secure new export markets by developing niches for valued-added products.

We already referred to the WTO rules, but as part of our message to you today, we also want to mention the current crisis affecting agricultural commodities and, more specifically, the farm income crisis and product prices.

In conclusion, there is no doubt that whatever goals are set must be consistent with WTO rules. In preparation for the next round of negotiations, we expect the government and all industry partners to develop the necessary strategies to ensure a greater presence for Canadian producers on both domestic and export markets.

If there are any questions, as Mr. Levasseur mentioned previously, we will attempt to answer them as intelligently as possible.

[English]

The Chairman: Thank you, again, Mr. Pilon. Again, I offer my apologies for not recognizing you earlier. My thought processes are not as strong today as they should be.

Now we'll turn to Mr. Hilstrom for the first round of questioning. You have seven minutes.

Mr. Howard Hilstrom: Thank you, Mr. Chairman.

Mr. Pilon, I'd like to speak to you first. You gave us a kind of Jekyll and Hyde type of presentation. You start off by saying we have to go and look at these agreements with the WTO. You talked of globalization in the marketplace and in your industry. You talked about increasing the size of farms to be competitive. You want to advance technology; you want to increase exports. And you do this to avoid becoming non-competitive.

• 0945

Then you go on and you get into words like “stability” and “tools to enhance exports”. You want to avoid overproduction. And you've now slipped in supply management.

Those two are what we're dealing with in the WTO talks. The issue is how do you reconcile the two together to achieve your globalization and export goals, while at the same time having total supply management in Canada? In order to accomplish this increase in exports, do you think the government should be the ones to regulate this and get this going, or do you think the supply and demand forces of the globalized marketplace should be the ones to determine farm size, export levels, and this sort of thing?

[Translation]

Mr. Denis Levasseur: Could Mr. Paradis translate the question? There were some parts of it we may have misunderstood.

Mr. Denis Paradis: Do you not have any interpretation?

Mr. Denis Levasseur: No.

[English]

Excuse me, could you repeat the question?

Mr. Howard Hilstrom: Mr. Chairman, I guess I'd like to start over.

The Chairman: We'll just pause until Mr. Levasseur adjusts his translation device. Okay, Mr. Levasseur, are you ready now?

Mr. Levasseur: Yes.

The Chairman: All right, Mr. Hilstrom, do you want to start again? We won't deny you the time; we'll go back to zero.

Okay, go ahead.

Mr. Howard Hilstrom: I'm sorry, the only French I was able to use was Monsieur Pilon.

My question had to do with what appears to be a contradiction in the way the industry is run in Canada and your attempts to achieve massively increased exports outside of Canada. You talked in the early part of your presentation about globalization and how the industry has to be modified to accommodate and get involved in that. You have to increase the size of farms. You want to advance technology and you want to advance exports. And you want to have subsidies lowered in other countries. What you're in essence saying is you want a free, open market. Is that true, that you want to get subsidies in other countries to zero? Do you want a free market?

[Translation]

Mr. Denis Levasseur: Our presentation complements the one made by the Union des producteurs agricoles.

In referring to supply-managed commodities, we made the point that it is absolutely necessary to maintain Canada-wide control in order to avoid price variations such as those we experienced in certain commodities two or three years ago.

As regards free markets, we believe it is absolutely necessary to include supply-managed commodities, and we want such structures to continue to exist here in Canada. You are saying that this seems contradictory. However, we are forced to live with the system currently in place here in Canada.

The other issue—and I very much liked what Mr. Proulx said in that regard in his presentation—is whether or not other countries are fully complying with the rules of the agreements signed several years ago at the WTO or GATT. As Mr. Proulx pointed out, it is important that Canada ensure that other countries come up to our level if they want to continue to export goods.

• 0950

[English]

Mr. Howard Hilstrom: Thank you, M. Levasseur.

What we're exactly talking about here is how to go into these talks and negotiate with the other countries to achieve this increased free flow of goods around the world that enriches us all. When we go into these talks, do we not have to....

I would like to just go back a little bit. In 1993, quotas were changed to tariffs in the dairy industry, were they not? Those tariffs were designed to drop a little bit all the time. Is that true or not?

[Translation]

Mr. Denis Levasseur: That should be the case. However, I am not an expert on the regulations now in place or the actual provisions of the agreement signed. Our message to you is...

[English]

Mr. Howard Hilstrom: Mr. Proulx, please.

Mr. Yvon Proulx: Yes. They have been designed to be reduced over time by an average of 36%, but in the supply management sector, steps have been taken to reduce them by 15% until 2001. We have to negotiate that again to see if they will be further reduced or not.

Mr. Howard Hilstrom: Okay. So you accept that we are going into these talks with these things on the table. Yes or no?

Mr. Yvon Proulx: For sure.

Mr. Howard Hilstrom: Okay.

Mr. Yvon Proulx: Every country is like this. Every country has sensitive sectors to protect and other sectors for which they want to open the market.

Mr. Laurent Pellerin: There is no more contradiction between the export commodities and the supply management commodities in Canada than there is in the U.S.; they want to protect their sugar and peanut industries. And in the EC it's the same thing; they have some sectors they want to protect. What is happening in Canada is no different from what is happening in other countries.

Mr. Howard Hilstrom: What's the essential core of the reason dairy and supply management is a sensitive area in Canada? Do you have an explanation, M. Proulx?

Mr. Yvon Proulx: It's because this is the commodity that is the object of the most export subsidies in the European Union.

Mr. Howard Hilstrom: Okay.

Mr. Yvon Proulx: As we have said before, as long as countries don't get out of export subsidies, we won't open. It's as simple as that.

Mr. Howard Hilstrom: Okay. How can you want to increase exports, then...? So it's going to go hand in hand. But you talk about the government providing tools for exports. What kind of tools are you talking about here?

M. Pilon.

[Translation]

Mr. André Pilon: When we talk about tools, we are referring to the need to grant export quotas. Regulations are currently in place for the domestic market, but we want quotas. We are not necessarily talking about subsidies. In fact, we are not talking about that at all. Instead, we are talking about the possibility, through joint supply-managed commodities plans, of having export quotas; we could sell our products at competitive prices that might be lower than prices domestically.

[English]

Mr. Howard Hilstrom: Okay, I'll just wrap this up. The Manitoba situation is such that they had a large egg producer that had a market offshore. They had it all set up. They were going ahead. And they were told they would come about fourth down on the supply management to supply this market. Because of supply management, this guy is sitting out there with a big investment and no opportunity to access this market and make foreign currency earnings for Canada. What do you say to this guy?

The Chairman: Just a short answer for this one.

Mr. Laurent Pellerin: I would like to comment on that. What about the pork price? There's a lot of opportunity to export a lot of pork everywhere in the world. What are we missing now?

Mr. Howard Hilstrom: I would appreciate an answer, Monsieur Pellerin, if you could.

Mr. Laurent Pellerin: A lot of barns are being built for raising hogs across Canada everywhere. There's no market. What is the return for Canadians on that investment? Nothing.

The Chairman: Okay. Thank you. Madame Alarie, you have seven minutes.

• 0955

[Translation]

Ms. Hélène Alarie (Louis-Hébert, BQ): My question is addressed to Mr. Proulx.

I really liked the fact that you began your presentation with a kind of stock-taking exercise, stating exactly what stage we have reached in the negotiations. My view is that we should really be taking our cue from what other countries have done.

At the meeting held in Montreal a couple weeks ago on the WTO—a meeting that you in fact organized—I recall that there were two spokespersons, one from the US and the other from the European Union, who clearly stated, if I understood their comments, that they were not prepared to eliminate export subsidies. The European spokesperson talked about maintaining them until 2010. As for the Americans, they seemed to be completely at peace with themselves as regards what I would describe as the protectionist measures they have taken in order to continue to shield a number of sectors of the American economy. They did not seem the slightest bit troubled by the idea of providing subsidies to producers.

In that context, I wonder what kind of boxing gloves we are going to need on entering these negotiations. Having taken stock of the situation, we now know that we are beyond reproach, and that we have lived up to the commitments we made to other countries. However, they are also saying, and I don't know whether they are doing this just to scare us or not: "We have no intention of changing our approach." How do we deal with that? And first of all, have I got it right?

Mr. Yvon Proulx: Yes, you have got it right. I think the next round of negotiations will be difficult because, as you say, the Europeans are intent on keeping their export subsidies and have no desire to let them go.

In that regard, our position is unequivocal. Why should we open up markets to people who are subsidizing exports? As I said earlier, there is no reason to open up our market to people providing subsidies. We are prepared to compete. We are prepared to compete with American and European farm producers, but not with the American government, and not with the pile of eurodollars the European Union is spreading around. We have no desire to compete with that. But we are prepared to compete with producers.

I think the negotiations will be difficult because the Europeans do not want to yield on that point and it is clear that the Americans intend to continue to support their commodities. Indeed, they have just demonstrated that. They wasted no time making the decision to increase subsidies. Nor did they waste any time deciding to increase export credits. Officially they are saying they want markets to be liberalized but the fact is they are going to continue to take protectionist measures.

So, if both the Americans and the Europeans take such a position, the only possible option for us is to maintain our own. If every country takes such an approach, there is no doubt the negotiations will be difficult to manage. They could take another five or six years. And a lot of arm twisting will be required over the next five or six years before any kind of improvement can be achieved.

It should be remembered that the process of opening up markets and increasing global trade is a slow and gradual one. Everything cannot be accomplished in one day. We have to begin by getting governments out of the export subsidy business and then we will see what else can be done.

Ms. Hélène Alarie: I have another question. In your presentation, you did not make any mention of what I call non- tariff barriers, such as plant health measures, biotechnology and harmonization of regulations with those in other countries. What I understood from witnesses who appeared earlier, who live in the real world, is that when tariff measures don't work, they find another way of preventing access, and waste no time erecting non- tariff barriers. Can you comment on that?

Mr. Laurent Pellerin: That is not something we specifically addressed, but there was in fact an agreement reached during the last round of WTO negotiations to bring about at least some harmonization of health and plant health standards. In actual fact, that work has not produced many results thus far. You are absolutely right. More often than not, these measures are used as new barriers to trade when tariffs decline or when minimum access increases.

The second protection measure countries use is to introduce so-called health or plant health measures. In the next round, international standards will need to be defined and set out in written form on an urgent basis. In that regard, Canada and Canadian farm producers have always demanded that there be no lowering of our standards, and that instead, other countries be required to raise their standards to meet ours.

• 1000

We know that Canada is known around the world for the quality of its products. We will certainly not lower our standards to satisfy harmonization rules intended to reduce everyone to the lowest common denominator. It will in fact be quite a challenge for the other countries to meet Canadian health standards. However, until that happens, this might give us access to very attractive markets. And that's for real, because Canadian health standards are in place now.

Ms. Hélène Alarie: I have one last question, if you don't mind, Mr. Chairman. It has to do with arguments presented by other witnesses with respect to agroenvironmental standards.

At the present time, the cost of producing pork in Quebec is relatively higher because we have very costly agroenvironmental standards in place that are enforced. Circumstances are such that we have no choice but to enforce them. Yet I cannot see how those regulations could apply to other countries. How can we possibly negotiate agroenvironmental standards? Sometimes, just among ourselves, we have trouble coming to an understanding in that area. I wonder whether you would like to comment on that.

Mr. Denis Levasseur: I have only one comment to make, because we made this point quite clearly in our brief. There is no doubt that there will be a strong need in future for agroenvironmental standards that allow producers to operate in an harmonized environment.

The main point is that we have to find ways of limiting potential increases in production costs when standards as rigorous as those in Quebec are put in place. If our production costs increase as a result of such standards, we will be taking ourselves out of the market. In our brief, we emphasized the need for the various levels of government to examine this problem to see what can be done to improve our standards while at the same time minimizing their impact on production costs, so that we remain competitive.

[English]

The Chairman: Thank you.

Now we go to Mr. Calder for seven minutes.

Mr. Murray Calder (Dufferin—Peel—Wellington—Grey, Lib.): Thank you, Mr. Chairman. I think I'm going to just pick up on Mr. Hilstrom's example.

We've seen right now that for the 1998 year the United States is going to pump about $15 billion into their farming community. The EU would probably do the same amount. So that's obviously going to distort trade. So let's say that we do have a producer—and I'm a chicken farmer in my other life. We have this guy who wants to build this great big plant in Canada, wants to produce a whole bunch of chicken and sell it on the international market and make all kinds of money.

But the chicken price is way down, as is the pork price. In a very short period of time he's going to be coming back to the government saying, “Here I am, I've built this plant, I'm supplying Canadian jobs and I don't even have access to my domestic market here in Canada. I want to start selling chicken in Canada because I can't make any money selling it internationally.”

That means to say that by that time it's going to disrupt our own domestic supply here in Canada and will drive down the farm gate price for the farmers. It is questionable whether it would drive down the wholesale and retail price, because it hasn't done so in the pork industry.

What would be your comment on that example?

Mr. Laurent Pellerin: You are a chicken farmer. I am a hog farmer, so I understand very well what is happening in the market now.

First, the important thing is that we think Canada signed the last world trade agreement with a good intention. There is no doubt in our mind about that. But the fact is that the agreement didn't fulfil the real objective it was supposed to achieve. With the figures we put on the table this morning, we find that Canada is probably the one that surpassed all its commitments. That is not the case for other countries, especially the U.S.A. and the EEC.

• 1005

As farmers, I'm quite sure that we are, if not the best, close to the best farmers in the world. All commodities together in Canada, we are able to compete with any other farmers across the world. There's no doubt in my mind.

Our problem now is that our government is not able to compete with other governments. That's the major problem we are facing now. In two months the U.S.A. doubled their input to farmers by close to $6 billion. That's not small money; that's a pile of money.

An hon. member: That's right.

Mr. Laurent Pellerin: And they made that decision in a period of two months.

I read in the newspaper last week that in Canada it will take at least until next spring to make sure farmers will receive something more. That is close to one year after the fact. So I'm a little disappointed about that. Not really a little—more than that.

Mr. Murray Calder: Well, in that situation—

Mr. Laurent Pellerin: It takes too much time.

Mr. Murray Calder: —we as a government are trying to respond as quickly as we possibly can to that.

Mr. Laurent Pellerin: I know that, but it's not enough.

Mr. Murray Calder: I know. It's never enough, and it's never fast enough.

Mr. Laurent Pellerin: And my measure is simple. The U.S.A. did that in two months. Why it is taking up to six or ten months in Canada? Are we less efficient than they are in the States?

At the bottom line, I cannot accept the argument that we have no money, we are not rich enough here, we are not able to compete with the U.S.A., our government is too poor. On a citizen-by-citizen basis in Canada we support farming activities at $143 per capita. In the U.S.A., they are at $297 per capita. That is double.

So there is no reason a Canadian citizen is not able to support as much as the U.S.A. is doing now with the type of low price we have on grain and pork. We have a problem there, and it's not the farmers who have the problem, because farmer by farmer, we are able to compete with the best in the world. Productivity is the number of piglets per sow, feed conversion on pork and chicken, and milk per cows. We are able to complete everywhere.

I don't think that our society is able to compete with our government. The figures I received make me a little nervous about the idea that our government is not able to compete. We have a big problem there.

Mr. Murray Calder: Yes.

Mr. Yvon Proulx: May I ask something? Even the price of milk at the retail level is lower in Canada than in the U.S.A.

Mr. Murray Calder: That's right.

Mr. Laurent Pellerin: Let me say something on the other part of your question, about the opening of a world market for a new farmer, for example. Yes, there are sometimes some opportunities to sell products across the world. We have to be prepared. With the type of market we now know in grain and pork, we are not very far from the idea that we have to manage some exchange on the world scene.

Japanese people buy 55% of their input on the world market. They want to be safe about the products they eat. So we are not very far from the time when we will do that job on a contract basis. Managed supply or supply management—I'm not too sure about the order of the words—but we'll have to manage something down the road very rapidly. This is especially true with the need for food in the next 25 years, if we want to feed everybody on the—.

The Chairman: Murray, Monsieur Pellerin, we only have a minute, so I think Mr. Pilon wanted to say something.

[Translation]

Mr. André Pilon: Part of Mr. Calder's question dealt with something we raised in our brief, namely the need to establish export quotas. Here we are talking about improving the production capacity of established operations, rather than granting new quotas to people who are not already part of the industry. If export markets and demand were strong, by means of these quotas, we could enable a producer to make optimum use of his animals. If at some point demand were to decline, the usual system would kick in. So, we're not talking about giving quotas to any new players. We simply want producers to have an opportunity to make optimum use of their existing animal population.

• 1010

[English]

The Chairman: Thank you. We're out of time.

Mr. Pellerin, I can understand your frustration when it comes to this matter of developing a disaster relief program. Time always seems to drag on in situations like this. But I think that in this particular case we've all been told, especially the government, that the last thing farmers want is a so-called ad hoc program. We just can't come up with money and throw it at the problem, something that has been done in the past. Now we have to come up with a finely tuned program that respects treaty obligations, takes into account safety programs already in place, and so on. Unfortunately, when you take that route it takes a little longer, but I think everybody around here understands your frustration.

Mr. Laurent Pellerin: I want to make a comment on your remarks. The last thing farmers like is subsidies. They don't want subsidies at all. They much prefer to receive the right price on the market.

In the past two, three or five years a lot of people, government people, politicians, university people, came to farmers and explained to us the virtue of exports, the good side of exports, the good side for all Canadians. Where are those people now? Where are they?

The Chairman: Well, we'll leave it at that.

Mr. Laurent Pellerin: They've disappeared.

The Chairman: We'll leave it at that. We'll have to go on to Mr. Proctor.

Mr. Proctor, you have five minutes.

Mr. Dick Proctor (Palliser, NDP): Thank you very much.

My first question is directed to Mr. Proulx. As you know, in response to the blockade at the border, on the 49th parallel in the midwestern United States and Canada this fall, we as a country went to both the WTO and NAFTA to complain about the actions the Americans were doing at the border, some with state government support. It's my understanding that as a result of the agreement that was reached last week, Sergio Marchi, the Minister for International Trade, has now put that on hold. That's my understanding of what he said, that we're not sure whether we're going to proceed with those complaints to the NAFTA and the WTO.

All members around this table have been saying throughout the fall that in the next round Canada has to go in from a position of strength. I think all of you gentlemen, in your own way, are saying that this morning.

So my long-winded question is this: if the Minister for International Trade's comments, as I'm suggesting, were accurate, is this a good signal for the future? Alternatively, does it send out a contrary signal that we won't be very strong in protecting our agricultural industry at the next round of world trade?

Mr. Laurent Pellerin: Regarding the specific case of the wheat exports, the blockades you've mentioned, I don't know if at that time we are able to understand this signal from the minister as a positive or negative sign preparing the next round of negotiations. It will depend a lot on how the situation will be set up at the end.

You know that ministers and government people have to play this game with the U.S. politicians on that question. There is a lot of public discussion. They are not real negotiations. They are public statesmen, and I don't know the exact words or the exact complaint that will be forwarded on this particular upcoming case.

Mr. Dick Proctor: Mr. Davidson, you've indicated in your paper this morning that NISA is not an answer, that the income assistance program won't be particularly helpful to alfalfa dehydrators, and that the next round of the WTO, as we all know, is many years away from resolution. Can you tell the committee this morning what the possible solutions for your industry are? What do you need?

• 1015

Mr. Bryan Davidson: Well, from the dehydrators' perspective, we have always been treated like the grain industry in the past. We were deemed eligible under the WGTA, special Canadian grain assistance programs, and that kind of thing. In this round, I would hope that provision would be made for people like us. There are parallels in our industry to farming. We have big fleets of field equipment, processing plants, and all of that. We're really here to appeal to government and to members to not overlook people like us.

It was interesting that some of the earlier discussion on the amount of subsidies was on some of these other industries. There has been some talk of $400 million to $500 million being an initial level of assistance to the Canadian agricultural industry. I would say that in one year the European dehydration industry receives about $500 million as a processor subsidy. That's in addition to farm level subsidies.

You can see that the amount of assistance being proposed for Canadian agriculture is no bigger than what the dehydrator industry gets in Europe. It is especially important to note that as the surplus now builds in Europe, that's a very hard thing for us to compete with.

As our brief indicated, we are now completely without subsidy since the WGTA was removed. One of our positions is that the WGTA really only needed to be reduced by 36% to adhere to agreements at GATT. Nevertheless, it was removed completely. That was a very big burden for us.

We just want a provision of some type in this particular program at this time to look after people such as us.

The Chairman: Thank you.

Mr. Borotsik, you have five minutes.

Mr. Rick Borotsik (Brandon—Souris, PC): Thank you. I would like to continue with Mr. Proctor's line of questioning.

Mr. Davidson, what other processors do you feel fall into the same type of situation as the dehydrators do? Other processors out there may well have difficulties with commodity prices currently, and their product obviously isn't getting the same value as on the open markets.

Do you know of any types of processors, other than the dehydrators, that would fall into a similar situation?

Mr. Bryan Davidson: I haven't taken a great deal of time to assess that situation. But back to the days of the WGTA and the debate about removing it or not removing it, when it was removed there were winners and losers. If you look at the canola or grain industry, there were benefits shifted from, say, the exporters to the domestic processing.

As I think I mentioned in our brief, in our industry it is an 80% to 90% exported product. It was just a pure—

Mr. Rick Borotsik: Based on that, on the 90% mentioned in the brief, the majority of those exports are overseas to the Asian economy. Are there any to the American economy?

Mr. Bryan Davidson: There are small amounts to the U.S.A., but they are largely to Asia.

Mr. Rick Borotsik: Is there an opportunity to develop the U.S. market?

Mr. Bryan Davidson: No, because they have an industry of their own in various regions.

Mr. Rick Borotsik: So do the Europeans. They have an industry of their own.

Mr. Bryan Davidson: Yes.

Mr. Rick Borotsik: So are we saying that we have an overcapacity right now for the world market, that we can't produce? I appreciate the subsidization aspect. When they're subsidizing it in excess of $150 a tonne, it's difficult to compete. But is there an overexpansion of capacity in the Canadian market?

Mr. Bryan Davidson: Well, yes. There is a small overproduction now, because Europe has expanded so much under the subsidy.

Mr. Rick Borotsik: I saw that.

Mr. Bryan Davidson: The subsidies are so great that trade is distorted. They are now willing to pour product cheaper to Asia from Europe through the Panama Canal than we are to ship it from Vancouver.

Mr. Rick Borotsik: What's the domestic market like for this particular product?

Mr. Bryan Davidson: The domestic market is okay. Some of us are working hard to develop a larger domestic market in this instance, but in western Canada, where the large part of the industry is, there is only a limited potential for business.

You are also competing against other feedstuff at the present time. That was one of the reasons for getting under the WGTA in the first place. It was the fact that it was a long distance from port, but also that other feedstuff had that benefit.

Mr. Rick Borotsik: Are any of the European producers finding a market here in Canada, in our market, with the subsidization price?

Mr. Bryan Davidson: In past years there have been small shipments, and there is always the threat of those. Twice in the last six or eight months we have heard of the potential for shipments, but I don't know that any have been made.

Mr. Rick Borotsik: You'd made a comment, something about the fact that an offer of a purchase is just as bad as the actual purchase or the sale itself. Were there any markets—

• 1020

Mr. Bryan Davidson: Well, particularly in a market like Japan. Japan, for the benefit of members, now imports about 3 million tonnes of forage, about 700,000 tonnes from Canada, but think of this as a total of 3 million tonnes.

They have a dairy industry. Mr. Pellerin would know better than I, but I think that in Canada we have something under 1 million head of milking cows. In Japan they have over 2 million. You can't have good genetics like they have and not feed dairy cows alfalfa.

Mr. Rick Borotsik: Okay, thank you very much, Mr. Davidson. I do have a couple of minutes left, I assume. I'd like to go to Mr. Pellerin, if I may.

Like others around the table, I perhaps see a bit of a contradiction on domestic supply management with respect to the international trade opportunities you have. I guess I have two questions.

You've mentioned pork, Mr. Pellerin, and I appreciate pork producers, believe me. I come from western Canada, and I know pork. Would you suggest that pork should be a supply-managed commodity?

The second question would be, what other commodities would you see as being supply-managed?

Third, if you had a choice of going to the WTO, would the choice be to maintain a very strong domestic market at the expense of an open, expanded international market?

The Chairman: You have one minute.

Mr. Laurent Pellerin: We are not very far from the time when we will have to manage everything. If we want to feed everybody in the world, we have to match the demand with the offer sometime down the road. There is no doubt about that.

I've been in the pork business for 25 years now. The money I will lose, I'm losing this year—

Mr. Rick Borotsik: Should it be managed?

Mr. Laurent Pellerin: Yes, I think so, on a world scene.

Mr. Rick Borotsik: Everything? All agricultural commodities?

Mr. Laurent Pellerin: At the limit, yes, we don't have the—

Mr. Rick Borotsik: If that's the choice, Mr. Pellerin, would that be your choice over expanded international markets?

Mr. Laurent Pellerin: I'm quite sure that if you manage a market across the world, Canada will capture a very large share of this market. I repeat that on a cost-of-production base, on a competitive base, farmers in Canada are the best farmers in the world. There is no doubt in my mind about that. If you take out subsidies from everywhere in other countries and just compete on a farm basis, we're in the game.

The Chairman: We'll leave it at that. Thank you.

Mr. Bonwick. Five minutes.

Mr. Paul Bonwick (Simcoe—Grey, Lib.): Mr. Davidson and Mr. Pellerin have both commented that in an ideal world there would be no subsidies. Based on your explanations, I would suggest that you're basing that statement on the confidence you have in the agricultural industry here in Canada. It's one that I certainly share with you. You've clearly demonstrated some examples of targeted subsidies in other countries that we're not privy to here in Canada.

My question, however, deals with the opposite side of the balance sheet, and that is the expense side, not the revenue side. Have your associations participated in any sharing-of-information processes with other communities or other countries, the EU for example, with regard to the cost of production?

I'd cite maybe two or three examples. The fuel cost in some countries is two to three times higher than that in Canada for the cost of production, something directly out of the control of the processor or the farmer. Equipment in some countries is significantly higher than the cost of purchasing equipment here in Canada.

Then there is health care. Some farming families or industries have directly borne the cost of health care for their employees, for their families. These are costs that are above and beyond that of the Canadian producer or that of a segment of Canadian agriculture. I'm just wondering if you might comment on that, and perhaps let me know if there has been some investigation on your part in that regard.

Mr. Bryan Davidson: May I have a word on that? We continue to hear from the Europeans about their high input costs of doing business, whether it be farming, processing and that kind of thing. At our annual convention this year in late October we had a presentation by the executive director of the European dehydrators association. This is because the démarche by our government had been filed, and they wanted to share their views with us. They did go through a long presentation, detailing their costs of production, but unless you were using a common reference point, it was very hard to follow.

• 1025

Now, he made a case for their energy costs, as you say, and for the fact that their costs for environmental concerns may be greater than ours. But I must say that I was listening as intently as I could and I didn't see some things in there that I would have liked to see, and I couldn't judge between the two systems.

So that's what I have to say about that. Garry, is there something you would like to add there?

Mr. Garry Benoit (Executive Director, Canadian Dehydrators Association): Well, I think the proof of the pudding is in the eating. You can look at the Spanish situation where they came into the Common Market and started getting the subsidy. Because of the subsidy alone, they started building an industry, expanding an industry. They expanded from 50,000 tonnes to where they are now producing double the Canadian production, 1.7 million tonnes.

To me, the subsidy is way too high. It's causing the creation of a mountain of surplus, which is now being dumped on our hard-earned foreign markets in Japan and elsewhere, and it is wrecking the market. So in spite of their costs, some parts of the European production is being oversubsidized, creating a mountain of surplus.

Mr. Paul Bonwick: How am I doing?

The Chairman: Yes, you have a question.

Mr. Laurent Pellerin: We have some figures comparing the costs of production in Canada with those of certain countries in the EEC. Everywhere the cost is higher than what it costs here to raise hogs or to produce milk or any other commodity. Sometimes it's double what it costs here.

So there is a big difference between the situation here in Canada and the countries in the EEC. There is no problem to compete with those farms, especially if there is no restitution payment.

With respect to a comparison with the U.S.A., we have very recently worked with the U.S.A. on milk. If you compare all things related to milk with the U.S.A., veterinarian costs, feed costs, everything, there is no major difference between Canada and the U.S.A. The only place where there is a major difference in the cost of production between Canada and the U.S.A. is that in Canada you pay the farmer. In the U.S.A. it's not a problem.

The Chairman: Thank you.

We have seven questioners. You can read the clock on the wall as well as I can. So we'll have to really move along to squeeze seven questioners into 32 minutes.

We'll go to Mr. Hilstrom.

Mr. Howard Hilstrom: Thank you, Mr. Chairman.

Mr. Davidson, I just have one short question for you. There's this mythical family farmer around this table here whom a lot of people talk about, and it's just for political purposes, to tell you the honest truth. Family farms come in a vast variety of shapes and sizes, including your dehydrating plants that are owned by processors. We have all kinds of co-ops, and I'm a member of some of them.

So in this farm disaster income crisis we're in, should the criteria for aid not be based on the fact of an entity hurt by foreign trade-distorting subsidies, as opposed to just...? Should that not be one of the key criteria, which you would then fall under?

Mr. Bryan Davidson: Well, from what I've heard, the government, Mr. Vanclief in particular, has taken great pains to indicate that they want to stay away from a sector-by-sector approach. In light of the trade environment, I think this is probably a worthy consideration. When other programs have been developed, we have found ourselves sitting on the sidelines. We have in turn made representations. They would see that yes, we are like the grain industry, and so we would eventually be considered.

So I guess the answer I'm looking for is that we are prepared to be considered in the disaster income situation along with other farming entities, because that's the work we do.

Mr. Howard Hilstrom: Thank you very much.

I'd like to go back to Mr. Proulx and Mr. Pellerin. Supply management is sure doing a great job for Canada. I make this kind of argumentative thing as a former cross-examiner in the police force. The Canadian Wheat Board exports about $6 billion worth of grain. Cattle are up around $5 billion. We have $2 billion or $3 billion in hogs. The dehydrators make massive things. Dairy, supply management, makes $350 million in exports a year.

So in this argument, this discussion, I think the Liberal government and their trade negotiators will see that the true future of Canada lies in free trade. Now, how fast we move there is another question. Throwing out the “feed the world” is kind of a red herring, because there's no doubt that we'll be able to feed the world, barring massive disasters.

• 1030

On the question of supply management, we have to have these facts on the table. You mentioned hogs, and you put it back to me, saying just look at what that would be. Well, I'll tell you, we had a witness in here, Monsieur Asnong of the Canadian Pork Council, and I asked him right to his face.... I looked him in the eye and he looked me in the eye, and I said, “Do you want supply management for the hog industry?” He gave a one-word answer: “No.”

How does the government equate your argument with that, and here again, how do you expect to increase exports and earn these foreign currency earnings for Canada and not be willing to move towards a world trade globalization?

Mr. Laurent Pellerin: I want to make sure you understand my words well.

I know Mr. Asnong very well, and I have never said that we want supply management for Canada alone now; I'm saying sometime down the road. We are not very far from the moment when we'll have to look at matching demands and offers across the world.

The problem we have now is that we receive $50 a hog, and it's worth about $600 at the retail store.

Mr. Howard Hilstrom: Mr. Pellerin, are you talking some kind of a world government, like under the UN, that would set these all over the world, the markets and all this?

Mr. Laurent Pellerin: Not really on the world government, because I'm not confident in the idea of governments at all. But for example, if Japanese people want 200 metric tonnes of pork per year for the next ten years, is there a possibility that we can contract with them and make sure that in price, quality, and delivery time, we set a contract that we will feed those people for the next ten years?

Mr. Howard Hilstrom: Do you not think there have been—

The Chairman: Sorry, we're out of time. We're going on to Mr. Desrochers, followed by Mrs. Ur and Mr. Paradis.

[Translation]

Mr. Odina Desrochers (Lotbinière, BQ): Everyone is talking about a crisis or emergency, but the Minister of Agriculture, it would seem, is not very receptive and prefers to maintain the status quo as far as programs are concerned. The United States and Quebec have taken action in response to the crisis in the pork industry. And we would obviously like to see the federal government act and take a more flexible and realistic approach by providing support now, rather than in four, six or ten months. That is the crux of the income security debate.

I would now like to come back to the upcoming WTO negotiations. I agree with what Mr. Pellerin and Mr. Proulx of the UPA both said: that Canada has done enough and that it is now time for our other partners to do their share.

Mr. Proulx, Canada's position is very close to that of the Cairns group, which does not include representatives of either the European countries or the United States. How do you explain the fact that Canada is supporting its position at this stage? My reading of the current situation is that this is basically what has occurred.

Mr. Yvon Proulx: During the last round, Canada went into the negotiations with a position that was very very similar to that of the Cairns group, which was advocating wide-open markets. Under pressure, and as a result of the process of negotiation and discussion, Canada finally came back to a more balanced position, and that is what we will be asking it to do again this year. There is no doubt that in the early stages of the negotiations, there was a tendency to take a position closer to that of the Cairns group, which represents countries only interested in protecting the interests of exporters.

We all know the other countries that are members of the Cairns group, and if the European Union and the United States do not belong, there is a good reason for it. Our main trading partners and competitors are the United States and the European community, both of which take a position that is less exclusively pro-export and pro-open market. Consequently, rather than taking inspiration from the Australian and New Zealand position, we should be battling the Americans and the European Union on this. Those major trading partners are also seeking to protect certain sectors of their economies, and we will do the same. There is no doubt the Canadian government will have to take that same approach.

• 1035

Mr. Odina Desrochers: Do you share that view, Mr. Pellerin?

Mr. Laurent Pellerin: Yes, absolutely.

Mr. Odina Desrochers: I was also in Montreal in November, and I heard speakers representing the European Union and the United States tell us that for all intents and purposes, their borders would be closed for the negotiations. What approach should Quebec and Canada take in order to maintain a firm position and still hope to gain something from the negotiations, since we have already conceded a lot?

Mr. Laurent Pellerin: We stated in our brief, and in fact we have been repeating since before the last WTO agreements were even signed that we would like to see all countries honour the commitments they made back in December of 1993 when the WTO agreements were signed. If they are not honoured, we hope the Canadian government and policy makers will ensure that farm industries are not allowed to disappear supposedly because Canada has fulfilled its obligations but others haven't.

Having been boy scouts once, let's not now behave like grammar school kids. We have to take serious action. We can't let the farming industry in Canada disappear just because some countries have not fulfilled the commitments they made at the last round of WTO negotiations. I think that is clear to everyone. We must not allow Canada's agricultural industries to go under simply because other countries have not behaved entirely honourably, whereas we have been too effective at meeting our obligations.

Mr. Odina Desrochers: Mr. Pellerin, should we demand that the matter of the 1993 commitments be dealt with before we sit down to negotiate?

Mr. Laurent Pellerin: That is what we said in our presentation: let's itemize the commitments made by other countries, look at what has and has not been accomplished and, based on that, if Canada has met its obligations, as we believe it has, but all the others have not, let's not put anything new on the table until the other countries have honoured their commitments.

The Chairman: Thank you.

[English]

Now we'll go to Mrs. Ur, followed by Mr. Paradis and Mr. Hoeppner, and then we'll finish off with Mr. Coderre and Mr. McGuire.

Mrs. Ur.

Mrs. Rose-Marie Ur (Lambton—Kent—Middlesex, Lib.): Thank you, Mr. Chairman.

Mr. Pilon, I'm rather confused with your presentation—and maybe it is in my interpretation. You said you needed tools to compete, and then in the next breath you said you wanted quotas eliminated because farmers are their own best judges of how much to produce and get rid of their product.

We have that experience presently with the hog industry, so I don't know how we can really say that would happen if the quotas were gone. We see that in the hog industry; it does not happen. People want to expand, hoping things will be there in the end, and it isn't.

So in one respect you want tools, but you want to take your tools away. So which way is it?

[Translation]

Mr. André Pilon: I didn't understand your question. You seem to be saying we want to abolish quotas, but there was never any suggestion that that should happen.

[English]

Mrs. Rose-Marie Ur: I thought you had stated that.

[Translation]

Mr. André Pilon: No. We said that in certain commodities, export markets could remain open, which would give us an opportunity to make our farms more profitable. Provision could be made for additional quotas—that could be called export quotas—to be granted so that we could make our farms pay. If demand dropped, we could simply eliminate or temporarily withdraw those quotas. As for existing domestic quotas, as far as we're concerned, they are here to stay.

[English]

Mrs. Rose-Marie Ur: So what you're looking at is looking outside your domestic quota market for export markets above it.

Mr. André Pilon: That's it.

Mrs. Rose-Marie Ur: Okay.

Mr. Pellerin, being a hog producer, I can understand where you're coming from these days, because our phones are ringing off the hook, too. I think you're absolutely right. Whether you call it supply management or planned production, a rose is a rose is a rose, and I think that's the only way some of this farming can survive, if we do have planned production.

Mr. Hilstrom and I are not seeing eye to eye on supply management, but I've farmed under both systems, and I can tell you I don't mind farming from morning until night if I know I have a place to send my product. But it's difficult farming from morning until night and not having a place to take your product.

How far in the future do you see this perhaps happening?

Mr. Laurent Pellerin: I think it will be a human responsibility. All people throughout the world need food.

• 1040

Mrs. Rose-Marie Ur: And the population is increasing.

Mr. Laurent Pellerin: I agree that there are some export markets there, and we have to capture those markets. But we have to keep in mind what we're losing as farmers this year. We'll certainly use everything we did in the past 25 years on my own farm. So as a farmer, I'm not gaining anything from that free market. Somebody in Canada gains something. So they have to pay for it, not me. Do you understand that?

Mrs. Rose-Marie Ur: I found it interesting, though, when Mr. Hilstrom said that gentleman last week from the Canadian Pork Council said he wasn't in favour of supply management. I believe that gentleman was also a processor. When he gave us a report on his documentation, this was up 6.9%. Well, if I hand you those figures, you would be wondering what we're doing here in Ottawa saying that the industry was up that much. Maybe his portion of the industry is up, but it's not so for the primary producers.

Mr. Laurent Pellerin: Yes, there are different people in Canada who have different understandings of the market. I understand that. But the fact is that, as farmers, we have gained nothing from free trade in hogs in the past 25 years. I'm sure of that.

If it's important for the country, I have no problem with that. We have to put in place the tools to make sure these farmers stay in business, as well as other farmers who are in supply-managed commodities. On top of that, if we create some economic activities to make sure we have enough taxes to pay politicians, civil servants, and everybody, there's no problem with that. In fact, I would be quite proud of that if it happens. But I don't want farmers to be alone to support this economic stress.

Mrs. Rose-Marie Ur: No, being a farmer, I can appreciate that. But that's what I'm saying. For it to survive and for producers to get fair dollars—that means a fair price with no subsidies—for their product, we have to be there as a family, as they say, in terms of the primary producer, processor, and consumer in the end. But if we don't play the family game, someone loses out. We can see that happening right now.

Mr. Laurent Pellerin: I gave you some figures before about the investment of each Canadian citizen in support of farming activities. It's $143. Compare this with what it is on the other side of the border, where it's close to $300. On top of that, Canadian citizens have the lowest-price food basket in the world. So they are gaining on both sides.

The Chairman: Thank you.

Mr. Paradis, you have five minutes.

[Translation]

Mr. Denis Paradis: My first question has do with enforcement mechanisms and it is addressed to Mr. Pellerin.

You mentioned, as did Mr. Proulx, that we have fulfilled almost 91% of our commitments and you emphasized the need for commitments to be met. Would you have any suggestions to make with respect to the upcoming negotiations? Should we thinking about new sanctions or additional sanctions? Is the grievance or dispute resolution process taking too long? What position should Canadian negotiators take with a view to increasing sanctions or ensuring that countries fulfill the commitments they have made?

Mr. Laurent Pellerin: We believe that Canada has an important role to play in generating new ideas that will contribute to a more effective international trade agreement. Although Canada is a relatively small country, it has quite a bit of influence at the world trade negotiating table. If Canada does not present new ideas for ensuring that countries honour their commitments, neither the Americans or the Europeans will, because it is already abundantly clear that they have no intention of fulfilling those commitments.

In answer to your question, there are definitely new options to be considered, including a more expeditious dispute resolution process, but Canada should definitely not be bringing any new proposals to the table as regards further opening up markets until past commitments are fully met. Canada should demand that the data be put on the table to show how commitments have or have not been met before the negotiations begin. That is a fundamental condition that must be met before we go into the next round of trade talks: that each of the countries who is a party to the agreement deliver the goods.

The Chairman: Yes, Mr. Proulx.

Mr. Yvon Proulx: I would like to go back to a question Mr. Proctor raised earlier. I wonder whether we shouldn't be a little more aggressive and take a tougher stance with the US.

• 1045

Mr. Proctor was saying earlier that they have closed their borders, which is something we have never done. I wonder whether we will not have to repay them in kind at Lacolle, Niagara Falls or some place in the West.

Mr. Denis Paradis: Thank you, Mr. Proulx.

Mr. Pellerin, Mr. Pilon mentioned that he was considering the possibility of different quotas and prices for export products. What is your position on that?

Mr. Laurent Pellerin: We have already referred to the fact that a special quota was established for some Manitoba egg producers to use a specific quantity of hens to produce eggs for export. So, within the current quota system in Canada, we already have a special quota for export products. The same could therefore be done for poultry producers, just as it is for dairy producers. There is no longer a limit placed on dairy production in Canada; producers can produce as much they want. Whatever portion of their production is not needed for the domestic market is exported, at whatever price the product fetches—the current price being approximately $25 a hectolitre, compared to production costs of approximately $50 a hectolitre. It doesn't take long to see where the producer's interest lies.

I should point out that the Manitoba producers given additional quotas for egg producing hens for export purposes do not produce eggs based on the same genetics. Nor do they produce eggs that conform to the same standards of quality. These eggs automatically go to egg-breaking facilities because they are not intended for direct consumption. You can always produce a product for less, but at the same time, you only get what you pay for.

Mr. Denis Paradis: Thank you, Mr. Pellerin.

Mr. Pilon, you repeated several times that production costs must come down. We know the markets. We know that we have very little influence over the price of gasoline and that grain prices are negotiated on a global scale. In your view, what production costs can be brought down?

The second part of my question relates to quotas and the possibility of different prices for products intended for export. If we decide to take that road, is there not a danger that our consumers will be unhappy that they are paying more for Canadian products than foreigners—Americans, for example—who buy it at the export price?

Mr. André Pilon: Mr. Levasseur will respond to that question.

Mr. Denis Levasseur: To answer the first part of your question regarding production costs, we did in fact mention this morning that globally, our production costs are relatively competitive. The real problem is here in North America.

In North America, we have to give a boost to those businesses that compete effectively with the US. That means giving them the tools they require in terms of technology, support and business size to ensure that our current and future production costs will be competitive in North America.

Mr. Denis Paradis: And what is the position of Canadian consumers on the idea of lower prices for products intended for export?

Mr. Denis Levasseur: As Mr. Pellerin pointed out, the retail price for our milk or our chicken is not necessarily higher than in the US. If we can identify potential markets for the meat or eggs we produce, and we believe they can be profitable for us, I think we have no choice but to go ahead.

Mr. André Pilon: And in the process, it will be easier for us to bring down our costs for the domestic market.

[English]

The Chairman: Thank you.

Now it's the turn of Mr. Hoeppner, after whom we will hear from Mr. Coderre and Mr. McGuire, and that will be it.

Mr. Hoeppner, five minutes.

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

I want to take a little different angle and try to put a line between all the comments that have been made. As you know, in the 1980s they had the same debate in the U.S., probably even stronger than it is over here. I heard of a study that was done at the time saying that no matter how much subsidies the government put into the farming industry, the net result for the tax man was still black. He got more return than they doled out. We had very high prices two years ago, especially in wheat and grains. Nobody cried about subsidies being the guilty party in that.

Can you people explain to me as businessmen why the subsidies don't affect high prices but only affect low prices? What this study showed was that the countries that stayed with their producers were the net beneficiaries. It was the in-and-out countries with ad hoc programs that were the big losers. Haven't we gone awry, or haven't we defaulted the food-producing sector, by not having the whole farm income program in place for the last five, six, or ten years?

• 1050

Who wants to answer?

Mr. Laurent Pellerin: I will make a comment on that.

In a country like Canada, with the large agriculture sector we have, what we need is a certain level of stability. In measuring what percentage of our income was coming from the market and from the subsidy, we ourselves realized that in the past five years on average, all commodities together, we gained 91.2% of our income from the market. Everybody is complaining or commenting on the question of subsidy. But in fact in Quebec it's nothing, less than 10% on average.

If we were putting the same energy into improving the markets, probably we'd get out of subsidies very rapidly. It's a very nice idea that it will be possible to get out of this...I don't have the English word. It's not a good—

Mr. Jake Hoeppner: It's a distorted market, probably.

Mr. Laurent Pellerin: There is something more to do in the market, and in the supply management sector they did something; they achieved something. Could we use a variation of this example to make sure we set the market to improve the income at the farm gate? We have to look at that very seriously.

Mr. Jake Hoeppner: Anybody else?

Mr. Bryan Davidson: Basically, Mr. Hoeppner, our industry at the present time is unsubsidized, and I think high prices often lead to high production. In the case of the Europeans, you get high subsidies and it leads to higher production. There you may have a factor or two that works into it in terms of decreasing the demand. We know there has been a bout of mad cow and warm winters and things like that to produce surplus in light of these higher prices.

So we think it's a reasonable argument to think that whereas you have an industry now that is basically unsubsidized, working on its own, with probably the cheapest cost base anywhere in the world to produce high-quality products, but that is being affected by other countries' oversupply, something should be done to maintain this industry on the ground as opposed to letting it go.

So our basic position is that we're not for ad hoc payments, but on the other hand, at times they may be justified in light of a situation like that.

Mr. Jake Hoeppner: Doesn't this impress upon us that we should have a long-term program available when it's needed? The Europeans are going to maintain that market no matter whether you're forced out of business or whether something is done. And what this study showed is that if you have the make-and-break cycles, the people who don't support no matter what the industry is during that time are going to be the big losers.

I know that on the farm, if I'm in and out of hogs, or I'm in and out of canola, I'm going to go broke. Is that a valid statement?

The Chairman: Thank you.

We'll finish off with Mr. Coderre and Mr. McGuire.

Mr. Coderre.

[Translation]

Mr. Denis Coderre (Bourassa, Lib.): Witnesses who appear before the committee often tell us how we should negotiate. Although my question may seem a little strange, I think it is an important one. Mr. Pellerin, what is your perception of our current negotiators? Do you have the feeling they are going to cave in and give the United States and the European Union everything they want, or that they will be able to defend the Canadian position, particularly as regards supply management? Do you have confidence in them?

Mr. Laurent Pellerin: I stated earlier that I recognize that Canada signed the last world trade agreement in good faith. But things have not worked as they should, and over the last three or four years, Canada has completely capitulated.

• 1055

Mr. Denis Coderre: But we are preparing to negotiate. How do you think...

Mr. Laurent Pellerin: We are going off to negotiate, but we are not leaving just now. We're not yet in the car.

Mr. Denis Coderre: I see. We should be keeping a tighter rein, in other words.

Mr. Laurent Pellerin: Both the Europeans and the Americans have understood that Canada has completely dismantled all its support systems. So, if I were they, I would say to myself that the time has come to go on the attack, to destroy its alfalfa dehydration industry, its grain industry and its pork industry, because in Canada, it takes a year before any support program can be put in place for producers. That is the message we are sending.

Mr. Denis Coderre: We'll block the highways.

Mr. Laurent Pellerin: That means war.

Mr. Denis Coderre: We'll block the highways, the way you did.

Mr. Laurent Pellerin: Well, we have to equip ourselves. Canada must clearly express its determination not to abandon its agricultural industry, just because they have not fulfilled their obligations. Canada has to state clearly that we are in this for the long haul. Then we can sit down at the negotiating table. You'll see that people will work much more seriously after that. We have to show them that we're not going to move over supposedly because others refuse to do so, and that we have every intention of staying in this business.

Mr. Denis Coderre: So far, I follow you. We don't disagree. We know each other pretty well. Is it your sense that our current negotiators don't have the right stuff? Are they asleep at the switch? I like that expression. Do you think they have adopted too much of a wait-and-see position?

Mr. Laurent Pellerin: I don't know them personally. So it's difficult for me to say whether or not they are asleep at the switch. However, I do think a little more firmness would definitely not hurt, and perhaps more strategic thinking as well.

I would suggest that our negotiators maintain close contact with farm producers because we have intimate knowledge of the farm products market.

Mr. Denis Coderre: The reason I asked that question...

Mr. Yvon Proulx: At the outset, we will certainly give them the benefit of the doubt, but I can assure you we will be watching them closely.

Mr. Denis Coderre: I also hope that the Federation of Dairy Producers works with the negotiators to ensure they understand all the issues. Do you remember the problem with butter oil? The definition of "dairy product" passed 51 to 49; then countries like New Zealand and Mexico found a way to get around the definition and develop a new product. Do you think that the definition of "dairy product" should be reworked in these negotiations?

Mr. Laurent Pellerin: I believe the definition was appropriate. The real problem was the 200 or more lines describing the various product combinations. One of those combinations, involving a certain sugar content, did not exist at the time; it was invented subsequently. It's a little like in a job description, where it says "and all other related duties". In this case, it said "all other mixed products".

We, too, are going to have to be imaginative. The Americans are imaginative enough to get around these agreements. And Canada cannot allow itself to be last when it comes to imaginative solutions.

Mr. Denis Coderre: You are confident.

Mr. Laurent Pellerin: That is our message to you today. We do not know them personally, but we will be watching them very closely.

Mr. Denis Coderre: Mr. Pellerin, you know them better than that.

I have another question. Following a request from the United States and New Zealand, the Canadian price-setting policy for exported dairy products is being closely examined by a special WTO panel. If Canada loses, what should be its plan B for dairy product exports, in your view?

Mr. Laurent Pellerin: Well, we'll see when the decision is announced. We are hopeful that Canada will win, particularly since the Canadian system has just been changed. It is now completely open; producers can produce as much milk as they want, and the only limitation has to do with the price on the world market. If the world price becomes attractive, I have no doubt that producers will respond. If the world price remains at its current level...

Mr. Denis Coderre: The answer you are giving me could be used as a basis for negotiations on...

Mr. Laurent Pellerin: Certainly. This would clearly show that changes that have been made to the Canadian system for the very purpose of meeting the requirements of the last international trade agreement.

Mr. Denis Coderre: Thank you.

[English]

The Chairman: Thank you, Mr. Coderre.

Now we'll finish, with Mr. McGuire.

Mr. Joe McGuire (Egmont, Lib.): Thank you, Mr. Chairman. I have at few points of clarification to Mr. Davidson or Mr. Benoit.

You seem to be in a disaster mode these last few years. How do you see yourselves as fitting into a whole farm scheme, either in the short or long term? Is that going to fit your particular industry?

Mr. Garry Benoit: If I can comment on that, what I think is important here is that you, as legislators, make sure we're understood as producers.

We produce the product. In most cases, our processing plants have the field equipment. They're out there harvesting the crops and feeding those dehydration plants 24 hours a day with fresh-cut, green chopped material, from June until October, and then putting up hay to process during the winter months. As we eventually have in the past, with the various grain-related programs, we have to be understood as being the producer.

• 1100

Mr. Joe McGuire: One difference is that this time it's not going to be commodity specific. It can't be commodity specific. There are no side deals. You're either whole farm or you're out.

Mr. Garry Benoit: I think our processing plants can lay out their books if it's based on a margin approach and show we have an income disaster for all the same reasons that—

Mr. Joe McGuire: These are individual farmers. We're not doing processing here. We're doing individual farms, a whole farm support program. If this is what happens, it'll be whole farm support. It won't be for hogs, wheat, canola or alfalfa, it'll be on a whole farm basis. I just want to know where you see yourselves fitting in with that type of concept.

Mr. Garry Benoit: If you're a hog farmer you produce hogs, and if you have an income disaster you can open your books and show that as a producer of hogs—

Mr. Joe McGuire: Or you could be something else too. You could be a grain farmer and a hog farmer, or a canola farmer and a hog farmer.

Mr. Garry Benoit: In the case of some of our plants, they are doing other things as well; in most cases they're pretty specialized in alfalfa. It's a case that they have the same income disaster. They have the field equipment. They're out there producing, processing shipments—

Mr. Joe McGuire: The plants do, but do the farmers?

Mr. Garry Benoit: The plants are the farmers. They should be treated as farmers.

Mr. Joe McGuire: It's an interchangeable concept here—your farmers and your plants are the same thing.

Mr. Bryan Davidson: Yes, often.

Mr. Joe McGuire: Is that true?

Mr. Garry Benoit: It often is exactly the case. We've been through this in the past, where we've had to come in and make that case with other programs that ended up to be similar, where we had to make the case that we are the producer and we have every argument to be included. So let's draw up the terms of reference broadly enough so we can deal with the dehy industry situation.

Mr. Joe McGuire: I think the terms were drawn up with our WTO agreement in 1993. We have to fit any kind of assistance program into what we agreed to then. It's my understanding that our trade experts say we cannot help the commodity specifically. It has to be a whole farm.

Mr. Bryan Davidson: There were provisions in the last GATT round that suggested export subsidies needed to be reduced by only 36%. Half of the pellets in Canada are produced in northeastern Saskatchewan. When the Crow rate was taken away at the rate of 100%, the government did our industry a disservice. It took away from us the only subsidy we had to offset the large freight cost from northeastern Saskatchewan to Vancouver. They removed it. You just basically threw us at the mercy of an industry in Europe that's being subsidized at the rate of $500 million a year. We have not been here in the last two years because the industry has been profitable and that kind of thing. It's only in the last six months that the full effect has come about. There has been a $50 per tonne reduction in the price of processed alfalfa on export markets in the last six months.

Mr. Joe McGuire: I'm not arguing with that.

Mr. Bryan Davidson: We think if we don't qualify, that industry will disappear.

Mr. Joe McGuire: But I'm asking you, do you consider yourselves primary producers or processors?

Mr. Bryan Davidson: We've always been considered producers under previous grain, special grain, drought, WGTA, things like that.

Mr. Joe McGuire: So you don't see any reason why you couldn't be included in our whole farm program.

Mr. Bryan Davidson: It'll depend on the strict definition that's put on this. I would ask that the committee consider having it broad enough to encompass people such as us, so we don't get left out and then basically have to come and make the case on a commodity-specific basis. There is the provision in the WTO to replace that portion of the subsidy that was removed unnecessarily. We would ask for that as an industry, if we're forced to do that.

• 1105

The Chairman: Thank you very much.

Mr. Davidson, you were saying your members have been left to the mercy of the European countries. There's not much mercy there. Would you agree?

Mr. Bryan Davidson: I would agree.

The Chairman: Thank you. I think we've covered a lot of ground this morning. My thanks to the witnesses and the members for your outstanding cooperation. I think we did a very good job. Thank you.

This meeting has ended.