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, May 25, 1999

• 0909

[English]

The Chairman (Mr. John Harvard (Charleswood St. James—Assiniboia)): I call this meeting to order.

Members, we're going to be dealing with the main estimates today, votes 1, 5, 10, 15, 20, and 25, and part III, the report on plans and priorities. With us today we have three witnesses: Denise Boudrias, who is the assistant deputy minister, market and industry services branch; our old friend, Mike Gifford, who needs no introduction—Just how long have you been around here?

Voices: Oh, oh!

The Chairman: But take that as a compliment.

And we have Andrew Graham, assistant deputy minister, corporate services branch.

• 0910

I understand from Madame Boudrias that she has about a 10-minute opening statement. Mr. Graham will follow with about a four-minute statement, if I take him seriously.

A witness: It's the other way around.

The Chairman: Oh, I'm sorry. You're starting. Okay.

And then Gifford doesn't have an opening statement, but he'll just answer all the questions, right?

Is that how it usually goes, Mike?

I don't know. My humour's not working very well, I guess.

A voice: I'm smiling.

The Chairman: Okay.

So Mr. Graham, you're the lead-off hitter.

Mr. Andrew Graham (Assistant Deputy Minister, Corporate Services Branch, Agriculture and Agri-Food Canada): Thanks very much, Mr. Chairman.

Thanks very much for the opportunity to speak today.

I just remind the members who are here that on 13 May, other officials from the department appeared: Peter Fehr from PFRA and Dr. Brian Morrissey from the research branch. Together, those two represent what is reported in our plans and priorities as the business line of “Innovating for a Sustainable Future”. Also, Tom Richardson appeared, who was the acting ADM of the policy branch and the principal for the “Strong Foundation for the Sector and Rural Communities” business line.

As you've already indicated, Mr. Chair, just after me, Madame Boudrias will speak, who is the principal for the “Expanding Markets” business line.

My role today is to speak very briefly as the principal for the “Sound Departmental Management” business line. I have with me other members of that particular group: Mr. Dennis Kam, who's the director general of finance and administration; and Ms. Yvonne Latta, who's the director general of strategic business planning. They are available to answer any detailed questions.

I'd like to speak briefly about Agriculture and Agri-Food Canada's report on plans and priorities document and the approach we've taken in reporting departmental business to you and to Parliament in general. I'll then provide a short description of the business line I'm responsible for and end on a couple of key issues that are striking us.

Several years ago, as part of a Treasury Board-sponsored pilot called Improved Reporting to Parliament, a number of departments, of which we were one, were asked to rethink how we would present our plans and priorities. This initiative came about because of considerable feedback from parliamentarians and citizens asking us to change the way we reported what we were doing.

We began to re-engineer our reporting framework in 1996, and focus was placed on improving the longer-term nature and certainly the readability of the documents. We did this so that the activities we were reporting on under the old system could be assessed against the results we were attempting to achieve, and certainly the planned outcomes. That's been a consistent message over my two and a half years at Agriculture, and certainly my experience in other departments from parliamentarians is to try to link these things better.

This new focus on managing for results meant we needed to place a lot more emphasis on the impact of our activities and a lot more emphasis on reducing the amount of detail we reported on.

We're trying to better measure what we do, and in the public service, that's not an easy task. But I think you'll see in this report, and certainly in the departmental results report in the fall, a considerable amount of progress in that area.

We've made a few changes to the 1999-2000 report on plans and priorities, all of which, once again, were aimed at creating a more readable and concise document for you, based on both individual feedback we've had from some members of this committee and on an exercise in which Treasury Board became involved, in consultation with committee chairs and other committee members, over the past year.

We've added a few new sections, in one of which we've described our approach to doing business, and we've identified the challenges and opportunities in our changing environment. We've also streamlined the number of financial tables. That may in fact cause some questions, but we attempted to focus on the most relevant information, and that meant focusing on planned spending at the business line level, rather than on historical data. But of course if members want any further detailed information of a financial nature, as was previously provided, we'd certainly be prepared to provide that on request.

• 0915

So the RP and P document really serves also as our business plan as a department, and as our three-year window on where we see ourselves going. As well—and this is once again based on feedback from parliamentarians and the public—it's an effort to focus more on results and less on bureaucracy, and less on boxes and lines and more on what we're attempting to achieve.

There's always the temptation to go back and ask, What branch does this? That's a fair question, because we often have to do crosswalks to make sure the accountability is still there, especially since the spending authority still flows through our branches. We're in the middle of an effort to achieve a number of ends here, and we think that as a department, we've struck a fairly good balance.

I want to talk briefly about the business line called “Sound Departmental Management”. The department is attempting to ensure of course that all the resources that taxpayers have entrusted to the department—and by resources, I don't just mean money; I mean the people, the information, the money, and the bricks and mortar—are allocated and used to achieve our results in the most effective way.

Although all the business lines are responsible for sound management, so I don't carry that alone—Madame Boudrias and other members of our management team have just as much responsibility—a number of corporate branches play a lead role in the achievement of this objective. That includes our human resource branch, our communications branch, our review branch, our legal, and the organization I'm responsible for, the corporate services branch. They form a business line and are responsible for providing centralized support services to the operational business lines. Our work may not have the profile of the operational business lines, but it's essential to providing the management policies and infrastructure so that they can get the job done.

My organization, the corporate services branch, provides information management, resource management, strategic business planning, and technical services to the whole of the department and in some cases to other parts of the portfolio. For example, we have a very close relationship on the financial side with the Food Inspection Agency.

I want to end by highlighting one of the issues we are spending a considerable amount of time on, and that is the Y2K challenge. We are responsible not only for the assurance that the department is ready, but also for working with the various business lines to ensure that all of the issues with respect to the assessment of the food supply, starting with producers through the transformation phase to the retail phase, are in fact going to be ready for the Y2K problem.

That of course is taking a considerable amount of time and moves us beyond what you might regard as the traditional corporate functions into working with a considerable part of the sector through our business lines and in cases directly. I'd be delighted to speak on that if anyone had any interest in that.

That's all I have to say, Mr. Chair.

The Chairman: Thank you.

Now it's Madame Boudrias' turn.

I understand this is your first appearance of this kind. Welcome, and I wish you well.

Ms. Denise Boudrias (Assistant Deputy Minister, Market and Industry Services Branch, Agriculture and Agri-Food Canada): Thank you very much.

Yes, I was appointed nine months ago to Agriculture and Agri-Food, so today is really an anniversary for me as well.

[Translation]

If I may, Mr. Chairman, I will start by speaking in French, and follow with English later.

The Market and Industry Services Branch has 400 employees, over 100 of whom work in the regions, close to our clients. Ten work abroad in offices of the Department of Foreign Affairs, embassies and consulates. There are some 150 people in all working in industry services in Ottawa.

Mr. Chairman, distinguished committee members, it is my pleasure to present to you today a brief description of our growing market sector. As you know, our general business line is to work with industry and other partners to improve and ensure market access, to help the agri-food industry develop domestic and foreign markets, including those for processed agri-food products, and to increase national and international investment in the sector. To this end, we work in partnership with other organizations in the sector with the same interests.

Between 1999 and 2002, we will be working to help the agricultural and agri-food sector in Canada reach some ambitious objectives. As you know, the objectives suggested by the Canadian Agri-Food Marketing Council, better known as the CAMC, mention a 4% market share. Recent statistics show that the market share is only 3.3%. Consequently, a great deal of work will have to be done to meet this objective by the year 2005.

• 0920

It was also suggested that we increase to 60% the percentage of processed agricultural and agri-food products. This will be a difficult task. We will need the help of all players, from both industry and other governments, in order to achieve it. Nevertheless, this is a worthwhile objective, since it is estimated that between 120,000 and 170,000 jobs could be created directly or indirectly by growth in the food and beverage sector.

In addition, as the lead department, we work in co-operation with Industry Canada and the Department of Foreign Affairs and International Trade to speed up our progress on Team Canada Inc. issues. As you know, initially, only three departments were involved, whereas now 20 department and agencies work together to support Canadian industry from coast to coast.

[English]

The first business line I want to talk to you about is market access. As you said, Mr. Chair, Mike Gifford will be here to answer all the detailed questions. He's really the superb mentor in this field.

Improving access to foreign markets will depend on effective negotiation in the international arena. The next few years will be critical ones for our sector. In late November 1999 the WTO will begin its agriculture negotiations, a process that is expected to continue over the following two to four years; we expect they will not go over that. This next round of negotiations is vitally important to furthering Canada's goals.

The negotiation to be launched at the WTO third ministerial conference in Seattle will give Canada a chance to build on what was begun in the last Uruguay Round of negotiations: bringing world trade in agricultural products under effective rules.

Canada has everything to gain from rule-based trade and effective dispute settlement mechanisms. Just this year it's been proven by the success we had in addressing border problems for grain and livestock exported to the United States. Despite intense political pressure, the borders were kept open.

In order to be prepared, Canada's initial negotiating position is being developed through extensive consultations with the full range of agriculture and agrifood industry participants. These consultations have involved parliamentary hearings, private meetings between Minister Vanclief and agriculture and agrifood industry associations and stakeholders, and a national conference in April 1999, including more than 400 participants. At a certain point in the program, we had almost 600, including eight provincial ministers, as well as delegates from all sectors and government levels, coming together to shape Canada's position. There were 24 working groups that looked at issues and strategies.

We've listened to what the industry had to tell us, and in a nutshell, we heard there is broad agreement on the need to eliminate export subsidies, reduce trade-distorting domestic support, and improve the terms of market access. We also know there are still disagreements among industry groups on some of the details, particularly with respect to Canada's approach to over-quota tariffs.

While the WTO negotiations unfold, we will continue to aggressively negotiate improved access in countries such as China and Russia as they accede to the WTO. We are in the midst of other discussions. We're completing agriculture negotiations on a free trade agreement with the European Free Trade Association in 1999. We will start the renegotiation of the Canada-Israel Free Trade Agreement in order to increase agriculture and agrifood commodities covered by this agreement. We are aiming to conclude the negotiations on the free trade area of the Americas, with 34 North American and South American countries, by 2005.

• 0925

Regardless of how carefully we negotiate, agreements are not cure-alls. Much of AAFC's effort is directed at defending our rights and removing technical barriers or trade irritants before tensions mount.

A primary focus over the next year will be maintaining and improving our relationship with the United States, our largest trading partner. In addition to dealing with U.S. pressure for contingency protection, we will be working to ensure the full and faithful implementation of the December 4, 1998 record of understanding and action plan, which has established an improved framework for our biggest bilateral agriculture and agrifood trade relationship.

Canada's goal is to make further progress in reforming agriculture trade and disciplining trade-distorting policy in competitor countries. We want to ensure that Canada's farmers compete with other countries' farmers, not with their government treasuries.

Success in global negotiation is often hard-won. The best preparation is a strong program of ongoing work with an international organization, such as OECD, APEC, or Cairns, to strike strategic alliances with like-minded countries. Working together, we are tackling huge global issues such as world food security. Canada's plan of action for food security is the country's commitment to work towards food security at home and abroad.

In specified ways, Canada can work toward a safe and nutritious food supply for all, including finding economically and environmentally sustainable ways to increase food production, promoting health and education.

[Translation]

As regards our market development business line, we are members of Team Canada Inc., and we will continue to offer unified, multidisciplinary service to inform our clients of the various programs offered by the federal government.

Our strategy for international trade in Canada, in the agriculture, food and drink sector, has enabled us to establish objectives for each of our eight priority markets. As you know, they account for 80% of our exports. The eight markets are: the United States, Japan, the European Union, China, South Korea, Taiwan, Mexico and Brazil. There are also four emerging markets—Singapore, the Philippines, Russia and Colombia. Although the department will focus its efforts particularly on these markets, we will clearly be supporting any other strategy that offers business opportunities in other parts of the world.

We have also developed a single approach for market development strategies, better known as AIMS, the Agri-Food Industry Market Strategies. The objective is to bring together players involved throughout the whole system, so that they can agree on a foreign market development plan to be partially financed by the Canadian government. In order to provide proper support for these strategies, we have also sponsored a number of trade missions, and we are encouraging participation in international food shows such as the FMI in Chicago, the Fancy Food Show in New York, SIAL-MERCOSUR, ANUGA or Food Ex.

We will continue to provide high-quality services for our various clients, and to develop a training program geared to the needs of exporters, whether they are new to the field or have some experience in it.

[English]

On the business line under investment, we want to take advantage of all new market opportunities in domestic and international priority and emerging markets, so we need to increase our capacity to supply competitive, world-class products and to produce the right products for the right markets.

In order to maximize the competitiveness of Canadian agriculture and agrifood in the global economy, attraction and retention of investment in the Canadian agrifood sector is fundamental. Consolidation, expansion, and productivity improvement through technology adoption, research and development, and innovative processing of agriculture products for world markets require funding. Priority should be placed on creating conditions that will attract significant new investment from domestic and foreign sources, including a more favourable policy and regulatory framework.

In order for Canada to pursue its growth opportunities, capital investment remains an issue, even if it has remained stable, averaging $1.5 billion a year. We also want to increase the visibility of our sector. We have supported the Canadian financial community with initiatives such as the Canadian Securities Institute in December 1998. We also addressed different climate impediments that were raised to us by our clients, particularly the scientific research and experiment development tax credit program. We've worked with Revenue Canada to try to find ways our clients can understand better and also to look at reduction of the administrative burden and process.

• 0930

In certain areas, such as frozen potato products, investment has grown tremendously. The prognosis for the next year is excellent. In addition, Canada is well positioned to take advantage of domestic and international markets for functional foods and nutraceuticals. That is why recently we've organized a round-table on the topic and we're studying recommendations and developing an action plan. We know Canada has the technological know-how and many of the raw ingredients, including grain, oilseed, and dairy products, that are used in the production of functional foods and nutraceuticals.

We're also promoting alliances through partnerships. For example, we've given seminars at the SIAL food show in Paris, and we've organized two federal-provincial industry investment seminars in Italy.

I also want to mention that our deputy minister is now a country champion for all the central region of the United States.

Existing and potential investors benefit from the work we're doing through the rapid response team. That means if an investment mission is coming or an investor is calling, in about two hours we can get a group of people together, depending on the topic, and they are able, with the provincial experts, to prepare a strategy to interest them, show them sites, and answer their questions.

[Translation]

In conclusion, we want to optimize our domestic and international market opportunities and develop a unified Canadian position for the negotiations. We want to manage our relations with the United States even more effectively.

[English]

We will work to eliminate technical barriers to trade in priority and emergent markets and maximize business opportunities in Canada and abroad in offering excellent services to business.

[Translation]

We want to offer high-quality services to the industry as a whole, both the agricultural and agri-food sectors.

[English]

We also want to increase the Canadian investment as well as the foreign investment in that sector.

[Translation]

Thank you.

[English]

The Chairman: Thank you very much, Madam Boudrias.

Members, I have just a slight housekeeping item before we go to Mr. Hilstrom for the first round of questions. I'm going to ask our clerk to distribute copies of a proposed budget for a possible trip to Europe in the fall, in connection with the WTO. All we need is approval from the committee later on in the meeting, and then the budget request will go on to the powers that be. So I've asked the clerk to distribute copies, and later on I'll put the question as to whether you approve or not.

We'll go to Mr. Hilstrom for the first round of questions, for seven minutes.

Mr. Howard Hilstrom (Selkirk—Interlake, Ref.): Thank you, Mr. Chairman. We'll certainly look at those. No doubt we could send them back with Denise and she could get them approved today, maybe.

You brought up a million things we could sit here and discuss all day if we had the time, but when you talk about a unified position, just who exactly are you referring to in the case of agriculture? Are you talking about a unified position between the processors and the primary producers? Who exactly is going to be unified on this trade position?

Mr. Mike Gifford (Director General, International Trade Policy Directorate, Market and Industry Services Branch, Agriculture and Agri-Food Canada): We'd like to have a unified national position—a national position of the entire agrifood sector, from the primary producer through the processor to the trader, involving both levels of government, federal and provincial.

Our feeling here is that unless Canadian agriculture collectively can get its act together, we're going to be picked off very easily in Geneva. You just don't have credibility in negotiations if you're representing a fragmented industry. The experience of the last two years in the consultation process has revealed a growing convergence of the views of all stakeholders: primary producers, processors, and the other members of the Canadian agrifood sector.

Mr. Howard Hilstrom: Thank you. Certainly one component has to be that primary producer's income. Otherwise you can kiss unity goodbye in that regard.

It's hard to talk about some of these things in the generalized terms contained in these estimates, so I'll talk about a couple of specifics.

• 0935

For a long time now, oats have been seriously subsidized coming into North America. What are you doing about that?

Mr. Mike Gifford: The main sources of oats into the United States are Canada on the one hand and the European Union on the other.

Historically, Finland and Sweden, even before they joined the European Union, were subsidized producers and used export subsidies extensively in shipping oats to the U.S. market, primarily for the racehorse industry. The Europeans are still operating within the WTO obligations with respect to export subsidies, so they're not acting illegally. But certainly it's a strong view of the Canadian government that the Europeans should do for oats what they did for barley—that is, exclude North America as an eligible destination for export subsidies. As part of our discussions with the Americans last December, they agreed to work with us to that end.

So we anticipate in the very near future joint representations to the Europeans by both the Canadian and U.S. governments. In the past, the Canadian ministers, both Minister Vanclief and Minister Goodale, have specifically raised our concerns about the use of subsidized exports of oats to the U.S. market with Commissioner Fischler of the European Union.

Mr. Howard Hilstrom: Okay, so the Europeans are acting legally there, supposedly. Well, let's talk for a minute about how they're acting illegally. May 13 has come and gone, in regard to the beef issue. Where do we stand at this moment on that?

Mr. Mike Gifford: The Europeans telegraphed very early on that they didn't expect to be able to bring their measures into conformity with the WTO panel finding on beef hormones, so they indicated that their preference was to enter into negotiations on compensation, pending the conclusion of some technical studies they have currently under way. Both we and the United States have indicated to the dispute settlement body in Geneva our intention to withdraw equivalent concessions—in other words, retaliate—unless a satisfactory compensation deal can be negotiated.

The United States has indicated that they calculate the level of impairment at roughly $300 million Canadian, and the Canadian calculation of impairment is something in the order of $75 million Canadian. We anticipate that the European Union will ask for an arbitrator to determine the appropriate level of either compensation or retaliation, and that that would come out by July 12. By July 12, if the United States and Canada have not resolved the issue bilaterally to their satisfaction through discussions on compensation, then the two countries will be authorized to retaliate at a level to be determined by the arbitrator.

Mr. Howard Hilstrom: Is it not up to us in Canada to decide whether we want compensation or not? Is that not our decision? It's not the Europeans' decision. It's our decision.

Mr. Mike Gifford: That's right.

Mr. Howard Hilstrom: So why on God's green earth would we codify the status quo by accepting compensation for a situation that is dead wrong on science and trade rules, and dead wrong on everything, on the part of the Europeans? Why would we accept $70 million when we should be saying we want access to that market? That's the big issue in trade with agriculture; is that not true?

Mr. Mike Gifford: Certainly our preference is for the European Union to open up its market for Canadian beef.

Mr. Howard Hilstrom: Well, whose decision is it, Mike? Is it the minister's decision, or the Prime Minister's? Who makes the decision that we're going to take $70 million instead of access to the European market?

Mr. Mike Gifford: The difficulty here is that the European Union has to make a decision as to whether they're going to bring their measures into conformity with the panel ruling or accept retaliation or pay compensation.

They've said they have a series of 17 or 18 scientific studies that have yet to be completed. They anticipate that these studies will be completed sometime during the year 2000. It's our expectation that these studies will continue to confirm what we and the United States have been claiming for the last 10 years: that when used properly, there's absolutely nothing wrong with the use of growth promotants in cattle production. But you can't force a country to bring their measures into conformity. It's their choice to either take retaliation or negotiate compensation.

• 0940

Clearly, in the short term, we'd like to have a trade-enhancing rather than a trade-restricting outcome, pending the conclusion of these scientific studies in Europe. But ultimately it's the Europeans' decision. If they don't want to offer quality compensation, then they're going to get quality retaliation. It's as simple as that.

The Chairman: We only have 30 seconds. I'll try to give it to you in the next round.

[Translation]

Ms. Alarie.

Ms. Hélène Alarie (Louis-Hébert, BQ): My question is not quite along the same lines. Every day I am more concerned when I see television programs and read newspaper reports about biotechnology, food produced using hormones, and biological products according to international classification. Mr. Gifford, what impact will these biotechnologies have on the upcoming negotiations?

[English]

Mr. Mike Gifford: A recurring theme in the consultations with the Canadian agrifood sector over the last two years has been this growing concern at the proliferation of so-called technical barriers. The classic example of course is our recent experience with the Europeans over beef produced with the benefit of growth promotants. That's been a 10-year saga.

More recently, we've experienced a virtual embargo on our exports of canola to Europe, because of the politicization of the European approval process for products of modern biotechnology. Both we and the Americans have seen exports of canola, soybeans, and corn stopped at the border going into Europe, because the approval process is just log-jammed. Technical committees approve these things, and then it's a political decision not to implement the technical decision.

It's certainly the firm view of the Canadian agrifood sector that these so-called technical regulations, which are certainly legitimate.... Nobody denies the right of a country to take appropriate action to protect human plant and animal health and the environment, but clearly these decisions have to be made on the basis of objective criteria, and not emotion or political rhetoric.

A number of countries, including us, the United States, Argentina, Chile, and Australia, have indicated that we are planning to raise the whole question of trade in biotech products in the next round. Right now we run the risk of world trade in commodities coming to a shuddering halt because of the inability of some countries to establish an appropriate regulatory approval process. The system has to work better.

To repeat, this is a disturbing issue, but everybody in the Canadian agrifood sector is convinced the only way to proceed is on the basis of science rather than arbitrary decisions.

[Translation]

Ms. Hélène Alarie: But there does not seem to be any urgency about agreeing on a registration process any time soon. At the meeting you held on May 17 or May 18, I spoke to some people in processing, people who buy canned or processed products, and they were telling me that when the fields are planted, American inspectors come to find out whether genetically modified products are being used in the neighbouring fields. They can control their own production, but they cannot control what their neighbours do. Our processors are already being embarrassed in international trade by our closest neighbour, not to mention the issue of Japanese standards or those of other countries.

What can we do for these people who make up 60% of the processed product market that we want to conquer by the year 2005? What can we tell them will be done soon?

• 0945

[English]

Mr. Mike Gifford: What's been developing over the last year or so is the recognition that the customer ultimately is always right. What you're seeing in effect is the development of a dual system: producing food under the traditional, conventional methods and producing food with the benefit of modern biotechnology. Two marketing streams are developing. This is now a reality, and it's a function of the differential acceptance of this new technology by various regions in the world.

Obviously in North America, modern biotechnology is more widely accepted than it is in Europe. So clearly you're going to have differential degrees of acceptance, and this over time will presumably intensify the development of, in effect, dual marketing systems. For example, soybeans from Ontario that are produced by the conventional method are finding a good market in Europe, whereas soybeans that are genetically enhanced run into difficulties.

[Translation]

Ms. Hélène Alarie: Do I still have some time?

[English]

The Chairman: Yes, you have about a minute and a half.

[Translation]

Ms. Hélène Alarie: Fine. Ms. Boudrias, you spoke about your support for major international exhibitions. The exhibitors who took part in Food Ex last year were very concerned, because they were afraid the government might withdraw its support for that event.

Ms. Denise Boudrias: I'm surprised these exhibitors were concerned, because we consider Food Ex one of our priority markets. We decided to continue to support it and we will be in touch with the exhibitors to reassure them and inform them of our decision.

[English]

The Chairman: Thank you very much.

Mr. Calder.

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

One of the things I noticed in this report is that there is no reference to my industry, supply management. I'm just wondering how we're going to deal with the processors in this country, because they are looking at the export market and they're looking at this as a growing market. We've even seen the dairy industry be challenged, with their two-tier pricing system.

One of the things I wonder is this, and I'd even throw it out to you, Mike, to tell me whether I'm on track or out in left field here. An export certificate system could be established with the processors, whereby the processors would look at what they feel they could export outside the country, and any farmer within the SM-5 who would be interested in export could go to the processor and buy that certificate. Thereby he would produce those kilograms worth of production of whatever it is—anything from milk to chicken to eggs to whatever—and that could exit the country and go into international trade.

Of course the export certificate would probably be worth the difference between the domestic price and the international price that he's shipping out at. I would like you to tell me whether or not that would be considered a two-tier pricing system or whether or not that would be WTO-acceptable.

Finally, to follow along on Howard's question, if the EU fails to lift its ban on beef right now—and for all anyone knows, it may ban other products, for whatever reason—what products are we going to be targeting with sanctions?

Mr. Mike Gifford: It's true that over the past several years, the supply management industry in dairy, poultry, and eggs has shown an increasing interest in producing for export. I distinguish between producing for export—for identified export markets—and simply producing structural surpluses that you try to get rid of at the lowest going rate.

• 0950

Both the poultry sector and the dairy sector have made solid progress in developing identified export markets, and I'm the first to agree that it's a mug's game to produce on spec for the international market and having to end up selling the stuff to, say, Russia at the lowest possible price. So the dairy and the poultry sector are beginning to gear to produce for export—for identified export opportunities.

The WTO panel that just released its report in Geneva basically said not all two-price systems are export subsidies. But it did suggest that the more government involvement there is through the delegation of government power, either by the federal government or by provincial governments, the greater the likelihood that the two-price system, if it's micromanaged by marketing boards that are using delegated governmental powers, will be found to be an export subsidy.

This particular panel seemed to suggest the following, and I'll use the example of the system in Alberta for dairy products. As I understand it, if a producer on the optional export program entered into a contract with a processor at a price lower than the made-in-Canada price, but this was a price freely entered into between the primary producer and the processor, they could even put it through the system of the marketing board, so long as it wasn't a marketing board saying, “This is the price, and we are setting the price on the basis of delegated provincial or federal power”.

The bottom line seems to be that the less micromanagement of the export sale by the agencies, the less likelihood you will have of running into a problem of a defined export subsidy. Therefore I'm afraid your idea of an export certificate would smack just too much of government involvement—in this case federal involvement.

It was very interesting that the panel did not say the optional export program was a defined export subsidy, but only 5D and 5E classes, which are basically milk sold for export at a low price—a price lower than the made-in-Canada price—and that price was set by the Canadian system, which involves delegation of governmental powers to a marketing board.

So this seems to be the story. We certainly don't like some aspects of the panel's report, and as you know, we're planning to appeal that decision. That appeal is expected to be heard this summer, and we expect a final and binding decision on this question in the early fall, probably in September. When we get that final, binding decision from the appellate body, the industry, particularly the dairy industry in this case, will then be able to fine-tune its system to bring it into conformity with our international rights and obligations.

Mr. Murray Calder: In February this committee had a chance to be down in Washington, and we appeared in front of the ITC, the International Trade Commission. I asked a couple of questions down there, and to be quite honest with you, I think the chair of the commission was wondering where I was coming from, because at that point in time he didn't really consider them very bright questions.

A voice: [Inaudible—Editor].

Mr. Murray Calder: Hey, I can get away with it; I'm a farmer.

I asked him a few questions. I asked what was going to be on the table, and of course he said everything. Then I asked what ultimately they wanted to achieve, which was basically a zero subsidy. So then I asked him what they were going to do, considering that we had a zero subsidy already on peanuts and sugar. We got very quickly into a “yeah, but” situation.

• 0955

Mike, how would you, as probably one of our negotiators, address the issue? For instance, with the possibility of the sugar beet industry in Manitoba, considering that the United States does not have a zero subsidy on sugar, how would we go about addressing that within the negotiations?

Mr. Mike Gifford: I believe the reference was to zero subsidy, but you really meant zero tariff.

Mr. Murray Calder: Yes.

Mr. Mike Gifford: Okay.

Yes, it's true, and Canada is certainly not unique in having certain sectors that are more import-sensitive than others. In the case of the United States, they have a number of sensitive sectors, including dairy, sugar, and peanuts.

The position of the sugar lobby, as I think I've mentioned before, is very simple. They simply tell Washington, “We don't really care what the United States' trade policy position on agriculture is. Our bottom line is we don't intend to provide any more access to the U.S. market than what the European Union is prepared to offer.” It just so happens that both Europe and the United States have highly protected sugar regimes that limit imports to about 8% of their respective consumption.

Similarly, in the case of peanuts, the United States runs a high-cost, highly protected peanut support program, and that's certainly import-sensitive.

Mr. Murray Calder: But we're already—

The Chairman: We're out of time, Murray. We'll have to keep this short.

Go ahead, Mike.

Mr. Mike Gifford: To conclude, Mr. Chairman, there are going to be three categories of tariffs in the next round.

One will be those product areas where countries agree it makes a lot of sense to go to free. For example, the oilseed and oilseed product sector is a good candidate for going free across the board.

Another big category is virtually all of the processed products and even many primary products that are just subject to straight tariffs, normal tariffs. There you're going to have some kind of tariff formula.

The third category is where the really difficult negotiations are going to be, and that's on the tariff rate quotas. It doesn't matter whether it's in Europe, the U.S., or Canada; those are the measures we use to protect our more sensitive sectors. There the issue is what to do with the size of the minimum access commitment, what to do with the tariff on the minimum access, and what to do on the over-quota tariffs.

Certainly all of those countries, in North America and western Europe, have the same problems and the same sensitivities. One of the sensitivities is what happens to asset values, what happens to the value production quota or the land value. It seems self-evident that none of these countries will want to take precipitous action that will have negative effects on these asset values.

The Chairman: We'll have to leave it there. We're well over time. Thank you.

Mr. Graham, just before we go to Mr. McCormick, in your remarks you were paying special attention or giving special emphasis to things such as results and impacts. That's understandable and that's all well and good. I just want to know whether it will fall to your office to look at the AIDA program.

I ask that because, as you know, last fall the government expended a lot of effort and energy to put together the program, and now we're in a situation where it's undergoing considerable criticism, whether that criticism is well founded or not. When the time comes, whenever that time is, if it's not your office, somebody else's office will be looking at the results and the impact to determine if there were shortcomings, what they were, and how the delivery of that program might be improved for next year.

Mr. Andrew Graham: Thank you, Mr. Chairman. I can speak generally about it.

First of all, an internal evaluation framework is being created for the program, and that's the responsibility of our review branch. That will determine how it was administered, etc. I'm certainly aware as well that the Auditor General will be looking at it, both at the administration of it—in other words, whether it achieved its goals—and also probably more broadly. I can't speak for the Auditor General's department, but I'm aware they have an interest in that. That's factual, what I know is happening with respect to asking if it was delivered on the basis of the decisions that were made.

• 1000

The Chairman: Okay.

We'll go to Mr. McCormick for five minutes, followed by Mr. Hilstrom.

Mr. Larry McCormick (Hastings—Frontenac—Lennox and Addington, Lib.): Thank you very much, Mr. Chair.

Witnesses, good morning.

I just want to say on behalf of myself and a few other rural colleagues who would have liked to have sat here, the fact that I wasn't here on time this morning and the fact that some others are not here is not, as the old saying goes, representative of our interest in having you here in front of us. We all have habits, and one of the habits we seem to have where we could get our fix in the last 10 days was getting our knuckles sore as we knocked on doors here in Ontario. A few of us did that for some long hours, because of an event that's happening.

A voice: I can't imagine what that is.

Mr. Larry McCormick: No, we won't have it in Manitoba until I guess September or October.

Another one of our habits in rural Canada is trying to do the very best we can at representing the views and the wishes of small business people, and it hurts when you hear a few Canadians talking about farmers and primary producers as if they are not business people. I'm always saying this, and I feel great support across Canada in small-town Canada when we talk about supply management, Mr. Gifford.

It's not because of the 72,000 people and families involved in that industry. It's not because of Mr. Calder; that's for certain. It's on behalf of thousands of other families and hundreds of other towns that will be weakened if we're not there for supply management. It's an old line. We've all heard that.

Mr. Gifford, I've heard around this table and outside this room that you are one of the best negotiators in the world. I've also heard a lot of criticism of you. It seems the bottom line is we have one of the best negotiators, if not the best, in the world. But any negotiator can only be as good as what the government wants that negotiator to be. Would that be an accurate statement?

Mr. Mike Gifford: Certainly negotiators operate on the basis of instructions, and Canadian negotiators in the next round of WTO negotiations will operate on the basis of a cabinet mandate that Minister Vanclief and Minister Marchi will bring to their cabinet colleagues. Negotiators stray from that mandate at their peril.

Mr. Larry McCormick: I want to take this opportunity to ask the clerk if I could get the blues for this meeting, the record. I don't want to miss a word of what any one of you or your colleagues presented earlier, because it's very important.

In this situation with the WTO, at this moment I see nothing more important to rural Canada in the next five to 10 years. We'll speak later about our business of going to Europe.

When I hear about the unified approach, all that sounds good, but whether it's vertical integration or whatever, when we see gigantic companies and there are only a very few processors in Canada of many commodities, and certainly only a very few wholesalers of many commodities, what...? I've not heard anything yet that will protect our producers enough in the future, and that's my concern.

Mr. Mike Gifford: Domestic marketing systems are not on the negotiating table in Geneva. How we decide to market and whether we decide to market collectively through, for example, the Canadian Wheat Board or through the various supply management agencies is our business. The only business the international community has is what's happening at the border, in terms of either export assistance or import barriers.

Certainly as far as I'm concerned, nothing in the rights and obligations of the World Trade Organization stops Canadian producers from organizing collectively and trying to maximize their negotiating leverage vis-à-vis the small number of buyers for their products. Absolutely nothing in the WTO prevents collective action by primary producers.

Mr. Larry McCormick: This is my last question, Mr. Chairman, at this time.

• 1005

I'm sure there's a world of difference between export assistance and import tariffs. Or is there?

So our tariffs are lowered to whatever degree in whatever year in the future—heaven grant, not too far. I've even heard one of my colleagues across the table say they'd be willing to support our demand for good support of supply management, but they're concerned that will take away support from some other commodities that aren't supply managed. So I'd like to hear you address that.

Second, these tariffs come down to the United States in dairy, for example, and then the export assistance program or some subsidy will come along, and we'll be right into the European Union beef situation, which could go on for years, and our producers will be taking a severe hit.

Mr. Mike Gifford: In terms of the concern, for example, that somehow Canadian export interests will be jeopardized because of a preoccupation with our import sensitivities, this is why the government initiated consultations with the industry over two years ago: so that we could develop a position that appropriately reflects the interests of all of Canadian agriculture in all of Canada's regions and all of Canada's commodities, not just some regions and some commodities.

I think primary producers understood very well that we would be shooting ourselves in the foot if we went into the next round with a fragmented position that was not coherent, that didn't make some sense. Where the Canadian industry seems to be converging is in the recognition that although considerable progress was made in the last round to bring agriculture under effective rules that applied equally to all, got rid of all these country-specific exceptions, and converted all these import quotas and variable import levies into tariff equivalents, the reality is that in order to get that outcome, compromises were made.

And unfortunately the outcome is a very uneven result. Some countries provide a lot more access, support their agricultures less, and do not use export subsidies—for example, the case of Canada. The reason the European Union is a net exporter of agricultural products to Canada is that they have very good access to the Canadian market and we have lousy access to the European market. One thing that all Canadian producers are united in is the fact that in the next round, Canadian negotiators had better level the playing field. That's a recurring theme; it doesn't matter whether it's a grain producer from Saskatchewan or a dairy producer from Quebec.

The Chairman: Thank you.

Mr. Hilstrom.

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

I'll make a generalization here: I think the Prime Minister says exactly what will happen in this regard, on trade and other issues.

On the retaliation, I just have to get this cleared up. I'd like it to be pointed out clearly that accepting money and having a bully buy his way out of a problem is not the way to go.

Do the retaliation items include non-agriculture items? Yes or no?

Mr. Mike Gifford: The compensation isn't financial compensation. It's basically the European Union, for example, reducing tariffs on some other products of interest to western Canada in particular. This is compensation. It's compensation by reducing tariffs on other products.

One of the items that has been of interest, for example, is bison, which is exported out of western Canada. It faces a 20% tariff going into the European Union, which makes it a pretty expensive product by the time it hits the restaurants in Europe. As for other products, for example, significant tariffs are still applied on imports of pork into western Europe.

But obviously the Canadian beef producer would like to get back his access for both the so-called Hilton beef, the high-quality beef that's going into the restaurant and hotel trade, as well as what we call edible offals, which go into the European sausage market.

It's either pay quality compensation or face retaliation. A range of products has been identified for public comment, which we would pick and choose from. This range of products clearly covers more trade than the level of impairment that Canada's claiming, the $75 million. It can cover such items as fresh and frozen pork from Europe. We import a lot of spareribs from Europe, for example. Chocolate, biscuits, you name it—a whole bunch of processed food products would be possible candidates.

Mr. Howard Hilstrom: Okay. The fact of the matter is we're dealing with injury to the primary beef producer, to the slaughter plants, and to the leather markets that we would ship to or whatever. So on the retaliation list that's compiled—and I'll be watching this very closely, and you can take this back to the Prime Minister—the number one items had better be everything associated with beef. Then after that, you can get down to cheese.

Unless you have some really succinct comment, that is just the position that would seem to be the most sensible to me.

• 1010

I have a couple of questions more closely related to other areas we're dealing with in the domestic area. These trade missions that go around have to be assessed as to how they work out. Could you tell me how much more wine we're exporting to Italy now that we had that trade mission down there? We had about 17 or 18 MPs go there; we should have been able to sell some wine.

Ms. Denise Boudrias: I would like to ask the director general of the food bureau to answer that question.

Mr. André Charland (Director General, Food Bureau, Market and Industry Services Branch, Agriculture and Agri-Food Canada): Yes, and Mike Gifford can probably help me on this one too, because the issue with Europe is primarily an access issue.

We have a few million dollars worth of wine going into Europe as a whole, and it's being shipped in under a special category, so it hasn't been subject to tight restrictions. We are in negotiation and discussion with the Europeans to increase access there.

Certainly we see tremendous possibilities for Canadian wine, particularly ice wines and higher-quality VQA wines, in the European market, more commensurate with what the Europeans sell into our market. But that is a question for negotiation and discussion at this point, which we are pursuing.

Mr. Howard Hilstrom: Okay. As long as we don't trade off this beef issue to let that wine flow in there, I'll be pretty happy.

Mr. Larry McCormick: I have a point of order, Mr. Chair.

The Chairman: What's the point of order?

Mr. Larry McCormick: I just wonder if we could clarify that there are other exports to Italy besides wine.

The Chairman: That's not a point of order. Come on.

Mr. Larry McCormick: Well, if you're going to come up with....

Thank you, Mr. Chair.

The Chairman: Mr. Gifford.

Mr. Howard Hilstrom: Oh, I think we can pass along. That was enough of a comment. We don't have any direct dollar figure yet for whatever might have come out of that trade mission trip, but it's very important, because these trade missions can be very good and important, and I know there have been some positive results. I'm just saying it should be made public what the results of these trade missions are, in actual sales and that.

Can I get on to domestic issues? Under “Stabilization of Farm Incomes and Risk Management”, on page 24 of the estimates, it says, “Improved stability of farm income”. You should publish what level of income you're trying to stabilize. We could stabilize farm income at $5,000 net a year. In setting this plan out and spending to accomplish it, what level of income are you looking at stabilizing? Is there such a figure?

Mr. Mike Gifford: The purpose of the safety net programs that the Government of Canada operates and that a number of provinces operate is basically to try to take some volatility out of the price fluctuations inherent in agricultural production. It's to moderate that amplitude of prices, which in turn impacts on incomes, that programs such as NISA are geared to. Basically producers put money into their savings account in the good times and draw it out in the bad times. It's a mechanism for risk management in which the government assists the producer to operate his NISA account.

But there's no absolute level. Obviously, as was mentioned earlier, producers are individual farm family businessmen, and each of them have their own capabilities and qualities. You don't expect that you're going to get a homogeneous Canadian farmer. There are 80,000 commercial farmers in Canada.

• 1015

The Chairman: I think Madam Boudrias wanted to add a comment.

Ms. Denise Boudrias: Yes.

The mission you referred to in Italy was not necessarily under our responsibility, so it was difficult to answer your question. The one I was referring to was a federal-provincial-industry investment one, so it was to promote Canada as a place to invest.

We know there will be a reciprocity mission coming from Italy in the third week of June to discuss how we can improve our trade mission, and also what to do about the barriers we have with Italy. So building more strategic partnerships first and meeting with them maybe helped, as well as the trade show.

On the trade show request, after a trade mission, we always have a follow-up with the people who go in, the exhibitors. For example, we know that following Latin America, 60% of the participants said they would make sales within the first six months, and they were doubling whatever they were expecting at the beginning. So we have numbers and we do evaluations.

We also do evaluations six months after, because sometimes in the spirit of the moment, they say something will happen. We follow up with them and see if there are any trade barriers or if they need any market intelligence in developing opportunities and strategies. We also offer tools and training if they fail at that time.

The Chairman: Thank you.

Mr. Murray, you have five minutes.

Mr. Ian Murray (Lanark—Carleton, Lib.): Thank you, Mr. Chairman.

Madam Boudrias, you mentioned discussions that are taking place on international food security. I was wondering if you could elaborate on that a bit. Do the WTO negotiations have an impact on this whole separate negotiation on food security? I'm looking at, for example, western countries looking to dump product on Third World countries. Is that a danger here? What kinds of regulations are being proposed to prevent that?

Mr. Mike Gifford: Developing-country exporters such as Argentina and Brazil have made the same point as developed-country exporters such as Canada and Australia. One of the distortions that creeps into the system when developed countries protect their agricultures, subsidize their exports, and restrict access is that when the subsidized exports hit the developing country's agriculture, they depress the prices received by the developing-country producer and knock him out of his own domestic market.

Sure, the developing country that's a net food importer gets food at cheap prices, because they're subsidized by some developed country, but it's certainly to the detriment of the primary producer in that developing country.

So certainly one of the issues in the next round is how to improve global food security. One of the ways you can do that is to recognize that if you expect importing countries to rely more on the international market for food security, for security of supply, then exporting countries cannot expect to get away with unilaterally imposing export bans and food embargoes—which has been done in the past—and using export taxes and export restrictions to meet various geopolitical considerations.

Therefore it's certainly one of the initial views of Canada, and a view shared by a number of other countries that are exporters, that in the next round, the exporting countries should be prepared to offer importing countries greater security of supply—in other words, for example, prohibitions on the use of export taxes and much greater disciplines on the use of export restrictions.

It's a short-term gain to import cheap food, but it's certainly to the detriment of developing-country producers.

Mr. Ian Murray: It's that old aid problem of giving a man a fish or teaching a man to fish. Is there any thought of perhaps allowing countries to earn credits for going into underdeveloped countries and helping them develop their own agriculture sectors? For example, if Canada were to send people abroad to help out, is there any way that could be worked into an agreement whereby we would earn some credit for doing that?

• 1020

Mr. Mike Gifford: We do that. The CIDA program has an extensive agricultural component, and certainly the international aid agencies over the last 40 or 50 years—

Mr. Ian Murray: Sorry to interrupt, but when I said “credit”, I didn't mean just a pat on the back; I meant actual credits.

Mr. Mike Gifford: In the aid efforts of all the developed countries, one of the important aspects has been to assist the developing countries' agricultural sectors to develop, because without a strong agriculture, you just don't have a strong economy, and that's been recognized.

Also, one of the benefits of liberalized trade is that it provides access for the exports of the developing country—not just the agricultural exports, but the textiles, the clothing. That's why they would rather trade than get aid, quite frankly. The ultimate objective of everybody's aid efforts is to assist these countries to be more self-sufficient and stand on their own feet.

Mr. Ian Murray: In her statement, Madame Boudrias mentioned some projections for increased sales abroad over the next number of years. How much does that increase depend on Canada being successful in the WTO negotiations?

Mr. Mike Gifford: The objectives or the goals of CAMC are set for 2005. The reality is that the WTO negotiations are unlikely to conclude much before 2002 or 2003, and they're going to take a year to be implemented in terms of introducing domestic implementing legislation. So as a practical matter, if we are going to achieve the goals CAMC has set, we're going to have to achieve them on the basis of the existing international framework.

Mr. Ian Murray: Okay, thanks very much.

The Chairman: Thanks, Mr. Murray.

Madame Alarie for five minutes, followed by Mrs. Ur.

[Translation]

Ms. Hélène Alarie: The major thrust of the Canadian industry's coherent position on export subsidies and market access is understandable. The problem I would like to raise concerns the support we should be providing for our companies to allow them to remain competitive. This support has been reduced considerably.

In addition, in our three priority markets—the United States, Japan and the European Union, and I don't know whether I mentioned them in order of size—we must continue to have stronger and stronger policies to support small business. I know that Japan is in the process of reviewing its policy, since it has no other choice because of the size of the farms and the age of the entrepreneurs. It has to provide very direct support. The European Union also provides very direct support and will continue to do so. It has said that officially. The United States is doing the same thing. How can we manage this issue?

[English]

Mr. Mike Gifford: The reality is that governments are always going to provide support to their rural sectors. The issue for the other countries is the level of support and the way that support is provided. Under the old-style programs, the farm programs that came out of the 1930s, the practical effect of these open-ended price support programs was to stimulate production and to require the use of non-tariff import barriers and the use of export subsidies to get rid of the ensuing surplus.

If governments wish to support the rural sectors, there are techniques and ways to do it that are less trade-distorting and trade-disrupting. That's the challenge facing North America and western Europe today.

There have been changes—for example, the move in Europe to reduce support prices for cereals and bring the support prices down closer to world levels. Admittedly they're getting direct income payments that aren't completely decoupled, but the bottom line is it's still better than the old system they replaced.

It's similar in the United States, with the FAIR Act. We produce from Saskatchewan very well, but the guy next door, across the line, is getting anywhere from five to 10 times more from his government than we are from the Canadian government. But the reality is that system is still a big improvement over the system it replaced.

So it's all incremental. Governments are progressively changing their farm programs.

What can good access do for the Canadian agrifood sector? Our exports to the United States have gone up by over 10% per year every year since the free trade agreement was negotiated. The United States now accounts for 60% of our total agrifood exports. It accounts for most of the growth in our exports of processed food products.

• 1025

In contrast, our exports to western Europe and our exports to Japan haven't shown that dynamic growth, in large part due to the restrictions at the border that these countries maintain. In the case of Japan, there are extremely high tariffs on some products—for example, close to 30% ad valorem tariffs on canola oil, for the sake of argument—and certainly in the case of Europe, virtually everything we export faces very high tariffs. So clearly one of the objectives in the next round is to get improved access to both the Japanese and the European market.

[Translation]

Ms. Hélène Alarie: We see in your paper, Mr. Graham, that Department of Agriculture employees should have excellent training. Is a certain percentage of your budget earmarked for employee training?

Mr. Andrew Graham: Our general objective is 4% of our operating budget. This percentage does not apply to each employee, but rather to all employees.

[English]

We're presently in the process of setting some priorities with respect to our training and development of staff. For example, most of the staff will be receiving training on diversity, working with people from diverse backgrounds. And we've just spent a lot of time getting people skilled up on computers, because of some of the changes we've made in our financial systems.

But in general, it will be 4%, and it will be higher in some cases, where the needs are. We have some very specialized training requirements.

The Chairman: Okay, thank you.

Mrs. Ur, you have five minutes.

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

As you have just stated, Mr. Gifford, the export market is going up several percentage points each year, but the long and the short of it is the farmers, the primary producers, aren't having the same success story. How can we change that? It's all well and good to have all these wonderful data on how much we're exporting, but the guy on the farm is not experiencing the same success.

Mr. Mike Gifford: Yes, Mr. Chairman, I know what Mrs. Ur is getting at. If you look at the aggregate farm income levels, they're relatively stagnant over the past decade, and yet at the same time our exports have increased quite substantially. One conclusion you could draw is that the benefits of expanded exports don't seem to be accruing to the primary farm sector.

A couple of research studies, one that's been completed and one that's under way, are going to try to get to this point. I know the Government of Alberta commissioned the George Morris Centre at the University of Guelph recently to do a study on the impact on the Canadian primary producer of freer trade. That study is currently out. Also, the policy branch of Agriculture Canada is in the process of doing a similar study.

One number I would point out, though, is that over the past decade, the net worth of the average Canadian farm family business has increased substantially. Even though in aggregate terms, the net farm incomes don't seem to have changed much, the net worth, the wealth, of the average Canadian primary producer has increased substantially. In other words, he owns more of the farm, and the bank owns less. That's the bottom line.

Mrs. Rose-Marie Ur: Yes, but it would be kind of nice to, like the rest of the people in the world, have a bigger cheque, not on the backs of our farmers.

We've had all kinds of meetings and consultations, and we're very proud to say we've been more successful this time than the last time around. With that in mind, when will the in-depth position be available to the people who have presented to the various groups or to the minister or in all these consultations, so that they actually know what our negotiators are going to be negotiating?

Mr. Mike Gifford: It's the intention that Canada's initial negotiating position will be announced before Minister Vanclief goes to the Cairns ministerial meeting at the end of August in Argentina. So it's hoped that sometime during the course of August, a clear statement of Canada's initial negotiating position will be available to all stakeholders.

• 1030

Mrs. Rose-Marie Ur: As Mr. Calder said, we were in Washington earlier, and when we met with the agriculture people down there, they wanted to have a tag-team effect with the EU as to subsidies.

You stated here that we have to eliminate subsidies. As you've heard a million times here when you've come to these meetings, what does Canada have left? We were the girl scouts and boy scouts of this. What do we have left to have any power over? Our pockets are empty.

Mr. Mike Gifford: Well, there's virtually zero in Australia, New Zealand, Argentina, and Brazil. We don't negotiate Canadian reductions in return for reductions in Europe and the United States. We've already reduced our support substantially from the levels of the mid-1980s. The Americans and the Europeans have not moved as far. The Aussies, New Zealanders, and Argentinians were never there to start with; they simply couldn't afford to support their rural sectors in the way North America and Europe support theirs.

We're of the view that a lot of the trade-distorting support in the United States.... For example, under their FAIR Act, their direct income payments are green, but these so-called loan deficiency payments are worth $4 billion a year to the corn and grain producers, and that is amber. So we want to see all the trade-distorting subsidies reduced as far as possible. And when it comes to export subsidies, we want the damn things eliminated once and for all, just as they were back in the mid-1950s for industrial products.

Mrs. Rose-Marie Ur: Do I have any time left?

The Chairman: Not really, but I seem to have been generous with everybody, so if you want another minute, take it.

Mrs. Rose-Marie Ur: Thank you, Mr. Chair. I will take you up on that.

I'd like to follow on Murray Calder's statement regarding the two-price system for dairy and chicken. You seem neutral on that; you don't seem too taken aback. Because of that, are you interpreting that as an attack on supply management down the road? Are you saying farmers opened the door? Is that why you're rather quiet on the two-price system? You're not so emphatically against it that you're saying, “Well, farmers, you did it to yourself”, are you? I don't want to hear this down the road.

Mr. Mike Gifford: No, not at all. There's nothing wrong with two-price systems. Industrial companies and firms do it all the time. They sell product for one price on the domestic market, they export to the United States at another price, and they export to Europe at yet another price. Differential pricing according to end use and market is something virtually all firms undertake.

There's absolutely no reason Canadian agriculture producers, whether they're in supply management or outside supply management, shouldn't price up to whatever tariff protection we have at the border in the domestic market, and export at whatever the world price is in various export markets. There's nothing wrong with that. Technically it constitutes dumping, but it's only a problem if the importing country complains and demonstrates that injury is occurring.

I have absolutely no problem with multiple price systems. The reality is that last time around, there was absolutely zero discussion in the negotiations on multiple pricing systems. This time around, in part because of the Canadian dairy export pricing panel, you can bet money there will be a very thorough discussion on how multiple pricing systems should operate. But I'm fully confident, for example, that a system such as the optional export program in operation in Alberta fully meets the preoccupations of that panel, because certainly they didn't attack it.

The Chairman: Thank you.

Analogous might be the television production industry. It's not unusual for Hollywood to produce a show costing $1 million a week and dump it on the Canadian market for well under $100,000, but nobody seems to complain. In a generic sense, it's dumping, but nobody complains. They're more than happy to get a television program for less than one-tenth of its original cost. Everybody's happy.

• 1035

We'll have a short question from Mr. McCormick and then finish with Mr. Hilstrom.

Mr. Paul Steckle (Huron—Bruce, Lib.): What about my question?

The Chairman: Oh, sorry. Your name is not on, but we'll go to you then, Mr. Steckle. I'm sorry. Go ahead, Paul.

Mr. Paul Steckle: Mr. Gifford, you were there in the Uruguay Round. Most of us around this table were not involved in that set of negotiations—a long period of negotiations. We've had ministerial meetings, we've had first ministers' meetings, and we've had many meetings in this room or in other rooms involving the same people. You've met with the farm groups. You've met with other industries, I'm sure. How do you feel going into this round, versus the Uruguay Round?

I realize we've talked about the various other issues on the table this time, rather than what was on the table before 1994. Are we as well prepared, or are we better prepared? Can you give us assurance this morning that we are better prepared going into this round? And perhaps you might want to elaborate on what areas we are better prepared in than we were in the Uruguay Round.

Mr. Mike Gifford: I guess I'm classified as an optimistic realist, as opposed to a cynic, when it comes to trade negotiations. I certainly think that at this point in time we're in a lot better position, nationally and internationally, as we head into the start of the next negotiations. This time last round, just before the Uruguay Round was starting, that was after almost 40 years of abysmal failure of the GATT to come to grips with the problems of agricultural trade. Round after round after round, agriculture was simply too politically sensitive and got pushed off to the sidelines. The situation got worse rather than better between 1948 and the mid-1980s.

The big difference between those earlier negotiations and the beginning of the Uruguay Round was the recognition for the first time that most of the trade problems that surround agricultural trade stem from the types of domestic agricultural policies countries choose to have. It was only when people recognized these linkages between domestic agricultural policies and the use of export subsidies and import barriers that we started to make progress.

I think it's fair to say there were an awful lot of cynical people the last time around. The export industry in Canada was very cynical that anything meaningful would come out of the Uruguay Round. And of course the supply management industry recognized that the old GATT did provide, ever since 1948, the opportunity to have import quotas in support of effective supply management. So we basically had a two-track position.

The supply management industry was always very well organized, very articulate, and got their views across. This time around, we've had nearly two and a half years of consultations with the supply management industry and the non-supply management industry, recognizing that they had to come together somehow, by hook or by crook, if the Canadian negotiators were going to be effective and have any chance of influencing the outcome.

The next round isn't going to be any different from the last, in that at the end of the day, there's going to be some kind of bilateral deal between the Europeans and the Americans. The challenge facing Canada today, as it was the last time around, is to get your ideas on the table early enough so that when the Americans and the Europeans do their bilateral, the basis upon which they do their bilateral is ideas that have been put on the table by us.

Therefore it's not particularly productive to keep your powder dry and not say anything for the first two and a half years of negotiation, because if you do, that's a recipe for having to take what other people have negotiated. So you really have to hit the ground running.

It seems to me—and certainly it was represented and reflected at the WTO consultation meeting in April—that we do have a strong converging sense. Sure, there are a few differences, particularly on the over-quota tariffs, but it seems to me we have the makings of a credible and strong Canadian position. I think it's going to be robust and sustainable.

Mr. Paul Steckle: My second question has to do with protectionism versus scientific evidence in terms of meat.

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If we use meat as an example—and we talked about it earlier today—we have to prove efficacy and we have to prove food safety. What is the acid test for us, particularly to the Europeans, as we attempt to resolve this issue as we go into the round? How can they justify it being one of those things, rather than protectionism? There has to be an acid test that determines that basically what you're trying to do is protect your interest, and it's not a case of efficacy or food safety.

We have the same thing with rBST in terms of allowing milk into Canada. We don't say to the Americans that we won't accept their milk. Yes, we have a limited quota of milk coming into Canada, but it could be milk produced from cows that have been treated with rBST. We don't say that, even though we don't use it here. We have it with Bt corn, and there are all kinds of incidents we can relate to. So what is the acid test on that particular issue?

The Chairman: A short answer is preferred, Mike. We're running out of time.

Mr. Mike Gifford: Okay.

Well, in the case of rBST, the decision not to use the product in Canada was taken on animal health grounds rather than human health grounds. Therefore we don't really have a basis to limit imports.

But in the case of Europe, the situation in beef hormones became extremely political from almost day one, and that was 10 years ago. Therefore it's very difficult for them to back away from the position for which they've gone out on such a big limb. That's the problem. Instead of taking the decision on science, it was made on the basis of political expediency, to be very blunt, and it's extremely difficult for them to move off that position as a consequence.

The Chairman: We'll have one question from Mr. Hilstrom, then a short one from Mr. McCormick, and that will be it.

Mr. Howard Hilstrom: Okay. As I said earlier, it's too bad we didn't have more time with you.

I need to have an answer to something. On page 26, you talk about co-operatives. This is very important to the agriculture sector across the country. You say the expected result is “federal policies and programs that facilitate the development of co-operatives”. I'd like to throw out an example to you, and you can tell me exactly what this means in relation to the example I'll give you.

Say wheat producers want to set up a co-operative to market their own wheat, but they can't do it, because the Wheat Board won't let them. How does this expected result come in, “federal policies and programs that facilitate the development of co-operatives”? Do we not have a situation where one part of government is wrecking the other part of government's plans? Could you comment on that, and on co-operatives generally? What do you think about them?

Mr. Mike Gifford: There is a co-operative secretariat in the department, but it's not part of MISB.

Certainly the co-op is a sort of organization that has proven very viable from the point of view of agriculture producers in North America, Europe, and Oceania. It's a form of collective action—individual producers facing a few buyers and deciding to act together. We've had a long history of co-ops in Canada. Some of the most dynamic businesses in this country are co-ops—for example, Saskatchewan Wheat Pool.

Mr. Howard Hilstrom: We're prevented from setting up new ones. That's the problem.

I'll give this to the Prime Minister's representative here. We're prevented from setting up new co-operatives that meet the needs of agriculture farmers in a given product area. Specifically—and we're going to be dealing with this in the committee—the durum producers of Canada have a select type of product they produce, i.e. durum wheat, which is good for pastas. They should somehow be able to set up their own co-operative to maximize their own returns.

I guess that's just a statement, Mr. Chairman. I'll pass along, unless Madame Boudrias wishes to comment.

Ms. Denise Boudrias: I would recommend that we transfer your question to the policy branch, because they are responsible for that question, and they may come back to you with the answer.

The Chairman: Mr. Hilstrom will have ample opportunity to vent himself on this issue. We're going to have two meetings over the next two weeks on this very issue of new-generation co-ops. So ultimately there will be a discussion.

Mr. McCormick, and then we'll finish up.

Mr. Larry McCormick: Thank you very much, Mr. Chair.

Following up on Ms. Ur's comments, I appreciate the fact that our minister has worked very hard, along with all you officials and people in the industry, to have our exports grow, and that will eventually help, and is helping, our producers. But, though our producers' income may be stagnant, very many surveys show the net income is down.

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With supply management, we can survive today. Even the beef is a little better. With pork there's some room for improvement; it could be a little better. But for the grain producers in the west, the commodity prices are lower than they were during the dirty thirties. If you ever have any ideas....

I know you want these people to survive so that they can benefit from your negotiations. I'm very concerned about that. Mr. Gifford, do you have any thoughts on anything we could do, besides AIDA?

Mr. Mike Gifford: The reality is that if we didn't export, the size of the Canadian agrifood sector would be considerably smaller than it is today. Traditionally the Canadian grain and oilseed sector has exported 70% to 80% of its production. But even in the red meat sector today, 50% of beef production and over 40% of pork production is being exported. In terms of processing, where you have job creation, 50¢ of every additional dollar of sales in food processing is coming from the export market, not the domestic market. So without a strong and vibrant export performance, Canadian agriculture would be in a far worse position than it is today.

That being said, I recognize that in terms of both cattle and hogs, which have had cyclical downturns over the last couple of years, and in the case of grains, we have a situation of too much supply and not enough demand. A lot of that supply is coming out of distorted programs in Europe and the United States. That's why we want to reduce them.

The Chairman: Thank you.

Madam Boudrias, in your opening remarks you devoted some time to export development, export promotion, market penetration, market expansion, and competitiveness. If I didn't know better, I'd confuse you with some sales manager addressing his sales group—you know, sell, sell, sell, sell.

Is your department comfortable with this new kind of culture that places so much emphasis on market development and expansion of markets? My guess is that some old civil servants working way back when would turn over in their graves if they heard the kind of language that is now employed. Are you comfortable as a department with this whole new perspective?

Ms. Denise Boudrias: Yes, we are, because if we look at the perspective as a whole, we find that one out of three jobs in Canada depends on exports. So being a small country, if we want to help a producer to produce more, we also have to build more on exports, and for sure we have to do more marketing. We have market development programs to help our new companies, our SMEs, to start exporting maybe to the United States. We are there to help our big companies to diversify markets. So we do believe. We don't have a problem in supporting and promoting Canada and the products abroad.

The Chairman: Thank you, and I wish you well in that regard.

Ms. Denise Boudrias: Thank you.

The Chairman: Members, we're going to just break for one minute to let our witnesses go, and then we'll do this one piece of housekeeping. So we adjourn for one minute.

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• 1050

The Chairman: Members, I'd ask you to take your seats. This shouldn't take long, I hope. We have to be out of here by 11 o'clock; there's another committee meeting right after this.

Members, I want to bring to your attention the proposed draft budget for a possible trip to Europe in the fall. I bring this to your attention now because I think we should get this into the mill now, since there is a possibility of prorogation, which would wipe out the budget. There will have to be a new request in the fall if there is prorogation, but we should alert the powers that be that the committee would like to go to Europe in connection with the WTO negotiations in the fall, and that we ask approval for a budget.

I'm sure you've seen the budget, as it was distributed at the beginning of today's meeting. It's predicated on sending six MPs and a staff of two, for a total of eight. The aggregate cost is $68,500. The number of MPs, set at six, is not written in stone. It was a rather arbitrary number chosen. If you think more should be sent, that's fine. It will cost an additional $7,500 for each additional member who might go.

If we sent all 16, as we did to Washington, it would cost an additional $7,500 per MP, for a total cost of $143,000. My guess is the Board of Internal Economy would find that a little rich and would scale it back. I know Mr. McCormick wants to say something on this. I see nothing wrong in asking for a larger budget, but don't be surprised if someone along the line—if not the liaison committee, then the Board of Internal Economy—scales back the budget. I say that because I sit on a budget committee of the liaison committee, and for all intents and purposes, even though the new fiscal year is only six weeks old, all the travel money is already spent. It's a crazy system, but the money is already spent.

One of the reasons all of the money is spent is that the finance department in the last two or three years has got into this habit of holding so-called pre-budget consultations, and that costs $600,000. We start off with a budget of only $2 million. We have over 20 committees in the House of Commons. The system is broken, and something is going to have to be done. We have to go ahead and apprise the powers that be that because of the WTO—and this is something that doesn't come up every year—this is something we should do.

Anyway, that's the budget. I know Larry wants to say something, and anybody else can, but we have to be out of here in five minutes.

Larry.

Mr. Larry McCormick: Mr. Chair, I'm hoping you and the clerk will tell us approximately how long it will take, after we make this submission, before we hear something back.

Mr. Chair, this is not an additional cost for whatever we suggest, 12 or 16 people. I wouldn't be happy, and I'd be willing to discuss this in a lot of places, including Main Street Canada, if we couldn't take at least 12 members. I'll tell you, I cross this country and do it on my own time often, and too much at my own expense.

As I said earlier, I don't think there's anything more important than the results of the WTO for rural Canada. So whoever we have to talk to, from the finance department up, with the throne speech coming up and all these things, which is not the budget....

This isn't a cost; this is an investment. Other people can make motions, but I recommend that we take a minimum of 12 members.

The Chairman: Murray, and then Mr. Hilstrom.

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Mr. Murray Calder: What I'm wondering, Mr. Chair, is instead of having this come out of the department for the airfare, why not use our MPs' travel points? Can we not rearrange it? You have $32,800 for airfare on economy right here. Personally, I don't come anywhere close to using up my 64 points. Why can't we organize that usage on the MPs' points instead, and then rearrange that $32,800 into other expenditures? That way we can take more members with us. Or are there any rules against that?

The Chairman: I just overheard Mr. Alcock say there is a prohibition. I don't know. I thought I once went overseas on Aeroplan points.

Mr. Reg Alcock (Winnipeg South, Lib.): Oh, I'm sorry, Aeroplan points. Yes, you can. I thought you meant your—

The Chairman: You're talking about Aeroplan? You certainly can't use—

Mr. Reg Alcock: No, he means the 64 points.

The Chairman: No, you can't use the MPs' points, Murray, but you could use Aeroplan.

Mr. Reg Alcock: You have extra in your 64 because you're close to Ottawa. Those who are further away don't. Those who are further away have Aeroplan points, and you don't. It works both ways.

The Chairman: I thought you were referring to Aeroplan. No, you can't use MPs' points.

Howard.

Mr. Howard Hilstrom: I don't dispute how important the trip is, and I've already indicated to the chairman that I agree the trip should be there. The question I'm concerned with is, just what size of delegation do we need to be effective and get our point across and to do the questioning?

I also travel across the country, and I know I can't go back to people and tell them we have extra people going along, for $22 for breakfast and this kind of thing. With six, the representation of each party is there, and that is the best I'd be able to go along with.

The Chairman: Mr. Murray.

Mr. Ian Murray: Thanks.

I feel it creates two classes of committee members if you have a smaller group going. I'm not talking about the travel aspect; I'm talking about the expertise one develops from sitting in on meetings like this. You're going to have a small group. A quarter of the people on this trip are staff, if you want to look at it: six plus two. You'll have the committee members; I'm guessing it would be two Liberals and one from each opposition party. That means parties represented by about 20 members in the House will have somebody.

I'm just saying you'll have the insiders and the outsiders sitting on the agriculture committee: those who have in-depth knowledge based on a week of talking to people at the WTO—as Larry says, probably the most important issue facing us over the next few years—and those who don't. If $600,000 is being spent on pre-budget consultations, the Department of Finance should find a way to pay for that and leave the money in the account for parliamentary committees.

The Chairman: That point is well taken, Mr. Murray.

The only way you can get around the concern you have about turning the committee into more than one class of member is to send all 16, because if we were to agree to Larry's suggestion of 12, that would mean four would be left out.

Madame Alarie.

[Translation]

Ms. Hélène Alarie: Mr. Chairman, I think that it's up to you to determine how many people will participate. However, if you have to choose certain MPs, I think that it's important to recognize that some of the people around the table have followed very closely all of this committee's work on the WTO negotiations. Consequently, the people involved seem almost naturally to fall into two categories. My assistant has never attended, so you can't count him, that's all. The situation is different from the case of those who have truly shown a great deal of interest. Furthermore, this trip is a logical follow-up to the trips we made to Washington. You will be the judge. I see no reason why all those who have shown an interest should not be there. If this means 12 people, there will be 12 people; if this means 15 people, there will be 15 people.

[English]

The Chairman: It's pretty hard to convince somebody that he didn't show interest. I don't know how you'd get around that.

Some hon. members: Attendance.

The Chairman: I don't think attendance is kept.

An hon. member: Yes, it is.

Mr. Howard Hilstrom: There aren't two categories of MPs here. What we have in a committee, any committee in this House of Commons, is the representation of five political parties. We each represent a political party, and that is the representation that needs to go over from any committee, as the basic.

Mr. Larry McCormick: I move that we ask for enough money to allow a minimum of 12 people to go. I look at six Liberals minimum, one NDP, one PC, two Bloc, and two Reform. That's my motion, if such a motion is in order, for a minimum.

The Chairman: Can I ask just one question, Mr. McCormick? If that motion were accepted, but if the chairman then found he couldn't get a request for that number through—in other words, they would support only six or eight—would you accept half a loaf as opposed to the full loaf?

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Mr. Larry McCormick: Mr. Chair, many times in my life I've survived on half a loaf.

The Chairman: Okay.

All in favour of the motion to ask for a budget in support of 12 MPs as opposed to six?

(Motion agreed to—See Minutes of Proceedings)

The Chairman: Okay. We will submit a budget in support of 12, but if I find at the committee meeting that it's a no-go—that they'll support only, say, six or eight—I think we're going to have to go along with that.

I'd like to have all 16.

Mrs. Ur.

Mrs. Rose-Marie Ur: We can perhaps look at one thing. I'm certainly not a globetrotter, so I don't know whether $325 a night accommodation is average in Europe.

The Chairman: I've asked. J.D., for example, has gone on many of these trips, and it's very normal. Europe is a very expensive place—very expensive.

We'll ask for 12. Don't be surprised if we don't get that many, but we can try.

Thank you. The meeting is adjourned.