AGRI Committee Meeting

STANDING COMMITTEE ON AGRICULTURE AND AGRI-FOOD

COMITÉ PERMANENT DE L'AGRICULTURE ET DE L'AGROALIMENTAIRE

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, April 11, 2000

• 0914

[English]

The Chair (Mr. John Harvard (Charleswood St. James—Assiniboia, Lib)): Members, let's bring our meeting to order.

This morning's meeting pertains to further consideration of the main estimates.

We have before us three witnesses from Agriculture and Agri-Food Canada: Brian Morrissey, who is the assistant deputy minister, research branch; Doug Hedley, senior executive director, policy branch; and Bernie Sonntag, the director general, Prairie Farm Rehabilitation Administration.

I understand that only Dr. Morrissey will be providing a short statement up front, a statement of two or three minutes, or something like that, and then we'll be able to get to questions.

Welcome to all three gentlemen.

Dr. Morrissey, you may begin.

• 0915

[Translation]

Mr. Brian Morrissey (Assistant Deputy Minister, Research Branch, Department of Agriculture and Agrifood): Thank you very much, Mr. Chairman. Honourable members, ladies and gentlemen,

[English]

it's a great pleasure to appear before this committee today.

My name is Brian Morrissey. I am the assistant deputy minister for the research branch at Agriculture and Agri-Food Canada, and co-principal for the department's “Innovating for a Sustainable Future” business line.

Ladies and gentlemen, I'm pleased to have with me today Doug Hedley, the senior executive director of our policy branch; and Bernie Sonntag, the co-principal with whom I share this business line, and director general of the Prairie Farm Rehabilitation Administration, or PFRA.

Increasingly, we're being asked to demonstrate the economic impacts of publicly funded agriculture and agrifood research on the nation. As a result, we've developed performance measures that describe the impacts of our R and D activities on Canada's economic growth, employment opportunities, and quality of life.

The department regularly conducts return-on-investment studies that demonstrate the cost-effectiveness of resources invested. ROI is an indicator of the value of federal agricultural research to the nation. ROI studies have been done on selected commodities, including wheat, potatoes, and hogs.

We'll very soon be releasing a study on the value of forage research. The ROI study on federal wheat research is a good example. Dr. Kurt Klein, of the University of Lethbridge, estimated that the net benefit to the Canadian economy each year from the money that Agriculture Canada invests in wheat research is $377 million. Last fiscal year, AAFC spent $270 million on all our R and D activities. One could argue that the benefits that accrue to the Canadian economy each year as a result of our wheat research alone justify all the R and D expenditures.

Another relevant observation from the wheat return-on-investment study, Mr. Chairman, is that 70% of all the wheat varieties grown on the prairies were developed by AAFC, including the well-known AC Barrie. We're currently working on breeding crops resistant to diseases such as fusarium head blight in cereals. The annual economic benefits of bringing fusarium head blight under control are estimated to be over $100 million.

The department also conducts market-driven research in partnership with taxpayers. Through our R and D partnerships and our matching investment program, our scientists are doing work that directly contributes to the sustainability and competitiveness of the sector at home and abroad, and that supports job creation. That the products and processes developed through this research are relevant to industry is assured, we believe, because in each case we're working with a partner. During the peak summer months, this program has helped raise the number of staff in our laboratories to double what it would be otherwise. For example, it has doubled the wheat research effort at the Winnipeg laboratory.

Not all our research has economic benefits that are evident and measurable in the short term, Chairman. There are long-term benefits from agriculture and agrifood research in terms of good stewardship of natural resources, protecting the environment, and indeed advancing knowledge. This knowledge itself may lead to more research that eventually gives us a new product or process that increases productivity, creates jobs and captures a market.

In conclusion, Chairman, I'd like to leave the committee with two messages. The first is that the outcomes of research are not usually predictable in advance. Knowledge gained is not always of immediate value, nor is it necessarily easy to quantify, and the path by which the results of research are transformed into products is not straightforward. However, over the long term, the ROI studies show a very significant net annual return to the Canadian economy that can be directly attributed to these research activities.

• 0920

The second message is that we're successfully transferring products, processes, and practices to the private sector through our partnership initiative. The feedback we've received from outside observers is that it's a useful force in Canada for getting the products of research out of the laboratory and into private hands.

[Translation]

Thank you, ladies and gentlemen.

[English]

The Chair: Thank you very much, Dr. Morrissey.

We'll now begin our questioning. Mr. Hilstrom, you have seven minutes.

Mr. Howard Hilstrom (Selkirk—Interlake, Canadian Alliance): Thank you, Mr. Chairman, and welcome again, gentlemen.

On the research into wheat, the R and D, can you tell us a little bit more about that? When that research is done, what percentage of it is financed by the federal government, by your departments?

On a given variety...were you involved in this research into the wheat that's going to be herbicide-tolerant, this resistant sort of thing, like canola that's expected to come on the market in the next four years? Was the federal government involved in that? I use the word GMO, but you use your terms.

Dr. Brian Morrissey: That's two questions, as I understand it. The first one is about the split of money between funding by the crown and by the private sector, and the second one is on wheat that has herbicide-resistant characteristics.

On the first one, our budget is about $270 million of crown money. Of that, about $25 million to $30 million goes into direct partnerships with people in the private sector, matched dollar for dollar with roughly $25 million to $30 million of private money. So a simple split would be about $270 million of crown money altogether invested, and of that, about $30 million going into partnerships, matched with $30 million of the private sector's money. That's the split of crown and private money.

On the second question, on herbicide-resistant wheat, we have a program in Winnipeg in partnership with a private company where we signed a contract about—I'm guessing—two to two and a half years ago to incorporate herbicide resistance into wheat.

Mr. Howard Hilstrom: I guess my question should be a little more specific—developing just one variety, one that has this herbicide-tolerant resistance. You said $30 million. Is that for all the R and D that's done? If we get down to this one wheat variety—say it has this unique characteristic—if it were dollar for dollar on that given variety, then we could expect the federal government to retain 50% of the patent protection on that. Otherwise, how much patent protection is there? Does the private company get it all, or does the federal government get part of it?

Secondly, what about access to that seed afterwards? We know that with canola now, producers sign production contracts by which they can't keep seed. So is there anything for the farmer in these varieties that are developed with at least part federal money so that they can get access to that seed without having to pay the licensing patent fees and that?

Dr. Brian Morrissey: There are two points to the answer: first, general principles around the signing of contracts, and then some specific comments about this particular contract.

Generally, going into signing contracts with private partners, it's a contractual process just like any two parties would have to a deal. The more money either party puts in or the earlier they come in, the more risk they take and the more rights they would sign on to. So it's a negotiated process; we don't dictate terms. If either party doesn't like the terms, they walk away from the table.

On the question of access to both the material and the intellectual property, generally the principle we use is that we would only invest in a piece of research that solved a Canadian problem. In other words, if it only solved a problem in some other country, we wouldn't invest.

• 0925

Generally, the material is made available to Canada and the distribution rights on it generally go to the private sector partner. If the private sector partner isn't in the distribution business, there would be a call for tender and they'd go out to somebody in Canada. The terms on the intellectual property again would be negotiated as part of the contract. In some cases we might agree that we would go through the patenting process and we would protect it. Quite often the company would insist that they go through the patenting process and they'd protect it.

Mr. Howard Hilstrom: Have there been internal audits on these contracts that are signed? If there have been internal audits, are those audits available to the general public? How would I get my hands on them if they were done?

Dr. Brian Morrissey: I'm speaking from memory, but to the best of my recall, there has been an internal audit done by our own internal review group. This is distinct from the Auditor General's—

Mr. Howard Hilstrom: Oh, yes. I'm talking internal.

Dr. Brian Morrissey: My memory tells me there has been an audit done by the internal audit people.

Mr. Howard Hilstrom: Has that been made public? That's maybe not a totally fair question.

Dr. Brian Morrissey: I'm not sure.

Mr. Howard Hilstrom: Are those internal audits made public as a general rule?

Dr. Bernie H. Sonntag (Director General, Prairie Farm Rehabilitation Administration, Department of Agriculture and Agri-Food): As general rule, yes.

Mr. Howard Hilstrom: As a general rule, they are. That helps keep transparency out there and keep accountability on it. It is an important issue, this whole issue of who controls the seed and what benefit accrues to the general public, the taxpayer, as a result of investment by the government.

I have a further question here. This would be maybe for Mr. Hedley.

The beef industry in Canada has had a program that was running, I believe, a million-dollar contribution from the federal government in regard to promoting beef exports. I understand that's coming to an end or it has come to an end. Is it intended that in fact that funding will be forthcoming for the program to continue? It sounds like it's very successful from what the Canadian Cattlemen and others have said.

Dr. Douglas D. Hedley (Senior Executive Director, Policy Branch, Department of Agriculture and Agri-Food): The industry development funds that were provided to the beef industry largely came from the windup of an earlier stabilization program, the NTSP. You're correct in saying those funds are running out. We're currently exploring whether there is the option of our continuing those. No decisions have been made on that.

Mr. Howard Hilstrom: Okay. It would certainly help meet Canada's goal of increasing exports. It has been successful. I just take it that you're working on it then.

Dr. Douglas Hedley: Yes.

The Chair: Thank you. I owe you about twenty seconds, Howard.

Madame Alarie, seven minutes.

[Translation]

Ms. Hélène Alarie (Louis-Hébert, BQ): Good morning, gentlemen. I made a comment when the Minister came before us and I'm going to make the same one again. Actually, I also made this comment last year and I imagine it will give the same results this year. I find that the budget presentation isn't easy for parliamentarians to examine.

On the one hand, the budget changes from year to year. How do you expect us to undertake a comparative study when we're not given the tables from the previous year? On the other hand, we don't have what I call, in my language, columns of figures. It's very hard to follow each one of the four sectors you identified from beginning to end. The obligations and cost recoveries follow the objectives you're looking for, by sector.

It is a nice presentation but it doesn't make the members' work any easier. Basically, the only meeting we've had is this one and we only have two or three brief hours to try to get to the bottom of things. In my opinion, that is not enough. I'd like it to be a little less on the pretty side but a bit more practical.

My first question is for Mr. Morrissey and it concerns biotechnology. I'd like to know how much has been earmarked for the development of products obtained from biotechnology. As a corollary, I'd like to know what percentage of its expenditures the department puts into the partnerships it has created in this area?

• 0930

Mr. Brian Morrissey: Thank you, Mr. Chairman. First of all, it would be useful to point out that, as you know, there are two main parts to biotechnology. There are the GMOs that all kinds of questions are being asked about and that consist in transfers between two species, tomatoes and potatoes, for example. There's the biotechnology where there's a transfer within the same species, for example from one variety of potato to another, where there seem to be fewer questions raised.

If you start off with biotechnology as a general tool, in other words the application of technology to biology through the tools that Crick and Watson gave us from 1945 to 1947, I could tell you—I can give you more specific figures by mail after—that we have...

Ms. Hélène Alarie: Yes, I'd appreciate that.

Mr. Brian Morrissey: ... about 100 of our total staff of about 2,200 indeterminates working on that. I think I heard that you also wanted to know how much money we're sharing with our partners in the private sector. Of our total 270-million-dollar budget, $30 million go to partnerships and a sub-amount of $30 million goes into biotechnology, which is about 10%. I'm giving you approximate numbers that represent a ballpark.

Ms. Hélène Alarie: You're saying you could give me more specific figures by mail or send them to the clerk of the committee.

Mr. Brian Morrissey: Yes, with pleasure.

Ms. Hélène Alarie: Thank you. The public has the perception that within the context of those partnerships, the government leaves it up to the partners to determine the orientations of biotechnology research. I'll follow your reasoning to properly understand the question I'm most interested in, GMOs. We get the impression that the departments, whether yours, or Health, Environment of Industry are being towed along by the major corporations. I'd like to hear you on that.

Mr. Brian Morrissey: When you negotiate a contract with the private sector, these are really contract negotiations between two parties that can leave the table whenever they want. One of our primordial principles is the public good. If the study has no bearing on the public good and is only interested in a private advantage, then we withdraw. Our definition of public good implies that the country needs that knowledge—take the example of a disease in a given crop—and that the private sector won't be able to provide a solution on its own.

I believe the allegation that the private sector is steering the ship and making the decisions is false. There are two parties to those negotiations. It often happens that we refuse a proposal because we think that it is a private matter. If we were to sign an agreement with Ms. So and So, then Mr. So and So could say there was unfair competition because we favoured one party over another. We try to commit to contracts where the situation will be fair from a competition point of view. If the proposal does not respect those conditions, then we leave the table.

Ms. Hélène Alarie: I follow what you're saying, but I have to make a few detours to put my question to you because I don't have specific figures on your budget. I'll try to stay in the GMO area because I want to get answers on that this morning.

You said that you consider the public good first. I must admit that this is a very broad definition, but in any case, you consider the public good. Almost all countries of the world, as well as the National Academy of Sciences, last week, said they see no problems, for the time being, with GMOs although they always caution us because we don't have data available on their long-term effects on health and the environment.

• 0935

I saw that part of your budget is earmarked for sustainable development. I suppose these are environmental questions directly linked to research because I don't find any heading that reads "environment". At the Agriculture department, what environmental concern is there with GMOs? What tests are being run to make sure that in the medium or long term we won't have any problems? Are there any kinds of tests being done and what does that represent?

[English]

The Chair: I just want to say, Madame Alarie, that you've already run out of time. I'll let Dr. Morrissey answer, but just try to tighten up your questions a little bit.

Dr. Morrissey.

[Translation]

Mr. Brian Morrissey: Thank you, Mr. Chairman. I must say that we're treading softly with GMOs. Two years ago, when we signed an agreement to develop GMO wheat, we decided to stay at the forefront of technology because everyone seemed to be going in that direction. We knew there were risks with perception and the possibility that the market might turn against GMOs, but, rightly or wrongly, we made that decision.

Quite recently, when we asked for advice on another durum wheat variety, we were advised not to got there. Both here and elsewhere, things seem to be proceeding more slowly with GMOs. However, for biotechnology kept within a same species, where there is no controversy, we are still forging ahead. To answer your question about the effects on the environment, I can tell you that we've undertaken studies at Lethbridge and Saskatoon on this matter.

[English]

The Chair: Thank you.

[Translation]

Mr. Brian Morrissey: Thank you, Madam.

[English]

The Chair: Just before I go to Mr. Murray, I have a question for you, Dr. Morrissey.

You've been mentioning the $272 million that will be spent on research projects. Regarding the projects where the partnership money will be spent—$30 million from the government and $30 million from the private sector—is there something peculiar about those projects that invite partnership money? Would you be happy as a department to have all $272 million matched by private sector funds to put the research over $500 million?

Dr. Brian Morrissey: I don't think we could match the $270 million because the matching is done at the margin. For example, the costs of the building, the heat, the light, are considered to be a fixed and sunk cost and are carried by the crown. If you came in as a partner, you would pay the marginal costs.

The intent of the minister of the day who brought this program in was to ensure that what was seen as black box science became relevant to taxpayers and that the technology was transferred. The real concern was that the work being done in the labs with the core budget be not just relevant to scientists but relevant to those who paid our bills. The minister felt that by insisting that I get a matching dollar before I could spend money out of this $30 million pool, the relevance to taxpayers would be guaranteed. Otherwise they wouldn't put a dollar up.

The second goal the minister had in mind was that he had heard we had research sitting on shelves collecting dust and he wanted to make sure the research got into the hands of those who had paid for it. He felt that by having partners put a dollar on the table, it would be guaranteed that the research would be transferred because it had been pre-purchased.

I don't think you could match the $270 million because a lot of the money that's coming in—in fact, all of it that's coming in—is on a competitive basis. For example, if you came in with a better offer than your neighbour sitting next to you, we'd take your offer first. What we've said is they must match at least 50%. Some people are coming in with 55% or 60%. We're charging what the market will bear. The indication is that the market wouldn't bear 100% of the cost. Otherwise they'd do it privately themselves and not waste their time with us.

The Chair: But if the private sector were breaking down your door with all kinds of research money, if instead of committing themselves to $30 million they'd be more than happy to spend $50 million or $100 million or $150 million, how far could you push that partnership envelope?

Dr. Brian Morrissey: That's a very good question. That's the question each deputy asks me. The answer up to about last year was that we didn't know. The curve of what was coming in the door was growing. We grew from about $500,000 a year to $28 million or $30 million last year. I frankly didn't know.

• 0940

Last year, with poor commodity prices, we only placed $28 million out of the $30 million we had. The agency has about $5 million. So it looks like, in a poor year, we could place about $28 million out of our $30 million. Our sense was that in good years—the years before that—we probably could have placed $35 million or $40 million. So my sense is that the ceiling, in terms of money coming in from the private sector, is probably between $30 million and $40 million. Just in terms of the four walls and how many people we can contain in them, we're probably close to the maximum now.

The point I should perhaps share with the committee is that we have dollars to pay about 2,200 employees, if they were all permanent. In July last year, when crops were at their peak, we had 4,600 people in the laboratory. So this program and other sorts of partnerships are almost doubling the number of staff in the labs. Physically we're starting to reach our limits. What will truly be the limits to growth will be permanent scientific staff inside. They can only manage so many people coming in on specific projects, or they start to spread themselves too thin and lose their credibility.

The Chair: Thank you for your patience, Mr. Murray. Seven minutes.

Mr. Ian Murray (Lanark—Carleton, Lib.): Thank you very much, Mr. Chairman. I believe I should address my questions to Dr. Hedley.

I want to talk about expanding markets. I notice the expenditure is $188.8 million, which represents just over 8% of gross departmental spending. I'd be interested in knowing what kind of return we get on that investment. How is that money spent and how do you measure the return on that investment?

Dr. Douglas Hedley: Mr. Murray, I believe you will have the opportunity to talk with the business line head in the next few days on expanding markets. I am here representing the business line “Strong Foundations for Agriculture and Rural Communities”. I don't have the answer to that question. It would be better posed to the other business line.

Mr. Ian Murray: That's fair enough. I thought the order of the day was to look at this part of the report as well. I'll save my questions then for the next day.

The Vice-Chair (Mr. Murray Calder (Dufferin—Peel—Wellington—Grey, Lib.): Okay. Mr. Proctor.

Mr. Rick Borotsik (Brandon—Souris, PC): He didn't get all his time, Mr. Chairman.

Mr. Dick Proctor (Palliser, NDP): No, he said he was going to come back.

I notice the objective for the business line includes strengthening opportunities for rural community development. When I speak with farmers in Saskatchewan, they are not only concerned about whether their farms or their neighbours' farms will survive; they're also increasingly concerned about whether their local communities can survive. I'm thinking of people who've spoken to me over the winter from places like Willow Bunch and Mossbank.

I'm interested in knowing some specifics. When you have this vision or objective of strengthening opportunities for rural community development, can you give me some examples of what we're talking about that would strengthen communities, like the ones I've mentioned?

Dr. Douglas Hedley: There are a number of ways we're doing that. First of all, you may recall that the federal government provided $20 million over four years to strengthen rural communities. That has many components.

First of all, we have now involved 28 departments and agencies within the federal government in looking very closely at how we coordinate all of our efforts for rural communities in Canada. That includes applying the rural lens to all proposals within the government, whether they be bank mergers, airline mergers, or agriculture and natural resource policies.

Secondly, we have an annual program that provides some funding to projects within rural and remote communities. For example, last year we had 68 projects worth $3.8 million. They were proposals from every region, province and territory of Canada. This year we will have about 71 projects worth about $3 million. They are community-centred, community-based, and community organized and operated proposals, to strengthen the ability of the community to survive.

• 0945

Third, this year we will be having the national rural conference at Magog-Orford in April. We will be bringing together again, for the second time, community leaders from rural and remote areas of Canada, to have a look at both what we have done as a federal government in strengthening communities, and what we ought to be doing in the future.

Mr. Dick Proctor: I think you mentioned sixty-odd specific programs. Can we get a list of those projects? Is there a list available?

Dr. Douglas Hedley: I believe so. I will have to ask, and if it's available we would certainly offer it to you.

Mr. Dick Proctor: Thank you.

During this committee's tour of the prairies last fall, I'm not sure the term “multi-functionality” was used, but there certainly was some talk among farmers about preservation of landscapes, environmental protection, etc. I know “multi-functionality” is a word we're hearing a lot from European agriculture, and I guess we're hearing it increasingly from the United States. Is there a Canadian model of multi-functionality in agriculture that you folks are concerned with?

Dr. Douglas Hedley: Multi-functionality has its origins in Europe. The European Union began to use the environment, particularly in rural areas, for rural tourism, preservation of habitat, and quite a number of things that would provide assistance directly to farms and farmers. That concept has become more widely spread today. Japan is now pursuing it as well, in addition to Europe. We've had a conference here, operated by the CFA, on multi-functionality, to look at it.

We have both positive and negative views on multi-functionality. Our great concern is that multi-functionality is another way of subsidizing agriculture outside of the current GATT rules, which would simply continue the very high subsidies in other countries that we're worried about. On the other hand, I think there are positive features to it, particularly in terms of the environment. We simply prefer to do those in more direct ways, as we are through say the HEMS project or in the climate change direction.

Mr. Dick Proctor: Thanks.

The Chair: Thanks, Mr. Proctor.

Mr. Borotsik, for five minutes.

Mr. Rick Borotsik: Thank you.

Mr. Morrissey, on research and development and the private partnerships that you've developed—and by the way, first of all, I congratulate you on getting $28 million, or $30 million, or $35 million—I've heard some concerns from the universities. Maybe you could help me with this. Is university-based research, which used to look to the private sector for help to offset some of the costs, being impacted by having the government and your own research stations and your own researchers going out to try to get private dollars? Are you finding the universities are coming back to you and are suggesting that they've been impacted negatively?

Dr. Brian Morrissey: My sense of it, Chairman, is that both we and the universities in the nineties avons perdu des plumes. We all lost budgets in the nineties. We got about a 20% cut, like all government departments, and while it varied for universities, I think it's fair to say they got very substantial cuts.

In my experience, what happened was that we called people at places like the University of Saskatchewan or the University of Guelph, and we'd say we were thinking of cutting program X. They'd say not to cut that because they were cutting that one, so we should cut something else. So we ended up being dependent on each other. In a given ecozone in Canada we have enough competence to serve the country, but we don't both have it, as might have been the case in the past. We do one thing and they do something else.

What that has meant is that if they get money through NSERC, which is the granting council federally for the universities, we have been specifically excluded from that. On the other hand, we get money from the matching investment program, from which they're excluded.

But if you dig a little deeper and look at how we're delivering in projects, if I go out to Rick Borotsik, the private sector person, and I sign an agreement to produce a new carrot weevil trap for the marshland south of Montreal for the carrot growers, there's a very good chance that I'm going to have to go in to the University of Montreal or the University of Laval—

Mr. Rick Borotsik: And use their facilities.

Dr. Brian Morrissey: —to subcontract a piece of it with them.

• 0950

Mr. Rick Borotsik: So are you working with the universities on that in partnership?

Dr. Brian Morrissey: Yes, very closely. We have no choice. They're doing the same thing with us in NSERC.

Mr. Rick Borotsik: And this is positive, as I said in my comments.

Dr. Brian Morrissey: I think it's positive, yes.

Mr. Rick Borotsik: Perfect.

Mr. Chairman, through you to Mr. Hedley, I'd like to ask about your policy. We talked about multi-functionality, and I didn't get a real confidence boost from your answer, quite frankly. We're supposed to be taking the blinders off, so to speak, and looking at where agriculture is going to be 10, 15, 20, or 25 years from now. Perhaps, Mr. Hedley, we should be looking more to the way multi-functionality is being defined in Europe and Japan. You say it's expanding.

I'd also like you to touch on the carbon credits, the carbon sink. You talked about environment being a major part of agriculture right now. Where is the policy for agriculture heading in the next 10 years with respect to carbon sinks and with respect to multi-functionality? I'd like you to be a little more specific on that. Are we simply saying we're not going to deal with that in Canadian agriculture and we're going to let the Europeans and the Japanese worry about multi-functionality?

Dr. Douglas Hedley: Let me start with the issue of multi-functionality.

As I said, our very great concern in the other countries is that this becomes a substitute for the direct subsidies they currently have, allowing them in turn to—

Mr. Rick Borotsik: If I can just interrupt there, do you not believe that in fact is a justification being used right now in Europe and Japan, that it is there currently?

Dr. Douglas Hedley: I quite agree with that, and it is growing.

Mr. Rick Borotsik: It is, and that's my point. Are we saying as Canadians we'll continue to let that grow, but we're not going to look at it positively from our side as well?

Dr. Douglas Hedley: There are two things. One, we have tended to approach those questions much more directly. Clearly in terms of manure management and the environment and through the CARD Fund, we've been able to address those issues quite directly, rather than direct subsidies to farmers to achieve a rural tourism objective or a habitat objective.

Mr. Rick Borotsik: You feel that's the proper way to go then, obviously.

Dr. Douglas Hedley: Yes, of course.

Mr. Rick Borotsik: What about the carbon sink?

Dr. Douglas Hedley: On carbon sinks, you may recall—

Mr. Rick Borotsik: Carbon credits. Let's deal with carbon credits with respect to the carbon sink.

Dr. Douglas Hedley: The federal government set up a series of round-tables, one of which was on agriculture and one of which was on carbon sinks themselves, over this past year. The reports from those tables should be in this month and next and available on the websites and for circulation. Out of that, we hope to get the development of an action plan on all of how we handle climate change.

Mr. Rick Borotsik: Do you believe farmers should be able to sell their carbon credits?

Dr. Douglas Hedley: On sinks specifically, we are just now approaching the available information that would allow Canada at the farm level to be able to operate a credit sinks program. Canada clearly is pushing for carbon sinks in agriculture within the Kyoto agreement. We pressed for that two years ago in Kyoto. We had it recognized as a sink, but not in the text. We clearly had agriculture recognized as a source of greenhouse gases.

We're working internationally in all the fora we possibly can to address that and get that in the Kyoto agreement. We have not achieved that yet. That takes a tremendous amount of work, and a lot of countries have to come onside for that.

Could we do it? I would defer to Brian in terms of the science to back that up, but my understanding is we are just now approaching the capability to have that as an operational system.

Mr. Rick Borotsik: I'll get back to you.

The Chair: That's all the time we have for this round.

Mrs. Ur.

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

I have to say your part III report on plans and priorities is rather well put together and easy to read, with your graphs and the way you have broken it down. I found it very interesting. But that's where my comments end on that.

I've gone through it fairly extensively, and I see little about cost recovery, when that's so much of the department's budget. There doesn't seem to be a great deal of effort put into cost-recovery explanations or allocations in this book.

• 0955

Dr. Douglas Hedley: Mr. Chairman, the vast share of cost recovery that takes place in the portfolio takes place in the Canadian Food Inspection Agency as well as in the Canadian Grain Commission. With respect to strong foundations, we have extremely little cost recovery. The only one I know of directly is the fees farmers pay for the NISA program.

I would let Brian respond to those for research.

Dr. Brian Morrissey: In research, we really have no cost recovery at all because cost recovery tends to be for a service rendered. Once our research gets to the stage where it's a repetitive service, we tend to try to place it in private hands where somebody can make a dollar out of it.

What we do have is the partnership program we mentioned earlier, which is a form of cost sharing. It's not cost recovery, which tends to be compulsory. If you want to run a meat plant, you have to pay money. In our case, you don't have to do research with us, so it's voluntary. It is fifty-fifty sharing at the margin.

Mrs. Rose-Marie Ur: Right.

On page 20 of that report, you state that $500 million will be injected to help farmers manage market and production risks. What are the details of that program? Will that try to help address the low commodity prices? Is that what you're looking to try to address? That still is a major concern no matter what province you live in.

Dr. Douglas Hedley: Can you give me that reference?

Mrs. Rose-Marie Ur: It's page 20, “Policy Framework—Income & Risk Stabilization”, part one. It's the second heading, “2000-2001”.

Dr. Douglas Hedley: Yes. The $500 million referred to there in the two years, 2000 and 2001, is the amount of money announced by the minister on January 14 for the AIDA successor program. This is for the income disaster program in each of those two years. He has subsequently announced that he would be seeking a third year of $500 million for the income disaster program.

Mrs. Rose-Marie Ur: Is the department working in any capacity to try to address exactly what is the real cause of the low commodity prices? Is there anything you can do within your department to address that?

Dr. Douglas Hedley: We've looked at the sources of that. We do the income forecasts twice per year. That work is done in conjunction with others, both abroad in OECD as well as in terms of capability in the United States and elsewhere.

The basic reason for the low prices in the grain sector is that we are just coming into the fifth crop year, which we think is going to be a bumper year in the world. This is unprecedented since the Second World War. We've have never had more than three. Last year was the fourth. The southern hemisphere crop is coming off in excellent shape, and as a result, we don't expect those prices to strengthen in the near future.

It is unfortunate for farmers. It is fortunate for those in the world who don't have much to eat. It is both a blessing and a plague around the world. We don't anticipate much change in those supply and demand balances over the course of the year.

Mrs. Rose-Marie Ur: Another factor in this is that under the business line, it said AFC is the best performing organization in the country. Performing in what terms, compared to what?

The Chair: Final comment, Mrs. Ur.

Dr. Douglas Hedley: A goal we have set for ourselves as a department is to be the best performing part of government. You will see the performance measures on the bottom of each of the pages. As you go through, we will be measuring all of those as well as benchmarking ourselves against other departments of government.

The Chair: Thank you.

Mr. Casson.

Mr. Rick Casson (Lethbridge, Canadian Alliance): Thank you, Mr. Chairman.

Gentlemen, I'd like to welcome you, particularly you, Mr. Sonntag.

Mr. Chairman, when Mr. Sonntag was in southern Alberta we used to curl against each other on most weekends and I remember getting some severe beatings from him in the past. I'd like to get a question in to him.

Mr. Joe McGuire (Egmont, Lib.): He was waiting for this.

Dr. Bernie Sonntag: He's still off the broom.

• 1000

Mr. Rick Casson: He used throw his out-turn a little wide.

Mr. Morrissey, I see that money is in the estimates for the expansion of the research facility in Lethbridge. We're certainly looking forward to that. I think I saw an article in the paper indicating that it was ready to go to the tender process.

That facility does a tremendous amount of good work. Southern Alberta has intensive livestock and a wide variety of crops because of irrigation and the climate, and they are a big contributor to the stability of the agriculture industry in our area.

As well, the University of Lethbridge does a lot of research, and I was interested to hear your comments about how the funding goes.

I'd like to direct a question to you, Mr. Sonntag, if I may. The Endangered Species Protection Act is reportedly going to be tabled right now in the House. I'd like to ask if you have had input into that as to how it will affect some of the holdings of the PFRA and how it will affect operations with regard to lands owned by the federal government. I'd like to know just what involvement you or Mr. Morrissey have had in terms of input into that bill.

Dr. Bernie Sonntag: We've been direct participants, with the environment bureau of our department, in the discussions with Environment Canada on the various aspects of the Species at Risk Act. Some of the provisions of the act—and I understand it is to be tabled today—regarding stewardship and compensation are I think a product of some of the activities we and others in the department have had in discussions of this with Environment Canada.

Mr. Rick Casson: Do you feel it was a pretty thorough process you were involved in, with lots of opportunity for input?

Dr. Bernie Sonntag: Yes, we think we've been heard. Of course, the community pastures program is the one likely to be affected by any consequences of the Endangered Species Protection Act and the recovery programs around endangered species.

I guess it would be fair to say that some of the endangered species are still with us because of the community pastures program. Those are federally managed lands, and as a result they will be affected directly by whatever recovery plans may be developed for specific species.

Mr. Rick Casson: I was given the sage grouse the other day as the animal to protect. It's one that runs around on some of the land that's owned in southern Alberta—

Dr. Bernie Sonntag: Right—by him.

Mr. Rick Casson: —by the research station.

I just want to let you know that Stephen Morgan Jones and Peter Burnett at the research station in Lethbridge are always making themselves available to me when I have a problem or need to have a discussion with them. I appreciate that very much.

One of the comments from Madam Ur was with regard to the cost recovery aspect. We all know that we have service charges, and we'll ask that question of the people who put them up, but what research is being done into the input costs farmers incur and into how to help the agricultural community reduce their input costs, whether it's chemicals or pesticides or irrigation or seed? Is there work being done in that area to help lower the overall operating costs for the average farmer?

Dr. Brian Morrissey: Yes, there is. When we enter into a research project that we 100% fund or a research project that we co-fund in partnership, we ask ourselves, first of all, is it the role of the state or is it the role of the private sector? Having got past that hurdle, one of the questions we ask ourselves is, what benefit does it give this country? We look at that under the four Ps—price, product, place, and promotion.

First, does it do something to reduce the price at which a farmer can put something in the marketplace? For example, if we can produce cereals that are resistant to fusarium head blight, we could reduce the cost by $100 million. So that would be looking at price.

With regard to product, you may have seen wheat lines, for example, registered under serial numbers—they don't yet have a name—at the recent registration exercise in western Canada. One has been registered as a hard white, and we're targeting the Chinese market for noodles out there. So what you get there is product. It's a product that's different and better from any other product that's on this country's market and can help us go in and compete against the Australians and China for the white noodle market.

Place is used in a twofold way. One, does it leave the place in which we produce these animals or these crops in better environmental shape than we found it? The other way we look at place is whether, for example, Morgan Jones, when he was working at Lacombe, could ship pork from this country into Asia not frozen—anybody can do that—but fresh, with six weeks' shelf life. So it's getting it from the place it's produced to the place it's consumed at a price and quality that beats the competition.

• 1005

Finally, promotion for us means technology transfer. For example, does this piece of research or this contract do something in a way that gets the technology off the bench and into the hands of people who can use it in a better way?

If it doesn't meet one of those four Ps, it doesn't get done.

Mr. Rick Casson: Thank you.

The Chair: Mr. Casson, did you say you were matched up with a grouse?

Mr. Rick Casson: Yes. What did you get?

The Chair: I was matched up with a bat.

Voices: Oh, oh!

The Chair: Judging by the long list of members who want to ask questions, we're going to have to go like a bat out of hell to get through this list this morning.

Mr. Calder.

Mr. Murray Calder (Dufferin—Peel—Wellington—Grey, Lib.): We definitely wouldn't want to say our chairman is batty, but....

Voices: Oh, oh!

The Chair: Don't, or I'll raise your rent.

Mr. Murray Calder: Okay. I take that back.

I'm looking at page 10 of part III, Report on Plans and Priorities. You have a pie chart there that basically shows the expenditure profile for 2000-01. Out of that, operating expenditures make up about one-third of the total part of that pie.

Now, I'm kind of curious here. In the whole thing, which I've been going through here, not very much is said about cost recovery, and yet, quite frankly, out in the rural community it is a big, big issue. You hear it from anyone from potato farmers out in the eastern part of the country to grain farmers to fruit farmers, and right across, that they perceive it as being a tax.

I'm wondering why there isn't more said about it that we can take away and find out exactly what revenues are coming in through cost recovery.

Within this, you've said that you're going to put together what you refer to as a “rural lens”, and from that you can find out what's going on.

First, how does the budget permit systematic study of the impact on rural communities of cost recovery, for instance, right off the bat? The department must have some type of strategy of measuring this impact and/or progress.

From that, I guess, how will you be showing how the billing is recovered for these services?

You've also said that through this rural lens you're going to be looking at how the department itself is performing. What criteria are you going to be using for departmental performance, and who does that evaluation? Is it going to be somebody who's at arm's length from the department or is the department going to be evaluating itself?

Dr. Douglas Hedley: Thank you, Mr. Calder.

First of all, the vast share of cost recovery in the portfolio lies outside the department. The only cost recovery we have inside the department of any significance lies in PFRA, with respect to community pastures.

The other two large areas lie within the Canadian Food Inspection Agency and the Canadian Grain Commission. When the minister was here, I believe last week, his comment was that we have frozen cost recovery fees now for a number of years. He is extending that for another year.

So I don't think the increase in fees is the issue. The issue is the level of fees.

In terms of who does the evaluations, clearly both the Canadian Grain Commission and the CFIA will be doing continuing internal reviews of the impact of that on their industries.

You may recall that the department, through the “strong foundation” business line, did a study of cost recovery and its impact on the industry, I believe two years ago. That is available to everyone. It is on our website. That was cost recovery as it affected agriculture generally, not just from our portfolio. It included, for example, the impact of cost recovery through Navigation Canada, NAV CAN.

• 1010

The evaluations of it are done initially through our review and evaluation branch, as well as through the policy branch, with the analytical capability we have there. I believe the Auditor General has as well looked at the impact of cost recovery by sector.

The Chair: We'll have to leave it there. Thanks.

Madam Alarie.

[Translation]

Ms. Hélène Alarie: I'm afraid I don't have enough time to put my two questions. My first has to do with the third world. There's a lot of talk about inequality in the world as far as food distribution is concerned. I get the impression that it's not a matter of production at all, but that it is in fact a problem of distribution.

When we meet World Bank representatives, they tell us that Canada isn't pulling its weight. Internationally speaking, we're under 1% of GDP. I don't know if we've set an average objective of 2.3%. What is the Department of Agriculture doing in co-operation with CIDA on that? Why aren't we promoting our products? We have a rural focus, why couldn't we have a new third world focus? We have overproduction all over the place including overproduction of grain. What are you doing to develop that area? Are you doing anything?

[English]

Dr. Douglas Hedley: First of all, I agree with your concern, Madame Alarie, with respect to the inequality of food in the world. Every day 800 million people go to bed hungry, when they have a bed. However, the concern for Canada's work abroad in the Third World lies with the mandate of CIDA, the Canadian International Development Agency, or ACDI, and as a result, we do not have a direct mandate overseas. Agriculture and Agri-Food Canada is involved in projects with CIDA overseas in a number of ways, through research, through the PFRA, as well as through the policy branch in the Caribbean, but those are directed primarily and led by CIDA—not exclusively, but that is where the mandate lies in the government.

[Translation]

Ms. Hélène Alarie: Fine. Basically, I hope that we can be more proactive. That would make us all happy.

My second question concerns small farms. Multifunctionality was mentioned before but I have a lot of questions about small farms. The US Department of Agriculture published a study titled A Time to Act where the small farm is defined, its relative importance in society is described and where measures that might have to be taken to support it are raised. We have no such equivalent study here nor policy focussing directly on small agricultural enterprises. In any case, I don't know of any. I'd appreciate your enlightening me on that also.

[English]

Dr. Douglas Hedley: One of the great difficulties is identifying what is a small farm. One can have a farm with a very small acreage and a very high gross income if one's farm lies, for example, in the Niagara Peninsula or some parts of the Montreal plains or southern British Columbia. You can also have a farm with a small area in the hog industry, where you have simply hog barns, and all inputs are purchased.

If you're referring to small as low gross income, that can happen on both extensive acreages as well as small-area acreages on farms.

The rule we use is that 20% of our agricultural product comes from 80% of our farms. Similarly, 80% of our product comes from 20% of our farms. All of those farms are valuable and unique in Canada in terms of the product they produce. Many of the small farms are multiple-job-holding farms, according to both the lifestyle and the desire of the operator, and I don't expect those to disappear. For example, cow-calf operations in some parts of Ontario and some parts of the west operate very well as relatively small farms in a multiple-job-holding system.

• 1015

The Chair: We'll leave it there. Thank you very much.

Mr. Knutson.

Mr. Gar Knutson (Elgin—Middlesex—London, Lib.): How much time do I have?

The Chair: You have five minutes.

Mr. Gar Knutson: Thanks very much.

Mr. Morrissey, I have two questions. The first is a general one. The government has announced increases in research, such as the 2,000 university chairs. Can you tell me how that's impacting on your budget?

Dr. Brian Morrissey: It hasn't impacted on the budget at all yet. It's impacted on me psychologically. I'm green with envy. I'd love to have a share in all of them.

I think it will have an impact in the future. I think 2,000 chairs for a country of this size is a huge infusion. The concept of a chair is that you go for the best of kind. You go for really top people. I think you'll hear a huge sucking sound not only from within this country but from around the world. You'll see some of the best people in the world. This is a great thing, being drawn into the chair.

From a purely parochial point of view, I think we may lose some of our best people to the chairs. I don't feel particularly badly about that in the sense that they'll remain in Canada and still work for this country.

Mr. Gar Knutson: So you see agriculture getting its fair share of those 2,000 chairs?

Dr. Brian Morrissey: We won't get any of them within the government research units. Will the agriculture universities get them? My sense is that they will. We have some quite competitive, strong agriculture universities in this country.

Mr. Gar Knutson: My second question is a more parochial concern in terms of my own riding. Tobacco is a major crop in southwestern Ontario, particularly in Elgin County. They're concerned about the future of the Delhi research station. I just wondered if you could update me on what the plans are for that.

Dr. Brian Morrissey: Delhi is an outside farm of the London research centre. Both that and Vineland report into London. We have just rebuilt Delhi. If you visit Delhi, the buildings are completely new. So we don't intend to leave Delhi. In fact we couldn't leave Delhi, because it's the outside farm where we do scale-up work for London.

In terms of the future of tobacco research, I think it's fair to say that we did research in about four or five stations across the country a number of years ago. That's now been scaled back over time so that Delhi is about the only place—in fact it is the only place—where we're doing any work.

Most of the work at present is funded by the tobacco industry itself. Insofar as it's done on our property, it tends to be work that's not related to tobacco per se but is related to the agronomics of a crop being rotated with other crops. So we're looking primarily at things like rotations, disease buildup, and so on. Our sense is that the industry, which really is a well-funded industry, will take over its own responsibilities increasingly over time.

Mr. Gar Knutson: If they want to continue working in partnership with the Delhi research station, does that present some difficulty for you?

Dr. Brian Morrissey: What we would prefer to see is that the tobacco industry, over time, move onto their own land and do their own funded research. We would limit ourselves in the London research centre to looking at tobacco only insofar as it's a rotation crop or a disease concern with other crops.

Mr. Gar Knutson: And over time means what?

Dr. Brian Morrissey: Over time means that this year we would continue studies we've had underway in the past with the tobacco community, but they would be on a case-by-case basis and we wouldn't undertake new projects.

Mr. Gar Knutson: You wouldn't undertake new projects for next year?

Dr. Brian Morrissey: We wouldn't undertake new projects, period. We would continue the projects, such as variety testing, that we had underway in the past, but we wouldn't get involved in new projects because our hope is to phase out and make that industry self-sufficient.

The Chair: You have one minute if you want it.

Mr. Gar Knutson: Is there any room to negotiate the phase-out, the time period?

Dr. Brian Morrissey: Yes, there is. As I said, we're willing to negotiate on a case-by-case basis. Those projects we have underway we've already negotiated and we've agreed to carry them on to conclusion. On new projects we're prepared to negotiate, but our preference would be to phase down.

Mr. Gar Knutson: Are you the key person there?

Dr. Brian Morrissey: Yvon Martel is the key person.

Mr. Gar Knutson: Does he work for you?

Dr. Brian Morrissey: Yes, he does.

Mr. Rick Borotsik: What's the number?

Voices: Oh, oh!

Mr. Gar Knutson: I said it was a parochial interest.

Thanks very much.

• 1020

The Chair: Thank you.

Dr. Morrissey, just on the question of the university chairs, you were suggesting that might cause some kind of giant sucking sound. I guess that would be okay if the sucking sound meant sucking students from say the United States to our universities.

I think one of the concerns we have as parliamentarians is that this sucking sound may have more to do with transferring students from smaller universities in Canada to the larger ones. In other words, the University of Toronto or McGill—this may not apply directly to agriculture, but it could—drawing away the students who are much needed by some smaller institutions elsewhere in the country.

I don't know whether you want to comment on that, but that's all I wanted to say on it.

Dr. Brian Morrissey: I'm really not in a position to comment, because I don't think it's generally known how the chairs will be carved up in this country. But the bottom message that I take is that there will be 2,000 top jobs for top people available, which means that somewhere, those 2,000 people will be in this country and not in another country. And while they'll move across the country, it will keep people here and bring people to this country. But as for moving between universities, I don't know.

The Chair: Thank you.

Proctor, followed by McGuire, Borotsik, Ur, and Hilstrom.

Mr. Dick Proctor: Thanks.

Gentlemen, on co-ops, I notice your total budget on this business line, as I read it, is around $1.7 billion, and you have a whopping $993,000 for co-ops. It strikes me as a very paltry amount of money, especially from the part of the country that I now call home, in terms of the influence of the co-op movement over many decades.

I'm looking, I guess, for a reaction. I wonder if this number has gone up or down in recent years. What can you tell us about co-ops?

Dr. Douglas Hedley: Mr. Proctor, you may recall the origins of the co-op secretariat. It was created around 1988 as a secretariat for all of government, not just Agriculture and Agri-food Canada. It works across all departments in the development and promotion of cooperatives.

You may also recall that the legislation lies within Industry Canada and that we have recently upgraded and expanded that legislation considerably to allow for the newer generation cooperatives, if you wish.

We've been talking with the cooperative sector now for at least a year since that legislation came in, first, to get the regulations behind it, which we've now accomplished; and second, to look at how we promote cooperatives as a viable business form, so it is preferred to other business forms like partnerships or corporations. We're working with them now on how we might do that and strengthen it. There are proposals for money on the table, but certainly no commitments at this time.

Mr. Dick Proctor: It was mentioned at the outset that you do have a partnership, obviously, with industry, and the figure was $28 million to $30 million, maybe growing a bit bigger. Do you envisage that there will be these partnerships with co-ops—perhaps certainly not starting out to approach that level, but at least something in the way of partnership?

Dr. Douglas Hedley: I see a great deal of commitment in terms of trying to strengthen and build on Canada's cooperative record. Agriculture is renowned for it, both in western and eastern Canada. But it also must serve.... Please recognize the cooperatives in the financial sector as well, the credit unions.

Where we go on this, I am not certain. I won't forecast where ministers may come out on it, but we are actively engaged in looking at how we develop that considerably further than where it is.

The Chair: Thanks, Mr. Proctor.

Mr. McGuire.

Mr. Joe McGuire: Thank you, Mr. Chairman.

I would like to ask a question of Mr. Sonntag in regard to water conservation. One of the few complaints about the AIDA program came from the Annapolis Valley, where recently they had very small incomes due to drought situations, and they couldn't really qualify—

Mr. Rick Borotsik: One of the few complaints.

Mr. Joe McGuire: —to trigger an AIDA payment.

• 1025

At the time there was some discussion that we would be drawing on the expertise of the PFRA to transfer some of the knowledge in water conservation you've built up over the decades to the Peace River, I suppose, but to Annapolis Valley in particular. Has anything been done there that you're aware of? Parts of Ontario are in the same situation. They've suffered drought-like conditions, and they really don't have the expertise your organization has. Has that been expanded to Nova Scotia or Ontario?

Dr. Bernie Sonntag: The short answer to that is no.

A longer answer is that our minister has indicated a desire to provide the expertise of PFRA to other parts of the country. At this moment no budget allocation has been made to that. There have been discussions between our deputy and the provincial deputies in a number of provinces to explore that possibility, and Nova Scotia is one of them. If and when this proceeds, it would be delivered in the form of pilot projects in consultation with provinces and producer organizations. At the moment there is no budget allocation to this, as I said. If one were to become available, then we would respond to that immediately and get into discussions and consultations on particular projects in the provinces where this program would be offered.

Mr. Joe McGuire: Could that be dealt with under CARD? Maybe the knowledge is already there.

Dr. Bernie Sonntag: I'll let Doug respond to that, because the CARD program is managed in the policy branch.

Dr. Douglas Hedley: There certainly is consideration of it. It is one source of money the minister is looking at in terms of trying to extend the human resource capability that lies in PFRA to the rest of Canada. No decisions have been made at the present time.

Mr. Joe McGuire: Dr. Sonntag, what is the situation in southwestern Manitoba and southeastern Saskatchewan, where they had the water problems last year? What are the land conditions there now?

Dr. Bernie Sonntag: There's probably still some water from last year in some sluices. There were high levels of rainfall in the spring in southwestern Manitoba and southeastern Saskatchewan. At the end of June it quit raining. In some cases there was a drought in the same year in which there was a flood. There has been very little precipitation in that whole area since then. The moisture situation in that area is actually quite low for the spring, even though there is water in sluices from last year's flood.

Mr. Joe McGuire: I see. Is it three million acres that have been affected?

Dr. Bernie Sonntag: It's two million to three million.

Mr. Joe McGuire: What does the future hold for the farmers who own those two million acres?

Dr. Bernie Sonntag: I presume that they will be seeded this spring, as they are in most springs, with a mix of crops. I would suspect that over time there would be a conversion of that particular area to more forage crops and livestock production than grain production.

The Chair: Just on the issue of PFRA, Mr. Sonntag, PFRA has a very good reputation on the prairies. It is seen as an organization that does a lot of good work. What is the current funding of PFRA, and how does it compare with the funding of the recent past?

Dr. Bernie Sonntag: PFRA incurred the same budget hit, if you like, in program review as other parts of the department, in the order of 20% to 25%. That's on the core-funded or A-based side of the PFRA budget. On the program side of the budget, we were the delivery agency for a number of programs funded through this department and others, and they have all been terminated now. So we are now limited pretty much to our core budget, which is in the order of $50 million.

The Chair: Has it recovered at all from the program review of a few years ago?

Dr. Bernie Sonntag: No.

The Chair: So it was more than $50 million at one time.

Dr. Bernie Sonntag: Yes.

The Chair: How much higher?

• 1030

Dr. Bernie Sonntag: Well, 20% higher.

The Chair: It was 20% higher. Do you foresee it getting back to its original level, if I can put it that way?

Dr. Bernie Sonntag: I can't answer that.

The Chair: Well, let's hope so, because it really does have a good reputation and it does a lot of work, and there's a great need out in the prairies for the kind of work that PFRA does.

Thank you.

Now we go to Mr. Borotsik.

Mr. Rick Borotsik: Thank you.

Mr. Sonntag, I'd hate to suggest that perhaps you don't have your finger on the real pulse out there.

But I have been talking to people over the weekend, Mr. McGuire.

We had about ten centimetres of snow just over the weekend. We had about two inches of rain in an area that was really affected—the Moline area—about a week and a half ago. Some of my producers down there suggest that depending on how the weather patterns unfold over the next three to four weeks, they may well be affected by some moisture levels currently. So we'll keep our fingers crossed, Bernie, and I certainly will keep in touch with you over the next little while to make sure that we do get that crop in this spring.

That's a good segue, however, to Mr. Hedley, with respect to natural disasters, not to be confused with the AIDA disaster program for commodity prices. I'm talking specifically about natural disasters.

Mr. Hedley, as the policy wonk for agriculture, do you believe that there should be a specific natural disaster program—not unlike DFAA right now, for other disaster assistance—put into place for agriculture? We have many examples of agriculture being affected by natural disasters, whether that be ice, substantial moisture, droughts, or tornados—there are a lot of natural disasters. Should we be looking at a far-reaching natural disaster program funded by the federal government in conjunction with provinces?

Dr. Douglas Hedley: First of all, Mr. Borotsik, what I believe is really irrelevant.

Mr. Rick Borotsik: It's not! You're “policy”, Mr. Hedley. I have a lot of faith in you. I expect you to put forward this wonderful vision of agriculture. As part of that, should there be a natural disaster program?

Dr. Douglas Hedley: First of all, let me try to paint the picture we have out there. Number one, we have the DFAA, the disaster financial assistance arrangements, which provide for natural disasters like the ice storm, like the Red River flood, like the—

Mr. Rick Borotsik: Mr. Hedley, I'd like to jump in here. That's infrastructure and we recognize that.

Dr. Douglas Hedley: Exactly.

Mr. Rick Borotsik: I'm talking about agriculture, about land as being identified as infrastructure. Should we be involved as a government and should you be involved as a bureaucrat in putting that forward?

Dr. Douglas Hedley: Let me continue—

Mr. Rick Borotsik: Okay. Please.

Dr. Douglas Hedley: —to paint the picture just a little bit.

Under the DFAA, the primary role there is to restore the infrastructure that existed prior to the natural calamity. Over on the agriculture side, what we have is an income disaster program to deal as well to the income side of what is happening when you have a natural disaster like a drought or a flood.

I admit that we have looked at those two programs and that we need to try to assure that they fit better together. As you know, some people believe there is a gap between those two at present. We continue to talk with our colleagues in National Defence, where the DFAA is domiciled, to look at how we can close that gap so that we do have coverage of both the asset side and the income side.

Mr. Rick Borotsik: Thank you, Mr. Hedley. I think your answer is yes, you're working, and you recognize that there is a gap, that some issues fall through the cracks, and that you would be prepared to look at those issues in a more comprehensive disaster program—at least that's how I took that.

In saying that, you're also involved in the long-term, albeit now somewhat short-term, assistance programs like AIDA, which is going to be extended—or some program is going to be extended—in 2000-01. First of all, Mr. Hedley, the $500 million that was originally announced in the estimates is now $435 million. Did you have any input as to a reduction from $500 million to $435 million? Do you have any input as to how the $435 million is best distributed, if you will, for commodities disasters right now?

The Chair: You have 40 seconds.

Dr. Douglas Hedley: Number one: yes, I was involved. The minister led the negotiations with the provinces and we certainly supported him in that.

As for the use of the $435 million, I will be meeting with the provinces on Thursday and Friday of this week to continue to try to develop the AIDA successor program, the income disaster program for 2000-01 and now, we expect, for 2002.

• 1035

Mr. Rick Borotsik: At $435 million extended...?

Dr. Douglas Hedley: At the funds we have approved for it currently—$435 million, yes.

Mr. Rick Borotsik: So it's your opinion that there's no need for any additional dollars, that the $435 million is sufficient for the next three years...?

Dr. Douglas Hedley: That is the amount of money we have allocated at the present time. I think time will indicate whether that is fully used or not fully used, but it would be a decision of ministers to change that.

Mr. Rick Borotsik: If it's not fully used, can we transfer it to Bernie's department? He could certainly use it.

The Chair: Thank you.

Ms. Ur.

Mrs. Rose-Marie Ur: Just to continue on with Mr. Knutson's questioning to Mr. Morrissey regarding tobacco, being a past producer myself, let me say that there are some positive elements in growing tobacco. One in the last little while has been that they're using the tobacco leaf as a medium for medical research. Would that be wiped out if that is indeed closed down?

Dr. Brian Morrissey: No. That work would continue. That's considered to be a plant simply used as a host to do other work.

Mrs. Rose-Marie Ur: Exactly.

Dr. Brian Morrissey: It really has nothing to do with tobacco as we know it. It's like canola, which happens to be an easy plant to work with.

Mrs. Rose-Marie Ur: So there is still strong support for continuing that.

Dr. Brian Morrissey: We could simply classify that as medically oriented research.

Mrs. Rose-Marie Ur: Is that moving along fairly rapidly?

Dr. Brian Morrissey: Yes.

Mrs. Rose-Marie Ur: In a positive mode?

Dr. Brian Morrissey: Yes.

Mrs. Rose-Marie Ur: Also, in the “Expanding Markets” section of your booklet, I may have missed it, but there didn't appear to be a mention of policy regarding supply management. We know that's certainly there for domestic demand or use. What we're seeing now is that some of our supply management people, that supply management group, are looking at expanding their markets. Do you, as a department, have a concern as to what that may lead to or how some other countries may view it?

Dr. Douglas Hedley: First of all, in terms of straightening out the bureaucratic lines in the document, the policies for supply management domestically would lie within the “Strong Foundation” business line; you will find them there under marketing. In terms of expanding markets, you will find that in the “Expanding Markets” business line itself.

In regard to the concerns you're raising, I think all of the views of the minister and certainly of the federal government are that we would like to see a supply-managed industry that is expanding, particularly into our export markets.

I understand, however, that discussions are still ongoing between the Department of Foreign Affairs and International Trade and the dairy industry in coming up with an arrangement that would be acceptable under the WTO judgment that we received. I would hope that we could satisfy those as quickly as possible and get on with an expanding export market.

Mrs. Rose-Marie Ur: Also, regarding the rural lens or the rural secretariat, you have great information in here about building communication infrastructure and making sure that every citizen is connected and all the rest of it, and making sure everyone's on-line.

In my riding, I am not isolated. I'm in southwestern Ontario, maybe half an hour from London, Ontario. It's not the boondocks of Canada. We have areas that don't have private lines and can't get the Internet; they can't get private lines. Is there any guarantee that all of Canada will have access to this in the near future? It's all wonderful to say it's online, but they don't have access to that kind of information.

Dr. Douglas Hedley: First of all, it's an overall objective of the Canadian government to have Canada the most connected nation in the world. From the numbers I've seen, we will be driving down very dramatically over the next two to three years the number of Canadians that have party lines and hence are inaccessible to the Internet.

Part of it will be through, as I understand it, the infrastructure program. Let me assure you that we are applying both an agricultural perspective and the rural lens perspective to all of the discussions internally in government on the infrastructure program.

The Chair: Thank you.

We have twenty minutes. I think we can squeeze them all in if we move fast.

Mr. Hilstrom, followed by Ms. Alarie, Mr. Hoeppner, and Mr. Knutson. Howard.

• 1040

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

Is there a new name for the son of AIDA, a new program name, or is it still AIDA? You're developing the program, so you must have given it a name.

Dr. Douglas Hedley: We are developing the program jointly with the provinces. It simply will be an income disaster program; we do not have a name for it yet.

Mr. Howard Hilstrom: In dealing with Manitoba crop insurance, I have an issue to bring up. In the crop insurance agreements between the federal and provincial governments, the funding is 60:40, I believe, still. I'll give you a little example here of something that's going to require policy change. I was just wondering if you can initiate it from your view or if it has to be from Manitoba's point. We have a cattle rancher up in the Steep Rock area of Manitoba up along Lake Manitoba who runs around 700 head, but he has a real problem with wolves. In fact everybody up that way has a real problem with wolves. If we get a direct kill and you can see the chew marks, you'll end up with compensation on it, and of course there are different levels.

He had a bad incident where the wolves broke the fences down and ran about 76 head out of the fence and and out onto Lake Manitoba, where 14 of them drowned. About 20 head ran 20 miles right across the lake to the other side of the lake and they recovered them. But he's not compensated for those kills just because they're not actually bitten and chewed up by the wolves. They drowned in the ice fissures in the lake. Would you be able to initiate policy discussions with them about opening that agreement up and maybe arranging—not for this particular case, but for future cases—indirect change in the criteria?

Dr. Douglas Hedley: First of all, the authority for dealing with animal kills lies with the province, not the federal government, with one exception, and that is where the federal government has entered into international agreements in the case of international migratory waterfowl. As a result, that is clearly within the Manitoba jurisdiction, not the federal jurisdiction.

Mr. Howard Hilstrom: But it would increase the amount of funding, the expense of the program, to expand the criteria of the coverage. So with 14 head at $800 a head—I don't know if they were breeding heifers or whatever, but say $800 a head—that's a lot of money. So you've saying that it should be initiated by the provincial government to change the criteria and of course then ask for more money.

We have a piece of legislation now before the House, Bill C-17, amendments to the Criminal Code in regard to cruelty to animals. Did you, as a department, have input into that legislation as to recommendations or anything?

Dr. Douglas Hedley: We talked at some length with the Department of Justice on that. I am aware of some concerns coming from the farming community on that. As far as I know, we were fully involved in the development on that legislation.

Mr. Howard Hilstrom: That's fine, because it's big from the area of not only hunting and fishing, but also agriculture practices, which are normally good safe practices. There's no farmer or rancher in the world who wants to see animals abused or anything. But this legislation is driving the animal rights agenda in this country, and anti-hunting and anti-firearm agenda, and agriculture is going to get caught up in that. I just want to know if you had input in it. I know you can't discuss it further than that, but it's a very serious matter with the agriculture community, and if you have a chance....

The last thing I'd like to bring up here is that we're talking about co-ops. I'm a big believer in co-ops. I belong to them, and we initiate them in the west real big time, just like you do in the east. But co-op members aren't looking for the federal government to go throwing money into co-ops and that. What we want is for legislation and legislative hurdles to be removed so that we can create these co-ops for the benefit of whoever wants to be in them. That's what the problem is.

• 1045

I'm not sure if you can expand on this co-op issue a little bit, but we have two good examples out in the west right now. The durum producers of the United States are proposing that the durum producers in Manitoba, Saskatchewan, North Dakota, and a bit of Montana form a bit of a durum cartel, so to speak—a co-op effort there to market and concentrate solely on durum. The second thing we have is a group of farmers who want to set up a pasta plant, and legislatively the Canadian Wheat Board is obstructing this.

The Chair: You're out of time, Howard.

Mr. Howard Hilstrom: Well, I had an extra twenty seconds from earlier on.

Voices: Oh, oh!

The Chair: You've already used it up.

Mr. Howard Hilstrom: I'd like you just to comment on that co-op. Are you in fact putting money into these things? What's the nature of the federal money you're talking about in regard to co-operatives?

The Chair: That sounds like a policy question, but I'll give you time to answer.

Mr. Howard Hilstrom: Well, it is a policy question.

The Chair: They're not policy-makers.

Dr. Douglas Hedley: I'll make two quick points.

The Chair: Please.

Dr. Douglas Hedley: Number one, no, we are not putting money, as far as I know, from the “Strong Foundations” business line into the co-ops you refer to in the west.

The second point is, with the money we're talking about, how do we strengthen cooperatives? How do we get the information about cooperatives as a business form well established, better established than it is today, and how do we promote them in Canada?

The Chair: Thank you.

Madam Alarie.

[Translation]

Ms. Hélène Alarie: I'd like to put a question about the management of the department. I looked at the high points of the management plan and I found two that are particularly interesting: the elaboration of personal career plans for all employees, and more diversified and representative staff able to respond to operational needs. If I were an agriculture department employee and I read that I'd be very satisfied. I imagine your 5,500 employees are the happiest ones in the entire public service.

You talked about the satisfaction rate of the population concerning the quality of service and said that you were aiming at increasing it 10%. I believe the rate is already very high at the Agriculture Department and that it is somewhere around 80%. Did you attain your objective?

You also mentioned that 4% of the payroll budget must be earmarked for employee training and development. Are you also reaching that goal?

[English]

Dr. Douglas Hedley: First of all, in terms of quality of service, what you're referring to there are measurements we have taken this past year. We intend to be measuring that quality of service, not only inside the department but externally, on a fairly regular basis to know we are in fact improving and meeting our goal. But we have not done a follow-up survey as yet to know how fast we're progressing.

[Translation]

Ms. Hélène Alarie: You haven't had any polls or reports on that?

[English]

Dr. Douglas Hedley: We did a survey across all of government that did include quality of service, level of service, and satisfaction with service. We'll use that as the benchmark for the department as well as for benchmarking ourselves against other departments.

The Chair: Might I suggest, Madam Alarie, that these questions are more appropriate for Thursday's meeting?

Dr. Douglas Hedley: Yes.

[Translation]

Ms. Hélène Alarie: Could you answer the second point I raised?

[English]

Dr. Douglas Hedley: With respect to training, let me ask Dr. Morrissey.

[Translation]

Dr. Brian Morrissey: Thank you, Doug. As I was responsible for training, I examined our expenditures in 1992 and established they represented approximately 4% of our operating budget which isn't bad compared to other institutions of the same nature. We ran a similar poll about two years ago, in 1998, and saw that they were higher than 4%.

Ms. Hélène Alarie: So, everybody is happy. Thank you.

[English]

The Chair: Thank you.

Mr. Hoeppner, and then we'll finish it off with Mr. Knutson.

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

I have a remark on joint funding of research partnerships. If you want to see a prime example, come to the Morden research station. We have slightly more staff there now than we had in the mid-1990s, when we were cut back by about 40% of the employees. So that's a prime example of how well it works.

• 1050

The question I have, though, is on the issue of the AIDA funding. I talked to a farmer in Manitoba yesterday about the cashflow they had received from all these programs. He tells me they've only qualified for $25 an acre from the provincial government. They may qualify under the 1999 AIDA program, but that $25 would then be clawed back. Now, who gets the benefit of that? Is it the provincial government, or does AIDA just pay out less money?

Dr. Douglas Hedley: First of all, in that case, to avoid the stacking in programs that could get us into difficulty internationally, we have said we will count that $25 as part of their disaster assistance. It will come first to them. Subsequently, we will take it into account when they put in their AIDA application for 1999.

Mr. Jake Hoeppner: So they will really get no disaster payments at all until they get some AIDA money.

Dr. Douglas Hedley: First of all, they had access to crop insurance in southwest Manitoba of $25 an acre. For 1999 that will be raised to $50. Secondly, there was an additional $25 provided by the Province of Manitoba, and another $25 that is part of the AIDA program. It will be deducted from their AIDA application.

Mr. Jake Hoeppner: Their real concern is the cashflow problem. If you only have $25 an acre, how are you going to put in a crop and pay all your last year's expenses? It's just not possible.

The other issue I want to quickly bring up is the PFRA. I am getting more and more complaints from rural municipalities that the PFRA program has been cut back to a point where they can't deliver enough good-quality water to farmsteads that are expanding, with livestock, to value-added industries. How are you going to address that?

Dr. Bernie Sonntag: We can do what we can within our current budget. I guess I can't answer that question beyond that.

Mr. Jake Hoeppner: It's very important that the value-added industries get established. Otherwise, farmers in western Canada will be in more trouble than ever before.

Those are my two questions. I think you should seriously look at increasing the funding for PFRA, to provide enough good-quality water to these farmsteads, so they can expand.

Dr. Bernie Sonntag: Our rural water development program in Manitoba at the moment is about $1 million a year. As you say, that doesn't go very far. We would like it to be more, but that's not our decision.

Mr. Jake Hoeppner: Well, keep punching on that issue, please.

Dr. Bernie Sonntag: Yes, we will.

The Chair: Thank you, Mr. Hoeppner.

Mr. Knutson.

Mr. Gar Knutson: Dr. Hedley, you're sitting down with the provinces to work out the continuation of AIDA, or whatever it's going to be called. It was my sense, just looking at my own community, that the program was fairly generous to farmers who had a sudden sharp spike down, such as the hog producers. It dealt with their disasters. But what about cash crop farmers or western grain farmers, who are slowly being squeezed? By now we're into the fifth year of bumper crops and low commodity prices.

If that corn farmer outside St. Thomas gradually goes broke over a five- or six-year period, or a three- or four-year period, that's not any less of a disaster than a hog farmer who might have gone broke quicker.

I'm just wondering if we're turning our minds to the issue that averaging and margins below a certain average don't provide any relief to the person who is being slowly but severely squeezed over an extended period of time.

Dr. Douglas Hedley: First of all, that issue is one of the central ones in our discussion. Let me approach it in two or three ways. Number one, that individual farmer has a series of programs available to him. One is crop insurance and one is NISA. Clearly, the third line of defence, as you wish, is AIDA.

Mr. Gar Knutson: Does crop insurance apply to just a gradual reduction in prices?

Dr. Douglas Hedley: That is the concern in the grains and oilseeds industry. Our difficulty, however, with AIDA is that to be responsible as a national government, we have to lie within the WTO green rules. Otherwise, we lose the impact of the program on others' treasuries.

The limit then is that we have two choices of period. One is the preceding three years as the basis, and the other is the Olympic average of three years out of five, throwing out the high and the low. Those are the only two options we have. For 1999, the minister has made both options available to farmers.

• 1055

Mr. Gar Knutson: I understand that, but these farmers are also being told by agricultural experts that the Americans don't seem to be bound by these rules, and that a corn farmer in Ohio or Michigan doesn't even pay attention of what the corn price is on the Chicago exchange any more.

Mr. Howard Hilstrom: They just produce.

Mr. Gar Knutson: They just produce and they get their money, while a hundred miles away in southern Ontario these guys are being slowly squeezed out of business.

Dr. Douglas Hedley: There are two points I would make. First, that is correct, as you stated. Secondly, please recall that Canada is a major exporter to the U.S. of virtually all our product in one form or another. We do not import in large quantity from the United States, as they do from us. In doing that, we have no standing to bring an arrangement against them.

The second point I'd make is that in our international trade agreements, it doesn't matter what you do in your own country; if another country is doing exactly the same as you are, you can still challenge them and have a countervail action against them.

Mr. Gar Knutson: Yes, but the difficulty is when a corn farmer, say, sells their product to the Chatham ethanol plant or to the Casco plant in London, they're paid the price based on the Chicago exchange.

Dr. Douglas Hedley: Yes.

Mr. Gar Knutson: That's a depressed price, because the Americans have flooded the corn market. Surely we need to take that into account when we're designing our safety net programs.

The Chair: This is your final comment.

Mr. Gar Knutson: With that reality, we need to take it into account.

Dr. Douglas Hedley: Let me assure you, that is part of our discussions. But it's not a matter of looking at only one program, but several.

I was just sent a newspaper clipping from Michigan, based on comments I had made in a conference in that state two months ago. Let me assure you that producers in Michigan are not happy with those in Canada, claiming that because of our currency exchange rate, Canadians have this wonderful advantage over the Americans and as a result are flooding their markets with product from Canada.

What I'm saying here about those markets is that both sides are equally unhappy.

The Chair: Thank you.

Mr. Howard Hilstrom: Mr. Chairman, I have a point of order before we conclude.

The Chair: Dr. Hedley, could you clarify something for me? Before they left office, the Filmon government announced this $50 an acre payment back in the summer of 1999. Was it $25 from the provincial government, unconditionally, to only those farmers in the flooded area, and another $25 an acre from the federal government, but that would be charged against any compensation under AIDA? Am I clear on that, or...?

Dr. Douglas Hedley: Chairman, if my memory serves me well, you have to count each $25 as you go through.

First, there was $25 an acre in crop insurance, but only 11 of 1,900 farmers took that coverage in the area. Secondly, the premier made the announcement of $50 per acre for Manitoba. That is exclusively provincial funding. I do not know the status of that payout.

In addition to that, we have offered to Manitoba that—

The Chair: The flooded farmers, or every farmer?

Dr. Douglas Hedley: No, just the flooded area.

The Chair: Okay.

Dr. Douglas Hedley: We have offered that we would have a program that would integrate with AIDA, but we have not had a response from them.

The Chair: I see. Thank you.

We're running out of time. We have to clear this room for the finance committee.

Howard, you have a point of order.

Mr. Howard Hilstrom: On a quick point of order, Mr. Chairman, the clerk came to me and asked if I had a witness list for the GMO hearings. I think we need to get into a steering committee and sit down with our committee members and figure out the nature of these hearings, the scope of them, and the type of witness we're going to have, rather than us just submitting them and you picking whoever. Let's do this in a planned way.

The Chair: Mr. Hilstrom, are you not aware that there is a steering committee meeting on Thursday?

Mr. Howard Hilstrom: Is there one coming up?

The Chair: Yes.

Mr. Howard Hilstrom: Okay. And is this going to be discussed at that meeting?

The Chair: Of course.

Mr. Howard Hilstrom: If there's a steering committee coming up, why would the clerk come and ask me for my witness list?

The Chair: If you were following what was said some time ago, I had invited the opposition members to submit suggested names for witnesses, and the Bloc, the Conservatives, and the NDP have done that, so that simply by submitting their lists in advance, we get some opportunity to understand what's being suggested and then we can come into the meeting with some prepared thoughts.

• 1100

If you want to leave your list until the very last moment, fine, but then we may have to have a longer discussion at the steering committee meeting on Thursday.

Mr. Howard Hilstrom: Well, we may have to, because this has to be planned out properly. It can't be just a slam-bam thing.

The Chair: That's what I was trying to do. I was trying to do that. I've announced the meeting a week in advance. I asked for the names from the opposition. To me, that's a planned approach. What you're suggesting is doing it on the fly. So I think you're arguing against yourself.

Anyway, this meeting is over.