AGRI Committee Meeting

37th PARLIAMENT, 2nd SESSION

Standing Committee on Agriculture and Agri-Food

EVIDENCE

CONTENTS

Thursday, February 13, 2003

Á

1105

The Chair (Mr. Paul Steckle (Huron—Bruce, Lib.))

Mr. Rick Phillips (Director of Policy and Government Relations, Dairy Farmers of Canada)

The Chair

Mr. Rick Phillips

Á

1110

The Chair

Mr. Rick Phillips

Á

1115

Á

1120

The Chair

Mr. David Wilson (Legal Counsel, Dairy Farmers of Canada)

The Chair

Mr. Howard Hilstrom (Selkirk—Interlake, Canadian Alliance)

Mr. Rick Phillips

Mr. Howard Hilstrom

Á

1125

Mr. Rick Phillips

Mr. Howard Hilstrom

Mr. Rick Phillips

The Chair

Mr. Louis Plamondon (Bas-Richelieu—Nicolet—Bécancour, BQ)

Á

1130

Mr. Rick Phillips

Mr. Louis Plamondon

Mr. Rick Phillips

Á

1135

Mr. David Wilson

The Chair

Mr. David Wilson

The Chair

Mrs. Rose-Marie Ur (Lambton—Kent—Middlesex, Lib.)

Mr. Rick Phillips

Mrs. Rose-Marie Ur

Mr. Rick Phillips

Mrs. Rose-Marie Ur

Mr. Rick Phillips

Mrs. Rose-Marie Ur

Á

1140

Mr. Rick Phillips

Mrs. Rose-Marie Ur

Mr. Rick Phillips

Mrs. Rose-Marie Ur

Mr. Rick Phillips

Mrs. Rose-Marie Ur

Mr. Rick Phillips

Mrs. Rose-Marie Ur

Mr. Rick Phillips

Mrs. Rose-Marie Ur

Mr. Rick Phillips

Mrs. Rose-Marie Ur

Mr. Rick Phillips

Mrs. Rose-Marie Ur

The Chair

Mr. David Wilson

The Chair

Mr. Rick Borotsik (Brandon—Souris, PC)

Mr. Rick Phillips

Mr. Rick Borotsik

Mr. Rick Phillips

Mr. Rick Borotsik

Mr. Rick Phillips

Á

1145

Mr. Rick Borotsik

Mr. Rick Phillips

Mr. Rick Borotsik

Mr. Rick Phillips

Mr. Rick Borotsik

Mr. Rick Phillips

Mr. Rick Borotsik

Mr. Rick Phillips

Mr. Rick Borotsik

Mr. Rick Phillips

Mr. Rick Borotsik

Mr. Rick Phillips

Mr. Rick Borotsik

Mr. Rick Phillips

Mr. Rick Borotsik

Mr. Rick Phillips

Mr. Rick Borotsik

Mr. Rick Phillips

Mr. Rick Borotsik

Mr. Rick Phillips

Mr. Rick Borotsik

The Chair

Mr. Rick Phillips

The Chair

Mr. Rick Phillips

The Chair

Mr. Rick Phillips

The Chair

Mr. Rick Phillips

The Chair

Mr. David Anderson (Cypress Hills—Grasslands, Canadian Alliance)

Á

1150

Mr. Rick Phillips

Mr. David Anderson

Mr. Rick Phillips

Mr. David Anderson

Mr. Rick Phillips

Mr. David Anderson

Mr. Rick Phillips

Mr. David Anderson

Mr. Rick Phillips

Mr. David Anderson

Mr. Rick Phillips

Á

1155

Mr. David Anderson

Mr. Rick Phillips

Mr. David Anderson

Mr. Rick Phillips

Mr. David Anderson

Mr. Rick Phillips

The Chair

Mr. Rick Phillips

The Chair

Mr. Gérard Binet (Frontenac—Mégantic, Lib.)

Â

1200

Mr. Rick Phillips

Mr. Gérard Binet

Mr. David Wilson

Mr. Rick Phillips

Mr. Gérard Binet

Mr. Rick Phillips

Mr. Gérard Binet

The Chair

Mr. Gérard Binet

The Chair

Mr. Louis Plamondon

Â

1205

Mr. Rick Phillips

Mr. Louis Plamondon

Mr. Rick Phillips

Mr. Louis Plamondon

Mr. Rick Phillips

Mr. Louis Plamondon

Mr. Rick Phillips

Mr. Louis Plamondon

Mr. Rick Phillips

The Chair

Mr. Louis Plamondon

The Chair

Mr. Rick Phillips

The Chair

Mr. Howard Hilstrom

Â

1210

Mr. Rick Phillips

Mr. Howard Hilstrom

Mr. Rick Phillips

Mr. Howard Hilstrom

Mr. Rick Phillips

Â

1215

Mr. Howard Hilstrom

Mr. Rick Phillips

The Chair

Mr. Claude Duplain (Portneuf, Lib.)

Mr. Rick Phillips

Mr. Claude Duplain

Mr. Rick Phillips

Mr. Claude Duplain

Mr. Rick Phillips

Mr. David Wilson

The Chair

Â

1220

Mr. David Anderson

The Chair

Mr. David Anderson

Mr. Rick Phillips

Mr. David Wilson

Mr. Rick Phillips

Mr. David Anderson

Mr. Rick Phillips

Mr. David Anderson

The Chair

Mr. Howard Hilstrom

Mr. Rick Phillips

Â

1225

Mr. Howard Hilstrom

Mr. Rick Phillips

Mr. Howard Hilstrom

The Chair

Mr. David Anderson

Mr. Rick Phillips

The Chair

Mr. Claude Duplain

Mr. Rick Phillips

Mr. Claude Duplain

Mr. Rick Phillips

The Chair

Mr. Rick Phillips

The Chair

Mr. Rick Phillips

The Chair

Mr. Rick Phillips

The Chair

Mr. Rick Phillips

Â

1230

The Chair

Mr. Rick Phillips

The Chair

Mr. Howard Hilstrom

Mr. Rick Phillips

Mr. David Wilson

Mr. Howard Hilstrom

Mr. David Wilson

Â

1235

Mr. Rick Phillips

Mr. Howard Hilstrom

The Chair

Mr. Rick Phillips

Mr. David Wilson

The Chair

The Chair

Mr. Claude Duplain

Â

1245

The Chair

Mr. John Maloney (Erie—Lincoln, Lib.)

The Chair

Mr. David Anderson

The Chair

Mr. Howard Hilstrom

The Chair

Mrs. Rose-Marie Ur

The Chair

Mr. Gérard Binet

The Chair

Mr. Gérard Binet

The Chair

Ms. Hélène Scherrer (Louis-Hébert, Lib.)

The Chair

The Chair

The Chair

Mr. Howard Hilstrom

The Chair

Mr. Howard Hilstrom

Â

1250

The Chair

Mr. John Maloney

The Chair

Mr. Paul Harold Macklin

The Chair

Mr. Howard Hilstrom

The Chair

Mr. Claude Duplain

The Chair

Mr. David Anderson

The Chair

Mr. Howard Hilstrom

Â

1255

The Chair

Mr. John Maloney

The Chair

Mr. John Maloney

The Chair

Mr. John Maloney

The Chair

Mrs. Rose-Marie Ur

The Chair

Mr. John Maloney

The Chair

---

CANADA

Standing Committee on Agriculture and Agri-Food

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NUMBER 015

l

2nd SESSION

l

37th PARLIAMENT

---

EVIDENCE

Thursday, February 13, 2003

[Recorded by Electronic Apparatus]

Á  (1105)  

[English]

    The Chair (Mr. Paul Steckle (Huron—Bruce, Lib.)): I'd like to call the meeting to order. I see that we have a quorum to begin our meeting.

    Perhaps I can take this time to seek the indulgence of the committee to please bear with us to the end this morning. We'll try to get to the witnesses perhaps 15 or 20 minutes early. Since we have a few matters of business we need to address, rather than weighing in on their time, we'll do it on our time. We'll get this meeting under way, and then we can deal with that business. We have a number of motions that need to be dealt with.

    Pursuant to Standing Order 108(2), we want to consider this morning the World Trade Organization's decision on the Canadian dairy export policy. We have before us as witnesses Mr. Rick Phillips, director of policy and government relations for the Dairy Farmers of Canada, and Mr. David Wilson,the legal counsel.

    So we'll let you gentlemen proceed. Have you a formal presentation?

    Mr. Rick Phillips (Director of Policy and Government Relations, Dairy Farmers of Canada): Yes, Mr. Chair.

    The Chair: Has it been circulated in both languages?

    Mr. Rick Phillips: I believe so. In addition to that, we have a more complete analysis that was also distributed.

Á  (1110)  

    The Chair: We're going to give you 10 minutes. If you need more time--perhaps Mr. Wilson has some comments--we'll allow for those comments to be made. Then we'll enter into the questioning of our witnesses.

    You may begin, Mr. Phillips.

    Mr. Rick Phillips: Good morning.

    I suspect all of you have had some exposure to the results of the appellate body decision. We have in fact distributed a copy of the full DFC staff analysis of that decision.

    What I hope to accomplish in this presentation is to move a little beyond the preliminary analysis and observe and perhaps even speculate a little about some of the implications that may pull from this decision.

    What does the WTO Agreement on Agriculture say about an article 9.1(c) export subsidy? In deciding on an article 9.1(c) claim, a WTO panel or the appellate body addresses the following questions to determine whether a measure constitutes an export subsidy for the purposes of that article.

    First, are there payments? Secondly, if so, are such payments financed by virtue of governmental action? Thirdly, if so, are those payments made on the export of an agricultural product in excess of export subsidy reduction commitments?

    We know the highlights of the appellate body's decision. The appellate body found that there was a payment based on full average costs of production, including quota costs, on an industry-wide basis. The appellate body found these payments were financed by government through third parties, namely producers. This financing was accomplished by the provision of resources to producers through domestic price support. Producers then used those resources to cross-subsidize commercial export sales, in the opinion of the appellate body.

    This case fundamentally changes the concept of payment. The consequence of the appellate body's decision on payment is that, where exports are made through third parties, the average industry costs of production, and not the domestic price, are the reference. As a practical matter, this decision means that all producers selling milk at CEM prices are making a payment. They are making payments regardless of their actual costs of production.

    I would also observe that nowhere in article 9.1(c) does it say the payments on the export must be made by producers.

    DFC's sense is that in article 9.1(c) as negotiated, “payment”, as was argued by Canada initially and by the Europeans until the very end of the case, was the agricultural agreement's word for “subsidy”, namely a financial contribution that conferred a benefit.

    This financial contribution might be made by way of a lower price. In a case where processors have access to imported inputs for export production, sales of milk to processors at the world price would not confer a benefit. Without a benefit, you wouldn't have a subsidy. Since you would have no subsidy, you would have no export subsidy.

    As a result of the first dairy case, a payment is deemed to be made whenever milk is sold by government at reduced rates, as measured by a reference to the Canadian domestic price, as opposed to the world reference price.

    In the more recent challenge, the idea of payment was expanded, in the case of third-party non-governmental sales, to include the notion of, and I quote, “sale at less than the proper value to the producer”. The appellate body introduced the idea of cost production as a measure of that proper value.

    In order to understand the implications of this appellate body notion of “proper value to the producer”, it is important to understand the distinction between short-run marginal costs and average total costs.

    Short-run marginal costs are additional costs incurred to produce that extra hectolitre of milk. If you already have a barn and if you already have a cow, these costs can be quite low. Average costs across all production include not only feed and labour costs, but also the cost of the barn and the cost of the cow, etc.

    In this case, the complaining parties, the panel, and the appellate body all took the view that there would be a payment if the CEM price was less than the average total cost, including the estimated return on labour and investment that a producer must recoup in order to remain in business over time.

    The appellate body's decision is at odds with normal economic theory that suggests that while the price in the long run will equal average costs, the current price will be equal to short-run marginal costs. In other words, while economists would be quite comfortable with the idea of sales at marginal costs, the appellate body says that sales at marginal costs are not a “proper value”.

    The appellate body said that producers need to recover all of their costs, not just their marginal costs, in order to stay in business over time. The appellate body in fact explicitly ruled out short-run marginal costs as a proper return for commercial export milk. The implication is that a proper return for commercial export milk would be one that reflects average costs and not short-run marginal costs. This result would also be consistent with the results of many economic studies that suggest in the long run, with no distortions, world prices would be much higher than they are currently.

    The appellate body's decision could introduce the notion that current world market prices, presumably equal to short-run marginal costs of production, should not be the benchmark for subsidies. Indeed, at current world prices, every third-party dairy exporter in the world is making payments on at least a portion of their exports.

    As a result of the Canada Dairy series of cases, there is now a clear inconsistency in the way benefit is referenced in the case of export subsidies versus domestic subsidies and tariff protection. In the case of export subsidies, we have an “average cost” reference; in the case of domestic subsidy and tariff protection, we have a current world price, and hence a “short-run marginal cost” reference.

    This case also fundamentally changes the concept of governmental action. The appellate body has had to go to great lengths to find government action that finances exports. In the latest appellate body decision, the government action may be “a single act or omission, or a series of acts or omissions”. It is not just what a government does; it may be what a government fails to do by failing to regulate export production that leads to an adverse finding.

    The implication is that if third parties receive domestic support and export, and if governments don't stop them, those governments may through that omission be in contravention of their WTO obligations. We may even find that other countries must introduce some sort of supply management to limit production to domestic requirements plus subsidized export limits.

    The appellate body also found that article 9.1(c) does not require that payments be financed by virtue of government mandate or other direction. No such compulsion need be involved. The appellate body decision says that it is the effect of government action that is important. It is the consequences of governmental action and not the intent of government that is significant. Thus article 9.1(c) applies to governmental action that has the effect of financing export payments, even if this result is not intended.

    In this case, the appellate body has found that the provision of WTO-consistent domestic support and WTO-consistent border measures by the Canadian government have the effect of providing a significant percentage of producers with the resources that enabled them to sell commercial export milk at below industry-wide cost of production and thus make a payment on the export.

    It does not matter that these measures are directed at ensuring adequate domestic returns for the average producer. It does not matter if producers who choose to export choose to do so without compulsion. It does not even matter if, as individuals, they could cover their costs.

    An interesting implication of the decision may be that even if the provision of support is not contingent on export, the fact that support allows a third party to export makes it an export subsidy. Even green domestic support may have the effect of financing an export subsidy.

    There are, of course, some immediate challenges that flow from this decision. I would observe that there are significant amounts of CEM milk currently contracted. If all the CEM milk currently contracted for delivery this year is exported, Canada will be significantly over its export subsidy reduction commitments. Canada is currently negotiating an orderly phase-out of CEM transactions with New Zealand and the United States. New Zealand and the United States are under no obligation to accommodate any exports above commitment levels. The case can be made that Canada's implementation period ended August 2000 and that all exports in excess of committed levels after that date are deemed to be in contravention of Canada's WTO obligations and subject to retaliation.

    On that subject, both the U.S. and New Zealand have indicated that, in their view, non-quota holders are captured by this appellate body decision. Both the U.S. and New Zealand have indicated that they may be prepared to accommodate an orderly phase-out of commercial export milk. Both have indicated that they are more interested in Canada's compliance than in the $70 million they have so far claimed in retaliation. Since Canada cannot export any subsidized product to the United States under the terms of the NAFTA, and since New Zealand markets are too small and too far away to attract exports, retaliation could affect a sector other than dairy. Canada has limited bargaining power in this negotiation.

Á  (1115)  

    DFC's assessment is that it would not be useful to continue to pursue unsubsidized exports until further jurisprudence or negotiations clarify the current appellate body ruling.

    The board of directors of the Dairy Farmers of Canada has passed a motion stating:

...all milk must be marketed under the regulated marketing system. Milk for exports must be purchased through the price classification system and notified to the Canadian Dairy Commission, to enable accurate determination of Canadian requirements.

    Processors are still free to expand their export sales using imported inputs under the import for re-export program or duty draw-back provisions.

    The panel and appellate body in Canada Dairy were prepared to go to great lengths to capture Canada's exports. I know that our negotiators feel that the appellate body went beyond the words of the Agreement on Agriculture to create new obligations for members. My own view is that this decision will be significantly modified either by future appellate body decisions or members' realization that the export subsidy provisions of the Agreement on Agriculture need to be clarified. It may be that future clarification could allow Canada to develop an export mechanism that is WTO-consistent.

    Under WTO rules, your system is WTO-consistent until another member challenges it. This is why California continues to operate a “special class” system, just like the one that was found to be WTO-inconsistent by the very first panel in Canada Dairy.

    Some of my observations may be proved to be correct, and others may not. The only way to clarify this appellate body decision is to challenge the export practices of others and/or negotiate clarification. These two processes are not mutually exclusive.

    With that, Mr. Chairman, I'll end my comments.

Á  (1120)  

    The Chair: Mr. Wilson, do you have any comments you wish to make at this time?

    Mr. David Wilson (Legal Counsel, Dairy Farmers of Canada): Not at this time, Mr. Chairman. I'm basically here as a resource to assist with any questions you may have. I'll leave it at that for now.

    The Chair: We have fairly adequate time this morning for these two gentlemen, since our other witnesses were unable to be here, given the circumstances. So we have plenty of time, and it's a very timely subject given the fact that a recent decision has caused some concern in the dairy industry.

    I think this morning we want to explore why this happened, what we can do to mitigate its happening again, and perhaps where we might look in terms of the current and negotiations.

    We will begin our questioning at this time with Mr. Hilstrom for seven minutes.

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

    How did we get into this? That's probably a good question, and maybe that's where I'll start. In the lobbying effort that the Dairy Farmers of Canada did with my party—and with other parties, I'm sure, although I wasn't at those meetings—we were told very clearly that what the Dairy Farmers of Canada were setting up to export milk was in compliance with WTO trade rules. We accepted that, but now we find that the WTO ruled contrary to what we were being told during the lobbying efforts.

    Do you have any comments on that? Why did that happen?

    Mr. Rick Phillips: I guess the short answer to that question is that the people we relied on for advice told us that, and those were governmental officials. When it came back from negotiations at the Uruguay Round, they initially said as long as you had the class pricing like that—we developed special classes—things would be fine.

    When that failed because of the prevailing governmental presence, first they said that as long as you priced product, article 9.1(c) in particular was intended to capture things like levy payments—actual financial contributions, or actual transfers of money. Initially, with the special-class system, you set it up so that prices were the same, and this, we were told, would be WTO-consistent.

    When the appellate body came back and said that was inconsistent, we then looked at how we might continue to export. The idea then was to get government as far out of the system of exports as possible. We were advised that this was how you do it, so we did it, and that proved not to be WTO-consistent either.

    In fairness, my own opinion is that the appellate body and panel went pretty far in terms of interpreting. They gave a very broad interpretation of the articles in the agriculture agreement. I think in fact they went well beyond what would have been considered by the people giving us advice to be normal interpretations of what a subsidy is or what governmental action is.

    Mr. Howard Hilstrom: Thank you for your answer.

    I accept that it was given to us in good faith. I don't think anyone was trying to trick us in their lobby effort or anything. I think you are giving it in best faith, and of course everyone must argue in their own cause as best they can.

    But now that this has happened and the ruling is down, I believe—on a personal basis, I suppose—that once the situation is clarified to a certain extent, you move on. Is Dairy Farmers of Canada prepared to move on now, as opposed to trying to continue to fight the battle that was lost at the WTO? By “moving on”, I'm referring specifically to the negotiations at the WTO that are presumably going to be set to start on March 31, with the positions being clarified from each of the governments.

    Are you prepared to go with the supply management, in particular of dairy, on the trade table? We know that the commitment by Canada is to go for market access and for tariff reduction. Is Dairy Farmers of Canada 100% behind participating in that and trying to achieve a tariff reduction that still maintains the viability of our dairy farmers, and also with market access? At the present time it's roughly 5% market access, in my understanding, to the Canadian market. How much is Dairy Farmers of Canada willing to increase that, and how much to lower the tariffs?

    Could you answer those two questions on what the Dairy Farmers of Canada's position is?

    I'd like to point out that there have been a lot of attacks on my party and myself personally over the years, that somehow we want to get rid of all tariffs that protect supply management. I bring this point up because under Canada's trade agreements with the WTO and with the world generally—I'm not talking of North America here—our beef industry also has tariffs that protect us above a certain amount of imports, so that we don't get flooded and destroy the beef industy.

    Could you comment on that specifically? What is the DFC willing to go to the WTO to negotiate? Or is it 100% “We're not changing anything”?

Á  (1125)  

    Mr. Rick Phillips: I'll preface my remarks by saying I'm not the expert on trade. There is a DFC director of trade who would be happy to come to explain in much fuller detail than I will what our position is. But I would note that the appellate body specifically made a comment on supply management at paragraph 153. It says:

We also wish to emphasize that we do not suggest that Canada's domestic supply management system is inconsistent with Canada's obligations under the covered agreements and, specifically, the Agreement on Agriculture. The consistency of Canada's domestic milk supply management is not at issue in these proceedings.

    That said, and moving on to the negotiations, supply management needs three pillars, one of which is border measures. In that regard, our position is that if you're going to give access, the better way of giving it would be through the tariff rate quota as opposed to lowering tariffs. Lowering tariffs will lead to nothing but price instability in the domestic market, and price instability, as we've demonstrated time and time again, is not good for producers and not good for consumers. We in fact have a domestic system that has proven to be good for producers. It has given them adequate returns where other systems have not, and it has proven to be good for consumers. We have price increases for consumers that are less than you find at the retail level for other commodity groups. Our consumers actually pay less than their U.S. counterparts.

    The economists also tell us that in a long-term economic free-trade equilibrium under perfect competition, the price in the world would not be what it is today. It would be much higher and would be approaching our domestic price. So the question is, why you would give up a system that works, that's delivering the policy objectives Canadians and producers want?

    Mr. Howard Hilstrom: The purpose is to move toward that ideal system. I think that's what Canada's position is: to move toward that ideal trade system in the world.

    My question really is whether the Dairy Farmers of Canada is willing to take even small, tentative steps toward that or not.

    Mr. Rick Phillips: The answer to your question is no. Why the heck would we go through all the adjustment that's necessary to get back to where we already are, where producers have adequate returns and consumers have good prices?

    The Chair: We'll move on to Mr. Plamondon, for seven minutes.

[Translation]

    Mr. Louis Plamondon (Bas-Richelieu—Nicolet—Bécancour, BQ): Thank you, Mr. Chairman. Welcome.

    When we see that attitude of the United States towards our supply management system and all of the challenges they are launching, we realize that with friends like that, we are not in a very good position. We see the action they have taken with respect to softwood lumber, we see their challenges to the steel industry, and we see that they're doing to try and bring down our supply management system, or to destroy it.

    Even though the United States boasts about signing international agreements and complying with them, the country has never kept its word, does not respect anything, is always on the warpath, and we must never count on the U.S. when we sign any kind of agreement with it.

    So we are forced to defend ourselves from the U.S. and not to collaborate with it. In this case, do you think that the Canadian government has been restrictive enough and strict enough in enforcing the WTO rules as regards imports from the U.S.? I am referring specifically to disguised dairy product imports, like yogurt, cheese, and so on. It seems to me that Canada has not been as firm as it should be when you look at the attitude the U.S. has adopted with regard to Canada in all of the other sectors.

Á  (1130)  

[English]

    Mr. Rick Phillips: I think you're right. We do have an issue with imports. Canada gave import access of about 5% at the Uruguay Round, made that commitment, and in fact, Canada has been one of the few countries that actually has provided the access that it committed to providing. We tend to have what they call high “fill” rates.

    In addition to that, as Mr. Plamondon has pointed out, there have been imports that we did not expect.

    The primary one, I think we could refer to as butter-oil sugar blends. That's a blend that has resulted in the reduction of about 2.7% in our MSQ. That's about the equivalent of 270 farms. Since 1995, imports of that particular butter-oil sugar blend have increased by about 557%. It's not alone; we have increased quantities of casein and whey products coming in. Those primarily act to reduce the blend price that we get.

    In addition to that, we have chocolate and flavoured milks that have started coming in. They've now taken over about 6% of the Canadian market. They've had a very significant increase, about 543%, over the last few years.

    So in effect, we're not giving 5% access; we're giving more than that, probably in the order of about 7% of total quota.

    Yes, this is an issue with us, and we have brought this to the attention of ministers Pettigrew and Vanclief, as well as Manley and Caplan. They have offered a working group, which is supposedly going to make recommendations to ministers within a very short period of time.

    I must admit, we weren't very pleased with the working group. We actually sat in on the first couple of meetings of that group. It seemed that we were the ones providing the solutions and they were providing the answers as to why those solutions couldn't move forward. So it was a bit frustrating. We're no longer on that group, but we're awaiting their recommendations, and we hope they may have had a change of mind in the meantime.

[Translation]

    Mr. Louis Plamondon: Let's talk more specifically about the decision of the appellate body on dairy products. I have taken some phone calls in my riding, and producers are very worried. Is it jeopardizing the survival of some farms, or is it just a decrease that could some day be overturned by subsequent decisions as part of new negotiations? In other words, is it just a temporary bad stretch for farmers rather than a definitive decrease? As a percentage, what will the average impact of this decision be on producers' incomes?

[English]

    Mr. Rick Phillips: CEM production in the end accounts for just under 5% of total production. Remember that it is production that does not go through the system, so there will not be a quota cut for producers at whole quota.

    One thing that would help producers in Canada recover some of that production would be to become a little tighter on the import side. That would give us an immediate increase of maybe 2% or 3%. That would certainly offset the types of exports we've seen under CEM.

Á  (1135)  

    Mr. David Wilson: Mr. Chairman, could I have one more comment on that point?

    The Chair: Yes, Mr. Wilson.

    Mr. David Wilson: This comes back to an earlier question. From my perspective--and I think a number of people feel this way--the WTO has moved the goalpost relative to what Canada negotiated. The extent of that impact will depend to a significant degree on how the Government of Canada responds. If the government takes the opportunity to seek clarification of this particular form of discipline and takes a vigorous approach in the Doha Round of negotiations in defence of supply management, the impacts need not be severe. It may in fact be a sort of wake-up call to get some of these items cleaned up and get the clarification that's needed.

    On the other hand, if the government takes a more passive role and some of the trade dynamics that are occurring are allowed to continue, it could certainly have significant detrimental long-term impacts. So I think the government can play a significant role in terms of what this is going to mean.

    The Chair: We'll now move to Mrs. Ur for seven minutes.

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

    How good a relationship is there between quota dairy producers and non-quota dairy producers regarding this matter? Is this a problem with the whole issue of the ruling?

    Mr. Rick Phillips: I don't know exactly what you mean.

    Mrs. Rose-Marie Ur: Has the non-quota dairy farmer put a glitch in the supply management system that has worked so well in Canada? I realize this is export marketing, but on the other hand has it opened a little wedge into supply management?

    Mr. Rick Phillips: Let me make some observations on this decision and non-quota holders. The appellate body declined to rule on the WTO consistency of an export mechanism that just has non-quota holders, but I wouldn't make any mistake: The current CEM mechanism was ruled to be WTO-inconsistent--and I'll quote--“even if some producers never make payments financed by virtue of governmental action”. It's still inconsistent, even if that is the case.

    I guess the question arises, could you develop a system that consisted solely of non-quota holders and design it in such a way to be WTO-consistent?

    Now, my reading of the decision is that non-quota holders would be making payments even if they sold milk at domestic prices. This is because the industry average COP would be used in calculating their payment, and that would be greater than the domestic price.

    I've also heard of New Zealand arguments that some non-quota holders derive the resources they need to make payments from previous participation in domestic markets.

    The appellate body itself also noted some other potential post-production sources--

    Mrs. Rose-Marie Ur: I have a lot of questions, so....

    Mr. Rick Phillips: That's fine, but let me finish.

    The appellate body itself also noted some other potential post-production sources of cross-subsidization, and commented on transportation and storage facilities. The appellate body observation suggests that any non-quota holder export mechanism would be at risk unless export milk was marketed completely separately from domestic supplies. Clearly the appellate body is prepared to look post production to find cross-subsidization. I would also note that nothing in article 9.1(c) refers to producer payment.

    The issue we have with non-quota holders is if we are forced to go back to the appellate body, that system would not be found to be WTO-consistent. Our approach would be to go back not as respondents but as complainants. Let's get some clarification on what this decision actually says and doesn't say and/or negotiate it. Then we won't have any issues with non-quota holders.

    Mrs. Rose-Marie Ur: I was reading an article in Ontario Farmer, and a couple of federal bureaucrats stated in this newspaper clipping that the non-quota holders were not part of this ruling and that they weren't subject to the decisions that were made.

Á  (1140)  

    Mr. Rick Phillips: Well, I'm glad you were listening. I said “even if” this decision applies to the commercial--

    Mrs. Rose-Marie Ur: I try to listen, sir, most often.

    Mr. Rick Phillips: Okay. I'm sorry about that, ma'am.

    This decision basically says that even if some producers never make payments financed by virtue of government action, the commercial export mechanism that is currently in place is found to be WTO-inconsistent. So even if you have non-quota holders, that current CEM mechanism is WTO non-consistent.

    Now, it may be that you could think of some way to develop a system that would consist of non-quota holders that might be WTO-consistent, but it's certainly not the current one, and I would suggest that it would be at risk.

    Mrs. Rose-Marie Ur: Do you have any information on the income of a dairy farmer who is under the present system, the supply management system, versus the non-quota system as to the bottom line at the end of the year?

    Mr. Rick Phillips: No, I don't have any information on that.

    Mrs. Rose-Marie Ur: That wouldn't be with DFO?

    Mr. Rick Phillips: We know very little about non-quota holders, to be quite frank; they were out of the system.

    Mrs. Rose-Marie Ur: As well, gentlemen, is the United States one of the main exporters...for our Canadian dairy products?

    Mr. Rick Phillips: Yes, we get a fair bit of import from the United States.

    Mrs. Rose-Marie Ur: Now, New Zealand has obviously been upset with what has been going on with this situation. Are we a major threat to the New Zealand dairy farmers under this?

    Mr. Rick Phillips: Well, they claim that we're a $35 million threat. They would claim that our production on the world market will somehow--

    Mrs. Rose-Marie Ur: The Americans claim that too.

    Mr. Rick Phillips: Exactly, and that would be a question for the arbitration panel that would proceed after April 10, I guess.

    Mrs. Rose-Marie Ur: Thank you, Mr. Chair.

    The Chair: Yes, Mr. Wilson.

    Mr. David Wilson: If I could, I'll just add one point of clarification.

    In the context of this whole proceeding, my impression--and I think this is widely accepted--is that the case was brought more as a test case against Canada with a view to the situation in Europe than with respect to what Canada is in fact doing internationally in terms of trade volumes. Again, I think that this speaks to the need to clarify some of these issues at the negotiating table so you have a clear set of disciplines and so people know what it is they negotiated at the bargaining table and what the rules actually are as opposed to a situation of finding out after the fact that the rules are quite different from what you initially expected.

    The Chair: Mr. Borotsik.

    Mr. Rick Borotsik (Brandon—Souris, PC): Thank you, Mr. Chairman.

    This is just part of the same thing, which was in the direction of my line of questioning. It's not the $35 million that New Zealand seems to be saying has impacted their industry, it's the fear that with Canadian milk on an export market at subsidized levels, it would impact their total market in New Zealand. In fact, it's not the $70 million in retaliation payments from both the U.S. and New Zealand that's the issue, and you said that in your own presentation.

    Would you confirm that their issue is the fact that if Canada continues to export what has been ruled as a subsidized export in the world markets, it will impact all their markets throughout the world? Is that not really what the issue with New Zealand is?

    Mr. Rick Phillips: Yes, I think that's right. I think they were very concerned that the Europeans were considering developing a similar mechanism.

    Mr. Rick Borotsik: Absolutely, and that would impact their export in milk, which is quite dramatic.

    Mr. Rick Phillips: Yes, that's what they were concerned about. But I point out, and I guess this is the issue, that in finding us WTO-inconsistent, this ruling was so broad that in fact even New Zealand might be captured.

    Mr. Rick Borotsik: You said in your presentation that the $70 million is not the issue here. However, you did say--and it's true, we don't export a lot of milk into their marketplace, obviously--it could affect sectors other than dairy. That $70 million could be impacting other agricultural commodities or for that matter products outside of agriculture commodities. Are the Dairy Farmers of Canada quite pleased with being able to impact other commodities that are being exported into their world market?

    Mr. Rick Phillips: Actually, I'd say we're a bit concerned because we're into negotiations that are continuing.... We're in a situation, as I pointed out, where we're asking New Zealand and the United States to accommodate potential exports that are already in the system. We're also in a position where New Zealand and the U.S. do have the potential to go to arbitration and to retaliate.

Á  (1145)  

    Mr. Rick Borotsik: Are you not concerned, Mr. Phillips, that you could impact commodities other than just dairy? We have other agricultural commodities.

    Mr. Rick Phillips: Our view is that we should comply, and this is what New Zealand and the United States want us to do. Complying, from the perspective of New Zealand and the United States, would be to shut down the whole commercial export market.

    Mr. Rick Borotsik: You had indicated that the export market, the commercial export milk that the dairy farmers of Canada do export, is about 5% of your total production. That was a comment you made. Is that correct?

    Mr. Rick Phillips: CEM had risen to just under 5%.

    Mr. Rick Borotsik: So quite possibly 5% of your total production is now substantially impacting other commodities outside of dairy. Is it worth that 5% if commercial export milk impacts other commodities, or would it be better not to export that 5% and just continue with your domestic production?

    Mr. Rick Phillips: We would agree with that.

    Mr. Rick Borotsik: Well, you didn't, needless to say, until the WTO ruled; then you appealed, and now they've ruled again. Before that, obviously the 5% was very important to the Dairy Farmers of Canada.

    Mr. Rick Phillips: Let's make it quite clear: there's nothing in the WTO that says you cannot act in a WTO-consistent way. We have rights and obligations. We are simply exercising the right to export. Now that it's been found inconsistent, that's a different matter. We believe that we should comply.

    Mr. Rick Borotsik: Yes, we should. They've ruled that. I go back to my question, was the 5% for the CEM worth the DFC's gamble in that particular case?

    Mr. Rick Phillips: DFC left it up to the individual producer to make that choice, and it was the individual producer who decided whether or not it was worth his while to export.

    Mr. Rick Borotsik: Well, you're the director of policy, and it's part of the policy of the Dairy Farmers of Canada to open export markets. Was that not the policy of the DFC?

    Mr. Rick Phillips: No, our policy was to allow producers to make the choice or at least to have the option of making that decision.

    Mr. Rick Borotsik: But I'm sure that as director of policy, you sat down and said, hey, here's a market; we can get into the export market and increase production. Is that not part of the policy process you went through in order to develop the export markets? But did you not at some point in time say, if only 5% is going into the export market, is there something else we're jeopardizing here that is maybe not worth that 5% of increased production?

    Mr. Rick Phillips: International dairy markets were not distorted. You would actually see Canadian exports on that market at the price. If you look at the econometric studies economists have done where they talk about world prices, those prices are not too much different from Canadian domestic prices. We're actually curtailing our production on world markets.

    Mr. Rick Borotsik: Here's a simple question, and I don't know the numbers. Can you tell me what the current average price for export milk is compared with the price received for domestic commercial? Do you know what the differential is?

    Mr. Rick Phillips: I think the latest CEM prices were in the $20 to $25 range per hectolitre, and--

    Mr. Rick Borotsik: That's for export?

    Mr. Rick Phillips: Yes, for export, and domestically we would maybe get around $60.

    Mr. Rick Borotsik: So your export CEM price was $25 per hectolitre and your domestic was $60.

    Mr. Rick Phillips: That's correct.

    Mr. Rick Borotsik: Thank you.

    The Chair: Thank you, Mr. Borotsik.

    Mr. Phillips, before we go on to our next questioner, when Mr. Plamondon was questioning you, you mentioned to him that the working group had removed you as a member. What were the reasons for that? Are the Dairy Farmers of Canada no longer part of that group? And, if I might ask for the benefit of this group here, would you tell us who the members of that group are? If the Dairy Farmers aren't, then goodness gracious, who is?

    Mr. Rick Phillips: I think the reason we were no longer a part of the process is that members of the committee determined that this would in fact be advice to ministers and that it would be inappropriate for us to sit on a committee that was providing advice to ministers.

    With respect to who's on the group, there are representatives from international trade, agriculture, customs and revenue, and finance.

    The Chair: These are all departmental people?

    Mr. Rick Phillips: Yes.

    The Chair: Has it always been that way?

    Mr. Rick Phillips: Yes.

    The Chair: Should it be that way?

    Mr. Rick Phillips: Well, in terms of developing technical recommendations, I think that at that stage it was appropriate, yes.

    The Chair: We'll go on to Mr. Anderson for five minutes, please.

    Mr. David Anderson (Cypress Hills—Grasslands, Canadian Alliance): Thank you, Mr. Chairman.

    Well, it looks like the PCs have punched a hole in the supply management bowl and the Liberals are letting it fill with water.

    I have two questions. Are exports essential to the survival of the dairy industry in Canada, and are they essential to its growth?

Á  (1150)  

    Mr. Rick Phillips: Basically, we have to be a little tighter in actually running the system. From an administrative perspective, it is more convenient to have access to the export market. It is not critical that we have access to the export market in order to have supply management, because supply management is a domestic program.

    Mr. David Anderson: What do you see then as the global potential of your industry? Your domestic market is basically mature in terms of the development of the dairy products, the cheese, the milk. How do you see your industry growing and developing over the next decade or so if you're saying it's not all that necessary to be into the export market?

    Mr. Rick Phillips: In addition to being a lobby organization, we're a promotion organization. In fact, those promotional efforts have been successful in expanding the domestic market. We do have a large and increasingly ethnic population that could come under the spell of Canadian dairy products, if that were possible. So we have had growth in the market. In fact, we've been expanding MSQ, which has been the domestic market for many years now, since the mid-1990s.

    Could you repeat the rest of the question? I'm sorry, Mr. Anderson.

    Mr. David Anderson: I was talking about how you see your industry growing. If you're going to stay domestic and you're talking about developing a domestic market, do you think you can maintain a healthy industry without having a substantial amount of your product exported around the world?

    Mr. Rick Phillips: Exports are not critical to the maintenance of supply management. If you give producers the choice, they'd much rather have a higher but stable domestic price than have exposure to world prices that are unstable.

    Mr. David Anderson: You've had some challenges from these blends, the chocolate milks and those kinds of things. Are you actively developing products that we can export that would fit under those guidelines as well? Are you finding markets for your products to try to deal with those situations and using some of your product in those combinations that would allow you to export into other areas?

    Mr. Rick Phillips: There is significant potential, and we might be going this way. If you look around the world, producer prices are quite low, but in fact consumer prices are pretty much the same wherever you look, and in some cases they're higher than in Canada. It may be that we may be able to price certain products out at domestic price and fill niche markets that would allow those exporters to provide reasonable returns to producers back home.

    So there is potential there.

    Mr. David Anderson: Rose-Marie brought up an interesting aspect, and that was the non-quota holders. You basically fought the trade action against you right to the last minute. If I hear what you're saying this morning--and I have the motion that the dairy farmers passed, suggesting that all milk be marketed under the regulated marketing system--you're asking the non-quota holders to basically give up their system. Yet when you gave your report here, you said you want further clarification and you think that some of this decision may be reversed over time by other decisions of the appellate court.

    You fought to the end to maintain your system. Are you suggesting they should just fold their system into you and not wait until those further decisions are heard?

    Mr. Rick Phillips: They, in fact, don't have a system.... Well, okay, there is one system, a commercial export milk marketing system. That is a system that has been found to be WTO-consistent. If they want to develop a different system, I guess the Government of Canada has determined they would be prepared to defend that.

    But I would suggest we're probably much better off not defending. We're probably much better off attacking and making sure this decision gets modified in a way that allows for those exports in a WTO-consistent way.

    The basis for the decision that these are defendable is that they're not mentioned in the report. But I'll tell you, it would be a real uphill battle for them to go over and win this case. Quite frankly, we're tired of being defendants, we want to attack.

    Mr. David Anderson: I just have two other questions.

    Have you approached the provincial government in Ontario to deal with the situation regarding the non-quota holders?

    Second, earlier you made a comment to Rose-Marie that seemed to suggest we should go as a complainant to the WTO against non-quota holding farmers in Canada. Were you suggesting that? Did you say we should go as a complainant and get this resolved or clarified?

    Mr. Rick Phillips: I guess the first answer is we have nothing with respect to the Ontario government, other than that I assume they're aware of the motion we passed to date.

    With respect to the non-quota holders, no, we're not going to complain against non-quota holders. Basically my position is that this decision is so far-reaching it's going to be very, very difficult for them to distinguish Canada from other countries.

Á  (1155)  

    Mr. David Anderson: Okay. I just wanted to give you an opportunity to clarify that.

    Mr. Rick Phillips: New Zealand, for example, has payments. They have a mechanism that allows those payments to be financed. The United States has payments. They sell their milk for less than their cost of production. Everybody has payments and everybody has a lot of governmental action. So quite clearly they had a tough time distinguishing Canada from these other systems.

    The one thing they have going for them is nobody has challenged them, and until you're challenged you're WTO-consistent. So let's challenge these countries that have systems that may, in light of this decision, have become WTO-inconsistent. I think that would jump-start the realization that they're going to have to do something about changing the rules in a way that makes much more sense than this decision.

    Mr. David Anderson: You suggested we should challenge the export processes of others and get clarification. Do the Dairy Farmers and the supply management industry have any suggestions as to how they may be able to develop an export component to their industry, in light of the ruling that has been made?

    I understand you have some access now but--

    Mr. Rick Phillips: Yes, system-level.

    Mr. David Anderson: Sure. Do you have any suggestions on a system or changes that might be made that would give you the opportunity to export your product?

    Mr. Rick Phillips: As I pointed out, there is opportunity for processors to participate in export markets through the import and export program or duty draw-back programs. You can also export out of domestic classes. There are some exports out of classes 5(a), (b), and (c), for example, because they're not contingent on export.

    But it's my strong belief that we should go back before we actually run and jump and develop a new system that presumably will be challenged. The one thing I can tell you is if non-quota holders choose to develop a system to export it will be challenged; if we develop a system it will be challenged. So let's go and find out just where the parameters are, only let's find that out by being complainants as opposed to defendants.

    The Chair: That's all, Mr. Anderson.

    Before I go to Mr. Binet, every industry seems to have terms they use. You talked about short-run marginal costs versus average total cost. Give us some explanation on that because we may not be thinking of the same thing. Let's get a balanced view on this.

    Mr. Rick Phillips: Those are actually economic concepts. They arose as an issue in this case because the appellate body decided they would choose the domestic reference price or reference in order to determine whether there was a payment by looking at average total costs.

    Average costs are basically all your cash costs--your return on labour and your return on the equity you have invested in your farm--contrasted with marginal cost. Marginal cost is cash cost without any assignment of fixed cost. I've no doubt introduced a few more terms that I'm sure people might ask about, but feel free.

    The Chair: I'm not sure if we're totally clear on that yet, but nevertheless we have a lot of things....

    I must move on to Mr. Binet for five minutes.

[Translation]

    Mr. Gérard Binet (Frontenac—Mégantic, Lib.): Thank you, Mr. Chairman.

    Good morning, Mr. Phillips and Mr. Wilson. Mr. Phillips, I was looking at your title: Director of Policy and Government Relations. With all of the turmoil in the dairy industry and this refusal, how long do you think it will take the government and the dairy industry to come up with a new approach to exports?

  (1200)  

[English]

    Mr. Rick Phillips: The sooner we start challenging the sooner we'll be able to determine the right answer to that question. If we were to try to develop an export mechanism now I think it would fail if it went to the WTO, so we need some clarification. It behooves us to move forward with complaints as soon as possible.

[Translation]

    Mr. Gérard Binet: How much time is a producer who hears that looking at? Six months, a year?

[English]

    Mr. David Wilson: Maybe it would help to clarify that we have two issues here. One is the issue of compliance with this decision. The second is the issue of what Canada may do over the medium to long term in response to this decision and other circumstances to deal with dairy exports.

    On the first issue, there have been discussions between Canada, the U.S., and New Zealand. The clear signal is that the U.S. and New Zealand aren't keen to bring retaliatory proceedings, provided they are satisfied Canada's in compliance with the ruling. The non-quota holder issue is a key sticking point in that discussion. If that issue can get resolved over a period of several months--and we're not talking about more than that--the issue of compliance should get ironed out.

    Then there's the other issue of the potentially new mechanisms or new approaches, etc. As Mr. Phillips pointed out, it's a little early to say exactly how that might be done. Part of the difficulty is that this very far-reaching ruling obviously limits Canada's scope in the dairy industry to develop new export mechanisms, particularly in the short term. That's why there's some need to get greater clarity, which will in turn make it possible to move forward and develop new opportunities.

    Mr. Rick Phillips: As David said, if we do not move to comply in the way the United States and New Zealand feel we should comply, we will be immediately before an arbitration panel and they will be looking at retaliation.

[Translation]

    Mr. Gérard Binet: Let's move on to my next question. I have held discussions with dairy producers in my region. Of course, when decisions like that are made, there is a very strong reaction. I always talk to them about business alternatives. You have to know how to shift gears rather quickly.

    In your opinion, what would be the best approach for a producer to adopt in order to be able to export and develop new markets? What could I tell my producers? What new approaches should they adopt to increase their exports and develop new markets?

[English]

    Mr. Rick Phillips: In terms of developing new markets, they should look for markets that return a price that is close to the domestic price. There are markets that exist. We are told there are markets where we can sell milk at the domestic price and we will achieve access to a particular product or market that will return that value.

    If you look at retail prices around the world they're quite expensive, so somebody's making the money. We believe it's the middlemen who are making money. If they want to give us a bit more of that, it's quite probable they could access certain niche markets and make a profit.

[Translation]

    Mr. Gérard Binet: Thank you.

[English]

    The Chair: Are you finished, Mr. Binet?

    Mr. Gérard Binet: Yes.

    The Chair: We'll move on then to Mr. Plamondon for five minutes.

[Translation]

    Mr. Louis Plamondon: I listened to Paul ask you a question that was linked to the question I raised earlier, and that takes me back to the strange situation where you were invited to work with a special committee, a committee made up of four important ministers, and you decided not to work with them. Have you lost confidence in those four ministers? Is it because you don't have confidence in the Canadian government? Were you betrayed in some way, shape or form? Leaving the table is usually a sign of a lack of confidence.

  (1205)  

[English]

    Mr. Rick Phillips: We left the table because the committee members made it clear this was a committee that was set up to provide advice to ministers; we would not have access to the final report; and we would not be able to debate the recommendations in the final report. So in that sense I don't think we ever were a part of the committee. That's where we are on that problem.

[Translation]

    Mr. Louis Plamondon: So it is a bogus committee. It is window dressing.

[English]

    Mr. Rick Phillips: Well, it was a government committee, and we weren't a member of it. We might have been there to provide some sort of consultation or input to that committee's deliberations, but we certainly weren't a full member of the committee. That became clear to us in December.

[Translation]

    Mr. Louis Plamondon: On the eve of WTO negotiations, are you concerned when you hear about a secret document left lying on ministers' desks? Do you remember the secret document that was made public last August? It stated that during negotiations concessions will have to be made and that supply management will perhaps be on the table during the next round of WTO negotiations. Does it worry you to know that senior officials have already written texts like that and are already considering the possibility of making concessions before the negotiations even begin? Are you concerned with the government's commitment to truly defending supply management?

[English]

    Mr. Rick Phillips: We always take instances like that seriously and approach the government and seek what assurances they are providing. Then it's up to us to assess whether or not those assurances are adequate.

[Translation]

    Mr. Louis Plamondon: Have you read the secret document? It made all of the newspapers. It was on the front page of La Terre de chez nous, a newspaper for Quebec dairy producers.

[English]

    Mr. Rick Phillips: I'm aware of the contents of that particular document.

[Translation]

    Mr. Louis Plamondon: I will send it to you.

[English]

I will send it to you.

    Mr. Rick Phillips: Okay, great.

    The Chair: Monsieur Plamondon, are you finished?

[Translation]

    Mr. Louis Plamondon: We are not on the same wavelength.

[English]

    The Chair: Mr. Phillips, if I might, would you suggest to us this morning that the dairy farmers of Canada, whom you represent, are satisfied with the kind of representation they're getting from the official body, the Dairy Farmers of Canada, on some of these issues pertaining perhaps to the question just put to you? After all, this is an industry that Canada is preparing and working to defend, a very good industry, which I believe the government has helped to defend. I think we all agree that we want to save this industry.

    Do you feel you have been empowered to do what you need to do to bring satisfaction to the rural community today?

    Mr. Rick Phillips: Without question, we represent all dairy producers in Canada. We've just come out of an annual meeting where we developed a policy statement agreed to by all dairy producer representatives in Canada. I don't think there's any question about whether or not this organization represents milk producers.

    The Chair: Okay.

    Mr. Hilstrom, for five minutes.

    Mr. Howard Hilstrom: Thank you.

    On behalf of dairy farmers or the individual farm family out there, I am hoping that the official body, DFO, is going to assess accurately and realistically the situation the dairy industry in Canada is in at this moment.

    We know that the genie of supply management was let out of the bottle in 1995 with the signing of the Uruguay Round of trade talks and the repeal of article 11. We know that other countries have payments or subsidies for their dairy commodities, for instance. We have subsidies for our grain exports, in the sense of domestic subsidies—not for exports directly any more. Many agricultural commodities get a subsidy of some kind or the other. And, of course, we know that the middlemen are always taking out what seems like too much of it.

    But as of 1995, the dairy industry in Canada has been slowly inching its way into the Canadian agricultural system. This is where the question comes out. Do you appreciate that agriculture around the world became part of a trade system and trade rules started to be set up as of 1995? With this WTO ruling from New Zealand and that, we've had the restaurant association of Canada and consumer groups...and this committee has started hearings.

    So do you appreciate or believe that Canada has been embarking on a national debate over the future of supply management? Do you think this is what's happening right now?

  (1210)  

    Mr. Rick Phillips: I'd like to point out that we dairy producers of course don't get subsidies from the taxpayer.

    Dairy producers want to receive a proper return from the market, which I think we get. We would not dispute that the WTO agreement would benefit from clarification clearly allowing producers to act collectively to offset market forces, which result in most producers—not just producers of our commodity—not getting the returns they should get.

    Whether that's a debate or not, I'll leave it to you.

    Mr. Howard Hilstrom: As for the rest of the agricultural commodities in this country, I don't have the figure right in front of me, but Lyle Vanclief, the minister, put in a newspaper article that we export about $50 billion plus of these commodities. Of course, these exports earn a lot of hard currency, which comes back into this country and pays for health care and education and all of the other things we need to have in this country.

    My concern is that dairy farmers not be told through their leadership that they are able to separate themselves 100% out of the overall context of Canada, and our domestic and international responsibilities. I'll let you restate this if it's true, but I guess the question is...you've said you don't want to be part of any trade talks coming up, or you don't want any changes to supply management at all other than having some way of exporting, which is very secondary.

    Maybe this isn't a fair question, Rick, because you already mentioned there are other people who deal with trade more than you do. But this debate is going to go on, and I'm concerned that the DFO leadership is going to take a hard-nosed position that's going to leave the dairy farm worse off in the end than if the leadership had been willing to take the position they're willing to negotiate on these issues in the greater context of international trade and other commodities in Canada.

    Do you have any comments on this? It's kind of a rambling statement, but this national debate is happening and we're participating in it today. I want to see if the DFO is going to participate and look at the long-term interest of dairy farmers.

    Mr. Rick Phillips: I'll correct you. I'm not with the Dairy Farmers of Ontario but the Dairy Farmers of Canada.

    Mr. Howard Hilstrom: When I said DFO I meant DFC.

    Mr. Rick Phillips: That said, the government's policy is to support supply management. Supply management rests on three pillars, one of which is adequate border measures. We would expect that the government would negotiate, and the government assures us they will negotiate, in a way that retains the border measure aspect of supply management, which will allow us to operate a domestic system to the benefit of not only our producers but also to Canadian consumers.

  (1215)  

    Mr. Howard Hilstrom: But do you appreciate there are other forces working on supply management, like the Georgian Bay milk producers, the Canadian Restaurant and Foodservices Association, and the Consumers' Association and of course outside influences...? Do you see the Government of Canada being be able to resist those forces on behalf of dairy farmers and the family farms?

    Mr. Rick Phillips: Well, we're a lobby organization, and we expect to have a healthy debate. This is a democracy.

    The Chair: Okay.

    Mr. Duplain for five minutes.

[Translation]

    Mr. Claude Duplain (Portneuf, Lib.): I want to make sure I have got this right. You just said that the government is working to save supply management. When Mr. Plamondon asked you if you thought the government was working in this direction, you said it would be up to you to do an assessment. Do dairy producers believe the government when it says that it wants to maintain supply management or are they skeptical?

[English]

    Mr. Rick Phillips: We think that more could be done, particularly with the imports. Some of these imports are coming in for reasons we think are pretty silly.

    I guess the example would be butter oil. Butter-oil sugar blends are a substitute; they're used as a substitute in ice cream. On the one hand, you had DFAIT negotiate tariff lines that would cover and actually restrict the importation of butter substitutes. But on the other hand, in another department you have somebody who defines butter substitutes in a way making it almost impossible for butter-oil sugar to be captured by this. This type of nonsense has to stop, and there has to be some consistency within departments on the intent of government policy.

    Yes, we have problems with this. That said, our job is basically to keep the government in line with respect to trade and with imports, reminding them when producers think they are straying away from those objectives.

[Translation]

    Mr. Claude Duplain: I want to go back to the question of the working group, because you left the table, and I think that the working group was something that the dairy producers were really counting on. What should we expect from the report? What do you expect from the report that will be coming out?

[English]

    Mr. Rick Phillips: I'll wait for the report, quite frankly.

    What we're expecting is that this group will do what the ministers mandated it to do, which is to provide workable solutions to the issues we've raised. Those issues related to butter-oil sugar blends, pizza kits, and flavoured and chocolate milks, for example.

[Translation]

    Mr. Claude Duplain: Has this working group been mandated to examine other specific issues?

[English]

    Mr. Rick Phillips: Yes, compositional standards and labelling.

    We'd be happy to bring some of those issues to this table, if you'd like. For example, you often go down and see popcorn that says it's “buttered” popcorn. If you look very closely, you'll see in print, “may be artificial”. Then you say “butter flavoured”.

    If something says it's “butter flavoured”, we'd like it to have butter in it. A lot of these products don't. And if it doesn't have butter in it, we'd like the labelling to inform consumers that it doesn't have butter in it. That could be by way of “artificial butter flavour”, perhaps, but only if the “artificial” is visible, and oftentimes it's not.

    These are the types of issues we have to deal with that are ongoing.

    Mr. David Wilson: Mr. Chairman, if I could add one additional point in terms of the role of DFC at the working group, it's not as though DFC went storming out of a meeting and said it's not participating any more. It's more the case that the discussions took place, meetings took place, and then the next step was one that in the view of departmental officials had to be an internal matter. So DFC was basically being told its role would be at an end.

    That's how that came about, just for clarity. It's not as though DFC participants walked away from the process.

    The Chair: Okay, we're finished with Mr. Duplain.

    Do any of you gentlemen have a question?

  (1220)  

    Mr. David Anderson: I have two.

    The Chair: Five minutes.

    Mr. David Anderson: Yes, five minutes is fine.

    You had mentioned earlier that there's lots of opportunity to develop processed products. I may be wrong on this, so if I am, I'd like to be corrected, but some of the information I have is that we're running at our WTO-established export levels with cheese and the other product designation, as well as with things like butter and skim milk.

    Is that true, or is that information incorrect? If it's true, we have a problem in being able to develop a further market, expand the market for dairy products in Canada.

    Do you know that? If you don't, that's fine.

    Mr. Rick Phillips: Well, I think DFAIT will be here and you can ask them what the actual numbers are for this particular year. I understand we have some room in some categories and no room in others. But that wasn't what I was talking about. I was talking about markets that would be not be WTO-inconsistent markets.

    You're allowed to subsidize a particular amount of export, and this is what you're referring to now when you're talking about those particular product categories. But there are still other opportunities for non-subsidized exports. I was suggesting we were told there are niche markets available at prices you find in the domestic market.

    Mr. David Wilson: If I could just add a point there, going back to this long history with the dairy dispute before the WTO, one point that many people forget is that in the earliest panel decision, the panel agreed with Canada that the special classes 5(a), (b), and (c) were not export contingent. So exports that would come out of those domestically oriented classes would not run afoul of the WTO rules.

    Nothing has changed to alter that situation, so that is a factor that speaks to at least some degree of flexibility, but obviously not as much as the Dairy Farmers of Canada would like, nor, I believe, as the Government of Canada would like.

    Mr. Rick Phillips: Could I just add a little bit there?

    You're talking at the producer level, as well. At the processor level, the level of import for re-export program exports approximated the CEM level. What was happening in terms of exports is that people were using domestic milk; they were using CEM milk; they were using the import for the export market. So they have these channels through which they can obtain imports with which to export.

    I'm sure DFAIT could probably provide you with better numbers on that.

    Mr. David Anderson: I just want to go in one other direction, and that has to do with trade issues as well. You're the director of policy. Leaders in some of the farm organizations representing you have really been trying to tie your supply management system to the Canadian Wheat Board and its marketing system. I see that there are some big differences in terms of the government financial backing the board gets. They have an entirely closed financial setting in their dealings. They have massive producer dissatisfaction with their system, at least approaching and probably passing 50%. They are overseen and controlled by the minister's department. The only similarity I see between them right now is that they're being subjected to trade challenges, which other areas are as well.

    As director of policy, do you think it's wise for your supply management system to tie itself that closely to that mandatory wheat marketing system?

    Mr. Rick Phillips: I wasn't aware that we were.

    Mr. David Anderson: Okay.

    Mr. Chair, that's all.

    The Chair: Howard.

    Mr. Howard Hilstrom: Could you explain to me why, after this ruling came down, the price of quota--I saw reports--jumped significantly? Could you explain why that would happen? It would seem that it should go the other way.

    Mr. Rick Phillips: There are a couple of things with respect to quota. When you have an export market, the research would now suggest that quota value is tied to the export market in the sense that if you can export, you can buy quota, and producers are basically indifferent as to buying quota or exporting. When you close off the export market, then of course quota becomes the next best market, even though that next best market perhaps provides a lower return than CEM.

    One of the things supply management does is provide price signals to producers at the margin. Once you get past quota, you know what the domestic market is willing to pay for new milk, and it's not a lot. There would be increased demand for quota, and that would be why quota value would rise once that CEM opportunity was gone.

    Now, let me say one thing about quota value. My sense is that it's gone up fairly recently. I think it's gone up mostly because of changes in how banks are financing quota. It used to be that they would finance it for a period of five to seven years, but now we hear that they're financing quota over 15 to 20 years. This also has the effect of raising the price of quota.

  (1225)  

    Mr. Howard Hilstrom: This is maybe just a little off our main topic here. I have lots of neighbours--or x number, anyway--who are involved in supply management: dairy, turkey, and the other supply management commodities. How come in Quebec it's around $30,000 for a piece of quota, in Ontario it's around $25,000, and in Manitoba it's around $16,000? If this is a kind of national system, how come the quota isn't of more equal value? Is it simply that this quota is reserved for Manitoba and that there isn't that much demand for it, or what?

    Mr. Rick Phillips: I think that is the case. The quota is basically provincial. We've had some attempts to develop pool quota exchanges and a national quota exchange, but provincial governments or producers are not quite there yet. That's why you have differences among the provinces.

    Mr. Howard Hilstrom: I think that's enough.

    The Chair: We'll have one more question from the Alliance, then we'll move over to the Liberal side, and then we'll conclude.

    Mr. David Anderson: This is just a follow-up to Howard's question, and that is, do you think it's a healthy development that the bank financing and extended credit terms people are getting on the quota are driving up the price of quota? Do you see that as a healthy development for long-term sustainability in your industry? Basically, what's happening is that better opportunities are being capitalized into higher costs for people who are trying to buy in. Is that a good development, do you think?

    Mr. Rick Phillips: Personally, I don't view it as prudent for banks to lend money on very long-term propositions. It would be better if it were back to the normal five to seven years.

    The Chair: Mr. Duplain, do you have any further questions?

[Translation]

    Mr. Claude Duplain: Earlier on, Mr. Borotsik asked if producers should be focusing less on exports and more on domestic markets and inputs. You talked about production for exports. It is only 5 per cent. I do not know which one of you did not agree; I missed a bit there. I would like you to go back over what you said.

[English]

    Mr. Rick Phillips: I would be pleased to clarify.

    Supply management is a system that is focused on domestic markets; that's where we believe we get our best returns, and that's where we'll continue to focus our efforts.

[Translation]

    Mr. Claude Duplain: More than on exports?

[English]

    Mr. Rick Phillips: Yes, sir.

    The Chair: If there is no one else, I'll have the concluding question or comment.

    You state in your printed document this morning that the recommendation that came down by way of motion was that all milk must be marketed under the regulated marketing system. This is the feeling the Dairy Farmers of Canada has. How do you reconcile that with the fact that, I know, in Ontario--I can't speak about the other provinces--there is an export contract exchange, where these hundred farmers and perhaps others have been marketing? I have the numbers here for the month of November. How is that handled now, given that's what you propose to do? Obviously, it must not be happening now. How do you propose to get these non-quota holders to market their milk or at least get the milk recognized through the system in one way or another? How do you propose to do that, and what is going to happen with this exchange?

    Mr. Rick Phillips: In terms of the exchanges, the bulletin board, if that's what you're talking about, closed down.

    The Chair: Is that closed for all intents and purposes for Parmalat and all the others who were partners in that?

    Mr. Rick Phillips: That is correct. There are no new contracts being formed in Ontario.

    The Chair: What is happening then to those contracts that had been signed by any one of these given companies and the farmers? What has happened to those contracts?

    Mr. Rick Phillips: This is what Canada is in the process of negotiating with the New Zealanders and the United States. They want to have those contracts filled for the time being, at least until the next dairy year, which would be August. Mind you, that means that for shipments of milk we're probably talking in terms of January or February and then the product afterwards. The intent is that Canada be within its WTO subsidy reduction commitments for the next dairy year.

    With respect to those producers, if you can afford to export at those prices, you can certainly afford to buy quota. And there is nothing preventing them from buying quota.

    The Chair: So these people, in any event, are still producing milk, but if the person who had contracted for the milk is not to handle that milk, where is this milk going? What truck is picking it up? I think there are some very simple questions here. The fact is, we have these people, and this is what, we believe, has in many ways precipitated the kind of problems we have with our challenges.

    We can't have it both ways.

    Mr. Rick Phillips: If you're speaking to the actual mechanics, I think you'd have to ask DFO, but my understanding is that they are picking up milk for contracts that were registered with the third party.

    Remember, government was not involved in these mechanisms. It was Deloitte & Touche that ran it. Deloitte & Touche would tell DFO who had contracts, and DFO would pick up the milk and transport it. If that product cannot be exported, and you're talking short term...it is my expectation that the product will be exported in the short term. In the longer term those producers will have to make the decision whether to buy quota and enter into the domestic market or go out of business.

  (1230)  

    The Chair: The concern this committee has and of course as government we have is that if we're here to protect a system but the producers themselves are in violation of an agreement, then basically we have a problem and we need to resolve that. That has to be resolved by the dairy farming community itself in large measure. It's pretty hard to go up to the table to negotiate when we in fact know that we're in violation of some part of that agreement--namely, marketing into a market at under a domestic price.

    Mr. Rick Phillips: I think it is our position that all producers should be compliant with the WTO decision or whatever. Well, the system certainly has to be compliant with the WTO system. Producers do not have WTO obligations, governments do, and that'll be enforced at the governmental level.

    The Chair: Okay.

    I think we have to conclude this, but go ahead if the question is very short.

    Mr. Howard Hilstrom: It is very short, and it's just to make sure we're 100% clear.

    The challenge wasn't in regard to non-supply management producers exporting milk. The challenge from New Zealand and the United States was to the supply management system, exporting. That's very clear; that's what it was about.

    We had New Zealand in here informally, their government people and ambassador, and they said that they don't care that we have supply management inside Canada; they don't want us exporting that system to other parts of the world and other parts of the world taking that up.

    Those are my last comments. If it's true what I said, then I guess you don't need to comment too much more.

    Mr. Rick Phillips: I do need to comment, because it's not quite true what you said. Supply management, as noted by the appellate body, was not a part of these proceedings, was not at issue in these proceedings.

    Mr. David Wilson: The status of non-quota producers was part of the package that was before the panel and the appellate body in this compliance proceeding. Certainly from a U.S. and a New Zealand perspective, they were part of the problem. So their concern, certainly in terms of the volume, the vast majority, was in respect of quota-holding producers, but their challenge extended to the non-quota-holding producers. That remains a concern to the U.S. and New Zealand.

    Mr. Howard Hilstrom: The ruling that came down more or less exempted those. They said that they weren't going to rule on the exports that those 100 farmers were doing, they were just ruling on the exports that were coming out from the supply management side.

    Mr. David Wilson: I think your second characterization was a little more accurate. They said they weren't ruling on the non-quota holding producers. They basically had found that Canada was not in compliance in respect of the CEM mechanism as a whole and they didn't need to go further than that, and so there is a bit of a debating point as to where the non-quota holding producers fits into this.

    There are some people who are of the view--and this has been the view expressed by the Government of Canada--that there's nothing in the decision that would suggest that the export activity of the non-quota holders is contrary to the WTO. There are other views, which frankly I share--and it appears the U.S. and New Zealand take this view--that would suggest that non-quota holding producer exports are at risk.

    That's a real issue, and it's part of the reason that the Dairy Farmers of Canada and the provincial commodity boards across the country have said, look, let's address this head on and fix the problem by regulating the system and regulating all production. That's the context of it.

  (1235)  

    Mr. Rick Phillips: If I could add, we would much prefer to spend our resources, and the governmental resources, not in Geneva as defendants before another compliance panel, but to use those resources to challenge the systems of others and to gain clarification of just what is meant by an export subsidy through that mechanism.

    Mr. Howard Hilstrom: Mr. Chairman, I think you indicated that we would possibly be having this Georgian Bay producers association, whatever they call themselves, appear before the committee and give that point of view.

    The Chair: There's another meeting on this matter, actually. The Department of Agriculture couldn't be here today, so there's another meeting on this. We'll get to another dimension of this.

    If that's all, I'm going to call the end to our questioning. Thank you very much, Mr. Wilson and Mr. Phillips, for appearing this morning. We will perhaps have to call you again some time, but for now thanks for appearing.

    Mr. Rick Phillips: Thank you for your questions.

    Mr. David Wilson: Thank you very much, Mr. Chairman, members.

    The Chair: I would ask members to remain here for a moment. We're still waiting for one member to appear so that we can very quickly deal with a matter of business before the chair.

  (1240)  

---

  (1244)  

    The Chair: We'll reconvene, although some of us never really did leave the table.

    There are a few matters that we need to deal with. First, how do you feel about our lunches? In the past, apparently--and I've checked into this a wee bit--a lot of committees, if they have a two-hour meeting and they run over the noon hour, don't bring in lunch. The cost of the lunch is somewhere around $260.

    I want direction from you.

    Monsieur Duplain.

[Translation]

    Mr. Claude Duplain: In my opinion, there is way too much. There could be less. There are some committee members who need to eat, and we must respect that. But I think the quantity is...

  (1245)  

[English]

    The Chair: Mr. Maloney.

    Mr. John Maloney (Erie—Lincoln, Lib.): It's a nice treat, but I'm not sure it's a necessity. If we were going from, say, 11 o'clock until 2 o'cock, or until 1:30 p.m. perhaps, but if we were going to close right at 1 o'clock, then....

    The Chair: Well, in at least some committees apparently the ruling is that at three hours they bring in food, and at two hours they don't. What do you people feel about it?

    Mr. Anderson.

    Mr. David Anderson: I think agree with Claude that we have too much food, but I think it's a good idea to have it; we can get it.

    The other thing is, I appreciate the beef and ham in the sandwiches instead of that mush that's in them at other times.

    The Chair: Mr. Hilstrom.

    Mr. Howard Hilstrom: Perhaps there's a way to have just some little sandwiches. For instance, at the cafeteria they make up a plate with a simple sandwich on it and a couple of little vegetables or something. I mean, $260 seems like a little too much for lunch. But if they could have sandwiches for, say, $100, that would be good.

    The Chair: Yes, Ms. Ur.

    Mrs. Rose-Marie Ur: I agree that it's nice to have something, but I think it has been extravagant. It's more than I usually eat at lunchtime, but if it's here, I'll eat it.

    The Chair: Mr. Binet, do you have some comment? You're on the justice committee. What do you do over there?

    Mr. Gérard Binet: We work very, very hard and don't eat.

    Some hon. members: Oh, oh!

    The Chair: I opened myself up to that one.

    Mr. Gérard Binet: The truth of the matter is, we normally run only two-hour meetings, and we do not have food.

    The Chair: Okay.

    Ms. Scherrer, what is your experience?

[Translation]

    Ms. Hélène Scherrer (Louis-Hébert, Lib.): We have had lunch twice at the Standing Committee on Environment and Sustainable Development. The first time, we had lunch and it was very good that it was there; the second time, we finished earlier than scheduled and in the end, the lunch went untouched. In my opinion, it is not necessary if we really finish at one o'clock. Then I think people can go and get their lunch somewhere else.

[English]

    The Chair: Does the chair then hear from this group a consensus that we cut down on the cost, that we cut down on the volume, but that we still maintain some sort of a food supply at the table? And then we'll review it as we go along.

    Okay? We'll try that. We can direct our clerk to direct the cafeteria.

    This impacts on what we want to do next. We passed two motions at Tuesday's meeting, and those numbers have been revised. We're going to amend those motions. You have a copy of the amended motions there.

    The reason for that is there's more cost to bringing in the witnesses and of course some cost to producing the report. We have to be realistic about it, and we now have some understanding of what the real costs might be.

    So the first motion would be that the budget adopted on Tuesday, February 11, 2003, be amended as follows:

That the proposed operational budget of the Committee in the amount of $11,900.00 be adopted and that the Chair present the said budget to the Budget Subcommittee of the Liaison Committee.

    (Motion agreed to)

    The Chair: The second motion replaces the second motion made on Tuesday. It says:

That the proposed operational budget of the Committee in the amount of $20,100.00 be adopted and that the Chair present the said budget to the Budget Subcommittee of the Liaison Committee.

    The difference between the two motions regarding the cost difference is $10,100.

    (Motion agreed to)

    The Chair: That's gone very quickly.

    Now we'll move on a motion that's before the committee, made by Mr. Hilstrom. Mr. Hilstrom is proposing that we invite the Minister of Heritage. We can't do it today because she's in Hamilton.

    You've read the motion. Given that we didn't have 48 hours' notice, we can deal with it if we have unanimous consent to deal with it.

    Mr. Howard Hilstrom: I would ask the chair to ask for unanimous consent to see if we can deal with this motion.

    The Chair: Do I have unanimous consent to deal with this motion today?

    Hon. members: Agreed.

    The Chair: Okay, we have unanimous consent.

    Did you want to speak to the motion, Mr. Hilstrom?

    Mr. Howard Hilstrom: Yes.

    I think Parks Canada has come under some criticism over this tuberculosis issue and I think it's only fair that the minister be able to come in and state, on behalf of the government, what the policy is in regard to ecological integrity and explain the fact that there won't be any “culling of the herd inside the park” idea.

    I think it's a question of fairness in addition to enlightening us, for the purposes of our report, to have the minister here. So if she were able to, I think it would be beneficial.

  (1250)  

    The Chair: Yes, Mr. Maloney.

    Mr. John Maloney: I don't take issue with a response from Parks Canada. I'm wondering whether that's of such a magnitude that it would require the minister to be here. Is there someone, perhaps, who is even more knowledgeable who could explain this? I think it's wrong and I think something should be done about it, but I question whether we're targeting the right individual. I'd like to have more information on it, and the reality of the situation is that I'm not sure how much time this specific minister's going to have on Parliament Hill these days.

    The Chair: Does someone else want to comment on the motion?

    Mr. Paul Harold Macklin: I'd simply say that I'm in support of the principle of the motion, because I think there is a balance that is trying to be struck here. And it's a very difficult balance that you're trying to strike between preserving nature in its natural state within the park and yet protecting domestic outside.

    I think one way or the other, you need to get a clear answer and a clear presentation before this committee of what the position is and how it's proposed that they will go forward.

    The Chair: May I ask a question? If the minister is unable to attend, would you accept the best people, on her behalf, who know the issue?

    Mr. Howard Hilstrom: The thing that needs to be spoken to is this. The Parliament of Canada, in years past, before I was here, passed, I believe, some kind of a motion or some other form in the House that one of the guiding principles for our national parks should be ecological integrity. And the policy that arose as a result of that motion in the House is the essence of whether or not you try to manage the habitat and, in the question of disease, whether it's in keeping with that ecological integrity concept that you would cull x number of those animals out of there. And I don't see anybody but the minister....

    Now, I appreciate very much, Mr. Maloney, that the minister has other things that are very important, to her and to the government, but I think we should try to have her here. If there is some gigantic, overriding reason why they couldn't, well, we would have to accept that.

    I would accept an amendment to the motion on the February 27th date that if that was impossible for her, that if there was something else more convenient for her to be doing, that we could work it out.

    I think it's still important.

    The Chair: Yes, Mr. Duplain.

[Translation]

    Mr. Claude Duplain: I agree with Mr. Maloney. Since it is a big department with a host of different occupations, and there are many people with different expertise who work there, it seems to me that I would have preferred to meet first of all with the people who are directly affected by these situations. We are not just talking about the situation in the parks; we are talking about tuberculosis, specific situations, work with other government agencies. Nothing prevents us from hearing from the minister after that, if need be.

[English]

    The Chair: Does anyone else want to speak to it on this side?

    Yes, Mr. Anderson.

    Mr. David Anderson: For the information of some of the members who are new to the committee, we have had officials from Parks Canada in here. We did have in some of the highest-ranking officials at Riding Mountain National Park who, I would suggest, basically made excuses for the conditions that were there. I think we need to have someone at the top who is accountable to come in, and the minister would be the person to do that.

    The Chair: I am going to call an end to the discussion. Perhaps we might want to entertain an amendment to the motion, entertaining the thought that if we cannot, then the most senior person be asked.

    I think we want to accommodate Mr. Hilstrom in doing this, but if we go the other route, if we simply don't get her, we don't get anyone.

    Mr. Howard Hilstrom: The only amendment I suppose I would consider--and I hate to even say this--would be the parliamentary secretary, when we're talking about somebody else. We need a political person in here to talk about ecological integrity and to say why we can't have a cull inside that park.

  (1255)  

    The Chair: Okay. I think we have some reasonable accommodation here. Can we have someone put forth...?

    I hate to be asking for an amendment, but we want to accommodate here, and we won't accommodate if we go amuck the other way.

    Yes, Mr. Maloney.

    Mr. John Maloney: I think the practical outcome of this will be that the parliamentary secretary will be there, but I'm flanked by those who know what's going on at that specific park, so....

    The Chair: Would you propose an amendment?

    Mr. John Maloney: I would propose that amendment, that the parliamentary secretary--

    The Chair: In the event....

    Mr. John Maloney: Yes, in the event that the minister is not available as requested, the parliamentary secretary be requested to attend with senior staff knowledgeable on this item or this issue.

    The Chair: Do we have a seconder for that? I think I saw a hand go up. Mr. Macklin.

    Is there any discussion on the amendment?

    Yes.

    Mrs. Rose-Marie Ur: I don't know whether it's apropos or not, but if we feel that we've met with these officials and we still have some concerns that need to be addressed through the minister, and if at that time we subject a meeting with the minister and we're still uncomfortable with the discussion, as maybe you saw here this morning, we should go one step higher and address it to the minister, so that she is well aware of the situation then.

    The Chair: Hopefully we can accommodate.

    Mr. Maloney, again back to the amendment.

    Mr. John Maloney: Maybe we can conclude that with “as an interim measure.” So it's shown that this is a stop-gap and that we still get the senior person.

    The Chair: Is there any more discussion on the amendment? Is the amendment understood? Can we have a reading of the amendment?

    Well, I think the consensus of the amendment is that if the minister cannot attend, then the parliamentary secretary would attend, and other aides appropriately, who are familiar with...as an interim solution.

    (Amendment agreed to [See Minutes of Proceedings])

    (Motion as amended agreed to [See Minutes of Proceedings])

    The Chair:Thank you very much for your indulgence and your time. And thank you, members, for coming in, because it expedited our getting this done.

    The meeting is adjourned.