AGRI Committee Meeting

37th PARLIAMENT, 2nd SESSION

Standing Committee on Agriculture and Agri-Food

EVIDENCE

CONTENTS

Tuesday, May 6, 2003

Á

1110

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

Mr. Mark Corey (Assistant Deputy Minister, Market and Industry Services Branch, Department of Agriculture and Agri-Food)

Á

1115

Mr. David Chatterson (Director, Multilateral Trade Policy Division, Department of Foreign Affairs and International Trade)

Á

1120

The Chair

Mr. Steve Verheul (Chief Agriculture Negotiator, International Trade Policy Directorate, Department of Agriculture and Agri-Food)

Á

1125

The Chair

Mr. Steve Verheul

The Chair

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

The Chair

Mr. David Anderson

The Chair

Mr. David Anderson

Mr. Steve Verheul

Mr. David Anderson

Á

1130

Mr. Steve Verheul

Mr. David Anderson

Mr. Steve Verheul

Mr. David Anderson

Mr. Rick Casson (Lethbridge, Canadian Alliance)

The Chair

Mr. Rick Casson

Mr. Steve Verheul

Á

1135

The Chair

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

Mr. Steve Verheul

Mr. Louis Plamondon

Mr. Steve Verheul

Á

1140

Mr. Louis Plamondon

Mr. Steve Verheul

Á

1145

The Chair

The Chair

The Chair

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

Mr. Mark Corey

Mrs. Rose-Marie Ur

Mr. Steve Verheul

Mrs. Rose-Marie Ur

Mr. Steve Verheul

Â

1220

Mrs. Rose-Marie Ur

Mr. Steve Verheul

Mrs. Rose-Marie Ur

Mr. Steve Verheul

Mrs. Rose-Marie Ur

Mr. Steve Verheul

Mrs. Rose-Marie Ur

Mr. Steve Verheul

The Chair

Mr. David Anderson

Mr. Steve Verheul

Mr. David Anderson

Mr. Steve Verheul

Â

1225

Mr. David Anderson

Mr. Steve Verheul

Mr. David Anderson

Mr. Steve Verheul

Mr. David Anderson

Mr. Steve Verheul

Mr. David Anderson

Mr. Steve Verheul

Mr. David Anderson

Mr. Steve Verheul

The Chair

Mr. John Maloney (Erie—Lincoln, Lib.)

Â

1230

Mr. Steve Verheul

Mr. John Maloney

Mr. Steve Verheul

Mr. John Maloney

The Chair

Mr. David Anderson

Mr. David Anderson

Mr. Steve Verheul

Mr. David Anderson

Mr. Steve Verheul

Mr. David Anderson

Mr. Steve Verheul

Â

1235

Mr. David Anderson

Mr. Steve Verheul

Mr. David Anderson

Mr. Steve Verheul

Mr. David Anderson

Mr. Mark Corey

The Chair

Mr. Claude Duplain (Portneuf, Lib.)

Mr. Mark Corey

Â

1240

Mr. Steve Verheul

Mr. Claude Duplain

Mr. Steve Verheul

Mr. Claude Duplain

The Chair

Mr. David Anderson

Mr. Steve Verheul

Â

1245

Mr. David Anderson

Mr. Steve Verheul

Mr. David Anderson

Mr. Steve Verheul

Mr. David Anderson

Mr. Steve Verheul

Mr. David Anderson

Mr. Steve Verheul

The Chair

Mrs. Rose-Marie Ur

Mr. Steve Verheul

Â

1250

Mrs. Rose-Marie Ur

Mr. Steve Verheul

Mr. Mark Corey

Mrs. Rose-Marie Ur

The Chair

Mr. David Anderson

Mr. Steve Verheul

Â

1255

Mr. David Anderson

Mr. Steve Verheul

Mr. David Anderson

Mr. David Chatterson

Mr. David Anderson

Mr. David Chatterson

Mr. David Anderson

Mr. David Chatterson

The Chair

Mrs. Rose-Marie Ur

Mr. Steve Verheul

Mrs. Rose-Marie Ur

The Chair

Mr. David Anderson

The Chair

·

1300

Mr. Steve Verheul

Mr. Mark Corey

The Chair

Mr. David Chatterson

The Chair

Mr. Mark Corey

Mr. David Chatterson

·

1305

The Chair

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CANADA

Standing Committee on Agriculture and Agri-Food

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NUMBER 028

l

2nd SESSION

l

37th PARLIAMENT

---

EVIDENCE

Tuesday, May 6, 2003

[Recorded by Electronic Apparatus]

Á  (1110)  

[English]

    The Chair (Mr. Paul Steckle (Huron—Bruce, Lib.)): Good morning. We apologize for the short delay in getting our meeting underway, but there appear to be many instances this morning where we're running short of bodies and we're running back and forth. So I apologize to our guests who've come to present this morning.

    Pursuant to Standing Order 108(2), this morning we're going to have a briefing session on the current World Trade Organization negotiations on agriculture.

    We're happy to have the following people with us this morning: from the Department of Agriculture and Agri-Food, Mark Corey, Assistant Deputy Minister, Market and Industry Services Branch; and Steve Verheul, chief agriculture negotiator. We're happy to have you back again. From the Department of Foreign Affairs and International Trade we have David Chatterson, director, foreign affairs and international trade, Multilateral Trade Policy Division.

    Thank you, gentlemen, for appearing this morning. I presume, Mark Corey, you're first off, and I think you have a presentation. Mr. Chatterson will follow you, and Mr. Verheul will be the last person to speak. We've given you about 17 minutes. If you could contain it within that timeframe, we would appreciate it.

    I should say at the outset that we may be interrupted for a vote this morning. I'm trying to find consensus at this table. If we can balance the bodies here, we will try to keep it going if the opposition parties agree to that. If not, we will have to leave and then come back.

    Mr. Corey.

[Translation]

    Mr. Mark Corey (Assistant Deputy Minister, Market and Industry Services Branch, Department of Agriculture and Agri-Food): Thank you, Mr. Chairman.

    As you mentioned, I am accompanied today by Steve Verheul, from Agriculture and Agri-Food Canada. He is Canada's chief agricultural trade negotiator and has been managing various aspects of Canada's agricultural trade policy for the last several years. Also joining us at the table is David Chatterson, Director of the Multilateral Trade Policy Division, at the Department of Foreign Affairs and International Trade.

[English]

    I'll provide a brief background.Then we will ask David to go into a broader discussion on the WTO, and Steve will then go into the specifics on agriculture.

    Canada's negotiating position in the WTO agriculture negotiations is the result of three years of consultations with hundreds of representatives of every sector of the agriculture industry. An intense consultative process was key to ensuring that Canada's negotiating position was both strong and credible by being representative of the trade interests of the entire agricultural sector. Government officials held many meetings with industry stakeholders to discuss their priority trade policy issues. Minister Vanclief held a number of round table discussions and met privately with many industry groups representing the complete spectrum of interests. These consultations culminated in April 1999 in a federal-provincial-industry conference on the WTO agriculture negotiations. Over 300 industry stakeholders attended this three-day meeting to give the two levels of government their views on Canada's priorities for the agriculture negotiations. At the end of this intense consultative period, cabinet approved Canada's negotiating position for the WTO agriculture negotiations in July 1999.

[Translation]

    The key objective of this position is a more level international playing field, upon which producers and processors from all countries can compete fairly and equitably.

    Specifically, Canada is seeking the elimination of agricultural export subsidies, the elimination or substantial reduction of trade-distorting domestic support, and real and substantial market access improvements for all agriculture and food products.

    This position continues to represent the interests of the entire agriculture sector and is serving us well at this stage of the negotiations.

Á  (1115)  

[English]

    Significant agricultural trade reform is critical not only to Canada but to most other countries, in particular the developing countries. The agriculture negotiations are really the key to the entire Doha development round, and we know that. In order to fully appreciate the dynamics of the agriculture negotiations, it's important to have a clear picture of the broader context, including the other negotiations of the Doha Round. So David will take the committee through an overview of discussions taking place at the WTO, and then Steve will deal with the specifics of the agriculture negotiations in more detail.

    David.

    Mr. David Chatterson (Director, Multilateral Trade Policy Division, Department of Foreign Affairs and International Trade): Thank you.

    Good morning. As you all know, this round of trade negotiations was launched about 18 months ago in Doha, Qatar. There are three core economic areas: one, significant agricultural trade reform; two, further liberalization of goods and services trade; and three, clearer rules on anti-dumping subsidies and countervailing measures. Also covered in these negotiations are negotiations on dispute settlement and some issues relating to intellectual property and trade and environment. It's called the Doha development agenda because development lies at the centre of these negotiations. Developing countries have had mixed success in benefiting from earlier rounds of negotiations and liberalization, and many face significant domestic constraints. We believe that these negotiations hold the promise of substantial economic benefit for all participants and will do much to help developing countries integrate themselves into the global economy. At this point we're halfway between the launch of these negotiations and the agreed concluding deadline of January 1, 2005, and we're four months away from the Cancun ministerial conference in September.

    I think we got off to a fairly good start in these negotiations. We established work programs in the structure fairly quickly. Participation in the negotiations has been quite good. We have made good progress in some areas, most notably in services negotiations. But progress has been slow on the two central issues of the round--agriculture and development. We have missed most of the deadlines we had established in these areas. This is slowing progress in the broader agenda. I think it's fair to say at the same time that all countries are increasingly focusing on the economic gains at stake in these negotiations. At the Cancun trade ministerial in September, trade ministers will review progress and provide forward direction in all areas of the negotiations.

    Agriculture, as I mentioned, is central to the round. Steve will be talking about that in greater detail.

    Another major area is non-agricultural market access. We're seeing lots of engagement and lots of proposals but no agreement yet on the overall level of ambition. Discussions will continue. Progress in this area is dependent in part on progress in agriculture.

    The services negotiations, as I mentioned, are progressing well. Canada tabled its offer at the end of March and has received requests from some three dozen countries.

    In the rules negotiations, anti-dumping subsidies and countervail, we've seen over 80 proposals from different countries. Discussions are still in what we call the issue identification stage, but we expect a pretty smooth transition to the negotiations phase post-Cancun.

    Dispute settlement negotiations are continuing and will for some time. They are very active but not moving toward convergence yet.

    A couple of points on development, there are no negotiations per se on development, but they pervade all areas of the negotiations, in particular questions about implementation, or how developing countries can better implement existing obligations, and special and differential treatment, or how developing countries can have more flexibility to implement and benefit from more liberal trade.

    One other area I should mention is the Singapore issues. At Doha we agreed to a launch of the so-called Singapore issues, which are negotiations in trade facilitation, transparency in government procurement, investment, and competition, with an explicit consensus on modalities to be taken at the next ministerial in Cancun.

    Just a quick summary, at this stage of the negotiations members are still positioning themselves more than moving toward convergence, which is not surprising given where we are. Agriculture lies at the centre of the round. We'll be looking for progress in agriculture to see progress in other areas. Developing countries have a range of interests, which are being addressed, across the full spectrum of negotiations. Overall, I think we're doing fairly well.

Á  (1120)  

    The Chair: Mr. Verheul.

    Mr. Steve Verheul (Chief Agriculture Negotiator, International Trade Policy Directorate, Department of Agriculture and Agri-Food): Thank you.

    As David mentioned, the minister set out the mandate and timelines for the agriculture negotiations at Doha in 2001. They instructed negotiators to establish modalities or the commitments that WTO members will undertake to reduce subsidies and to make market access improvements by March 31, 2003. As part of that process the chairman of the agriculture negotiations, Stuart Harbinson, released a first draft modalities text in February. This text was designed to be controversial in nature and was intended to stimulate meaningful negotiations between members. WTO members discussed the draft in late February, and Chairman Harbinson issued a slightly modified version of that draft in March. WTO members then met to negotiate on the basis of the revised draft at the end of March. Not surprisingly, WTO members were unable to agree on a modalities text by March 31, the deadline, given the wide differences that remain on many of the central issues in the negotiations. The most difficult issues have been the approach to tariff reductions and the level of ambition in reducing trade-distorting domestic support. All members, including Canada, have raised serious concerns about the draft text that was on the table. In particular Canada has repeatedly voiced our fundamental concerns with provisions related to market access, exporting state trading enterprises, and the lack of ambition on reducing trade-distorting domestic support.

    The failure to establish modalities by the March 31 deadline clearly represents a setback for the negotiations. Nevertheless, all WTO members remain committed to the negotiations and to fulfilling the mandate set out by ministers at Doha. WTO members have started to engage in a series of technical consultations with Chairman Harbinson in an effort to narrow their differences on some key issues. The ministers will also be discussing the negotiations in a series of upcoming meetings, and we hope that these discussions can put them in a better position to make the necessary political decisions to move the negotiations forward at the ministerial conference coming up in Cancun in September.

    Although we clearly face considerable challenges on some issues, Canada continues to be well positioned in the negotiations. As Mark said, our primary objective is to level the international playing field. We are seeking the complete elimination of export subsidies as quickly as possible and the elimination or substantial reduction of trade-distorting domestic support, and we're looking for significant improvements in market access for all agrifood products. It is clear that WTO members have not yet truly engaged in finding pragmatic solutions to reconcile their differences, in particular in relation to market access. As members search for creative solutions, the strength of our negotiating position situates us well to promote our ideas to achieve an ambitious and practical outcome that meets the needs and interests of the entire Canadian agrifood industry.

    As we move toward Cancun, it is becoming increasingly evident that the messages coming out of the U.S., the European Union, and key developing countries will have a major impact on our ability to make progress in the negotiations. Accordingly, I would like to briefly touch on their roles in the negotiations to give you a sense of the negotiating dynamics. Starting with the U.S., the U.S. remains committed to an ambitious outcome in the negotiations. In particular they are pressing very hard for an ambitious outcome on market access, although they are not showing as much interest in an ambitious result on domestic support. The European Union remains unwilling to show much flexibility at this stage. This is largely due to their internal debate over the reform of the European Union's common agricultural policy. The U.S. has made it clear that we must see how far the European Union is willing to go with CAP reform before we can tell how ambitious a result we can expect in the negotiations.

    As David has described, this new round has a development focus, and how developing countries organize themselves and exert their influence will be very important to the outcome. Developing countries have both offensive and defensive interests in the negotiations. Their offensive interests lie in getting maximum reductions in high levels of spending in developed countries, while their defensive interests lie in protecting their own markets. We're encouraging developing countries to realize that we all have a strong long-term interest in maintaining the pressure on reducing the high levels of spending in the U.S. and the European Union.

    For our part, Canada's strength lies in our ideas and our potential to attract support from WTO members at both ends of the spectrum. Our negotiating position presents a practical approach to advancing the negotiations toward an outcome that levels the international playing field for all members. We will continue to work hard to build strategic alliances with a wide range of countries in an effort to convince other members of the merits of our negotiating position and ideas.

Á  (1125)  

    In closing I want to stress that the negotiations are indeed progressing, albeit at a slower pace than had been foreseen in Doha. It is critical for WTO members to continue to move forward. Our agrifood sector needs a level playing field on which it can compete internationally. More broadly speaking, it is important to make progress so that WTO members can send a positive signal about the state of the global economy and to demonstrate that developed countries are serious about addressing the needs and concerns of developing countries within a multilateral context. Canada is well situated in the negotiations. We will continue to work hard with other WTO members to achieve an outcome that results in a fair and equitable international trading system for all agrifood producers.

    Thank you, Mr. Chair.

    The Chair: Thank you, Mr. Verheul.

    We know there'll be lots of questions.

    Mr. Steve Verheul: I expected that.

    The Chair: Before we go to the part of our agenda where we ask questions, I should see if I can get consensus. We have members on the government side and members on the opposition side, and their numbers would be equalized. I would be prepared to suggest that, if we can find agreement, we continue with our meeting while disregarding the vote given that there is a neutrality and balance here on the vote. Do I have that kind of consensus? I don't want debate. I just want consensus.

    Mr. David Anderson (Cypress Hills—Grasslands, Canadian Alliance): No.

    The Chair: Then we will move forward. We have about 20 minutes left, so we can get into our first round of questioning.

    We'll begin with Mr. Anderson.

    Mr. David Anderson: Mr. Chair, we wouldn't have to go vote if the government hadn't moved to invoke closure on Bill C-10A.

    The Chair: We're not into that, Mr. Anderson. We're just into the questioning.

    Mr. David Anderson: The supply management industry has told the committee that they would basically like to see a closed system. You understand what's involved there, where they will be able to work within Canada. Others have told us that there's a $3 trillion benefit to opening up markets and moving to a more liberalized situation. Can we reconcile those two positions? If so, how?

    Mr. Steve Verheul: I think that in fact we can reconcile those two positions. We've managed to do that in the negotiating position we've held for the last several years. Where there could be a potential conflict is on the issue of market access. Parts of our industry are looking for greatly expanded market access to other countries for their exports, and the supply management industry wants to limit improvements to market access.

    Our negotiating position isn't talking about not improving market access. It's talking about having different kinds of approaches to improving market access. We are calling for a substantial reduction of tariffs through a formula approach. But we're saying that for sensitive products, countries should have the flexibility to provide access through other means, such as tariff quota expansion. That way we can ensure a more level playing field, even for the access to supply-managed markets. We provide more access to our dairy market than the U.S. provides to their dairy market, for example. We need to rectify that kind of situation. So I think that on market access we have a position that does bridge those different interests in the industry.

    On domestic support we share the common goal that we should be getting high spending levels in Europe and the United States down to more reasonable levels so that all farmers can compete more fairly. I don't think there are any real differences there.

    We have an interest in getting to the stage where we can eliminate those most distorting forms of support, the export subsidies. We do have export subsidies in dairy. Those are the only ones we have. But the dairy industry is reconciled to the fact that those will be going as part of future reform. I think that has been accepted by the industry.

    Mr. David Anderson: I know that you're trying to get a position that's going to sustain both things, but it sounds to me as if this is basically a continuation of the chipping away at the supply management system. In the long term you can't have both of those things. You can't have market access and then expect that you're going to be able to limit market access to your own country. I see the road you're moving down. But over the last 10 years the Liberal government has been chipping away at that, and it looks as if they're continuing to do that. You can't restrict your market and expect that your products will have access to markets at the same time.

Á  (1130)  

    Mr. Steve Verheul: I think it really gets back to how you provide market access. What supply management needs is predictability of access. They know how much is coming in, so they can manage the rest of the domestic supply. Making access improvements through tariff quota improvements allows them to have some predictability and to know what the supply is going to be, including how many imports are going to come in in any given period. I think we can reconcile those positions, because we can make market access improvements through tariff quotas. But if we went to a tariff reduction scenario, then they would have less of an idea of how the market would be able to be managed by their industry. So I think we can reconcile those two positions by providing access through tariff quota improvements as an alternative.

    Mr. David Anderson: It seems as if things have been moving very slowly. You're saying that countries are still positioning themselves. They're not converging. Will that be the case in Cancun as well? Will it be a meeting of positioning, or do you see it as a meeting of convergence? If this positioning goes on too long, do you think that at some point the United States and the European Union will begin to negotiate with each other rather than dealing with the WTO?

    Mr. Steve Verheul: I think that's a concern a number of us share. There is a possibility that the U.S. and Europe will start to get together and try to work out a deal that works for them but may not necessarily be in the best interests of the rest of the membership, including us. We have noticed in recent weeks that the U.S. and Europe are talking about the negotiation issues more on a one-on-one basis, and that is concerning us. But a number of ministerial meetings will be coming up in the next several months before Cancun in which we'll be trying to move forward. There's a mini-ministerial meeting being held in Egypt in mid-June. A G-8 meeting will be held before that in early June. We're going to have a Cairns ministerial sometime in the summer. There's going to be a meeting of Quint agricultural ministers, which is Canada, the U.S., Japan, the European Union, and Australia. So that's another forum for us to discuss with that group where we should be trying to move the negotiations. I think we have to be very mindful of the fact that the U.S. and Europe could start to work toward a deal that works for them and leaves the rest of us out. But we need to keep the pressure on. We have also been working with other countries in the negotiations that would be similarly concerned about a European Union-U.S. deal. I've spoken to China, India, Japan, and various others that also share that concern.

    Mr. David Anderson: I'll turn the remaining time over to Mr. Casson.

    Mr. Rick Casson (Lethbridge, Canadian Alliance): Thanks, Mr. Chair.

    Steve, you mentioned the lack of response from the European Union with regard to any movement on their behalf to reduce domestic support. The U.S. is not leaning that way right now. With regard to the expansion of the European Union and CAP and the changes there, what does our government need to be doing to try to push both of them into action? If indeed they do pull out and work by themselves, then this whole thing is for naught. Producers have been looking to these negotiations for years as the next step to bring some kind of saneness to the marketplace and to reduce the domestic support and the export subsidies. If we can't make a move there, then a whole lot of the hope that has been placed on this thing is going to be gone.

    The other thing is--

    The Chair: Your time is up. If you want an answer to that question, you're going to have to stop there.

    Mr. Rick Casson: I'll let him answer.

    Mr. Steve Verheul: The main thing is that we have to continue to work with other countries. Obviously, we work closely with the U.S. and the European Union on one side, and we meet with them regularly to discuss the state of the negotiations. But at the same time it's important for us to continue to work closely with developing countries, which have a big stake in this negotiation. It's the Doha development round after all, and developing countries are going to be key to the success of this. So we've been keeping very closely engaged with developing countries. There are 108 of them. They're going to have to be satisfied to some degree with the outcome of the negotiations. We've been suggesting to them that we need to focus on the real interest we all share in getting down the high levels of spending on domestic support and getting rid of export subsidies once and for all. So we have to make sure that pressure from all the rest of the membership is kept on the European Union and the U.S. throughout the next several months.

Á  (1135)  

    The Chair: Thank you very much, Mr. Verheul.

    Mr. Plamondon for seven minutes.

[Translation]

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

    My question is for you, Steve. You have experience in international negotiations, and you no doubt have heard that the reaction to Mr. Harbinson's speech was one of profound concern on the part of producers, both in Quebec and in Canada. As you know, in his first speech, he talked about a decrease in tariff barriers from 299 per cent to 166 per cent, which would have disastrous consequences for supply management, at least according to the producers. In his second speech—and this is the basis of the negotiations that are underway—he talked about a decrease in tariff barriers that would not be as radical.

    I would like to know what your mandate is with respect to the government's intention here. It seems that, in the comments you made about supply management here in Ottawa last week, before a group of farmers, you mentioned that there are three pillars in the agricultural sector, one of which is called “administered pricing”; apparently, you said that you are not mandated to take a position in that regard. Could you please clarify that for us?

[English]

    Mr. Steve Verheul: Sure. We were greatly concerned about a number of provisions in the Harbinson text, especially market access and what that would mean for the supply management industry. On the issue of domestic support, in particular administered pricing, there is nothing in the Harbinson text that would affect that one way or the other. It's not addressed by Harbinson in that text, and it hasn't been a focus of discussion in the negotiations. In the discussion I had with the supply management agencies last week, I referred to the fact that in Canada's negotiating position there is nothing that indicates a particular path we would follow with regard to administered pricing, largely because we don't see that particular pillar as being directly under threat in this negotiation. Market access and tariff reductions are a big concern, but there has been no discussion of administered pricing in the negotiations.

[Translation]

    Mr. Louis Plamondon: The fact that this has not been discussed does not mean that you don't have a clear position. When you sit down at the negotiating table to represent the Government of Canada, and by the same token Canadian producers, what is your position? Are you trying to keep the three pillars of supply management intact, or is it your position that you will try as best you can to arrive at some arrangements that would be acceptable to producers?

    As you know, two confidential documents have been circulated. The four ministers involved were given a document stating that it might be necessary to put some aspects of supply management on the table, and even to put supply management itself on the table. There was quite a reaction on the part of producers; they are very concerned.

    First of all, when you are at the negotiating table, are you there with a clear mandate from the government to maintain the status quo on supply management? Secondly, in your discussions with other countries that are among the 144 members of the WTO, are these countries really aware that Canada has a clear position on this issue?

[English]

    Mr. Steve Verheul: The mandate with regard to supply management is entirely clear. Our minister has said on many occasions that he supports supply management 1,000%, and in the negotiations our mandate is to ensure that we maintain supply management, including all of the different aspects it needs to continue to operate. So that mandate is very clear. I have spoken to a range of countries about our perspective and our proposals on things, such as market access, that would work for our supply management commodities and other issues of interest to supply management. We've been doing that on a very broad basis. No other country in the negotiations has met with more countries than we have in the January, February, March period. We've been extremely active in meeting countries from every perspective, making sure they understand our position in detail and trying to make sure that we can get as much support as possible.

Á  (1140)  

[Translation]

    Mr. Louis Plamondon: You said the minister has a clear position; well, when I questioned him in the House last week, he said that that was the government's position, that the industry was in agreement with that position, and that it was also the position being put forward by our negotiators.

    With all due respect, I would point out that you know as well as I do that the ministers are here in Ottawa, but that the negotiators, those who make the decisions and who make the deals, if you will, are at the table negotiating with other countries. Oftentimes, they will report to the minister that the negotiations went quite well, but that there was a bit of a stumbling block, and that producers will just have to understand that they will be losing some ground on two or three issues. They are quite worried about that. They often tell me that supply management is like a dam, where the water is at the same level as the dam, and that even the least bit of tinkering would make the water go over the dam, thus completely destroying our supply management system.

    From everything we have heard about the discussions taking place at the table, it would seem that almost every sector in every country, including our supply management system, will be on the table. That is cause for concern.

    On that topic, the researchers specializing in agriculture issues have suggested a question which I find interesting and which I would like to ask you in its entirety. It reads as follows:

The modalities offer some flexibility, by allowing countries to increase access to their market by 8 per cent (rather than 10 per cent) for certain agricultural products, as long as this more limited access is compensated for by an equivalent number of tariff quotas at 12 per cent of domestic consumption.

    Do you think that supply managed production could benefit from this flexibility? Secondly, could you give us a concrete example to show how this flexibility might play out?

[English]

    Mr. Steve Verheul: On the issue that negotiators are the ones who are actually at the table and the minister receives reports and may not necessarily be involved in every single issue, we have a process whereby we report back on a daily basis to the minister on what is happening in the negotiations in Geneva. In Geneva over the last little while we've been focusing on a lot of fairly technical issues. For the more difficult issues, which could potentially have an impact on various parts of our industry, such as what we do with tariff reductions and domestic support, a lot of those decisions are going to have to be made at the political level. We will need direction from the political level to us as negotiators as to how far we can go on those issues. That will come much later in the day, although potentially at Cancun.

    With regard to your issue about flexibility in the modality on tariff quota improvements, Chairman Harbinson did have a provision in his text where the general rule would be that everybody expands their tariff quotas to 10% of recent domestic consumption, but for a certain number you could provide only 8% of domestic consumption if you balanced that off with others being provided to 12%.

    Currently, we could hypothetically take advantage of that kind of situation because we have some tariff quotas that we are less concerned about. We have tariff quotas on wheat, wheat products, and margarine, for example, which are less sensitive to increases because we don't have any real sensitivities to imports. But I think that is an extremely hypothetical situation because our view continues to be that we can provide even greater market access if we do it in the right way. You can get more access at 5% of domestic consumption than you can at 10% in certain cases if you make sure that it's done cleanly. We'd rather have a lower level on a clean basis than a higher level that continues to have a lot of games being played on how they're constructed.

Á  (1145)  

    The Chair: We'll have to leave it at that. We will now adjourn. We ask that you come back immediately following the vote.

    For those that have a shortage of members here, bring a colleague along. I think this is a worthy effort.

    We promise you that we will be back.

    The meeting stands adjourned until we see you after the vote.

Á  (1145)  

---

  (1218)  

    The Chair: We really were not adjourned. We were suspended. I apologize. I don't like to be in suspension.

    Some hon. members: Oh, oh!

    The Chair: Mr. Verheul, you were our last speaker.

    We're going to move now to Mrs. Ur to carry on the discussion. Seven minutes, Mrs. Ur.

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

    I thank you for your presentation this morning.

    I have a few questions. On May 1 the Minister of Agriculture made it very clear that he would not support the Harbinson report on modalities. Given the minister's statement, Steve, would you hope that this would not form the basis for the upcoming negotiations? You wouldn't use it as a base or a framework to deal from.

    Mr. Mark Corey: Mr. Chair, maybe I could just start it off and then turn it over to Steve for more detail. One of the things we really need to have clear, because oftentimes we get questioned on this, is that negotiators don't freelance. They have a very clear negotiating mandate. In our case the negotiation mandate is from cabinet. The mandate was passed in 1999. It's public. Everyone knows exactly what the position is. As negotiators, for example in Geneva, we have no authority to negotiate things that are not contained within that mandate. To change that mandate would require a cabinet decision. If we were ever to move outside of that negotiating mandate, it would require going back to cabinet and getting a decision to change it. As Steve mentioned, we're in daily contact with the minister when the WTO is in session. He's being kept very closely informed. I think the important thing to underline is that the important decisions on the substantive issues are really made by ministers and not by the negotiator.

    Steve, can you fill in a bit more.

    Mrs. Rose-Marie Ur: What is your mandate, then? I'd like you to make it short because I only have seven minutes. If it's long, you can send it to us.

    Mr. Steve Verheul: I'd like to get back to your original question, too.

    Our mandate is as outlined in the Canadian negotiating position. We're seeking elimination of export subsidies as soon as possible, maximum reduction or elimination of trade-distorting forms of domestic support, and substantial improvements in market access for all products in all markets.

    To get back to your question relating to the Harbinson text, the Harbinson text was intended to move countries toward convergence on the issues and to give them some basis on which to move forward. As I think was recognized early on, most countries had a lot of problems with the draft, and we certainly had a lot of fundamental problems with it. The result was that it failed completely in what it was intended to do in moving us closer together. So the draft in that form is certainly off the table. The chairman--and I've had this discussion with him a couple of times--still thinks that we should leave the text there as a basis and change whatever needs to be changed. We can take entire pieces out of it and rework it or change every word. But he thinks we need some kind of focus for the negotiations. There are parts in there that we are comfortable with. Elimination of export subsidies is one example. But, obviously, we have to get the other areas changed where we have problems.

    Mrs. Rose-Marie Ur: We certainly have to be diligent. In the 10 years I've been here, this is the first time, other than a social aspect, that I have seen supply management here in such a large number very seriously discussing the state of affairs within their industry. I think it really is a heads-up. I commend the minister for saying he supports supply management 1,000%. I do, too.

    I think we've been the Boy Scout, if you want to put it that way. We want to do all these things in the next round. I think Canada has already stepped to the forefront. We need to look at the United States, the EU, and other countries to ensure that. Do you know how you're going to achieve that in the next round?

    Mr. Steve Verheul: Yes. I think--

  (1220)  

    Mrs. Rose-Marie Ur: Good. We've been doing pretty poorly till now.

    Mr. Steve Verheul: We do have a very strong negotiating position that we're carrying forward. We've been at this for a long time. We know where all the other countries are coming from, and they're starting to know very clearly where we're coming from. Every time we're in Geneva we sit down with the Americans and have a very frank and open discussion. It's the same with the Europeans and dozens of other countries we meet with.

    Mrs. Rose-Marie Ur: We had that in Uruguay, too. We had a lot of allies. But it's much like government here. When push comes to shove, they seem to fall by the wayside. So I think it's really important to have them sign on the dotted line somehow to make sure they're there for us.

    In a letter dated May 5 from SM5 to the minister and Mr. Pettigrew, SM5 put forward the following, which is about supply management. I'll just read a bit of it.

Given that fact that the Harbinson text, should it re-emerge, would spell the end of supply management in Canada and jeopardize the future of the dairy and poultry industries and the allied businesses that support and benefit from our industries, a decision on the direction that Canada will pursue is critical at this time.

    Do you agree with this statement from the SM5?

    Mr. Steve Verheul: Yes. I think the Harbinson text clearly failed. It's not going to be the basis on which we're going to reach an agreement. That has left an opening for countries, Canada in particular, to put new ideas on the table and try to find ways that do bridge the gaps that exist between countries. I think our position is well formulated for that. We're very well situated. We're in a position where we can talk to both those that want extreme liberalization and those that want very little changes at all. So I think we remain well positioned where we are.

    Mrs. Rose-Marie Ur: Do you feel that we have to go to great lengths to revise our strategy in order to be more productive at the negotiations?

    Mr. Steve Verheul: I don't think so at this point in time. I think we're still in as good a shape as we can be. We have this situation now where we have the U.S. and some other countries at one extreme and the European Union and others at another extreme. Neither the European Union position nor the U.S. position is going to carry the day. Everyone recognizes that. Once countries move off their positions, they're going to have to move somewhere else. What we're saying is that we have an approach that can meet objectives that both of them are interested in, and that's why we should be looking at some of these Canadian ideas.

    Mrs. Rose-Marie Ur: There was a document outlining Canada's negotiation position dated January of this year. There was the statement “If other countries have concerns regarding alleged trade effects of orderly marketing systems, Canada is prepared to discuss any factual concerns.” What do they mean by alleged trade effects?

    Mr. Steve Verheul: That mainly relates to exporting state trading enterprises, such as the Canadian Wheat Board. The U.S. considers that to be an unfair form of trading, because they think that enterprises like the Wheat Board can sell in some markets at very high prices and they can, in their view, cross-subsidize by selling in other markets at very low prices. So they think that the ability the Wheat Board has as the main purchaser of all grain gives them an extra advantage in the marketplace as far as pricing goes.

    The Chair: Your time is up in this round. We'll get to you in the next round.

    Mr. Anderson, five minutes.

    Mr. David Anderson: You mentioned that you're going to the Cairns ministerial meeting. What do we expect to get out of the meeting considering that we don't support the Cairns position on either market access or domestic support?

    Mr. Steve Verheul: The meeting we're going to have with other Cairns group ministers in July or August is basically to talk about strategy going into the Cancun meeting.

    We do have very much in common with the Cairns group on export subsidies and export competition more broadly, including export credit, food aid, and other issues. We've signed on to their proposal on export subsidies. On domestic support we're not that far apart. We're both calling for very significant reductions in trade-distorting domestic support. We had some differences with the Cairns group over specific aspects of how we'd get there, but I think that on the fundamental objective we're in the same place. Even on market access we have views in common on how we manage tariff quotas and how you calculate tariff quota increases. So we have elements in common there.

    At the Cairns group ministerial in the summer we won't be going into that level of detail. It will be more an issue of strategy. For example, I can think of one issue that will be on the agenda. We have this concern that the U.S. and Europe are moving toward some kind of agreement. The issue is how we, as a third force in the Cairns group, can push that in the right direction for us.

    Mr. David Anderson: When you say that Harbinson failed, do you mean that he failed in the specifics of the suggestions he made with regard to the modalities or that the general framework of what he suggested has failed?

    Mr. Steve Verheul: I think it's more on the specifics that he has failed, especially in areas such as market access where there are wide differences. He didn't succeed in creating any conversions around those differences. So I think he failed in that respect. But at that point in the negotiations I don't think anyone could have produced a draft that would have moved countries closer together. Countries simply weren't prepared to make those kinds of moves at that point in time.

  (1225)  

    Mr. David Anderson: Somebody had to take that first position, and he did that. Obviously, not everyone is going to agree with that.

    You talked earlier about tariff quotas and how important they're going to be in our strategy. The suggestion was that those tariffs would double from the current level to 10% of domestic consumption. What level of tariff quotas are you prepared to move to in terms of our negotiating position? If we move up, that damages supply management, but it gives some other sectors an opportunity. What sectors would benefit from a move to 10%?

    Mr. Steve Verheul: The Canadian negotiation position calls for expanded tariff quotas to at least 5% of domestic consumption. That's our mandate for tariff quotas.

    The more important element for us is to make sure that we correct some of the mistakes of the past on how tariff quotas were established and calculated. We need to make sure that tariff quotas provide clean and real access that can be usable right from the beginning. We have big problems with countries that maintain in-quota tariffs, which in our case are very close to 0%, but some countries maintain them at up to 800%. So it would result in real improvements in access if we could eliminate those in-quota tariffs. Our focus is much more on how we do it than on the number at this point.

    Mr. David Anderson: We've given the 5% on each commodity. Others have decided to group them together as an aggregate. In which direction are the trade talks moving?

    Mr. Steve Verheul: The trade talks are moving in the direction of doing it on more of a product-by-product basis. So under the Harbinson text you would have 10% access for any particular commodity, for example, 10% access for beef or pork, based on recent consumption data calculated in that country.

    Mr. David Anderson: So you're trying to bring them closer to what we're doing than, say, what the Europeans are doing.

    Mr. Steve Verheul: Yes. We've been relatively cleaner in the way that we've administered and calculated our tariff quotas. We think we need to have rules this time around rather than simple guidelines. We need to have rules that say this is how you calculate your tariff quota and this is how you administer it.

    Mr. David Anderson: Is that an area you think you'll be successful in?

    Mr. Steve Verheul: I think we've already made significant progress. There were a number of elements even in the Harbinson text on tariff quota administration that reflect Canadian ideas. In one portion of the text he referred to the method used in the last round for calculating tariff quotas. Due largely to our efforts, that reference was removed. So I think we are building support and making quite a bit of ground in that particular area.

    Mr. David Anderson: To go to a different area, I'd like to know what the status is of the WTO trade challenge from the States regarding the Canadian Wheat Board. I understand that it's just beginning, but I'm wondering if you could give us some details on how the U.S. is going to pursue that issue and what our position is, considering the fact that 50% of the people who are held captive by that system don't want to be.

    Mr. Steve Verheul: The case is still very much in its early stages. In December they requested that we hold consultations with them in January. They then proceeded to request the panel at the WTO, and that panel was accepted and is now in place. Over the last little while we've been trying to figure out who is going to sit on the panel.That involves a process of identifying names that are acceptable to us and the U.S., and that process has moved very slowly. We haven't reached any kind of consensus on who the panellists should be. After that we have to get into the arguments. First, the Americans are going to have to set out in detail what they think we've done that doesn't comply with the existing rules. To date they've given us very little specifics on what kinds of complaints they have. It has been difficult to identify all the aspects of our reaction because we don't know exactly what they're going to be challenging us on. So we've been asking for more details.

    The Chair: That's the end of the questioning for that round.

    Mr. Maloney.

    Mr. John Maloney (Erie—Lincoln, Lib.): You've indicated that the cabinet has given you your marching orders. They've told you where they want to go in the negotiations. But negotiations are give and take. There has to be a little bit of flexibility. You indicated that you had no authority to deviate from that. How do you reconcile those two positions? Is there a minimum below which you wouldn't go or is there a fallback position? How does the process work?

  (1230)  

    Mr. Steve Verheul: The mandate at this stage is very clear. It's set out in the Canadian negotiating position, and that's what we're promoting in Geneva. We are still a long way from actually agreeing on things. If the negotiations go in a particular direction, we may have to go back to ministers and to cabinet to get some new directions. But for the moment we're still at the stage of promoting our ideas, and we have some flexibility in doing that as we provide further details underneath the mandate. But we report back to ministers on an ongoing basis as to how things are going and what exactly we're doing.

    Mr. John Maloney: I came in late. Perhaps this question has already been answered. For those products where there's tariffication of over 90%, there's a plan to reduce that over five years by 60%. If that were to happen, have you calculated which of our supply-managed industries would potentially be vulnerable to offshore competition in our domestic market?

    Mr. Steve Verheul: Yes. All of our supply-managed over-quota tariffs are over 90%, so under the Harbinson draft they would be subject to a 60% average reduction and a 45% minimum. We of course have rejected that as the right kind of approach to use on market access, largely because it would have an impact on supply management. If we reduce those over-quota tariffs by 60%, then we do run a very real risk of having some product come in, which is why we've rejected that part of the proposal.

    Mr. John Maloney: Thank you, Mr. Chair.

    The Chair: Mr. Anderson, you're back on again.

    Mr. David Anderson: Great. There are some advantages to being lonely.

    Some hon. members: Oh, oh!

    Mr. David Anderson: I'd like to go back to the timeframe for the WTO challenge. What is the timeframe there, and at what point can penalties be assessed on that challenge?

    Mr. Steve Verheul: This is with regard to the challenge of the Wheat Board's consistency with international obligations at the WTO. This isn't the anti-dump or the countervail challenge. After we reach agreement on the selection of panellists, then we enter a period where we'll have sixty days until the first stage of the panel is completed and ninety days for the panel to issue its decision. There'll be an oral hearing in the middle of that. We'll be exchanging arguments. The U.S. will submit theirs first. We'll submit our counter-arguments. We'll go through that one more time and then the oral hearing. After we get through all that, the panel will take all that information and go away, and they have roughly thirty days to reach their decision. All of this can slip a bit, particularly if the members agree that we need more time or the panel needs more time. So we're probably looking at anywhere between six and nine months until a decision is reached. A decision at the WTO can be appealed, so you could have an appellate body process, which could take another sixty to ninety days after that.

    Mr. David Anderson: Just for the record, I didn't get a clear answer to one of my earlier questions. What sectors would benefit from higher tariff quotas or from that clean 5% access by product?

    Mr. Steve Verheul: Virtually all of the sectors that have an interest in export markets would help our grains and oilseeds producers by a considerable amount. It would help our beef and pork industries, which have key market interests in markets that now have very high tariffs. Those are probably the main beneficiaries. But any commodity that's engaged in the export market would see some significant improvements.

    Mr. David Anderson: Have you done any studies to see what the negative impact on supply management would be compared to the net benefit from some of the other industries in terms of the national economy?

    Mr. Steve Verheul: We've done some analysis on what improvements we would see with an approach that provided a clean 5% level of access. That's about as far as we've gone. Anything above that would simply be an extrapolation of it.

    We keep coming back to examples such as the European Union. In the way they've calculated their tariff quota for pork, for example, they provided some 75,000 tonnes of pork. If they had done it the way we're suggesting it should be done, on a clean basis based on the consumption of pork rather than amalgamating meat, which is what they did, rather than that 75,000 tonnes, we would have had access of approximately 750,000 tonnes. So you can see that even within a 5% range, if you do it on a clean basis, you end up with a lot more access.

  (1235)  

    Mr. David Anderson: Is that a priority of your position?

    Mr. Steve Verheul: Absolutely.

    Mr. David Anderson: I want to talk about non-trade barriers, in particular some of the biotechnology restrictions from the EU. How important is it in your negotiating strategy to try to move some of those things aside in order to open up access that's being restricted by some of those barriers?

    Mr. Steve Verheul: At the Doha ministerial meeting there was no agreement to enter into negotiations on phytosanitary and sanitary barriers or on technical barriers to trade, which are the agreements that things such as genetically modified organisms would fall under. So we don't have a mandate to negotiate in those areas during the Doha Round.

    However, on those particular issues we work on more of a country-to-country basis. We're also working with the U.S. and other countries that share an interest in trying to get some of those measures overturned in Europe, and we'll continue to work with them, including possibly proceeding with a dispute settlement case.

    Mr. David Anderson: What level of priority would that be in terms of bringing that to the WTO and getting that on the agenda as soon as possible? Countries are using it, obviously, to restrict people's access to their markets. You can open up a lot of this other stuff, and if they can use those food health issues as a way to stop access, they're going to do that.

    Mr. Mark Corey: Mr. Chair, when you look at the SPS agreements, the sanitary and phytosanitary, plus the TBT, the technical barriers to trade, the rules are actually not all that bad right now. In fact, we've won a number of cases against the European Union under those rules. The jurisprudence is there. They need to have a scientific basis. We've won on genetically modified foods and beef hormones. The rules are there, and they're fairly clear right now. They're not bad. We've won a number of cases under them. Actually getting the implementation is the difficulty we've been having; for example, bringing the European Union around to changing its approach to allow Canadian canola and things like that back into the market. We had significant canola markets--I think it was about $420 million back in the early 1990s--which were lost because of their rules. They've lost the cases, and we're still not getting any in.

    The Chair: We'll have to stop there for now.

    Mr. Duplain, for five minutes.

[Translation]

    Mr. Claude Duplain (Portneuf, Lib.): I could share my time with Mrs. Ur, who hadn't finished. We have heard some interesting questions so far; I only have one, however, and it's for Mr. Steve Verheul.

    In fact, when you get right down to it, our situation is this. The minister says that he wants to maintain supply management, and all the ministers are saying they support supply management. You are a negotiator, so you know that for the last several months, farmers and their federations have been coming to Parliament Hill. They have concerns about whether or not supply management will be maintained.

    We talked about this earlier, and you mentioned it several times. I wonder if you could tell us something about supply management that would really allow us to reassure farmers. When we talk to them, we find that they believe ministers want to maintain supply management. But, as Mr. Plamondon just pointed out, when farmers' federations hear the names of those negotiating on our behalf, they are skeptical. What response can you give to convince them that in these negotiations, Canada supports supply management?

    Mr. Mark Corey: Mr. Chairman, I could start, and then Steve could provide more details.

    As I mentioned earlier, cabinet has given us a very clear mandate, that is to preserve supply management. Any decision to change that mandate would have to come from cabinet, and it would have to be supported by ministers. Our mandate as it stands is quite clear: conduct negotiations in Geneva. We have no right to change that, nor are we authorized to enter into any other discussions.

    Steve, could you perhaps elaborate further?

  (1240)  

[English]

    Mr. Steve Verheul: Probably the best illustration of that came through the Harbinson text, which, understandably, did cause a lot of concern among the supply-managed commodities because it would have had a fairly negative impact on them. We said very clearly to all of the countries and to the chairman directly on a number of occasions that the Harbinson text was not acceptable as he had drafted it, in particular with regard to market access as it would affect supply management. The result has been that text is now not seen as a way we're going to be able to reach an agreement at the end of the day. There is no question, as Mark said, that the government position is that we support supply management. That's the negotiating position.

[Translation]

    Mr. Claude Duplain: Any discussion about supply management must, by its very nature, deal with three pillars. So you support the three pillars on which supply management is based. Is that right?

[English]

    Mr. Steve Verheul: I think there has been a bit of confusion about that. On the various pillars that support supply management, one of them is border control. That relates directly to the market access issue. We're addressing that in a way that the supply management commodities are comfortable with.

    One of the other pillars is administered prices. I think there has been some confusion on this issue. The Harbinson text didn't say anything that would affect administered prices or our ability to set administered prices. So there's nothing in our negotiating position that specifically targets that issue, because it hasn't been a focus of the discussions. We fully anticipate that the negotiations will come out with a result that will not include anything that affects our practices on administered pricing.

    The other pillar of production quotas is not something that's at issue in the negotiations, either.

    So our main focus has been on making sure that the market access pillar, or the border pillar for them, is the most fundamental aspect, which allows them to continue to operate supply management with a predictable supply. That's where our efforts have been focused in the negotiations.

[Translation]

    Mr. Claude Duplain: Thank you.

[English]

    The Chair: Perhaps the reason there's such a concern, particularly on the government side, about the issue of supply management is that in 1993, when we became the government, we were given the impression that there was an article 11 to protect, but article 11 was no longer there. Once caught, twice shy. I think that this time we want assurance, and I think you've done a pretty good job of giving that to us this morning. In fact, I met with a group of people you had previously met with, and they said that they had a good meeting with you and that you had given them the same assurance. We want to be able to do that, because we don't want to have another article 11 on our hands going into the next round.

    Mr. Anderson.

    Mr. David Anderson: I'm wondering why we continue to be so shy about challenging our trade partners. The United States has a big program going there. It seems as if there are some areas of cross-subsidization of programs. A report has come out saying that they're selling a massive percentage of their grain below the cost of production. That's one of the issues they supposedly used against us in this Wheat Board challenge. Why aren't we going after them? I'd like to know about that cost of production thing. Is it because they're selling it privately and we can't go after them that way? Why do we sit and watch?

    Mr. Steve Verheul: On the specific issue of the cost of production, that arises in a dumping case, which is really an issue with the industry across the border. For instance, the U.S. industry initiated the anti-dumping action against imports of Canadian wheat, and that's where the calculation of the cost of production comes in to demonstrate that they are or are not dumping. Our industry, if it saw fit, could initiate an anti-dumping action against U.S. wheat. Part of the problem is that we don't buy all that much, because we're such a big seller. But that's just on that specific issue.

    More broadly, we had a lot of concern about the U.S. farm bill when it came out last year. It turned the corner the wrong way, as far as we're concerned, in providing much higher levels of trade-distorting forms of support. Not only did it move the wrong way with regard to the spending amounts, but it moved the wrong way with the way they were spending it. So we've spent a lot of time starting to lay the groundwork for a potential case against some elements of the U.S. farm bill. The problem is that some of it is still being implemented, and we have to wait until the measures are actually in place before we can challenge it. At some stage we will be ready, and we certainly have no hesitation in proceeding with the right case once we get it.

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    Mr. David Anderson: Would country-of-origin labelling be an international issue or is that a continental one? Some of these have to be initiated by the industry in the country. But is country-of-origin labelling something that could be taken to the WTO?

    Mr. Steve Verheul: Country-of-origin labelling could be taken either under NAFTA or the WTO. That's part of the assessment we're making with regard to a potential case on country-of-origin labelling. On that issue we need to wait to see whether they're actually going to move to the mandatory stage, since it's voluntary at the moment. That means that our strategy for the short term is to work with the U.S. industry that is also opposed to the country-of-origin labelling and try to prevent it from ever becoming mandatory in the first place. But if it does reach the mandatory stage, then I think we would have quite a strong case.

    Mr. David Anderson: Can we only challenge what comes into our market? You mentioned that the U.S. industry initiated the countervail and anti-dumping challenge to us. If they're selling their wheat below the cost of production, the fact that we're not importing it doesn't stop us from being able to launch a challenge against the way they're conducting their trade, does it?

    Mr. Steve Verheul: It depends on how you want to make the challenge. We could do an anti-dumping investigation, but we couldn't reach a finding unless we could prove that they were injuring the domestic market. If the quantities aren't high enough, it's difficult to prove that an injury is happening. But on things such as country-of-origin labelling and the U.S. farm bill, you can challenge those and it doesn't matter whether or not you're importing from them. You're challenging whether they're acting consistently with their obligations to either NAFTA or the WTO.

    Mr. David Anderson: The Supply Management Five have said that no deal is better than a bad deal. I'd like to hear your comments on that.

    Mr. Steve Verheul: Minister Vanclief has said the same thing, that no deal is better than a bad deal. I think that in the context of the Harbinson draft, that deal would have been worse than no deal. We need to make sure that we can move toward a deal that is going to make sense for us. I think the right kind of deal is going to have a lot of benefits and advantages for Canadian industry. We much prefer the right deal to no deal, so we're going to have to keep pushing in the right direction.

    Mr. David Anderson: Can we take that position at the WTO if we see the EU and the U.S. beginning to talk?

    Mr. Steve Verheul: We're concerned that they're talking at one level, but at the same time we're not going to realistically get a deal unless those two countries are on side to some degree. What matters is that we shape that deal in a way that provides us with the benefits we need, and that's what we're going to focus on. I think that if the U.S. and Europe come up with something that they have a hard time selling to other countries, including developing countries, then it's not going to fly. We have to keep our position front and centre and keep working with other countries on advancing it as much as we can.

    The Chair: Mrs. Ur.

    Mrs. Rose-Marie Ur: Mr. Verheul, you stated that the Harbinson modalities didn't have anything on administered pricing. You didn't have to do anything with it. Do you have a proactive approach ready should there be something down the road, rather than just saying that it wasn't there this time so we didn't have to really think about it? Is this not a heads-up to maybe have some kind of programming available or possible thoughts on it? Have you thought about it since the Harbinson modalities failed?

    Mr. Steve Verheul: We have given it some thought. But in the context where we're talking about domestic support, it is really very much focused on the high spending levels in Europe, the U.S., and Japan. That's all focused on the direct spending, the dollars they put out. There's much less focus on what they call market price support, which is the approach taken by our supply management commodities. So it hasn't been a focus of the discussions, not just in the Harbinson text, but in the three years that we've been conducting these negotiations.

    If someone were to manage to bring it up as an issue--and it's very late at this point to bring a completely new issue into the negotiations--then they would have to build a lot of support from a lot of countries in order to get that to happen. I think it's fairly unlikely at this late stage that a new idea with new disciplines could come into play. But that's not to say that we aren't watching for that very carefully, because we know the importance to the industry. If the unlikely event did arise, then certainly we would have approaches in place to, first of all, probably oppose it and to seek support so that it doesn't move in that direction.

  (1250)  

    Mrs. Rose-Marie Ur: There appears to be more discussion with least developed countries.The EU is pumping up to the front stating that they are the champions of this. Where do we stand with the EU and the United States? Where are we on the totem pole on that one?

    Mr. Steve Verheul: We have a lot of concern about what Europe has been saying in relation to developing countries and least developed countries. They've suggested that their approach is much more beneficial to developing countries. They focus a lot of their attention on the tariff preferences they provide to developing countries for some products. That seems to be their focus, that they provide better access to their markets for some developing countries. Our concern is that they're providing it only to some developing countries, not to all developing countries. We need that kind of approach to be applied across the board.

    We have very open access to developing countries. We're one of the more open economies in the world for developing countries. We're certainly farther along in that regard than Europe is, and we're pretty close to the U.S. as well. We certainly think we're well positioned with developing countries. We're also prepared to talk to developing countries in detail about some other elements they need in the negotiations. We spend a lot of time working with various developing countries.

    Mr. Mark Corey: Mr. Chair, at the World Food Summit in Rome, which was held under the auspices of the FAO, Minister Vanclief had a meeting with about 10 or 12 agriculture ministers from other countries, a number of them developing countries. This was in reaction to the U.S. farm bill. I think there was an emerging consensus that one of the worst things you can do for developing countries is to subsidize agricultural products. It drives international prices down. It takes away the capacity of those countries to produce into the world markets and sell in the world markets, something they could actually do well. I think Canada has been at the forefront of countries that have been promoting trade liberalization, in particular the reduction of export subsidies and domestic support as a way to improve the lot of developing countries. The Prime Minister as well has been very active in things such as the new economic program for African development. The minister of CIDA has taken a very proactive role in bringing agriculture back into the framework of international development. So I would say that Canada as a country has taken international development very seriously. It's a very large part of some of the things that are driving us in trade liberalization.

    Mrs. Rose-Marie Ur: I really appreciate the briefing today. When we have small numbers, not only do our questions get answered but questions from the audience get answered. They don't have the opportunity to sit at this table. So I think it's really great to have this opportunity.

    Thank you, Mr. Chair.

    The Chair: Thank you very much, Mrs. Ur.

    Mr. Anderson, perhaps you could give us some of those audience questions.

    Mr. David Anderson: Mr. Chair, I may have already done that.

    The Canadian position is that countries can choose to use TRQs on particularly sensitive products. For Canada that's obviously dairy and poultry. Some of our biggest export customers are sensitive to other areas, such as beef and pork. Asia and the EU would be examples of that. The current administration of the TRQs already keeps Canadian products out of many markets. How does Canada's position of justifying more of them benefit our trade? One country's export is somebody else's sensitive product.

    Mr. Steve Verheul: We're suggesting that countries would have a choice. They could either go with a very ambitious reduction formula on tariffs or they could provide access improvements through tariff quota improvements. I don't think we'd see a proliferation of new tariff quotas in that environment. Some countries would prefer to take the tariff reduction approach. In having that option that way, it isn't any kind of escape clause or a way of not providing improvements. It just means that you're doing it in a different way.

    Going back to the European Union, a lot of what they've done on tariff quotas in the past has resulted in a lot of restrictions. We didn't get access to the tariff quotas in the last round because of some of the ways they constructed them. That's why we're focusing on making sure there are actual rules this time around so that the way you administer your tariff quotas is done according to rules, transparent and predictable, and the way you establish that access is provided according to rules as well. That gets me back to that example of pork into Europe. If they did it the right way, we'd have roughly 10 times as much access as they are providing us now.

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    Mr. David Anderson: From their perspective, did they do it the right way?

    Mr. Steve Verheul: No. They will acknowledge that they used some innovation in calculating their tariff approach. The problem the last time around was that we were operating under guidelines rather than rules. I think we need rules this time so that countries don't have that flexibility.

    Mr. David Anderson: I think Mr. Pettigrew is on record as saying that the deadline of December 31 is a hindrance rather than an incentive to the process. Is he wavering on a commitment to that deadline, or are we just not able to meet it?

    Mr. David Chatterson: No, I don't think there's any wavering at all. We're involved in complicated negotiations. He's also on record as saying that he's seeking the right deal for Canada, not a quick deal for Canada. We're halfway along an ambitious three-year deadline to conclude these negotiations. At the meetings he attended in Paris last week the question of not meeting the deadline of January 1, 2005, was never raised.

    Mr. David Anderson: What are the realistic chances of meeting that? We're halfway along in terms of the timeline but about 10% in terms of the negotiating and the work that needs to be done.

    Mr. David Chatterson: A lot of movement is not apparent until very late in the day. A lot of the work is being done. Whether we will meet the deadline, I'm not sure. It's certainly in the realm of possibility. I'm not sure how probable it is.

    Mr. David Anderson: At one time agriculture was seen as the central issue in these negotiations. If no deal is reached, will other areas go ahead, or is everything going to stop until there is an agriculture deal?

    Mr. David Chatterson: I don't think everything is going to stop. Even though we missed some deadlines in agriculture and other areas, work is continuing across the full spectrum of the negotiations. Agriculture and the reform of agricultural trade are so important to so many different participants in the negotiations, though, that they are looking to see a positive outcome along the lines of what we agreed to pursue when we launched the negotiations. The negotiations are also governed by a single undertaking, which means essentially that nothing is really agreed until everything is agreed. I don't think you'll see a stoppage of movement or progress in other areas. They will continue to move. But we need all parts of the puzzle before we can conclude.

    The Chair: Mrs. Ur.

    Mrs. Rose-Marie Ur: With regard to Mr. Anderson's question about the creative method of calculations used by some countries, which is on an aggregate basis and groups certain commodities together, have we closed that loophole?

    Mr. Steve Verheul: Not yet. We've put forward ideas in the negotiations that would close that loophole, and I think we have a reasonably good chance of getting it closed this time around. It's a loophole that existed in the last agreement in 1995. But I think we have a good chance because countries have seen the effect of it over the last five to eight years. I think there's a fairly broad consensus to get it closed this time around.

    Mrs. Rose-Marie Ur: Thank you.

    The Chair: Mr. Anderson, do you have anything more?

    Mr. David Anderson: No.

    The Chair: One of you mentioned a moment ago that we're now living by rules rather than guidelines. Is that something we've learned from the Uruguay Round? What else have we learned from that round? Obviously, there are many things, but perhaps you could mention something significant so that we might, in our own minds at least, find some consolation in the fact that we've learned something from our past experience. We have had a lot of experiences since the Uruguay Round in terms of butter oils and those kinds of things and our interpretations. Other people find interpretive ways of doing business. Have we learned something pretty significant from our Uruguay Round?

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    Mr. Steve Verheul: I think so. The Uruguay Round was a little bit different because we did have this whole effort to turn any existing border protection into tariffs and tariff rate quotas. That's the first time this has ever been attempted. There was a lot of room to manoeuvre around that, and the guidelines in some cases were fairly loose as to how you did that. Now that we've gone through it once, I think we have learned what makes sense and what doesn't. We've certainly learned that we need more of this to be rules-based rather than simply guidelines if we're going to get an effective result.

    Mr. Mark Corey: Mr. Chair, the other thing that has happened from, say, 1991-92 pre-Uruguay to 2001 is that we've learned very well how to sell into foreign markets, and we've taken advantage of the access we got under the Uruguay Round. I know that we always deal with the problems. On the other side we were selling $13 billion in exports of agriculture and agrifood in 1992. By 2001 that had increased to over $26 billion. So we've more than doubled our agriculture and agrifood exports in that decade. There are still problems. That is really the purpose of the next round. But I think we need to remember that we've actually done very well under the rules of the Uruguay Round.

    The Chair: I would agree with you, Mr. Corey. That's a very good point.

    Mr. Chatterson has been left off the hook this morning. I have a question for him, perhaps my last question. We know that cabinet rules. Agriculture, Natural Resources, and DFAIT are represented at the cabinet table. At the end of the day are you comfortable with the way you resolve your differences at the cabinet level so that you can come to a common set of rules going into the negotiations? What happens if Agriculture wants something that perhaps DFAIT doesn't? Who wins the day?

    Mr. David Chatterson: We're officials.

    The Chair: I know you are. You're the officials, and you often get blamed for this, so take your blame today and run with it. Somebody is going to be blamed if something goes off the rails. Obviously, it comes back to the politicians, and of course we defer. But can you give us some idea as to what happens if there's a stalemate between Agriculture wanting something...? We'll assume that it's supply management. Mr. Vanclief says, we assure you that you have 1,000% support from the agricultural sector. But DFAIT decides that in order to get a deal on softwood lumber, we need to make some concessions on supply management. Who wins that day?

    Mr. Mark Corey: Mr. Chair, if I could start, I think one of the strengths of the parliamentary system is cabinet solidarity. Where ministers have serious differences of opinion on policy, it forces them to reconcile those views and to come to common understandings and positions. So while there may be differences going into cabinet meetings, there is always unanimity coming out of those meetings. As officials we can't speculate on where cabinet discussions would go and what the decisions would be. But I think that is one of the strengths of the system.

    So far, on all of the issues related to the agriculture trade negotiations, I don't think there have been any really serious differences at the officials' level between Foreign Affairs and Agriculture. We spent a lot of time developing the trade negotiating strategy and position, and I think it served us well because it does represent all of the interests in agriculture in Canada. So I would say that we have a very coherent view of agriculture. We have consistent advice going to ministers.

    David, did you want to add to that?

    Mr. David Chatterson: We have a very extensive interdepartmental process among the officials, as high as the Deputy Minister level, and this has been ongoing since before Seattle in terms of the trade negotiations. One of the reasons is that many of the issues are what we call horizontal issues. They have implications outside of the trade and economic fields. It has very much been my experience that it's a collective effort. We have had differences, but we always have been able to resolve them. I think everyone is working with the collective interests of Canada very much uppermost in their mind. The only other comment would be that we also are very fortunate to have two very experienced ministers, who have been involved in this for some time, and very effective ministers, I could add.

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    The Chair: I don't want to leave the impression that I want to diminish the softwood lumber sector, because I think that's very important, as is the auto industry and other sectors as well. They're all important. I drew the analogy of softwood lumber because it's something that's first and foremost in the minds of a lot of people in terms of resolving that issue.

    Ultimately, there comes a time when you have to see-saw and give and take a little bit. We want to leave this room this morning with the full assurance that we have your total commitment. I believe we have.

    I want to thank you for coming, Steve, and for being our negotiator. We want you to be there and negotiate hard. Mark, continue to be there for us. David from DFAIT, we thank you for coming this morning. We look forward to perhaps having another meeting sometime.Thank you.

    The meeting stands adjourned.