STANDING COMMITTEE ON AGRICULTURE AND AGRI-FOOD

COMITÉ PERMANENT DE L'AGRICULTURE ET DE L'AGROALIMENTAIRE

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, October 22, 1998

• 0802

[English]

The Chairman (Mr. John Harvard (Charleswood St. James—Assiniboia, Lib.)): Members, let's get started. I apologize for the call of an early meeting, but it was unavoidable. The minister has other commitments for this day.

We want to get started. The minister's here for just one hour, so I would hope that we can hear from him in just a moment and then get to your all-important questions.

I have a word on housekeeping. I would like to, if at all possible, wrap this meeting up at about 10.30 a.m. and then devote any or all of the remaining 30 minutes—that is until 11 a.m. when we have to vacate the room—to an informal steering committee meeting in camera so that we can wrap up a couple of scheduling items. So let's keep that in mind.

Right now, let's get to the minister. Of course, he's here in connection with our series of meetings—we call them “take note” hearings—on the upcoming WTO negotiations, which will be beginning in a little more than a year from now. These are important hearings. So I would invite the minister...and of course, his deputy, Mr. Claydon, is with him, as is Mike Gifford, his major trade negotiator. Mr. Gifford's real title is director general, international trade policy.

I want to make sure I get that right, Mike.

Anyway, let's get to the minister. Good morning.

Hon. Lyle Vanclief (Minister of Agriculture and Agri-Food, Lib.): Good morning, Mr. Chairman.

First of all, I want to congratulate you on being the chair of the committee. To all of the members who have been either reappointed or newly appointed to the committee, I look forward to working with you in the weeks and months ahead, as we certainly have a number of very important issues before the committee and before the industry of agriculture and agri-food in rural Canada.

I appreciate the opportunity to be here. Unfortunately, because of cabinet commitments, it is for only one hour. I have a cabinet meeting at 9 a.m. I do want to make some opening comments, but I certainly appreciate the opportunity to be the first to appear in the “take note” hearings that you are having to seek the views of the agriculture and agri-food sector in the forthcoming WTO negotiations on agriculture.

I want to stress to you—I know I don't need to—that you are launching a process today that is a very important one. We need to work together to form a long-term vision for our industry in Canada. It is critical even in tying in with all of the other issues that are before us, and the realities before us, that we collectively create a positive environment so that our industry can grow and strengthen. I know you will recall that when Canada and the other WTO members signed on to the Uruguay Round agreements in 1994 there was an agreement that a new round of multilateral trade negotiations would begin before the end of 1999. These negotiations will continue the reform process that was begun in the last round.

• 0805

We all know that Canada is a trading nation. Exports of goods and services currently account for more than 37% of our gross domestic product in Canada. But in agriculture, if we take that back to the primary producer level, which is the beginning, of course, of the agriculture and agri-food industry in Canada—that's where it all starts—somewhere between 48% and 50% of the average farm gate dollar income to Canadian farmers comes to the farmer because of trade. Certainly in some commodities the percentage is higher and in others it is lower, but on average it's just a little bit under 50%.

Overall in Canada, one out of three working Canadians owe their jobs to Canada's success in the global marketplace. We surpassed—and when I say “we”, that's a collective “we”, the industry with provincial governments, the industry participants with the federal government, all working together—the agri-food industry's goal and had exports of $20 billion in 1996, and that was four years ahead of their goal.

We are here as a committee representing and working with a $90 billion domestic industry in Canada in addition to a very large export business. Now the industry and the Canadian Agri-food Marketing Council want to increase Canada's share of world agriculture and agri-food exports to 4%. Presently I believe it's just a little bit over 3%, but they feel they can go to 4% of the world agriculture and agri-food trade by the year 2005.

It's very clear that the upcoming talks are important to us, and if Canada is to influence the direction of the talks, we will need to go to them with a strong, unified, and credible negotiating position. Without one, we risk being marginalized early in the process. We risk having imposed upon us a negotiating outcome that might not be in our best interest.

To ensure that Canada's initial negotiating position reflects the full spectrum of trade interests within our agriculture and agri-food sector, I made a commitment to the sector and to my provincial colleagues that the federal government would conduct a thorough consultation. Over the past year or so, Agriculture and Agri-food Canada has actively encouraged an informed debate within the industry on how the next WTO round can be used to help achieve the industry's economic growth goals. Certainly one of the areas where that was raised was here at this committee a number of months ago, when I believe there was a motion in this committee that you people get involved in this as well.

I certainly welcome that, and, as I stress, these “take note” hearings are providing and will provide stakeholders their first opportunity to more publicly present their interests. These hearings are a forum for the various parts of the agri-food chain to express their views on three critical questions. The first is, what are their long-term economic growth goals? Second, what role can the next WTO round play in helping to realize these long-term goals? And third, what priorities should Canada pursue in these negotiations? It's with this information in hand that we will best be able to develop a strong negotiating position, a position that represents the interest of the entire agri-food industry.

I'm certainly pleased that the response to your committee's invitation has been so positive. I think with such high interest it's indicated that the consultative process is already on a very positive track. It is vital that the voices are heard from across the spectrum of the sector, from the farm gate, to the services, grocery retailers, and everyone in between.

Canada isn't required to submit an initial negotiating position right away. However, we do need to have a strong, unified position by the time the WTO ministers meet in late November 1999 to agree on the specific terms of reference for the agriculture negotiations. The hearings you are starting today will play a key role in the development of Canada's agricultural negotiating position.

• 0810

Over the next year, there will be many industry meetings and conferences, where those in agriculture and agri-food will have the opportunity to express their views on Canada's position. I certainly hope to attend as many of these as possible. Next month, for example, I will go to WTO-related conferences in Alberta and in Quebec. Next April 18, 19, and 20 here in Ottawa, Agriculture and Agri-Food Canada, together with the provincial governments, will hold a major conference on the WTO agriculture negotiations. This will present yet another opportunity for the sector to provide advice on Canada's interests and priorities in the negotiations. In addition, I have offered to meet privately with as many organizations as possible over the coming months to discuss what they believe are the key issues for their sector of the industry.

In keeping with the federal government's consultative approach to developing an initial negotiating position, I wish to stress that, as negotiations become more fully engaged beyond 1999, we will continue to consult closely. As negotiating issues emerge more clearly and other countries reveal their position, Canada's position will have to be fine-tuned. But as we do this, I remain committed to consulting fully with the stakeholders on an ongoing basis.

I want to talk a bit about industry goals and how they relate to this process.

The global environment in which our agri-food sector operates has changed, and it will continue to change. How will we meet tomorrow's challenges and opportunities?

Industry players, whether they view themselves as export-oriented or import-sensitive, need to reflect on where they want to be in 10 or 20 years, and how they will continue to grow and prosper in a world where trade barriers and trade-distorting subsidies are subject to progressive reductions.

As I said at the start, the goal of the Canadian Agri-food Marketing Council, or CAMC, is to gain 4% of the market share of world agriculture trade by the year 2005. An important element of this goal is the challenge of improving our value-added performance. At present, 60% of our exports are primary products and 40% are processed. The sector wants to reverse this ratio, and we certainly know that as this ratio is reversed and shifts the other way, this creates more economic activity, more value-added, and more jobs here in Canada.

It is clear that if the industry's goal for obtaining an expanding share of world agricultural trade is going to be achieved in 2005 and beyond, we are going to need a successful WTO round. We need to ensure the upcoming talks will build on the success of the Uruguay Round, which placed, for the first time, world agricultural trade under effective international rules, equally applicable to all. Preparing for the next round of WTO is certainly one of my top priorities.

In my view, the development of a realistic negotiating position will necessitate taking a number of basic facts into consideration. In particular, as a major agricultural importer and exporter, Canada has a vital interest in a more liberal, rules-based, international trading system. Such a rules-based system serves the smaller and medium-sized countries such as ours very well in dealing with economic superpowers such as the European Union and the United States. This is evidenced by our recent experience with regional interests in the United States seeking to limit our grain and livestock exports.

The U.S., for example, because of the rules base, no longer has recourse to section 22 import quotas. They were terminated as a result of the Uruguay Round agreement. Without this provision, the United States administration was unable to resist political pressure to illegally block Canadian exports.

Since then, we've had a very productive meeting with the United States' officials. Our officials have agreed on a work plan for a detailed review of all the issues on a priority basis, and I think this is a very positive first step.

I want to assure you that Canada will not agree to limits on exports to the United States. The purpose of our meetings with the Americans is to enhance trade, not limit trade.

• 0815

Canada is a major agricultural exporter, so we need more secure and improved access to international markets for a whole range of commodities and processed products. World prices not only reflect global supply and demand, they also reflect the effects of trade-distorting production subsidies, export subsidies, and restricted market access.

If the Canadian agri-food sector is serious about increasing exports—particularly of the value-added products—to the levels outlined by the CAMC export targets, this suggests a broad approach on market access. An increased emphasis on value-added export certainly means we will need to address the problem of tariff escalation, in which the more highly processed the product, the higher the tariff.

Improved market access also means dealing with unjustified technical barriers that block Canadian agri-food exports. We are also a significant agri-food importer, and like many other countries we have some import-sensitive sectors.

Canada will not be alone in wanting to ensure our sensitive sectors are not asked to go further than those in any other country. The Uruguay Round results provided a reasonably good idea of the likely main agenda items for the next set of negotiations.

The WTO Agreement on Agriculture includes a comprehensive set of rules, disciplines, and commitments in a broad range of areas, including market access, domestic support, and export subsidies.

The related WTO agreement on sanitary and phytosanitary measures established a new set of rules and disciplines that calls for such measures to be applied on the basis of scientific evidence and that they not act as disguised barriers to trade.

The results of the Uruguay Round provided us with a solid framework within which to pursue our future multilateral negotiations. I expect the upcoming WTO round will build on this accomplishment. However, these negotiations will also provide an opportunity to deal with new issues. These are issues such as the need to develop an appropriate international framework that allows trade in genetically enhanced products to expand, while respecting the rights of governments to maintain appropriate regulatory and approval mechanisms to ensure the health and safety of our human population as well as the environment.

Clearly, it would be naive to assume the results of another WTO negotiation will somehow magically eliminate all problems of the agricultural trade. We will continue to have fluctuations in supply and demand and therefore in prices. We will continue to face protectionist pressures in our export markets. Such pressures tend to increase around election times, as we might note, especially election times in the United States.

Nevertheless, we shouldn't be too cynical. The Uruguay Round demonstrated governments are prepared to accept international disciplines on their freedom to develop domestic agricultural policies, provided the disciplines are backed up by effective dispute settlement mechanisms and the rules apply to all countries.

This represented a fundamental change in the agricultural trade environment and one that is not likely to be reversed in any significant way in the foreseeable future.

It's against this backdrop that I would ask this committee to explore and probe. I would ask you to help us all understand the kind of international environment producers and processors will be facing as we move into the next century, and how we can use the next WTO round to help us more fully exploit the growth potential of our tremendous Canadian agri-food sector.

In this way, I believe you as committee members and as members of Parliament can make a significant contribution to the important effort to ensure that Canada continues to have a healthy and prosperous agriculture and agri-food industry. It is not without its challenges. It's not without its ups and downs. But we know that it is a healthy industry.

I trust the work of the standing committee will be completed as quickly as possible, Mr. Chairman. I know that it will be an invaluable contribution toward the development of our Canadian position for the next WTO round of negotiations.

I thank you and I look forward to your questions or comments.

The Chairman: Thank you, Mr. Minister. I trust that you will make available copies of your remarks.

Members, given that the minister will be here until just 9 a.m., we have to observe time limits very strictly. I ask for your cooperation. In the first round, each gets seven minutes. We'll start with Mr. Hilstrom.

Mr. Howard Hilstrom (Selkirk—Interlake, Ref.): Thank you, Mr. Chairman.

• 0820

We're talking trade, of course, but farm income is directly related to what other countries are doing, in particular the United States and Europe, with regard to us competing with them. I'm talking about, first of all, the primary producers. I'd just like to mention that after the Uruguay Round in 1994, it seems our primary producers became more exposed to the world markets and less competitive as the other countries continued with their subsidies. A lot of farmers indicate that this seems to be totally unfair. Why was it that the other countries weren't required to lower their subsidies at the same rate? I note just in the last couple of days the Americans have put in another $3 billion in market loss payments. Are those not subsidies? What's going to be done about that kind of thing in our trade talks coming up? Perhaps you could answer that.

Mr. Lyle Vanclief: First of all, on the farm income issue, if the committee sees fit, I would be pleased to come back for a discussion on that whole issue, maybe using some overheads.

Yes, Mr. Hilstrom, it is important and, as I said, rules based. What has happened and what is happening as a result of the Uruguay Round is that everyone, quite frankly, is still within their WTO commitments. Different countries in different areas had different bases to go from. If we look at the comparisons the OECD uses, contrary to what we usually think, the overall support to agriculture in Canada is slightly above that of the United States, but specifically, maybe not. As I said in my comments, one of the things we need to take a look at is what everyone is doing with their support to agriculture and how they are doing it, because you are right, that definitely affects the day-to-day return to agriculture, to commodities, and to our producers.

Mr. Howard Hilstrom: Industry is composed of primary producers right up to processors and that sort of thing, and they're all part of the trade. The primary producers seem to be the ones having the most problems. It doesn't seem necessarily that the interests of the finished product exporters are the same as those of the primary producers. Will you be ensuring the interests of those producers in non-tariff-type commodities, such as wheat and barley, will be guaranteed to be taken care of and not traded off in any way? In fact, they should receive the benefit of the main negotiations, and we should try to do something for them, as opposed to emphasizing this increase in exports of the finished product. We should be conducting these trade negotiations so as to ensure that we have a viable farm industry at the producer level.

Mr. Lyle Vanclief: Yes, but what I said earlier, and I'll repeat, is that we're all in this thing together, and we need to have a broad trade negotiation position. There are a lot of players in it. The primary producers are certainly where it starts, and they want access for, if you will, raw product. There are access issues with regard to, for instance, raw wheat. There are also access issues that need to be discussed with different countries and different trading partners for the products we produce from wheat here in Canada. If they can't get access for those products, then that certainly comes back to the primary producer as well.

As for my saying, or for anyone saying, even before the negotiations start we can guarantee everything for everybody, I referred to that as well in my comments. We will go in there after we talk to everyone involved in this.

• 0825

We have a broad-based agriculture and agri-food industry, and it behoves us.... As I said, there are different interests because of different commodities. If we do not come together and put together a joint comprehensive negotiating package and approach, we aren't going to do very well at all and we will be at the mercy of somebody else doing that for us.

I cannot sit here and say we will do anything more than our very best in cooperation with anyone else. There will be no secrets; everybody will be involved in it, as they have been now for nearly two years in consultations, and we will continue to do it. But for me or anyone to sit here today and say that as a result of these trade negotiations the price of product X is always going to be a profitable price under every or any condition that's out there in the world, that's impossible for anyone to say.

But we will work with everybody to put together the best trading deal we can in order to strengthen and hold the strength of our industry.

The Chairman: Thank you very much, Mr. Minister.

Now we'll go to Madame Alarie.

[Translation]

Ms. Hélène Alarie (Louis-Hébert, BQ): Good morning, Mr. Minister. If I understand correctly, you will be appearing before us again to address income security. I hope that that will be in the very near future.

I'm going to make another comment. You talked about agricultural support measures and stated that overall support to agriculture in Canada is slightly above that of the United States. Could you provide members of the committee with tables that compare export subsidies and hidden support measures, etc., especially for primary products, to assist us in holding better discussions over the coming week?

[English]

Mr. Lyle Vanclief: As I say, Madame Alarie, I will certainly come back with a detailed presentation on that if the committee so desires. But if we take the basis that everyone in the world uses...then we have to get into what the definition of that basis is. It is usually referred to as the OECD calculations of the level of support to agriculture. If we take that basis, in Canada it's 20%. This was in 1997.

In Canada it's 20%. In the United States it's 16%. In the European Union it's 42%. But I'll come back later to the committee with the.... That isn't meaningful until we go over what the definition is and how OECD arrives at what they say is support.

[Translation]

Ms. Hélène Alarie: One of the objectives of farmers in Canada is to increase exports. To do so, they must have an attractive product. In my opinion, we meet that requirement. We also need articulate producers, and I think that we have that too. And they must be competitive. In that sense, I think that Canadian producers have something more, including the sanitary measures that we have put in place and the environmental regulations that Canada has established, which come at a cost. But there is a price to pay if we want to be competitive. During our discussions, I would like us to take that aspect into account and I would like it to become an objective for us. We are often penalized with respect to competitiveness because of the costs linked to that, even though our products are perhaps more attractive. I would like to hear your point of view.

[English]

Mr. Lyle Vanclief: I can tell you, Madame Alarie and committee members, that there isn't a country that can attract, for obvious reasons, any more attention from foreign buyers than Canada.

We have a reputation in the world that is second to none in regard to the quality and safety of our product and the quality of our service in providing that and backing up that product. That reputation is one the industry has worked hard to obtain, right from the primary producer up. If the primary producer doesn't provide the processors, or the grain shippers or whatever, with a good product...you can't make it that way—but they do. Our industry does that all the way up. We are competitive. There's no question we are very competitive. That's one of the ways we're competitive. We're competitive as well because of the recognition, and it is an important recognition, of the sustainable environmental way in which we produce those products.

• 0830

Yes, that can be improved. We still have a long way to go, but our industry is working in this direction and that support is there, not only from the federal government but from provincial governments as well, recognizing that it's an important part of the whole process.

[Translation]

Ms. Hélène Alarie: Before starting to negotiate seriously, is some work done with a view to establishing a sort of memorandum of understanding with the European countries, especially with respect to biotechnology? We have come up against a brick wall in that respect, and I would like to know what you do prior to starting negotiations to try and avoid coming up against a wall like that.

[English]

Mr. Lyle Vanclief: Maybe Mr. Gifford can expand on that after I leave. There has been a series of information papers for at least the last two years, Mike, that have been exchanged between countries. They do not disclose what anybody's negotiating positions might be, because of course we do not have ours in place, but what they do is talk about the concerns and the issues that need to be discussed in the negotiation process. That has been going on for, as I say, two years now.

Mike, do you want to make a brief comment on that and just fill us in?

The Chairman: You have thirty seconds, Mike.

Mr. Mike Gifford (Director General, International Trade Policy Directorate, Market and Industry Services Branch, Department of Agriculture and Agri-Food Canada): Very briefly, Minister, Mr. Chairman, biotechnology has been identified by Canada and the United States, and a number of other agricultural exporting countries, as extremely important. Basically we need to develop an international process that will allow trade in genetically enhanced products to expand. We're facing major constraints into Europe, and that's one of the issues we have to deal with.

The Chairman: Mr. Calder followed by Mr. Proctor.

Seven minutes, Mr. Calder.

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

Minister, in a perfect world we wouldn't be talking about what we're talking about right now, because in 1993 we negotiated a flat line of 85% on tariffs and everything, and that was to make sure commodity prices would be at a good level. Obviously, that hasn't worked, because commodity prices are not at a good level; therefore, this tells me that some of the people who negotiated into the deal in 1993 are not playing by the rules. This is one position we, as the Government of Canada, have to start looking at.

The United States, for instance, was supposed to have shelved their EEP program. They've dusted it off and are using it. If they're going to use it, why wouldn't we come up with a program that's similar to theirs? If they're using it, then why don't we adopt one?

They also came up with the U.S. Farm Bill, which is going to put $35 billion into the hands of U.S. farmers over the next seven years—in other words, $5 billion a year. As Mr. Hilstrom has already alluded to, just Thursday they hailed a new $6 billion emergency aid package for farmers that the White House and Congressional negotiators hammered out amidst last minute budget negotiations. That money is going to include a $3.1 billion subsidy and payment for crops, and that will be an increase of over 50% from the 1998 levels. They're also going to put in $875 million for multi-crop loss caused by natural disaster or disease, and they're also putting in $36 million in tax deferred accounts and other tax breaks. If we negotiated that we were going to cut back by 15%, quite frankly to me it looks like the United States isn't playing by the rules.

• 0835

Mr. Lyle Vanclief: I'm not here to defend in any way, shape or form what anybody else is doing. The realities—and I can show you that when I come back on the farm income as well, unless it was thrown out of proportion yesterday—of the low commodity prices we have at the present time have very little to do with any changes in the export subsidy levels of either the United States or the European Union. If we remember three or four years ago, particularly about two and three years ago, commodity prices were considerably better than they are at the present time.

When we look at it, the European Union and the United States have done very little, if anything, differently in the last three or four years from what they were doing four years ago. What has affected the price of commodities in the last twelve to eighteen months has been the world financial situation and the supply of product in the world. Yesterday the Americans may have thrown that off.

The other reality is that even though the United States has dusted off their EEP program, they have not yet used it in grains. We certainly hope they don't, but they have not yet used it. It is there, there's money allocated for it if they so desire to do it, but they have not yet used it.

I want to make it clear that I am not here to defend what anybody else is doing. When we look at what Canada, the United States, and the European Union have done with their support to agriculture in the last three or four years, we are all, particularly Canada versus the United States, in relatively the same positions we were in a few years ago. The European Union may not have reduced as much as Canada and the United States; however, everybody is still inside the box, inside the rules and regulations, and inside their commitments that were made at that time. That's the reality.

You mentioned the 85% at the beginning. I just want to make sure that everybody understands—and I know that was your intention, Mr. Calder—that the reduction to 85% was a reflection of supply management commodities, that the tariff levels for those commodities would reduce to 85% of where they were set in 1995 and they were to be reduced to 85% of that by the year 2001. But that certainly wasn't the case with other commodities.

The Chairman: Thank you, Mr. Minister.

Mr. Calder.

Mr. Murray Calder: Thank you very much, Mr. Chairman.

Minister, obviously one of the things we should start taking a look at is what the production of grain was in volume in 1993 and what the production of grain is now in volume in 1998. Obviously, whether there's Asian flu, or however you want to cap it, these people still like to eat three squares a day. So the consumption is still there, and probably rising. That would be the first thing. And obviously if we have low commodity prices, we have low commodity prices because there's a glut of grain. Why? Who is producing more? Is there more production?

I also know too that in Russia, for instance, this year, whereas they don't have any money, they still have a basic crop failure. They're down 22% on their average production, and their average production isn't that high. The question is, are we going to allow these people to starve to death this winter if it happens to be an exceptionally cold winter? I don't think so.

These are all questions right now that are still outstanding as to why we have low commodity prices.

Mr. Lyle Vanclief: In overriding all you say, Mr. Calder, I think it stresses the importance that we have a known set of trading rules in the world. If we see somebody else or if we think somebody else is stepping outside the boundaries or the lines of what they can and can't do, then we have the rules based in the appeal boards and all of that to go back to, to say you can't do that, etc. We have used that very successfully to our benefit.

• 0840

If we look at supply management, the NAFTA challenge that was there, and the WTO challenge that's there in the dairy industry right now, when you have a rules-based trading regime, even though you may not be 100% happy with the rules—the rules may not be the be-all and end-all for everybody within your country—you have it, and everybody, whether in a big country or a small one, has to abide by that set of rules. That's why, in this whole discussion, it's so important that we hear from everybody about how we approach this. We have a negotiating position right now. The only thing we can probably all agree on in Canada right now is that we don't like export subsidies.

The Chairman: Thank you. We must move on. We're doing well, thanks to your cooperation.

I assume Mr. Keddy will want to take his party's time. You'll follow Mr. Proctor, Mr. Keddy, if you want. Mr. Proctor.

Mr. Dick Proctor (Palliser, NDP): Yes, thanks very much.

Welcome, Mr. Minister. I think perhaps the only thing we could all agree on is that we've got a problem in this country at the present time. You talk about all the countries being inside the box. Would you not agree that what happened last week with the extra $6 billion to U.S. producers is a trade-distorting subsidy?

Mr. Lyle Vanclief: If we look at it technically, Mr. Proctor, some of it is trade distorting and some of it isn't. I do not question at all—I agree with you—that what the Americans did yesterday or in the last few days is certainly going to affect trade. In my view, it's certainly going to play a major part in depressing grain prices, not only to American farmers but to farmers around the world as well.

I have stressed that with Mr. Fischler in the European Union and with my counterpart in the United States, and I will continue to say, when countries do this, that there are two losers and one winner. The one winner is the person who's buying the product. They don't need it any cheaper than they have it right now, if we want to refer to grains, because it's at a lower price than it has been. The loser is the taxpayer and the primary producer, not only in the country where it happens but around the world, because they depress the price.

Unfortunately, it's a reality we have to deal with. How we deal with it is what we need to talk about. Can we deal with it? If we can't deal with it, what do we do about it, etc.?

As we know, every two years in the United States there's an election, and 23 months before that election, they start playing games.

Mr. Dick Proctor: I don't disagree with your response at all, but it's Canadian primary producers who are really being clobbered at the present time.

I appreciate your comments earlier about being prepared to come back to talk about the farm income, but is there not anything we can talk about to bridge the current cash shortfall that grain producers and others are experiencing?

Mr. Lyle Vanclief: We certainly have been working with the industry and provincial governments over the last number of months, because I think all of us could see this coming. We have been hoping that we weren't seeing the right thing, but unfortunately, in reality, we were.

What we're doing at the present time is certainly pointing out to the primary producers the importance of using all of the tools in the tool box, if I can say that, that there are at the present time. We're working with them so we can improve that tool box, that support to them, and help them use it as best we can.

Mr. Dick Proctor: Mr. Minister, there's an area in which some people think the government could help out. This is the charge back to the primary producer on a whole range of issues, such as meat and grain inspection. If I understand the terminology correctly, this is referred to as GATT green. This is something that other governments do. We seem to have a fetish in this country to charge as much as we can back to the primary producer. I'm wondering, if given the crisis we're in at the moment, you could look at doing something like that to alleviate this and put more money in the pockets of Canadian farmers.

Mr. Lyle Vanclief: Certainly in addressing the financial situation that we had in the country, a number of ministries have started using a cost-recovery process. And yes, that's a cost to whomever has to pay it, whether it's at the primary producer level, the processor level, or whatever. There's always a debate on that and about how much is public good and how much is private good.

• 0845

We have done as good a job as we can. We looked at a number of those fees over time to see whether they were proportionately as accurate as possible. I'm having discussions with the department, both at Agriculture and Agri-Food Canada and the other part of our ministry, the Canadian Food Inspection Agency, to ensure that those fees do not increase from where they are at the present time. If at all possible, we'll freeze where we are at the present time so that there will at least be no additional or new cost-recovery fees. That's certainly in recognition of the financial pressure that producers in the industry are under.

The Chairman: Thank you very much.

We'll move on to Mr. Keddy. You have five minutes.

Mr. Gerald Keddy (South Shore, PC): Thank you, Mr. Chairman.

My question for the minister is directly related to farm net income. The 1986 farm net income was around $3.5 billion nationally. I'm sure you're aware of all the statistics. This past year, farm net income is expected to drop to $2.5 billion. That's a $1-billion drop. Program support in the mid-1980s was around $2.5 billion. Today, the current expenditure is $600 million, which was after the meetings last summer.

The United States recently increased their safety net budget by almost $6 billion from the current $15.5 billion. Now, I realize there are more people in the United States and I realize they have a huge agricultural sector, but it's still a 40% increase this year alone.

So all that came out of the meetings last summer was a $600-million safety net program for possibly one year. That's what we were discussing. Even the safety net committee's report that was released this summer suggested that a nationally based safety net program should be created that would be available to all producers and all production in all provinces.

So if the U.S. can increase its budget, why can't we, Mr. Minister? That's the first question.

I guess the second question is, have you considered the possibility or have you already lobbied the Minister of Finance for the additional funding for the farm income safety net?

The Chairman: May I remind you, Mr. Keddy, that this session is about WTO, not about farm income, which is very important. I think before you arrived, the minister indicated that he would be more than happy to come and talk at length about farm income, which is naturally very relevant and timely. But really we're here today to talk about WTO.

Mr. Lyle Vanclief: I will make a brief comment. I don't want to diminish at all, Mr. Keddy, the concerns we all have.

What I will repeat is, yes, I do wish to come back, if the committee wishes me to come back, as soon as it's convenient for both of us. I will not procrastinate on that because we have some very worthwhile information and challenges and opportunities out there, for example, on this whole thing. The deputy ministers of agriculture across the country will be meeting in early November.

Yesterday, I called the provinces. Notices are going out today to the industry people. I have called an industry-provincial, can I say, get-together or round table discussion on November 4 to talk about where we are, how we got there, what tools we have, and what might be available, and if so, how it could be done. I won't go into the specifics of the, if I could put it in my layman's terms, real head-bashing sessions talking about the situation we're in at the present time.

I mentioned this earlier and I just want to mention this again. I talked about the support that's assessed by the OECD. I don't think we want to draw conclusions specifically from the numbers I gave. These were numbers that were there, but we have to recognize that with different commodities, those levels of support are at different levels than they are overall. So we can get into this at that time.

Mr. Gerald Keddy: I appreciate the answer. I'll stick to the subject at hand here, the WTO.

At this summer's meeting on Niagara-on-the-Lake, the quote that came out of this was that “Everybody recognises that we have to have a Canadian position earlier rather than later”, referring to 1999 WTO negotiations.

• 0850

Have the disputes with South Dakota this fall split your department's positioning with respect to WTO? How have the disputes affected Canada's strategy or position on trade talks, if at all? I think what we want to look at here specifically is whether or not you feel we could see a move to more protectionist positioning in the agriculture sector during the next round of trade talks, as the South Dakota example certainly alludes to, or whether you believe most countries will continue to move towards greater trade liberalization. Do you think the Asian crisis, the South Dakota disputes, and the collapse of the Russian economy will push other countries to even greater free trade, or will it go just in the opposite direction and be more protectionist?

I realize we're running out of time, Mr. Chairman, but where in that mix does that leave some of our supply management practices in the agriculture sector that are already threatened? There are a lot of dynamics there.

Mr. Lyle Vanclief: Good question.

Without question, what happened in South Dakota this year strengthens very clearly the necessity for a clear set of rules and a dispute settlement mechanism for those rules, no matter what the organization is. That was a very good example, and when we took what they were doing to both the WTO and the NAFTA consultation process, it was very interesting that the U.S. as a very large country came back to us as a small country and said they really didn't want to go that way; let's try to avoid it if we can and try to settle these things out.

Quickly, on your other comments, there is no question that the agricultural community around the world wants to move to more open and freer trade. Access into other countries means that we naturally want the go-ahead for our commodities, processed or unprocessed. But it's a two-way street, and they therefore want access into our markets for some of those commodities. Having said that, all countries also have their sensitive commodities and sensitive areas as well.

As far as the financial crisis is concerned, being a realist, I think we have to understand that even having said what I said about the goals of the industry around the world, the natural instinct in tough times is to be protectionist. If you get backed into a corner, you protect. That is a challenge that's going to be there. The people—and this includes a lot of us—may very well say they believe in freer and open trade, except there are these things that we want to protect. We're not alone there, though.

The Chairman: We have about eight or nine minutes for the minister, and then we can go to the officials. I want to hear from three more members for two to three minutes each. We'll go to Mr. McCormick first, followed by Mr. Penson.

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

I know Mr. Calder mentioned an 85% flat line on the supply management sector of our industry, but I've been asked by people in eastern Ontario to bring this forward. I think it could put something to rest and be a fair question. I'm referring to the fact that we're always hearing these rumours that our government is not supporting supply management. Of course, whether it's taken out of context or not, this summer there appeared an article in one of the farm papers that at least one department official—or more—made statements that were not in support of supply management for the future. It's not just the 72,000 producers, or whatever number involved in this; it's the communities of rural Canada. Supply management is the one strong arm of the economy there. I would feel most comfortable if I could be reassured that we will be there for our supply management sector and our people in the future, as we have been in the past.

Mr. Lyle Vanclief: I think your words at the end are the critical ones, Mr. McCormick. We have been there in the past and we will be there in the future. This government and this cabinet certainly recognize very fully the importance and the strength of supply management. I think the reality of the commodity prices at the present time gives us even more reason to emphasize to our trading partners that we have a sensitive area that is important to us. The supply managed sector as well is evolving and is recognizing all of that.

• 0855

As I said, the supply management sector, as well as all the rest, are taking a look at where they want to be in ten, fifteen or twenty years. How do they want their industry shaped, etc.?

We have been there strongly for supply management in the past. We will also continue to be there fighting alongside all of the players in the industry for what we now know is, right now, a strengthening and growing dairy, egg, and poultry sector in Canada, all the way from the producer to the processor to the consumer. We can show our Canadian consumers very clearly that this system is a big benefit to them as well. All they have to do is look at what happens to those prices or those commodities and their availability in other parts of the world.

The Chairman: We'll split the last five minutes between Mr. Penson and Mrs. Ur.

Mr. Charlie Penson (Peace River, Ref.): Yes, thank you, Mr. Chairman. I'd like to welcome the panel here this morning.

Mr. Minister, in order to talk about the future of where agriculture is going, I think it's important that we also look at the past and how it evolved. You will know, Mr. Minister, that the backdrop to both the last Uruguay Round signing and the negotiations that took place over several years was a massive trade war in several sectors of agriculture. I went through that, so I know what it's all about. I don't think most Canadian farmers want that to happen again.

The important thing that came out of the Uruguay Round was the fact that agriculture was brought under trade rules for the first time. Most countries recognized that it was a modest start, but at least we got started; hence the 15% reduction that most countries took. We know that other countries are staying within their guidelines. We may not like their domestic export subsidies and tariffs, but they are within the guidelines.

What Canadian farmers are looking for now is movement in that significant second stage, the round that's going to take place in 1999 and 2000. In the past, Canada has played a very strong leadership role in developing these kinds of trade rules in the industrial sector and in the service sector. I think Canadian farmers are looking for that same kind of leadership going into this agricultural round. I'd just ask you to first comment briefly on that.

Secondly, would you favour rolling agriculture into a general round with other sectors in order to try to get more on the table, or would you like to see a go-it-alone negotiation?

If you don't have time for all of that, a written answer is fine.

Mr. Lyle Vanclief: What we know, Mr. Penson, is that there will be an agricultural round. I think there's one other sector as well, that being services, and at the ministerial meeting we'll decide in November 1999 as to whether or not it goes further than that. The important thing to our industry is that we do have an agricultural round. We know that will be there, so that's the one we're naturally concerned with.

I agree with what you're saying. At least we now have rules that we can build upon and can improve upon. What I want to stress is that I need help. Our negotiators need help. That's why it's so important that we hear from absolutely everybody. We know there are views on trade out there on which there is a 180-degree difference from one individual or individual organization to the next.

I'll just sum up what I said before. If we don't go into this negotiation with a long-term vision.... We need to do the negotiations to the best of our ability. I can tell you that even though there are only 30 million of us as Canadians, we have an inordinate positive effect for the size of our country when it comes to the trading and to these types of negotiations. When the people in the United States say they need Canada to work with them in order to approach what the European Union is doing, to me that is a very big compliment to Canada.

I'm not kissing up to anybody, but this is a team effort, one that needs this whole committee. This is a non-partisan issue. Even though we have our own political views, we all have the same interest at heart, and that is a stronger, more sustainable, more viable agriculture industry and rural Canada than we have at the present time.

The Chairman: Mr. Penson, we're going to have to squeeze in one more question before the minister goes.

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

As you stated earlier, all sectors will be involved. That's no secret. I believe that was our intention in 1993 as well. As we all know, we had the butter-oil-sugar fiasco a little while ago, for example. They came back to us and stated that it was our fault things weren't done right there. I thought they were involved in 1993 as well.

• 0900

What are we going to do to ensure that there are going to be no secrets, that these people will know what the bottom line is, so that they don't come back to us after it's ratified and say we goofed up?

The second one is just a quick point. Yes, we have the highest quality safety service and Canada's reputation is second to none, but it comes at a cost to the farmers. I don't really think that's factored in under these conditions. We have cost recovery and all the rest, such as the green programs that we have met. The other countries don't seem to be at the same base as we are, though. It appears that we are up top and the other countries are down below, that our costs are going down while their costs aren't.

Mr. Lyle Vanclief: I think I can best address your second question when we come back on the other issue, Mrs. Ur.

On the first one, I have guaranteed, and will continue to guarantee, that there will be no surprises as we go through this next round of negotiations. Everybody's going to be in on it from the start, and you people are going to play a major role. You have dozens of people coming before you. I won't repeat all of the rest of the process we're in, but there will be no surprises. If we have tough sledding, everybody's going to know we're in tough sledding. However, if you refer to a situation such as the butter-oil-sugar one, that was the tariff classification of a specific product. Is everybody going to know those tariff lines when there are reams and reams and reams that were thought up, where x minus 2 has such a such a complement and so on, or where they're going to fit? Nobody's going to guarantee that.

We don't need to get into it now, but everybody was around the table when those things were there before. Sometimes, through nobody's fault, not everybody has as complete an understanding as they maybe could have had. Hindsight is a wonderful thing. The important thing is that we've always played by the rules, and we will continue to do so.

The Chairman: Thank you, Mr. Minister. I know you have to go to a cabinet meeting. On behalf of the committee, I appreciate the fact that you came in here today. I welcome your offer to come back to speak to us about farm price incomes and other serious matters with respect to agriculture.

Mr. Lyle Vanclief: Thank you very much, Mr. Chairman, and we certainly look forward to the report on the comments you hear from the numerous groups that are going to appear before you.

The Chairman: Thank you.

Members, Mr. Gifford is going to stay, so we will resume our questioning.

Mr. McCormick.

Mr. Larry McCormick: Could we take a brief break?

The Chairman: Let's take a one-minute break.

• 0903

• 0906

The Chairman: Members, we will resume our meeting. I'd like to draw your attention to the business at hand, members.

I want to say a big thank you for your cooperation while the minister was here. He was here for only an hour, and I wanted to squeeze in as many questions from as many members as possible. I think we accomplished that quite well, thanks to you people who were gracious enough to observe the time limits. I think that served all of us very well. So again, thank you.

We are going to resume this meeting without Mr. Vanclief, the minister, but Mr. Gifford is here.

My understanding is we will now go to Mr. Hoeppner, who will be followed by someone from the government side, but they haven't indicated yet who that will be. Mr. Hoeppner, you have five minutes.

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

Mr. Gifford, trade is an interesting subject. We heard the minister say today we need cooperation with the United States. That is probably one of the prime objectives of the agriculture minister. I'd certainly agree with that.

But I would like to hear your comments on items that appeared recently in the papers, where the U.S. trade officials were talking about the cooperation they received from the federal government. They said, “They might as well have told us to go to hell when it came to opening up the Wheat Board books, to making it transparent, and to addressing some of the trade irritants.” Are the American officials not taking us seriously when it comes to us trying to cooperate with them? Just recently, the ambassador from the U.S. said on television that when the Liberal government was talking during the 1993 election about renegotiating the U.S. free trade agreement, he told the Prime Minister not to use the word “renegotiate” because that would spell trouble.

Do we really have any clout with the Americans? Is there any way we can get on a level playing field with them? To me, it seems when they sneeze, we catch the flu and get very sick.

I hear the minister say 20% of our net farm income is subsidy supported. I grain-farm and I've also livestock-farmed, and I can't find that 20% subsidy in my canola fields, my wheat fields, or my grassland. Sure, the Canadian Grain Commission sometimes subsidizes just very slightly. I think 95% to 100% comes off farmers' income.

• 0910

So where is this support? Where is this communication or, let's say, the harmonization between ideas of the U.S. and Canada to fight the Europeans? Really, in my opinion, they are our problem.

Mr. Mike Gifford: Mr. Chairman, in terms of the averages the minister spoke of, the bottom line is this. In Canada overall, roughly 20% of farm income can be attributed to government support and protection. In the United States in 1997, the figure was 16%. But as the minister indicated, those averages hide big differences between commodities. So clearly in the case of wheat, U.S. support in 1997 was roughly five times higher than the Canadian support to the wheat sector.

We have a lot of farm programs, for example our NISA program, which applies virtually across the board, certainly to most agricultural sectors. But in the United States, the bulk of their support is focused on grains, and there's hardly any support given to their red meat, to their cattle, and to their hog sectors.

So you have very uneven support and protection levels among commodities. I think this is an important thing to remember when we talk about these national averages.

Mr. Chairman, the bottom line in terms of the United States is that we certainly need U.S. leadership when it comes to multilateral trade negotiations. If the United States isn't putting its shoulders squarely behind trade liberalization multilaterally, then clearly you just don't have the same impetus. You don't have the same expectations if they're not pushing.

When it comes to bilateral trade, I think most thinking American farm leaders realize the NAFTA has been to our mutual benefit. We've both benefited. But certainly some farm state politicians, particularly in the northern states of the United States, take the view that any import is a bad thing and the only good thing about trade is exports. Therefore, when they see two million tonnes of Canadian wheat and barley being imported each year, somehow they think there's something wrong with NAFTA if that much is being imported.

As I say, I think this is the view of a minority of the U.S. agricultural interests. But as the minister indicated, when conditions get tough, when we have cyclically low cattle and pork prices, when we have depressed grain and oilseed prices, then the first thing that comes to people's minds is to blame the problems on imports. That's unfortunately what we're experiencing right now with the United States.

The Chairman: Time flies when you're having fun. Five minutes have already gone by. Thank you.

Mr. Gifford, may I ask a question before we go to Mr. Calder?

Unlike the United States, we don't have an export enhancement program or an export subsidy program. When it comes to WTO negotiations, will we be at a bit of a disadvantage from this point of view? We can't say to the Americans, “Well, if you reduce your export subsidy program, we'll reduce ours.” We don't have that kind of thing to give away.

They may say in negotiations that they will reduce or eliminate EEP if we reduce or eliminate some other vital program that we have in support of our agricultural community. You can understand, perhaps, the kind of dilemma we face.

What would be your comment on the kind of dilemma I'm trying to conjure?

Mr. Mike Gifford: In Brazil, Argentina, Canada, Australia, and New Zealand, we don't have export subsidies. The United States and the European Union do. Even though the United States are not using exports today on grains, they're certainly using it, for example, on dairy products. The Europeans subsidize across the board.

The bottom line, Mr. Chairman, is that the industrial sector banned export subsidies back in the mid-1950s. I think most agricultural policy-makers, whether they're in Europe or in North America, realize it's about time we did the same thing for export subsidies in agriculture.

So I don't think it's a question of a trade-off. We don't have to have export subsidies in order to persuade somebody in Washington or in Brussels that it's in everybody's enlightened self-interest to finally phase export subsidies out of world agricultural trade.

The Chairman: Thank you.

Mr. Calder, you have five minutes.

Mr. Murray Calder: Thank you very much, Mr. Chairman.

I'm going to pick up right where the chairman left off because this is the line of questioning I wanted to go with. The United States has the Farm Bill. The United States has EEP. They've just come up with this emergency aid package worth $6 billion. The European communities have a whole bunch of different subsidy packages too.

• 0915

Would it not be smart for us to get in quick right now and balance the books? Obviously all these aid packages in there must be GATT green or they wouldn't be doing it. It would trigger a dispute, wouldn't it? Yet we're not doing this.

Mr. Mike Gifford: I think there's some confusion about GATT green. GATT green simply says if a support program meets certain criteria, it doesn't have to be reduced; it's not part of your reduction commitments on domestic support. You can still have so-called non-green support, but you have to keep it within those commitments. Because the commitments were based on 1986-1988, when virtually every industrialized country in the world had all-time record support levels back in the mid 1980s, there's still lots of wiggle room for the United States and Europe to keep within their commitments to be reducing, relative to 1986-1988, but to still have much larger support levels than those in Canada. That is the conundrum.

If you have a green program, you don't have to reduce it; you can increase it as much as you want. Amber or non-green means you have to keep it within those reduction commitment levels. As the minister was saying earlier, the reality today is that much of the United States' support has been turned from non-green into green. That's not to say all of the $6 billion is green. Some of that $6 billion is non-green, but it's still within their overall reduction commitment levels.

Mr. Murray Calder: Why wouldn't we then come up with mirror programs, the same as those in the European Economic Community and the United States? We don't necessarily have to fire tons of money into it. We could set up the infrastructure that's there and if we had to we could increase the support level. Right now, any time the United States uses EEP against the European Community, they're not using it against us, but they're taking away a market we have over there, or a potential market, because they've just driven down the price of that commodity and we can't afford it because we don't have the same type of program in place as the United States. Why wouldn't we do that?

Mr. Mike Gifford: To be fair to the United States, they have only used EEP on grain exports once since the spring of 1996, if memory serves me right, and that was on a targeted response to the European use of export subsidies on barley to California. Therefore, we cannot blame the United States over the last three years for the downward pressures on grain prices. I think the reality when it comes to grain is that we have excess supplies relative to the demand that's out there. Certainly the European Union is still using export subsidies, but it's within their reduction commitments.

Rather than other countries introducing new export subsidy programs, the ultimate solution is for the rest of the world to tell the Europeans and the Americans once and for all that it's time to eliminate export subsidies. That is one area where the Canadian agri-food sector has a common position.

The Chairman: Just a few seconds, Mr. Calder.

Mr. Murray Calder: The bottom line is that they have those programs in place to enact when they see fit and we don't. Why?

Mr. Mike Gifford: In theory, we do have the potential to use export subsidies. Part of our Western Grain Transportation Act subsidies to the west coast were defined export subsidies. When we got rid of the WGTA we still kept the capacity, in theory, to use export subsidies, but as somebody has pointed out, it's a mug's game. When prices are low, countries use export subsidies that force prices lower, so they use more export subsidies and lower go the prices. At the end of the day, the only ones who win are the importing countries and the losers are Canadian producers and Canadian taxpayers.

The Chairman: Thank you, Mr. Gifford.

Now we go to Mr. Breitkreuz for five minutes, followed by Mr. McCormick.

Mr. Garry Breitkreuz (Yorkton—Melville, Ref.): Thank you very much. I'm really pleased to see the non-partisan nature of the discussion around the table today.

I don't know much about economics—I studied it for a couple of years at university—but it seems obvious to me, and it's what you're saying, that if excess amounts of grain are causing the distortion in the market, subsidies would be causing that excess production. To say the subsidies aren't the problem and it's the excess production...I know enough about economics to know that the subsidies can cause the excess production.

• 0920

The question I want to end up with is this, and I'll tell you where I'm going right from the beginning. Foreign subsidies and dumping have depressed grain prices for the last ten or fifteen years. Grain prices are really the problem we have to look at. What can we do to force a dramatic reduction in foreign subsidies and put a stop to dumping? I really believe that's what's forcing down the price of grain.

You stated that the American subsidies on grain are five times higher than those of the Canadian farmers. If we are going to go to the bargaining table, what are the trade irritants that the other countries can point to in Canada that really reduce our credibility in negotiating with these people to bring down the level of subsidies? What are the trade irritants at home here that we have to get rid of? If the Americans are subsidizing five times more on grain, there must be some other areas in Canada that are in conflict. So, in answering the question of what we can do to dramatically reduce that, what is compromising our position here?

Mr. Mike Gifford: There is this observation that governments around the world tend to accept that the international community has a right to expect disciplines on market access, trade barriers, export subsidies, and measures at the border. They get a lot more sensitive when it comes to making commitments on reducing domestic support.

With the agricultural sectors now, in advance of the industrial sector, we have commitments to reduce certain types of domestic support, but not all support it. A lot of the support in western Europe, you're quite right, is to European grain production. That has caused excess production of grains in Europe. Nobody would dispute that fact, least of all the Europeans. Clearly, over time, we need to reduce these excessive support levels.

The European Union is slowly moving to reform some of the elements of the common agricultural policy, but it's politically sensitive, it's political dynamite, and change comes very slowly. I think that's the bottom line. All countries have sensitive sectors, or high support levels in certain sectors, and they're not prepared to make abrupt changes to long-standing farm programs. When change comes it tends to come over reduction commitments of five or ten years.

But we have to keep our eye on the ball. We have to clearly enunciate what our objectives are, what we want to try to achieve, but recognize we're into a three- or four-year negotiation that will be implemented over five or ten years, and really we're talking about the trading system of 2010, 2015 when we start talking about what the next round of the WTO will achieve.

I'd say in terms of what other countries objectives are vis-à-vis Canada, all exporters obviously have an interest in reducing barriers to access. Some countries, particularly the United States, seem to have a hang-up about single-desk selling. We've told them to basically document what their concerns are and we'll discuss them, but if they simply want to debate differing market philosophies they can take a flying jump. So far, they haven't documented what their real concerns are, apart from saying they don't like the system and it's un-American because it's not like their system.

Mr. Garry Breitkreuz: But is there something besides the single-desk selling that irritates them in Canada?

Mr. Mike Gifford: I draw a good distinction between the perceptions some Americans hold that somehow it's a lot easier for Canadians to export to the United States than it is for Americans to export to Canada. Those are things you can sit down and deal with. The view of other Americans is that they just don't like imports. They don't give a damn what kind of marketing system we have, they just really don't like imports. They like exporting, but they don't like importing.

When it comes to the first set of irritants, trying to reduce the paperwork at the border to enable a freer two-way trade flow is clearly in both our interests. On the northwest cattle project, 10,000 head of American feeder cattle will move from Montana into Alberta this year. That was a conscious decision to sit down and develop a system that was more user-friendly to exporters on both sides of the border.

Those are the positive kinds of things we can work out with our American friends and will continue to do so.

• 0925

Mr. Gary Breitkreuz: Do you think that—

The Chairman: Sorry, time's up.

Mr. McCormick, you have five minutes.

Mr. Larry McCormick: Thank you, Mr. Minister and Mr. Gifford, for being here.

The WTO challenge that you or the minister mentioned is now being examined by the panel with regard to the export policy of pricing of Canadian dairy products...if we lose that, how can we still export and to what degree? What could be the impact of this ruling with the next round of WTO? I don't expect that you would have all these answers.

Mr. Mike Gifford: Let me just say that the preparations and the presentation of the Canadian case to the WTO panel on dairy export pricing occurred on Monday and Tuesday of this week, and it seems to me it was a classic case of a Team Canada approach. You had representatives of Foreign Affairs, Agriculture Canada, Ontario, Quebec, the Dairy Farmers of Canada, and the National Dairy Council. Basically that team together I think presented a very strong case as to why Canada believes our export practices are in full conformity with our international obligations.

Obviously you can't predict the outcome of a panel. We certainly believe our case is strong. The impact on the industry will depend on precisely what the panel findings are. The bottom line is that neither the Americans nor the New Zealanders have challenged all of our dairy export pricing—only certain parts—and it's only those parts that will be potentially vulnerable to an adverse finding.

I simply don't want to speculate on what the panel may or may not do. The bottom line is we think we're in full conformity. We've presented a very strong legal case and we're confident of the result.

Thank you.

Mr. Larry McCormick: Mr. Chairman, I have two questions here and I'd like to get them both answered. In Mr. Gifford's expert opinion on the first one, when I found out that the Standing Committee on Foreign Affairs and International Trade, who of course are going to conduct hearings towards the next round, will also be including agriculture...I was perhaps not surprised to see this, but our primary producers are always worried about the fact that the government or whoever will trade off one natural resource against the other.

Mr. Gifford, I want to give you an opportunity here. You mentioned the word “perception”. I use it around the kitchen table when I go home on the weekend more than my family wants to hear about it—the perception of politics and the perception of all we do. But there's been a perception—and I mentioned this to the minister—in regard to yourself and supply management that you may not be in support of supply management for the future continued existing mechanism as much as many producers think you should be. I just wondered if you would care to comment on that, Mr. Gifford.

Mr. Mike Gifford: Very much so. I think I've spoken to as many producer groups as probably most people around this table, and I don't mind basically repeating to you what I've said to them.

In the case of the dairy sector before the late 1960s, Canada was a net exporter of dairy products. We lost our access to the European market. We saw other dairy markets closing down. We saw other countries using export subsidies. And the Canadian industry at that point in time said there's no point in trying to compete in a distorted international trade market. Let's retrench. Let's concentrate on servicing the domestic market.

That was a perfectly rational decision at the time. That was back in the late 1960s. Today we're in the late 1990s and the situation has changed. You now really have effective disciplines on export subsidies and you have reductions in market access. The international market, although still distorted, is certainly not as distorted as it was in the late 1960s.

The question facing the Canadian dairy producers is this. You have a stagnant domestic market, a domestic market of only 30 million people. Do you want to stay where you are, basically servicing 30 million people, or do you want to venture back again into the international dairy market? That's a decision governments aren't going to decide. It's going to be a collective decision of the dairy farmers of Canada.

It seems to me that the experience of the last two or three years—and the same applies to chicken—is that slowly but surely there is an increasing interest among both dairy and chicken farmers in basically seeing if they can exploit the opportunities of the international market. The bottom line is that the policy of the Government of Canada is to support supply management in this country.

• 0930

Negotiators, contrary to perception or popular belief, do not operate on the basis of a free-wheeling, “do what the hell we want to do” attitude. We operate on the basis of clear instruction from cabinet. For the next round of negotiations, we will seek a cabinet authority. The Minister of Agriculture and his colleague, the Minister for International Trade, will go to cabinet and say that this is what they're proposing for an initial negotiating position. Once cabinet has decided on that initial negotiating position, those are the instructions upon which Canadian negotiators will operate.

I can't be any more explicit than that, Mr. Chairman. Bureaucrats, contrary to popular myth, do not operate independently of the political process. Thank you.

The Chairman: Thank you, Mr. Gifford. Thank you, Mr. McCormick. We're out of time.

Mr. Proctor, you're next, followed by Madam Alarie. Mr. Proctor, five minutes.

Mr. Dick Proctor: Thank you very much.

Mr. Gifford, what comes through increasingly clearly—and I just want to make an editorial comment here—and you reflect it and so does the minister, is that Canada has this brush-cut, apple-cheeked image of the boy scouts of the world. I'm sure it looks good on you folks when you're at international conferences, that we're from Canada and isn't it great. But in the meantime, at the other end, we have an unmitigated disaster going on on the farm because we're not going to do some of the things the European Union or the Americans are doing. I would suggest to you that to protect our producers perhaps we need to change that boy scout image and get a little bit of a motorcycle gang image, get a little down and dirty and a little nasty.

Mr. Mike Gifford: Mr. Chairman, contrary to the clean-cut image most Canadians think applies to themselves, I think some of our American friends don't think we're so clean-cut. They certainly have their bitch lists, and I think a lot of them think their negotiators didn't do as good a job in the free trade agreement negotiations as the Canadian negotiators. But the bottom line is that we're various shades of grey. There are no blacks and whites in agricultural trade.

The problems a minister of agriculture faces in Brussels are the same as a minister of agriculture in Canada, the same as a minister of agriculture in the United States, the same as a minister of agriculture in Japan. They're all faced with the problem of how to adjust an industry to adapt over time to changing economic circumstances.

It seems to me, Mr. Chairman, that I can certainly deal with the questions relating to trade and trade policy. The question of support levels and the aggregate amount of money that's spent in support of the rural sector is basically a domestic political decision; it has nothing to do with trade negotiators. Basically, it's through the domestic political process that governments decide on how much money they're going to provide to their agriculture sector. Basically, trade negotiators work on the basis that trade policy is a means to an end.

We have had a heavily distorted world agricultural trade environment for 50 years. We're trying to improve it. That's not being boy scoutish; that's just basically saying Canada is better off if we have less distorted trade than if we allowed a situation to continue as it has been for the last 50 years.

Mr. Dick Proctor: Thank you. I have one more question, Mr. Chair.

Mr. Gifford, in your earlier comments you said that within the box, to quote the minister again, there's lots of wiggle room for the Europeans and the Americans. What about Canada? Is there wiggle room for Canada or not?

Mr. Mike Gifford: Yes. Canada's base support level—I don't want to be quoted on the numbers—from my recollection in rough orders of magnitude, is something in the order of $5 billion. Back in the mid-1980s, when you totalled up the dollar support and the support provided by border protection—a fancy calculation—it amounted to something in the order of $5 billion. We undertook to reduce that demand by 20% over six years, down to $4 billion, and I think the current levels of expenditures are in the order of something like $2 billion. So there's a gap of roughly $2 billion.

Mr. Dick Proctor: So some of that, then, could be used. It comes back to what you said in the previous answer: it's a political decision. We have wiggle room, is what you're saying.

Mr. Mike Gifford: Correct.

Mr. Dick Proctor: Thank you.

• 0935

The Chairman: Thank you Mr. Proctor.

We will now go to Madame Alarie, followed by Mr. Hilstrom. Then we'll go to Mrs. Ur. Those are the next three questioners. We have a couple of names after that.

Madame Alarie.

[Translation]

Ms. Hélène Alarie: I'm going to continue along the same lines as Mr. McCormick on problems with perception. Canada is a member of the Cairns Group. At the end of the last meeting, it was implied that the future of supply management and agricultural support would be bleak. Moreover, earlier on, the Minister told us that with respect to supply management he anticipated clear rules and an increase in regulatory mechanisms. That is the first perception problem that I have identified. I would like to hear your point of view and understand your vision. After that, I will raise a second problem with perception.

[English]

Mr. Mike Gifford: Mr. Chairman, it's true the other members of the Cairns Group have primarily agricultural export interests. But it's also true that in the Uruguay Round we worked with the members of the Cairns Group in support of our agricultural interests. We also worked very closely with Japan, Korea, and certain western European countries in developing the Canadian position of a clarified and strengthened article XI. So it was possible back in the Uruguay Round basically to have a unified Canadian position that was perceived by both the stakeholders in Canada, the export side and the more import-sensitive side, as a strong position that didn't prejudice the interests of one versus the other.

The challenge, as the minister was saying earlier, is that while there is a national consensus today in Canada on the need to eliminate export subsidies, there is absolutely no consensus in Canada on what we should be doing with respect to improving market access. It seems to me, Mr. Chairman, the challenge for the committee, the sector, the provinces, and the federal government over the next 12 months is how to reconcile these differing views with respect to market access.

There is no magic solution. If the solution were easy, somebody would have enunciated it long ago. It's going to be a very tough slog, and that's why we need to sit down. If we come out with a fragmented position 12 months from now, we're going into the next round in a very weakened position, and basically we'll have to take what's been agreed on.

It seems to me, Mr. Chairman, that the challenge for us collectively is to work together and try to develop a position that is as defensible and as credible, both internally and internationally, as we had in the Uruguay Round.

The difficulty today is we don't have article XI. We have to find something else. And that, Mr. Chairman, is the challenge we're throwing out to everybody in this room. If we don't collectively answer it, we are in deep trouble, Mr. Chairman.

[Translation]

Ms. Hélène Alarie: The second problem of perception is with respect to American subsidies, namely for grains. Mention has also been made of subsidies for primary production in Europe. The impression is that we have a two-tier agricultural system. You said earlier that the Europeans wanted to make some changes, but that these changes were not happening very quickly. But in the meantime, we are under the impression that we are losing out. I would not want to talk about a boycott, but is there some kind of quick action that we could take to flag the issue before the negotiations begin?

[English]

Mr. Mike Gifford: That's a very relevant question, Mr. Chairman. What can governments collectively do short of entering into a multilateral trade negotiation to try to alleviate the problems. From time to time people have suggested that we at least agree to some kind of early harvest. Why can't we agree, for example, to phase out export subsidies and at least take that pressure off the international market?

The unfortunate thing, Mr. Chairman, is while such suggestions make a lot of sense, countries don't want to give up something without getting something in return.

• 0940

So when you go to Europe and ask why we don't agree in advance to finally phase out export subsidies and not wait for the next negotiations, their reply is that the negotiations in agriculture are going to be a package; they're not going to give up on export subsidies and two years later we'll go back to them and ask for more market access.

So the bottom line, Mr. Chairman, is although that scenario is completely understandable, in reality it is extremely difficult to achieve.

The Chairman: Thank you, Mr. Gifford.

We're out of time for this round. I have indications from four more members that they would like to ask questions. This should work out quite well. It will take roughly 20 minutes if each member uses his or her maximum time. Around 10 a.m. or so, I think we have one motion to deal with from Madame Alarie. After we've dealt with this, we'll go in camera for our steering committee meeting.

We now go to Mr. Hilstrom, followed by Mrs. Ur, by Mr. Hoeppner, and then Mr. McCormick.

Mr. Howard Hilstrom: Thank you.

In the supply management area, the dairy industry has already taken the position in Quebec and western Canada and across the country that they want to increase exports of dairy products. It has been well publicized. What are our negotiating partners going to say and negotiate when we go in there and say we want to maintain our supply management domestically with the prices that go along with that, and then we go to the world market and put out our excess, or whenever we think we can make a profit, pump it onto the world market? Is this not a contradictory position we'll be going in with?

Mr. Mike Gifford: Mr. Chairman, when we went into the last round, we had a very effective system of supply management that we believed to be in full conformity with article XI. We offered to improve access and to accept disciplines on our exports in exchange for a clarified article XI. The dairy industry itself was prepared to offer improved access into the Canadian dairy market and to accept disciplines on exports in exchange for a clarified article XI.

The international community, in its wisdom, decided they didn't want to maintain article XI any more and basically decided to convert all these import quotas to tariffs. Once this occurred, we were under no obligation to keep the screw turned as tightly as we had in the past, and we can, certainly under the new rules, expand production to take advantage of export market opportunities.

It's now up to the supply management industries and the export-oriented industries to reconcile their interests. What do they want to get out of this next round with respect to market access? There are a number of elements. There are all the over-quota tariffs. In most cases, those over-quota tariffs, whether they're in Europe or the U.S. or Canada, are basically prohibitive tariffs. With so-called within-quota tariffs or within-tariff-rate quotas, you have a relatively low tariff. In the Uruguay Round, the Canadian within-quota tariffs on supply managed products were reduced by 57%, not 15% as it was in the over-quota tariffs.

The other element is the size of the minimum access commitment. What quantity may be imported at low tariff rates? The industry and both levels of governments are going to have to try to figure out, with those various elements of market access, what should be the Canadian position.

On our export side, we want maximum reductions in tariffs, maximum increases and minimum access commitments. On the import side, the industry is going to have to try to reconcile those export interests with the import interests. So far, it is not apparent how we're going to reconcile those.

Mr. Howard Hilstrom: Thank you, Mr. Gifford. Obviously, we'll be going into this further as we get the industries in presenting.

The domestic subsidies over in Europe are our biggest problem. There's absolutely no doubt about that. What can we go in with to get them to move away from those high domestic subsidies, which are causing them to overproduce virtually every agriculture product in the world? Is there anything, or do we just kiss that goodbye? Obviously, a solution going in would be, ideally, to have total free trade between Canada and the United States and go in as a North American bloc, and then we would have some clout over there to kick some butt. But is there anything we can do at the current time until we harmonize more with the U.S.?

• 0945

Mr. Mike Gifford: Certainly we can work with the United States and with the other agricultural exporting countries to put pressure on the Europeans to accept increased disciplines on domestic support.

Probably the greatest force of change is not from external forces; it's from within the European Union. The European Union is going to expand from the 15 countries today to 20, 23, or 25 countries by the turn of the century. Eastern Europe basically is going to join the European Union.

The bottom line is that the common agricultural policy, as it exists today, simply cannot continue in the future, because a lot of those countries have a lot of agricultural potential, and even the European Union won't be able to afford a common agricultural policy that's based on today's policies 5, 10 or 15 years from now.

So there are internal reform pressures within Europe saying exactly this. We're going to have to change the common agricultural policy. We're going to go from 15 to 20 or 25 countries. If we're going to do that, let's do it in a way that recognizes that Europe is also the world's second largest agricultural exporter, as well as the world's largest agricultural importer.

We have export interests. We should make our industry more competitive so we can compete internationally without the kind of protection levels and support levels they currently have. That's a big and little debate.

Mr. Howard Hilstrom: We're as competitive as we can be right now on producing foodstuffs. I don't know how much more competitive we can get than we are right now.

Mr. Mike Gifford: I am simply agreeing that Europe has to become more competitive.

The Chairman: We'll go to Mrs. Ur, followed by Mr. Hoeppner.

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

Negotiation is bartering. You indicated earlier that the EU and United States have a larger margin within which to barter than Canada. With that statement, I don't know how we can expect to cut a good deal for our farmers when we don't have that leverage room.

I have a few questions, if you want to take notes so I can get some answers.

You said there's basic understanding regarding subsidies, but you have to improve the market sector export market. The fact of the matter is it's all well and good to improve the market sector export market, but even though we're improving that, the primary producers aren't gaining anything. So what is the purpose of constantly pushing export when our primary producers are losing each year, rather than gaining, since WTO?

I don't know, this is a perception I have, but could expanding production within Canada not trigger even increased subsidies from the EU and United States as well?

Our Canadian farmers have a major problem now with commodity prices. Could you tell me what we have in place now to assist them that wouldn't trigger a dispute or a challenge under WTO? They need help. What do we have there to help them?

Could you provide this committee with a graph or a chart regarding subsidies in the United States, Canada, and Europe, and this wiggle box you said Canada had? Give the figures for the other countries too.

Mr. Mike Gifford: First of all, the reality is that the European Union and the United States have far larger treasuries than the smaller and the medium-sized agricultural exporting countries. That's one of the reasons why Canada is a member of the Cairns Group. Australia, New Zealand, Brazil, Argentina, ourselves, Thailand, the Philippines—none of us have the financial capacity of the economic superpowers, and therefore it's not a question of these countries, in effect, saying, well, we will reduce our measly amount of support and protection if you will reduce your huge ones.

We're saying, look, it makes sense for everybody who's in the agricultural export business—and let's not forget that the Europeans are major agricultural exporters—to say we have to reduce trade distortions. Certainly we'll work with our friends, no matter where they are, on specific issues. When it comes to saying we want to reduce trade-distorting support, we have firm support from the rest of the Cairns Group. Obviously we have differences in some other areas, but in terms of reducing support levels that are trade distorting, that's where the Cairns Group is probably most influential.

• 0950

You suggest that primary producers are losing from trade liberalization. I would dispute that. I recognize and accept that there is still a tremendous amount of trade distortion left in world agricultural trade, and hopefully the next round will do a substantial job in further reducing them.

I also accept the reality that producers, particularly in North America, are suffering from cyclical downturns in the cattle sector, in the hog sector, and in the grain sector. I will also accept that some of these price reductions do reflect distorting production subsidies and distorting export subsidies.

On the trade policy side, we can work to reduce or eliminate export subsidies. We can work to improve market access. We can work, in effect, to reduce the the price pressures downwards that result from government intervention. But we basically can't do much about the natural fluctuations in agriculture that occur as a result. When there are good prices, producers expand production, and when there are poor prices, they contract. We're never going to get out of that cyclical situation. I think that is the reality.

The best governments can do is to cushion those cyclical changes, but do it in ways that are the least trade distorting. That's basically what has been happening over time. Countries are progressively getting away from commodity-specific open-ended support that basically rewards production—the more you produce, the more money you get—and moving towards more targeted programs, such as Canada's NISA program, which I think even the Americans would admit is a good program of farm support. It's not commodity-specific; it applies across a wide range of commodities.

The Chairman: Mr. Gifford, we must move on.

We'll hear from Mr. Hoeppner, followed by Mr. McCormick, then Mr. Breitkreuz and Mr. McGuire, and that should be it.

Mr. Hoeppner, you have five minutes.

Mr. Jake Hoeppner: Thank you, Mr. Chairman.

Mr. Gifford, I'd like to continue on these boom and bust cycles. I say sometimes we're our own worst enemy. One example is the hog industry. The hog industry in Manitoba is in terrible shape. The provincial government lobbied very hard to get a plant into the Brandon area. What kind of tax concessions they gave, I don't know. But one of the hog producers came to me two weeks ago and said, “Jake, when you get to the House, don't just bang the table; jump on the desk, because we're going bankrupt faster than you can imagine.”

We have a situation now in the hog industry where we could give them the grain for nothing and they would still go bankrupt, and it's due to political pressures from provincial governments to overexpand.

You see the Quebec farmers putting gates on the Trans-Canada Highway and telling us they're losing $43 a hog, and Mr. Bouchard says, “Well, I'll give you enough subsidies to make sure you stay in business.” I agree that something has to be done, but how do you do it across the whole country?

In Manitoba now, with the hog barns that have gone up, we can supply, I think, half of North America with hogs, if they ever get into operation. So we're killing ourselves; we're forcing them to go bankrupt again.

One of the agriculture people came out and said the NISA accounts average about $18,000 per farmer. That doesn't take care of one month of losses in one of these hog operations. How can we deal with this so it doesn't affect us on external trade?

We're in a boom-bust cycle, as you said, and we seem to do it every time there is an upturn. That has to stop somewhere.

Mr. Mike Gifford: I'll leave it to the minister to reply to the domestic income situation, as he has indicated he's going to be coming before this committee on that subject. I simply note in response to farm income problems that when governments provide support to certain sectors, the one thing a Canadian minister of agriculture and provincial ministers of agriculture have to bear in mind is that we are operating on the basis of a North American livestock economy for hogs, and we have to be very careful that we don't repeat the experience of the tripartite stabilization program, where basically the feds, the provinces, and producers put money into a stabilization fund and got countervailed. The bottom line was that all of that money was negated by the action of U.S. countervailing duties.

• 0955

So whatever we do in the future, Mr. Chairman, we have to bear in mind the fact that the United States' hog and cattle industries do not receive direct financial subsidies, and if we put in massive subsidies we are basically going to invite U.S. countervail investigations.

Mr. Jake Hoeppner: And on their markets. If the Americans ever closed the doors to us on hogs and livestock, our whole agricultural industry would be shot. We'd be finished. That's my concern, that we're slowly heading that way, because the Americans aren't going to allow their farmers to go bankrupt, just like the Europeans. They have the treasury and they'll do it. Now, how do we save our farmers? How do we save our agriculture industry?

Mr. Mike Gifford: I think those are the questions, Mr. Chairman, the discussions on November 4 are going to have to address.

Mr. Jake Hoeppner: Thank you.

The Vice-Chairman (Mr. Murray Calder): Is that it? Okay, Larry.

Mr. Larry McCormick: Thank you, Mr. Chairman, and thank you, Mr. Gifford.

I do appreciate your answer to me and that you made it clear how cabinet decides the position—an ongoing position. I want you to know I realize you're acknowledged across this country as an expert, excellent negotiator. Therefore, it's up to the government to hold you to its position. Many commodity groups have told us that.

The dairy industry wants to get into exporting more. That's where part of my concern is, for the family farm. I want the farmers to be able to grow with a free market, and they want to control their own destiny. But when we get into the exports and we allow the egg producers in Manitoba to export without a quota.... If this goes in any direction toward the dairy situation here, with the average dairy farm milking somewhere between 47 to 52 animals, my concern is for those family farms that would be left behind as the farms get larger. I just wonder in how much jeopardy they might be in your view.

There's one other thing I wish you would share with us, and I think we'll ask for your and the minister's advice more over the next year or two. The minister has asked the committee to be very involved, and we can probe and look at the international environment having to do with the ongoing direction toward the next round at the WTO. And we're limited with our resources, even though we have all these groups coming here. I just wonder how we might be better equipped or might expand our focus and where we can be involved here.

Thank you, Mr. Chairman.

Mr. Mike Gifford: Well, Mr. Chairman, just on the last point, clearly the department is certainly willing to respond to requests from the committee for information. I think in the past we certainly demonstrated we would reply promptly and comprehensively to requests from the committee for information.

But I think, Mr. Chairman, you're going to have over 30 agricultural groups appearing before this committee, and they have a very rich background of expertise and knowledge. They themselves can provide you with an awful lot of information. So it seems to me, between the federal government and the industry, we can certainly provide this committee with all the information you require.

In terms of your first question, Mr. Chairman, again the bottom line is the future of the industry. Whether it's dairy or chicken or any other industry, it's in the hands of the producers. If they choose and it's in their collective self-interest to have a single-desk agency—that's basically what we've got for supply management—that's their decision. Their challenge, like the challenge for every other agricultural sector around the world, is how do we maintain that marketing system that served us so well in the past, in a future where the international pressures are going to be to reduce not only export subsidies, but also market access barriers. That's something the industry is going to have to grapple with and come up with a decision on. Governments can't force a decision on the industry. Industry will have to figure out where they want to go in a trade environment that will change progressively over time.

• 1000

Mr. Larry McCormick: I'd like to thank Mr. Gifford for his comments on that, to put it on the record.

The Chairman: Thank you, Mr. McCormick.

We'll go to Mr. Breitkreuz and then Mr. McGuire.

Mr. Garry Breitkreuz: Thank you, Mr. Chairman.

I would like to just follow up on the questions on the other side, your answer on market access barriers and so on being a problem, and what I asked previously about trade irritants of other countries. Are our supply managed industries a trade irritant that other countries can point to? Of all the groups that will be coming before the committee, will there be some that are paying the price for other groups within our agricultural sector?

I guess I'm not being very clear on this. Are some being sacrificed? Are some having to give up a level of subsidy so others can have a stronger position? Right now grain producers are really hurting but others aren't. Do you understand what I'm getting at here?

Mr. Mike Gifford: I know exactly what you're saying. Sometimes as Canadians we think we're the only people in the world. The United States have supply management in peanuts. The United States have classified milk pricing in California that's very similar to the Canadian system. The Europeans have all kinds of import-sensitive sectors. We're not alone in having to try to grapple with reconciling our import sensitivities with our export interests.

In the last round, because we had a credible negotiating position at the outset that was developed by the industry and was a unified position, I can say categorically the interests of the export sectors were not sacrificed to support and protect the supply management sector. We managed to have our cake and eat it as well.

The challenge for the next round is basically to replicate that. We no longer have article XI. We have to develop a credible position. Nobody has any magic answers. We have roughly 12 months to try to figure out how to achieve what we achieved in the Uruguay Round.

Mr. Garry Breitkreuz: Thank you.

The Chairman: Thank you, Mr. Breitkreuz.

Mr. McGuire.

Mr. Joe McGuire (Egmont, Lib.): I was wondering if Mr. Gifford could indicate to us how the country will reach its objective of doubling its exports. Through this negotiation process, what areas do you see helping us to reach our objectives in that regard?

Mr. Mike Gifford: The goal CAMC has set for the industry collectively is to double exports roughly between now and 2005. By 2005 the next round will be barely over and the results will have only just started to be implemented. So if we're going to achieve CAMC's goal between now and 2005, it will be on the basis of the existing trading framework.

But clearly for the future, if the industry wishes to continue to grow, we will benefit from a trading environment where the system is based on the rule of law that applies equally to all countries; on a system where governments have hopefully, at long last, decided to phase out export subsidies; a system where more and more domestic support policies are less trade distorting and more production neutral and where you have some security and predictability in market access.

I think that's my last point. Why has our trade performance into the United States been so excellent? Since the negotiation of the free trade agreement, our exports have increased to the U.S. by 10% a year, year in and year out. Our exports to the rest of the world in contrast have been much less.

One of our challenges is how to improve our access to offshore markets such as Europe. We are a net importer today of agriculture and agri-food products from Europe because they have excellent access to the Canadian market, but Canadian access to the European market is still highly restricted.

• 1005

One of our objectives in the next round is to reduce those trade barriers in Europe to level the playing field. That's one theme I'm hearing from various agricultural groups around the country. They want the playing field levelled, whether it's in terms of reducing export subsidies, reducing market access barriers, or reducing trade-distorting domestic support.

The Chairman: Thank you, Mr. McGuire. Thank you, Mr. Gifford. As usual it's been a sterling performance on your part. I'm sure you'll be back with us again and again.

Mr. Mike Gifford: It's been a pleasure, Mr. Chairman.

The Chairman: That's why we pay you the big bucks. Thank you again.

Members, why don't we just take a few seconds' break to allow Mr. Gifford to leave. We will then continue with our open session for a couple of minutes to deal with Madam Alarie's motion. Then of course the steering committee members will go in camera for future business.

• 1006

• 1011

The Chairman: Members, please take your seats.

We have one item of business for our public session, and that is Madam Alarie's motion arising from a meeting we had last week with officials of the CFIA. As soon as we have dealt with Madame Alarie's motion, the steering committee members will go in camera to deal with future business of the committee.

The motion from Madam Alarie reads as follows:

The Committee recommends that the Minister deal equitably with all affected producers and that he make compensatory measures retroactive to January 1, 1997.

Madam Alarie, I think you've already spoken to it, but if you want to add a few more words, fine. I've already had an indication from Mr. Coderre that he wants to respond. So you may say a few words and then we'll hear from Mr. Coderre.

[Translation]

Ms. Hélène Alarie: It is quite clear that everyone wants producers to be treated fairly. A private group and industry representatives have made a recommendation to the Minister along those lines. So some of the work has already been done.

What has not been done, and it is of major importance, is to make compensatory measures retroactive to January 1, 1997, the date the crisis began and when the first people revealed the situation to the Agency, thus acting responsibly. To date, these are the producers who have faced the biggest losses.

If only out of fairness, if we say that they acted responsibly by taking the steps they did, they deserve to receive as much compensation as the other producers.

[English]

The Chairman: Thank you, Madam Alarie.

Now we'll go to Mr. Coderre.

[Translation]

Mr. Denis Coderre (Bourassa, Lib.): Mr. Chairman, I have maintained since the beginning that we must help producers. Efforts have been made and pressure has been brought to bear. It must be pointed out that this point of view is not partisan and that all members of the committee have worked very hard. We noted that some important steps had been taken and that there had been some changes.

I had planned to table a motion on retroactivity, but because the Agency is currently awaiting a legal opinion,

[English]

legal advice on retroactivity, and considering that even the Quebec sheep producers' federation asked the minister for legal advice on retroactivity

[Translation]

I do not feel ready to take a stand on this motion right now. I would like you to have access to the legal opinion and for you to let me know when it will be ready. I want us to wait.

[English]

We should table the motion until we have legal advice on retroactivity.

[Translation]

That way, we will have a much clearer position on the concept. We must speak to the issue in terms of legality. We are all aware that everyone wants producers to be compensated fairly: the Minister, the MPs who brought pressure to bear, the Quebec Liberal caucus, the rural caucus, the Reform Party and the NDP. That is why

[English]

I put forward a motion to table that motion until we have that legal advice on retroactivity.

• 1015

The Chairman: If I understand it, you would like to support Madame Alarie's motion, but you think that, first of all, we should have this legal opinion—

Mr. Denis Coderre: Yes.

The Chairman: —so that the position of the committee is absolutely clear.

Mr. Denis Coderre: We should table this for now and ask for legal advice.

The Chairman: Mr. Proctor.

Mr. Dick Proctor: Just for clarification—maybe somebody could help me out—how much time are we talking about for this legal clarification?

The Chairman: Denis, do you think it's a matter of days?

[Translation]

Mr. Denis Coderre: We should have an answer in a week or two at the very most.

[English]

The Chairman: Would it be fair to suggest that we should try to secure this legal opinion by no later than the week after next? If we don't get it, for whatever reason, then we'll darn well go ahead with the motion as proposed.

Mr. Breitkreuz.

Mr. Garry Breitkreuz: Thank you, Mr. Chairman.

The legal opinion is fine, but wouldn't we also need to have some economic background? What are the economic repercussions of this, and so on? Wouldn't we have to be given advice on that? It's not just legal; it would have to be economic.

[Translation]

Mr. Denis Coderre: Mr. Chairman, it is clear that we do not want to debate scrapie here today, because we have already had that debate. In my opinion, there is unanimity and consensus in this area. I want to help producers; I support producers. But because we are legislators and there is an impact not only for taxpayers, but especially with respect to the legality of the retroactivity, I want to make sure that we make the right decision from a legal perspective.

[English]

The Chairman: I will go to you next, Mr. Hoeppner.

Ms. Alarie, can you live with the tabling for, say, no more than two weeks? If you're agreeable to the tabling, then there's not much point in talking about this further. I think Mr. Coderre is suggesting that we hold back until no later than the week after next, and then we'll deal with it.

[Translation]

Ms. Hélène Alarie: I would have preferred debating it this morning and getting it over with, because it does not make any substantive changes. If retroactivity is not possible because of a legal problem, we will accept the fact that it is not possible. But our support for this motion will help the Minister speed things up. I don't see why we should wait two weeks. I stand by the motion.

[English]

The Chairman: Mr. Hoeppner, you had a question.

Mr. Jake Hoeppner: Yes, the question I have is, are there some farmers who didn't get any compensatory measures up to 1997? Have some farmers not received any compensation?

The Chairman: They got some.

Mr. Jake Hoeppner: They have some?

The Chairman: I think there was, what, $2 million, Joe? About $2 million has been paid out already.

Mr. Larry McCormick: It was $150 for—

Mr. Jake Hoeppner: This was to all producers that were in for 1997?

Mr. Joe McGuire: For any sheep producers who had to dispose of their flocks, it was $150 for a crossbreed and $300 for a purebred.

The Chairman: You heard the other day that there's a possibility the compensation levels will be raised.

Mr. Joe McGuire: Mr. Chairman, some moneys have been given to the Government of Quebec for compensation in situations like this. They have chosen to pay it in a different way, as price support, rather than with this kind of support. So the money, basically, has been—

The Chairman: Members, let's hear from Mr. Coderre, and then let's deal with his motion.

[Translation]

Mr. Denis Coderre: The reality, Mr. Chairman, is that we support producers. Compensation has already been paid out and some people think, and rightly so, that they did not receive their fair share. Some producers will be compensated on the basis of a new compensation model that, as a result of the pressure we have brought to bear, according to the Agency, will be as high as $600.

The problem is as follows. Even the chair of the Fédération des producteurs d'agneaux et de moutons du Québec had asked the Minister, before October 16, to have us start by determining whether or not the retroactivity was legal. I do not want to get caught up in semantics with respect to jurisdiction and the legal aspect. I do however want to ensure that when we make our decision, we won't be moving into a grey area. That is why I do not want us to hold the debate today.

I am asking for the motion to be tabled, for reasons of intellectual integrity. We will be able to make a better decision once we have everything we need at hand, namely the figures requested by Mr. Breitkreuz and especially the legal opinion on retroactivity.

[English]

The Chairman: Let's hear from Mr. Hilstrom and then Ms. Alarie, and then I will put the question.

Mr. Howard Hilstrom: The only option I see is to table this motion here today. That's other than everyone virtually voting against it, for the simple reason that without sufficient information, why would we vote for it? I'll go along with tabling it, but I won't go along with any more debate or anything on it.

• 1020

The Chairman: Hélène Alarie, I'll give you the final word and then we'll put the question.

[Translation]

Ms. Hélène Alarie: Okay, I'm going to agree to that, but I would like to know the timeframe. I do not want this to drag on indefinitely. If we are talking about postponing it for 10 days, I will agree to that.

Mr. Denis Coderre: Ten days, perfect.

Ms. Hélène Alarie: A 10-day extension.

[English]

The Chairman: Madam Alarie, I would hope that we could have the information about this legal question by next week. If we have it next week, let's deal with it next week, but no later than the week after. Okay?

Ms. Hélène Alarie: Okay.

The Chairman: Yes, Mr. Proctor.

Mr. Dick Proctor: Looking at our calendar, it seems to me that to be totally precise we should say not later than Thursday, November 5, which is the last day that this committee meets before the Remembrance Day break.

The Chairman: No later than Thursday, November 5. Thank you.

All in favour of tabling this motion until no later than Thursday, November 5?

Some hon. members: Agreed.

The Chairman: It's unanimous. Thank you.

Now we'll break for about half a minute so we can let people like Mr. Hoeppner and Mr. Breitkreuz leave.

[Editor's Note: Proceedings continue in camera]