SINT Committee Meeting

37th PARLIAMENT, 1st SESSION

Sub-Committee on International Trade, Trade Disputes and Investment of the Standing Committee on Foreign Affairs and International Trade

EVIDENCE

CONTENTS

Wednesday, March 20, 2002

¹

1530

The Chair (Mr. Mac Harb (Ottawa Centre, Lib.))

Mr. Larry Hill (Director, Canadian Wheat Board)

¹

1535

The Chair

Mr. Jim Caldwell (Director, Government Affairs, Canadian Cattlemen's Association)

¹

1540

Mr. Neil Jahnke (Chairman, Foriegn Trade Committee, Canadian Cattlemen's Association)

The Chair

¹

1545

Mr. Bob Friesen (President, Canadian Federation of Agriculture)

¹

1550

¹

1555

The Chair

Mr. Liam McCreery (President, Canadian Agri-Food Trade Alliance)

º

1600

The Chair

Ms. Sandra Marsden (President, Canadian Sugar Institute)

º

1605

The Chair

Mr. Rick Casson (Lethbridge, Canadian Alliance)

The Chair

Mr. Larry Hill

Mr. Rick Casson

The Chair

Mr. Bob Friesen

º

1610

The Chair

Mr. Rick Casson

Ms. Sandra Marsden

The Chair

Mr. Bob Friesen

The Chair

Mr. Pierre Paquette (Joliette, BQ)

Ms. Sandra Marsden

Mr. Paquette

Ms. Sandra Marsden

Mr. Pierre Paquette

Ms. Sandra Marsden

º

1615

Mr. Pierre Paquette

Ms. Sandra Marsden

Mr. Paquette

The Chair

Mr. Larry Hill

The Chair

Mr. Bob Friesen

The Chair

Mr. Liam McCreery

º

1620

Mr. Ted Haney (Director, Canadian Agri-Food Trade Alliance)

The Chair

Mr. Pierre Paquette

The Chair

The Chair

Mr. Victor Jarjour (Strategic Planning and Policy, Canadian Wheat Board)

Mr. Pierre Paquette

The Chair

Mr. Casey

Mr. Neil Jahnke

Mr. Casey

Mr. Neil Jahnke

Mr. Casey

º

1625

Mr. Neil Jahnke

Mr. Casey

Mr. Neil Jahnke

Mr. Jim Caldwell

Mr. Casey

Mr. Neil Jahnke

Mr. Jim Caldwell

Mr. Casey

Ms. Sandra Marsden

Mr. Casey

Ms. Sandra Marsden

Mr. Casey

Ms. Sandra Marsden

Mr. Casey

Ms. Sandra Marsden

Mr. Casey

Ms. Sandra Marsden

Mr. Casey

Ms. Sandra Marsden

Mr. Casey

Ms. Sandra Marsden

Mr. Casey

Ms. Sandra Marsden

Mr. Casey

Mr. Larry Hill

º

1630

Mr. Casey

Mr. Larry Hill

Mr. Casey

Mr. Larry Hill

Mr. Casey

Mr. Neil Jahnke

Mr. Jim Caldwell

Mr. Casey

Mr. Jim Caldwell

Mr. Neil Jahnke

Mr. Casey

The Chair

Mr. Ted Haney

Mr. Casey

Mr. Ted Haney

º

1635

Mr. Casey

Mr. Ted Haney

The Chair

Mr. Mark Eyking (Sydney--Victoria, Lib.)

º

1640

Mr. Bob Friesen

º

1645

Mr. Mark Eyking

Mr. Liam McCreery

Mr. Mark Eyking

Mr. Liam McCreery

The Chair

Mr. Bob Friesen

The Chair

Mr. Jim Caldwell

º

1650

Mr. Mark Eyking

Mr. Jim Caldwell

The Chair

Mr. Rick Casson

The Chair

Mr. Liam McCreery

The Chair

Mr. Bob Friesen

º

1655

The Chair

Mr. Larry Hill

Mr. Rick Casson

The Chair

Mr. Ted Haney

The Chair

Mr. Ted Haney

»

1700

Mr. Bob Friesen

The Chair

Mr. Victor Jarjour

»

1705

Mr. Bob Friesen

The Chair

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CANADA

Sub-Committee on International Trade, Trade Disputes and Investment of the Standing Committee on Foreign Affairs and International Trade

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NUMBER 026

l

1st SESSION

l

37th PARLIAMENT

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EVIDENCE

Wednesday, March 20, 2002

[Recorded by Electronic Apparatus]

¹  (1530)  

[English]

    The Chair (Mr. Mac Harb (Ottawa Centre, Lib.)): We'll call the meeting to order. It's a meeting of the Subcommittee on International Trade, Trade Disputes and Investment of the Standing Committee on Foreign Affairs and International Trade. We are looking at World Trade Organization issues. We are in the process of making a report to the House of Commons. Our report will be suggesting a number of things. We've had a number of meetings so far, and today we are blessed with a group of very distinguished Canadians from the Canadian Wheat Board, the Canadian Cattlemen's Association, the Canadian Federation of Agriculture, the Canadian Agri-Food Trade Alliance, the Canadian Sugar Institute, and the Union des producteurs agricoles du Québec.

    I welcome you. We'll start with the Canadian Wheat Board. Each one will spend between three and five minutes on presentation. At the end, we will open the floor for discussions and comments, and we will ask you questions at that time. So the briefer you are, the better it is. It'll give us a chance to ask more questions. If you do have a report, we will consider your report as being a part of the minutes, so you don't have to read the whole report into the minutes.

    Mr. Hill, the floor is yours.

    Mr. Larry Hill (Director, Canadian Wheat Board): Thank you very much. I'd like to extend my thanks for this opportunity to speak to the committee.

    The CWB markets western Canadian wheat and barley in the export market for both food and feed and domestic human consumption. The CWB is governed by a board of directors, which consists of 10 elected farmers and 5 people appointed by the federal government. The board's mission is to maximize western Canadian producers' revenue through the marketing of quality products and services.

    The export sales account for 63% of western Canadian wheat production, 75% of durum production, and 13% of barley production, while the remainder is consumed domestically. The point we want to stress here is that western Canadian farmers are considerably more dependent on exports than their counterparts in the U.S. and the European Union. The value of the CWB sales annually is about $4 billion to $6 billion Canadian dollars. I'd like to stress the point that the CWB neither provides nor receives subsidies. Wheat and barley are marketed globally and domestically entirely on commercial considerations.

    The CWB supports the federal government's initial WTO negotiating position. We share the same objectives in the areas of export competition, domestic support, and market access. The CWB fully supports multilateral and bilateral trade agreements and views them as a means to establish fair trading environments combined with clear rules to resolve disputes. The CWB endorses the elimination of export subsidies. At the moment the U.S. and EU are not using subsidies on wheat and barley, but export subsidy provisions remain in place in both of these regions.

    Food aid used as commercial market development, rather than to serve humanitarian purposes, is of concern to us. Similarly, export credits with excessively long repayment terms that are being used as a means for surplus disposal of inventory or market development in commercial markets pose a serious threat to fair market-oriented international grain trade. Effective disciplines must be imposed on abusive export credits, as well as on the illegitimate use of food aid, to provide a fair trading environment.

    The CWB is not an export subsidy, and as such, must not be caught under the definition of an export subsidy, thereby making it subject to elimination. Special provisions, including single-desk exporting authority and government guarantees, are essential to the operations of the CWB and must be maintained. Article 17 of the WTO explicitly permits the existence of STEs, and this must continue.

    Negotiations must in no way impede the CWB's ability to operate as a commercial organization. Protection of commercially confidential information must be maintained, and the CWB must not be subject to more stringent requirements than those required of private traders. It is absolutely crucial that the CWB not be put at a disadvantage by facing requirements to report transaction-specific data and commercially confidential information. Disciplines that might be imposed on the CWB should equally apply to large private entities, and here we should not lose sight of the fact that 38% of the wheat trade is controlled by only four private companies.

    An area of considerable concern going into the Doha round is production- and trade-distorting domestic support. The coloured box system introduced during the Uruguay round has not properly addressed this issue and must be re-evaluated. Extremely high levels of farm support, as are witnessed in the U.S. and the EU, provide an incentive for uneconomic investment, which ultimately leads to overproduction and depressed world prices. These impacts are most damaging to those who must compete without such subsidies, western Canadian farmers included. It is estimated that subsidies in foreign countries have cost western Canadian grain and oilseeds producers $1.2 billion Canadian in net income annually.

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    Redefinition of the boxes must not allow or leave room for abuse, as was the case after the Uruguay round. Real and substantial reductions in government subsidies must be achieved. The CWB supports changes that would result in official limits on total farm support expenditures, elimination of the blue box provision, and an overall cap on the minimally trade-distorting subsidies captured by the green box provision.

    The most recent trade challenge by the U.S. against the CWB illustrated once again that the CWB is a fair trader and that our sales to the U.S. are not harming U.S. farmers. The discouraging aspect of the decision is the continued harassment of the CWB, as evidenced in the USTR's decision outlining potential trade challenges. These continued trade challenges are taxing for western Canadian farmers and should be stopped.

    Thank you very much, Mr. Chairman.

    The Chair: Thank you, Mr. Hill.

    Mr. Caldwell.

    Mr. Jim Caldwell (Director, Government Affairs, Canadian Cattlemen's Association): Thank you very much, Mr. Chairman. We certainly appreciate the opportunity to come and discuss our industry with your committee today.

    I will do some of the presentation, and Mr. Jahnke, our president, will do the rest.

    As background, Canada's beef industry involves 100,000 beef producers and represents the largest source of farm cash receipts in Canada at $7.8 billion in 2001, or approximately 22% of the Canadian farm income. We are now the third largest exporter of beef and beef cattle in the world, representing 12% of world exports, and export value has reached $3.9 billion in 2001, up 29% from $3 billion in 2000. Two of the largest and most modern packing plants are operated in Alberta, and major expansion is planned for the largest plant in Ontario. So we are on the move.

    The Canadian beef industry has also taken a leadership role in establishing the national identification program, the “Quality Starts Here” program, quality-based branding programs, the HACCP programs, adaptation of new technology, the new consumer-friendly retailing, naming, and system industry. All are working together to make beef much more safe. These are clearly growth opportunities for our sector. Our new global marketing strategy has identified the opportunity to increase our beef sales by 172,000 tonnes by 2010, or 18%.

    I will now ask Mr. Jahnke, the president of the Canadian Cattlemen's Association, to give us some of the objectives in the trade negotiations for the beef cattle sector.

¹  (1540)  

    Mr. Neil Jahnke (Chairman, Foriegn Trade Committee, Canadian Cattlemen's Association): Thank you, Jim and Mr. Chairman.

    We continue to support further market liberalization as our key priority in the upcoming round. We support continued progress in reducing production- and trade-distorting programs and subsidies and improving market access. That includes elimination of all in-quota duties and tariffs, maximum possible reduction in tariffs, clear and binding rules on the administration of tariff rate quotas, and the maximum possible increase in minimum access commitments.

    Some of our priorities are further liberalization of the Japanese and Korean beef markets, meaningful access to the EU--that's been an on-going bug with us--and maintaining an equivalent tariff rate quota for beef products with the U.S., including identical tariff rates. We also want the elimination of all export subsidies. If this objective cannot be met fully, we support the extension of the Andriessen assurance that the EU will not use export restitution to subsidize beef exports into the Asian market.

    On domestic support, we want further reduction in the level of permissible spending on trade, production, and distorting domestic subsidies and elimination of the blue box category for domestic subsides.

    We're also advocating that the SPS agreement not be included or opened up in the upcoming round of negotiations. Our policy in this area is based on the following principles. Science-based rules would prevent the use of the SPS measures as non-tariff barriers to trade, ensuring that sound science remains the only basis for resolving SPS issues.

    We want to ensure that anti-dumping rules are changed to recognize that price cycles within importing and exporting countries are a normal function of supply and demand and that the definition of dumping be restricted to predatory price discrimination.

    Other issues include ensuring that technical standards, approval of genetically enhanced organisms, product labelling, and food safety requirements are based on internationally accepted science and are consistent within our national trade obligations.

    We want to ensure that the WTO's dispute settlement mechanism is strengthened, to enforce prompt implementation of WTO decisions. This is to include financial compensation for non-compliance. That brings up the EU and all the trouble we've had with that.

    We thank you for hearing our points and positions.

    The Chair: Thank you very much.

    Mr. Friesen.

¹  (1545)  

    Mr. Bob Friesen (President, Canadian Federation of Agriculture): Thank you very much, Mr. Chair. It's a pleasure for us to be able to come and present to you what we feel are some of the key objectives we need to achieve in the next round.

    Available for distribution we have a kit that includes the CFA trade policy, as well as a brief I will use to make some comments this afternoon. I will not read it in its entirety. Of course, CFA has always thought that the WTO needed to be the forum where we develop and establish clear and effective rules governing international trade.

    Two key objectives we feel need to be achieved in the next round are reaching an agreement to eliminate all export subsidies and reaching an agreement that contains precise and enforceable rules to apply equally to all members and thereby rectify the disparity in the level of commitments that resulted from the Uruguay round. As most of us know, the implementation after the Uruguay agreement was not carried out in every country within the spirit and the rules of the last round. We need to achieve some equity there.

    We always have supported our government's initial negotiating position. We believe that position is still very valid. The background document for this hearing asks how one reconciles the Canadian position with the more aggressive stance of the Cairns group. I believe the key point is the primacy of the Canadian negotiating mandate.

    One thing that's become very clear to us as we have talked to farm leaders in the other Cairns countries is that our government did much more extensive consultation with the agricultural industry, and therefore that legitimizes and strengthens the initial negotiating position Canada does have. The other Cairns countries did not carry on the same extent of consultation with their industry and their constituency. So we have a more comprehensive negotiating mandate than any of the other Cairns countries.

    However, it's also clear that the other Cairns countries have more aggressiveness when it comes to trade. While their trade position lacks in comprehension, they clearly are more aggressive than just simply saying we need free trade. However, we all know that simply talking about free trade does not establish fair and equitable rules, nor does it necessarily achieve the objectives we are trying to achieve. I believe it goes without saying that while Canada is a member of the Cairns Group, there are certain areas where Canada cannot agree with the other Cairns countries, and what they need to do is continue, if they cannot agree to the general Cairns position, to submit their own position to the WTO. That is the only way we will be able to ensure that we can achieve our objectives.

    Let me get briefly into some of the trade issues we need to look at in the next round to accomplish our objectives.

    First, I already mentioned that we are calling for the elimination of export subsidies. That includes also ensuring that other countries cannot use export credit, export promotion programs, and food aid programs as disguised export subsidies. I need merely direct your attention to the new farm bill that's being discussed in the U.S., where they are calling for an increase of market access programs from $90 million to $200 million. We need to ensure that cannot happen.

    I would also like to say that Canada, in its initial negotiating position, does have the tools we need to accomplish everything we need to accomplish for all agricultural sectors in Canada. The single and two-stage tariff concept embodied in Canada's negotiating mandate is definitely the right approach. We should ensure and pursue full equivalency of minimum access levels based on clear and precise rules. Canada should also continually pursue ways to increase and improve market access opportunities for our agricultural sectors. I cite the zero-for-zero initiative that some of our export interests have pursued. That is definitely an initiative we can use to avail ourselves of increased market access opportunity. Of course, when it comes to minimum market access, we know that other countries did not comply with the spirit and the rules of the last round. We need to make sure that as a first priority, every country in the WTO does offer the same level of minimum market access that Canada has offered since the Uruguay round was signed. Agricultural sectors that already offer access greater than the common minimum access should not have to increase their market access.

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    When it comes to minimum market access commitments, when it comes to tariff reduction, CFA calls for a set of rules that, if implemented, would significantly increase our market access opportunities around the world. I have already cited zero-for-zero. We're pushing for zero within TRQ tariffs, no tariffs within TRQs. We're calling for disaggregation of market access; in other words, market access should be offered on a product-specific basis. We should also eliminate tariff escalation; in other words, access should be offered on a product and all the value-added products subsequent to that at the same level. We're also calling for a maximum reduction on single-stage tariffs. Single-stage tariffs are those tariffs that are not above a TRQ, do not protect a TRQ. So we are calling for a maximum reduction in single-stage tariffs. At the same time, we're calling for those tariffs that aren't protecting a TRQ to stay at a level that will ensure the intended market access.

    I mentioned earlier that we have all the tools we need to accomplish both maintaining orderly marketing structures and improving and increasing market access. One of the things the Europeans have suggested is that we should simply go back and use the same formula in tariff reduction we used in the last round, which was an average of 15% reduction in tariffs. What our government has tabled and is part of the CFA's trade position is that countries should reduce their tariffs to as low a level as possible. However, if countries are not committed to reducing their tariffs to a level that provides meaningful access, they should provide a guaranteed minimum market access. If you were to research that, you would find that in many areas, if a country provides only a 15% reduction in tariffs, that would still be a wall too high for us to go over. In fact, we would get more market access if they would guarantee a minimum market access.

    Let me go into a few other areas. One is domestic support. As you know, our farmers in Canada are competing against the government treasuries in other countries. We're calling for a reduction in domestic support. We're also calling for a cap on all agricultural spending. That cap would be based on a percentage of the value of farm-gate production. We're calling for the elimination of exemption of blue box programs from the amber limits. We're also calling for a clarification and tightening of green box programs. I don't have to tell you that some of the programs that were defined as green box and non-trade-distorting in the last round clearly, since such high levels of spending have been introduced, are no longer non-trade-distorting, and so we would like a redefinition and clarification of green box programs.

    On the subject of anti-dumping that has already been mentioned, there is no question that there are countries abusing this, although at this point in time we are not calling for the elimination of anti-dumping. We are simply saying, as the previous speaker has already said, that we need to take a long hard look at it. The anti-dump trade remedy could have had more serious repercussions than we have experienced over the last while.

    The other thing we are calling for is that any countervailing duty not exceed the net difference between the levels of subsidy provided for the product in the exporting and importing country. If we look at the last two years, we know we had a country that challenged us in countervail, as well as anti-dump, that, in fact, was using huge amounts of money to subsidize its industry. We feel that if that is the case, they should not be able to apply countervail action.

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    As I said earlier, we do have the tools we need. There's no question that there is growing support around the world for using an approach such as Canada is using, because other countries are beginning to realize that the only way to achieve their objectives is to have a disciplined round and a round that does develop clear and enforceable rules and does allow countries to manage the trade that is happening around the world.

    I would also like to say that it is absolutely imperative that Canada, in order to achieve its objectives, needs to build alliances around the world for the position we have coming out of Canada, because we feel there is a lot of potential. If we do build alliances, we will better be able to negotiate a win-win situation for our Canadian agricultural sector.

    In my final statement let me say that CFA led a delegation to Geneva late last fall. From meeting with country-specific delegations and listening to Commissioner Fischler from Europe speak and listening to the U.S., it is very clear that there will be a push from other countries to again force Canada to, in part, deregulate its orderly marketing structures. At the same time, those same countries that are calling for wide open borders will also push very hard and potentially achieve their ability to spend huge amounts of money in agricultural subsidies. If that's the case, the scenario we have is that orderly marketing structures will again, in part, be deregulated, and we will allow other countries to buy up markets wherever they want to buy up markets. In that case, our entire agricultural sector loses, and we need to be very vigilant. Again, the key is to build alliances to ensure that we can negotiate the objectives Canada has set.

    Thank you.

    The Chair: Thank you very much.

    Liam.

    Mr. Liam McCreery (President, Canadian Agri-Food Trade Alliance): Thank you, Mr. Chairman. I'd like to start by saying thank you to you and to the committee for allowing us to make a presentation today.

    My name is Liam McCreery. I'm a farmer in southern Ontario, a cash crop farmer, and I'm also president of an organization called CAFTA, which I'll be introducing to you today. With me is Ted Haney, a director of CAFTA, and he is here to help me fill in the gaps that I will undoubtedly will leave.

    I handed a brief called “The Benefits of Further Trade Liberalization” to the clerk. I would ask that it be part of my presentation and put into the record. Thank you.

    The Canadian Agri-Food Trade Alliance is a coalition of 12 associations, companies, and exporters united in support of more liberalized world agricultural trade and agrifood trade. We're a unique group in that we're not just producers, we're not just processors, we're not just exporters, we're all the groups brought together, representing a wide dynamic in the industry. CAFTA's members make a significant contribution to the agricultural and national economies of Canada. Together, our members employ almost 500,000 Canadians directly in production and in processing. We conduct over $40 billion in business annually, which is substantially more than the farm gate of Canada. We represent between 70% and 80% of all Canada's agrifood exports, a value of $18.3 billion in the year 2000. It should be noted as well that the estimates for 2001 are that we exported $26.3 billion in agricultural and agrifood products out of Canada and contributed more than $7 billion to the trade surplus. We're an important part of the economy.

    More liberalized trade would substantially benefit the agricultural industry and the Canadian economy as a whole. Agriculture Canada estimates that for every billion dollar increase in exports, the net cash income of farmers would rise by about $300 million. The George Morris Centre, a think tank in Guelph, Ontario, concludes that the elimination of all tariffs in 10 years would bring an additional $2.5 billion to the industry annually.

    CAFTA's overall goal is the elimination of all subsidies and tariffs on a global and reciprocal basis. In transition to tariff and subsidy-free trade, CAFTA supports substantial and meaningful reductions in all tariffs by all WTO member countries; substantial and meaningful increases in minimum access commitments; the elimination of all export subsidies and prohibition on their future use; zero-for-zero agreements where international commodity sectors support them; meaningful reductions in trade-distorting domestic support programs on a product-by-product basis; the development of clear and enforceable rules to ensure that programs notified as non- or minimally trade-distorting truly do not influence production and trade; rules to ensure that measures taken to protect human health and the safety of the environment are based on internationally recognized science; rules to ensure that trade disputes are resolved in a timely fashion; the development and application of clear definitions and rules, to ensure that developing and least-developed countries can become fully integrated into the WTO and benefit from a more liberalized trade environment.

    I was honoured to be a part of the Canadian delegation to Doha in November. The Canadian trade position was a very strong one and stood on three pillars, market access, domestic support, and export subsidies all being ratcheted down. We support a increase in market access, a decrease in domestic support, and the elimination of all export subsidies.

    You have an excellent brief we've put together--we think it's an excellent brief. It lays out our groups. We are a broad-based, all across Canada, all across the sector group, and we're proud of what we do. I am honoured to make a presentation today.

    Thank you.

º  (1600)  

    The Chair: Thank you very much for an excellent presentation.

    We'll move on to the Canadian Sugar Institute. Sandra.

    Ms. Sandra Marsden (President, Canadian Sugar Institute): Thank you, Mr. Chairman. It's a pleasure to be here to speak briefly about the views of the Canadian sugar industry with respect to the WTO process.

    As many of you have heard before, the focus on the WTO is essential for the Canadian sugar industry, for a few reasons. Past trade agreements have not resolved the problems for Canadian sugar. We are already essentially an open market. We are very close to the United States as the largest importer of raw sugar in the western hemisphere, probably soon to exceed the U.S. in that respect. We have the lowest tariffs on sugar in the world, an applied tariff of zero on raw sugar, an applied tariff of approximately 8% on refined sugar. That being said, the rest of the world doesn't operate that way. Sugar producers are protected, it's one of the most highly protected commodities. As a result, we have to struggle within that distorted environment.

    Less than 1% of our production of refined sugar can be exported, given U.S. import barriers and similar import barriers around the world. To give you examples of tariff protection, whether that be with tariff rate quotas or straight tariffs, the U.S. tariffs are in the order of 150%, Guatemala 160%, and if you go as far as Japan, you're getting well over 200%. So there just isn't export access. We do depend on our customers, our food processors, and 85% of what we sell is for further processing. For those products that are not covered by quota restrictions, we have some growth in exports.

    So we fully support an aggressive WTO agenda that fully engages all WTO members and an aggressive focus on those commodities that escaped the forum in the Uruguay round, and sugar and a number of other commodities are in that context.

    With respect to Canada's opening position, we support a focus on levelling the playing field, because that field is not level for us and for many other commodities, as part of the Canadian Agri-Food Trade Alliance.

    We share a view of the importance of expanding exports for value-added products. Our members produce refined sugar, iced tea, crystal drink mixes, sweetened gelatin mixes, so we add value up the chain, and it's clearly important that restrictions are not higher on those products. For example, the United States permits 1.1 million tons of imports of raw sugar globally and 22,000 tons of refined sugar globally, and that just can't continue if we're to manage our industry.

    We fully support the focus on the three pillars. I don't need to reiterate those, although it's our view that Canada's position on market access falls short of the aggressive approach we would like to see to support our industry, as well as other agricultural exporters in Canada. We would support an approach that keeps all options open, because countries use such a variety of approaches to restricting access, whether that's small in-quota volumes, high over-quota tariffs, or straight tariffs. We believe all of those are components of trade reform. Clearly, if we don't look at some of those elements, we may achieve nothing out of the next round.

    Obviously, we would encourage a process that moves quickly, and we recognize a lot of the barriers around the world to doing that. We support down payments early in the process. In the Canadian context, we would support that, particularly given the advancement of regional negotiations, which will be more problematic than helpful to our industry, when those negotiations don't engage the United States as our most important export market.

    As to developmental issues, we support one agreement for all members, which is consistent with the CAFTA, and special treatment in capacity building and so on. But there must be some differentiation between more transitional developing economies and those that are less developed. So, for example, as Brazil is the largest, most efficient, and most competitive sugar producer in the world, it's our view that this should be taken into consideration when contemplating special and differential treatment.

    Those are my remarks. Thank you.

º  (1605)  

    The Chair: Thank you very much.

    Mr. Casson.

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

    I want to thank the witnesses for coming and for very well prepared, concise, and--because there are so many of you--brief briefs. We'll have a chance to go over the more detailed ones later.

    I have a couple of questions, and some of you have already alluded to some of these situations; Mr.Hill, I think you have, and Bob, you have too. State trading enterprises are going to be an issue in this next round of talks. Europe and the U.S. and others are looking for some change there. Australia is already signalling its willingness to move. If Canada is required, in the give and take of negotiations, to eliminate its monopoly powers to get gains in market, looking at reductions in trade-distorting and production-distorting support, should we do this? Mr. Hill, I can anticipate your answer, but maybe the others who are here have a view as to whether Canada should put that aspect on the table. Will it need to, as part of the negotiation, in your minds, and where would that lead us if we did?

    Mr. Chairman, I just open that up to anybody who would like to respond.

    The Chair: Mr. Hill.

    Mr. Larry Hill: I would like to start. I think the key here is that the world and the WTO negotiations should judge the CWB for what it does, not what it is called. The CWB is commercial. When it comes to the monopoly issue, I think that decision is clearly up to Canadian farmers, and I think Canada should support that position on the world stage.

    Mr. Rick Casson: Thank you.

    The Chair: Bob.

    Mr. Bob Friesen: One of the things I think all the other countries at the WTO need to realize is that the Canadian Wheat Board is nothing but a legislated farmers' selling group, and I think Canada should defend it at the WTO. The Canadian Wheat Board is well within compliance currently at the WTO. I believe Canada should defend its right to continue with the Canadian Wheat Board. It's not an import monopoly, and with all the challenges the Canadian Wheat Board has had over the past, the Canadian government has always also said they are willing to be as transparent as those transnational companies they compete against. Let's be clear on one thing, that there are probably five or six huge transnational companies that are poised and ready to come into Canada and monopolize our grain industry. Why should we not have a legislated farmers' selling group that does that?

º  (1610)  

    The Chair: Rick.

    Mr. Rick Casson: I think, Sandra, you pointed out in your presentation that if we work on the free trade area of the Americas and these other regional agreements in advance of the WTO, this could be detrimental to some of the things we're trying to achieve. Could you expand on that? And maybe there's someone else here, Mr. Chairman, who would like to comment on that aspect.

    Ms. Sandra Marsden: In the FTAA region, whether we're looking at Central America or the FTAA region as a whole, these are large surplus sugar-producing regions. In and amongst themselves they have protectionist sugar policies and so on. The problem for us is that if the United States is not engaged in those negotiations, we face the threat of.... We already have an 8% tariff, so we're already competing with these countries, times are already tough, but we face the threat of the loss of that 8% tariff without any real export gain. So we could be looking at Guatemala, for example, that's producing two and a half million tons of sugar, and their 160% tariff comes down over a 15-year period, while our 8% tariff is reduced over the same period. We face a very large threat of increased imports, without any real offsets. So it's not likely we would ever look at Guatemala as an export market, it wouldn't make sense for us, but at least if the United States was engaged and they were reducing their tariffs, we'd have an offset in that market. We've restructured under the current scenario, and so the day the U.S. border starts to open, we're ready to fight, but we can't fight with our hands tied behind our backs.

    The Chair: Bob.

    Mr. Bob Friesen: One of the regional trade negotiations the Canadian sugar producers were very disappointed in was the agreement with Costa Rica, where they applied asymmetrical implementation of the agreement, which marginalized our sugar beet producers. That said, our government has in the past committed itself not to negotiate an advantage for one sector at the expense of another, and there is a sense that this is what happened in the Costa Rica agreement.

    The Chair: Pierre.

[Translation]

    Mr. Pierre Paquette (Joliette, BQ): Thank you very much for your presentations. My first comment will focus on the last remarks made by the gentleman representing the Canadian Federation of Agriculture.

    The sub-committee addressed the problems of the sugar industry regarding the free-trade agreement with Costa Rica. In this issue, the Bloc québécois attempted to bring an amendment to the treaty in order to remove that part dealing with unilateral liberalization of sugar, but that amendment have obviously not been accepted.

    That being said, do you feel, Ms. Sandra, that the Canadian government brings your concerns to the World Trade Organization or within the negotiations on the Free-Trade Area of the Americas? I have never seen Canada presenting your position at the WTO or at the FTAA, namely a real opening of the markets for refined sugar, and in particular real access to the American market.

[English]

    Ms. Sandra Marsden: I can't understand the translator. I should listen to you.

    Mr. Pierre Paquette: Do you think the Canadian government has helped you in this issue of the liberalization of sugar around the world?

    Ms. Sandra Marsden: Has the Canadian government assisted us?

    Mr. Pierre Paquette: At this point.

    Ms. Sandra Marsden: No.

º  (1615)  

    Mr. Pierre Paquette: That's a good answer. It's my opinion too.

    Ms. Sandra Marsden: We're fighting fires. We're just trying to keep pace. It's an issue of timing for us, and if we get sacrificed in small trade agreements as they go forward, we won't be here to sustain our industry in a WTO environment. It is important to a huge food-processing industry in Canada. We're a very important ingredient, a competitively priced ingredient today, given our world market, but if we can't be here to supply that industry, we are going to see some industries moving out of this country.

[Translation]

    Mr. Pierre Paquette: So, in its report, the sub-committeee should recommend to the Canadian government to have a very firm position on market liberalization for refined sugar, which obviously includes the American market.

    You almost all have the same position on the need to eliminate export subsidies, but there are external factors that will have an impact on the negotiations, and it is mostly about that issue that I would like to hear your views. I will name three of them and my question is addressed to whoever wants to answer it.

    First of all, there is the U.S.Farm Bill, both in the Senate and the House of Representatives. There are two different versions. As you know, they are proposing incredibly high levels of support for American producers. In this context, how could we consider any further liberalization of agriculture in Canada and in Quebec?

    Secondly, there is the policy of the European Community, which is extremely protectionnist. I was in Mexico last week and all the South American countries complained about both the American and European protectionism.

    The third factor which, I believe, will greatly influence the course of negotiations is China becoming a member of the WTO.

    I would like to hear your views on these factors. What impact could these factors have on the negotiations and what should the Canadian government do to make sure that they do not hinder the achievement of the goals that you all share more or less?

[English]

    The Chair: Mr. Hill.

    Mr. Larry Hill: Thank you, Mr. Chairman.

    The U.S. farm bill is a very large concern to the farmers in my areas. I farm near Swift Current, Saskatchewan, in the southwest, and we grow a lot of pulse crops. We're anxiously watching to see which form of the bill is included in their final proposal, to see whether pulse crops are included. We see pulse crops as being very profitable. The Americans could put this under their farm bill and drive the profitability away from us, so we're very concerned that the American farm bill is very market-distorting. It causes overproduction.

    The other difficulty we see here is that it appears to be that the Americans are ramping up their subsidies prior to the negotiations, so they maybe have something to deal away. This is a very big concern to Canadian farmers, as we see us operating with basically no support whatsoever and going to these negotiations with very little to give away.

    The Chair: Bob.

    Mr. Bob Friesen: I would have to say ditto to what Mr. Hill just said. The $75-billion farm bill is simply a top-up of their core spending. That is not their entire bill, it simply enshrines the top-ups they made to what they were already spending over the last three years, including more crops. This is what I was referring to earlier when I said that while they are willing to belly up to the bar in trade negotiations and improve market access, they are also more than willing to then come in with a lot of money and buy up the markets.

    The other thing that has us concerned in the new farm bill is the mandatory country of origin labelling, which we believe has the potential to impede our exporting into the U.S. market.

    As for the EU, again, they may want to negotiate in the next WTO, but it's clear to us that they are going to find other innovative ways of subsidizing their producers. I was talking to the U.K. agriculture minister and he said they were done investing in agriculture. It had cost them somewhere around $13 billion over the last years. They have nothing for it. It's only 1% of the GDP. Tourism is between 4% and 6%, and they were going to start spending money on tourism. That, to us, means just simply sending farmers cheques, and it's a backdoor way of, again, subsidizing agriculture.

    The Chair: Liam.

    Mr. Liam McCreery: Thank you, Mr. Chairman.

    You bring up an excellent point. You're highlighting a trade-distorting practice that's really hurting Canadian farmers. A knee-jerk reaction might be to take a protectionist point of view and say, the trading rules aren't fair in the world, maybe we should put up a wall and protect ourselves and not try to compete in a very aggressive world trading environment. That, I think, would be a naive conclusion. I'll use the beef market as an example. There are over 100,000 beef producers in this great country, and 60% of the beef that's produced is exported. So if we were to say we don't want to play in the international market, we would lose 63,000 Canadian beef producers. That's completely unacceptable. So you're highlighting one of the real problems we have in the world in international trade, domestic support. We must aggressively try to ratchet that back.

º  (1620)  

    Mr. Ted Haney (Director, Canadian Agri-Food Trade Alliance): In addition to not putting up the walls in a protectionist environment, as a coping mechanism, as we see some overproduction from this subsidy, our answer would be an aggressive market access agenda, so that the products we want to sell and the products that are produced in all other markets have the most efficient access into client nations, particularly, in our case, Asia and Mexico. It's to spread as far as possible and amongst as many consumers as possible that production with as little protection as possible. So an interim coping mechanism is market access, liberalization, and opening, in addition to being part of the longer solution, while at the same time attempting to challenge the use of those high levels of domestic subsidy. An aggressive market-access agenda is actually part of this solution.

    The Chair: Any other comment?

[Translation]

    Do you have any other questions, Pierre?

    Mr. Pierre Paquette: No one seems interested in answering my question about China.

[English]

    The Chair: Is anybody interested in the--

[Translation]

    Mr. Pierre Paquette: I cannot believe that the Canadian Wheat Board has nothing to say about China.

[English]

    The Chair: Mr. Jarjour.

[Translation]

    Mr. Pierre Paquette: In every Chinese movie, you can see great rolling fields of wheat.

[English]

    Mr. Victor Jarjour (Strategic Planning and Policy, Canadian Wheat Board): First, to go back to the other matter, I think you raised some very interesting points. The direction of the U.S. farm bill is very concerning, not only for the possibility that it could include other commodities, but through the tremendous increase in farm spending and domestic support. I'm not sure we necessarily address the European Union, the European Commission, and its programs. Let's not forget that Europe supports agriculture to the tune of something like $65 billion Canadian annually, a huge number in respect of access to the European market, but also in respect of price-depressing effects for Canadian producers in third country markets.

    On the implications of China in the WTO negotiations, we've been silent and others have been silent on the question, because it's really early. It's very difficult to judge what that implication will be, with China having just joined the WTO. It has been sometimes an important market for the Canadian Wheat Board, not necessarily as large recently as it has been in the past.

[Translation]

    The Chair:: Pierre, do you have any question?

[English]

    Mr. Pierre Paquette: No, thank you.

    The Chair: Mr. Casey.

    Mr. Bill Casey (Cumberland--Colchester, PC/DR): Thank you.

    You all make me realize how little I know about your field. It's kind of awesome.

    Neil, you mentioned anti-dumping. What countries are you concerned about? Have you had experience on anti-dumping charges?

    Mr. Neil Jahnke: Yes, we certainly have had experiences with the United States. It cost our industry about $5 million to defend ourselves. It's a pernicious form of protectionism, that's about the best way I can describe it. As a producer, I think we've all had times when we have lost money growing our product, and if I sell a product into the United States and they deem that I'm selling it at less than it cost me to produce it, I'm dumping. So it's a rule that's very near and dear to our hearts. We need that dumping rule changed.

    Mr. Bill Casey: When did the charges first come?

    Mr. Neil Jahnke: Three years ago.

    Mr. Bill Casey: Are they still outstanding?

º  (1625)  

    Mr. Neil Jahnke: No, we won, but it cost the industry. Thank God for government at times, but in that particular case they couldn't support it, so the industry had to dig up the money to defend itself, and we did so successfully--but the Washington lawyers got it all.

    Mr. Bill Casey: What forum did you end up getting the final answer in? Was it the WTO?

    Mr. Neil Jahnke: No, this was country to country.

    Mr. Jim Caldwell: It was a trade tribunal. We were investigated both for countervail and anti-dumping. Of course, the government can assist you in presenting your case on countervail, but the industry must defend itself before the commission on dumping charges. That was the price of beef at that time, and it certainly was below the cost of production. They were also shipping beef into Canada below the cost of production, and some of our producers asked why we didn't charge them with anti-dumping. Well, we didn't have another $5 million to pay lawyers, and it probably wouldn't have made any difference anyway. They would have lost the case, we won ours, so where would you have been?

    Mr. Bill Casey: Somebody said a minute ago that 60% of beef grown here is exported. Is that mostly to the U.S.?

    Mr. Neil Jahnke: It is 78% to 80% to the U.S--right, Ted?

    Mr. Jim Caldwell: Mr. Casey, just to go back a step, I think what we would like to see is some sort of forum where you don't need to have U.S. lawyers who make a living doing this, trying to convince a group to take action against another group just to make money. There may be legitimate cases, but that's usually what it amounts to. Surely, in modern society, the U.S. people can sit down and we can sit down and try to iron these things out without having to involve great numbers of lawyers and economists and all these kinds of things, and still end up with the same situation.

    Mr. Bill Casey: It's a set-up really, because if they are successful in their countervail charges, the industry gets the money. What industry wouldn't go for it? It's set up to encourage countervail charges in the U.S., and it is particularly offensive. We're in the softwood lumber issue right now, and we think we have free trade, but they have domestic internal law they can use against us. No wonder they sign free trade agreements in the U.S., because they don't mean a lot, as they have these other tools they can use.

    On sugar, where does the sugar come from that you manufacture?

    Ms. Sandra Marsden: Close to 90% of what we produce is imported raw sugar from Brazil, Guatemala, Australia, Cuba, and then about 10% to 15% is from sugar beets grown in Alberta.

    Mr. Bill Casey: How much--10%?

    Ms. Sandra Marsden: It is 10% to 15%, depending on the crop.

    Mr. Bill Casey: From this graph you have here, this trade is totally affected by quotas and tariffs, right? That tells quite a story.

    Ms. Sandra Marsden: Yes, with each free trade agreement we've lost access.

    Mr. Bill Casey: Yes. So at one point we had 120,000--what?

    Ms. Sandra Marsden: Tonnes.

    Mr. Bill Casey: That was the maximum, in 1977. What happened in 1981?

    Ms. Sandra Marsden: There was a U.S. anti-dumping compliance, which was absolute harassment in its use. Following that they imposed country-specific quotas. The interesting thing is that they counted those two years in their calculation of how much of the global quota Canada should get, so we were allocated 1% of the global quota, based on a seven-year history, two years of which were under this artificial anti-dumping.

    Mr. Bill Casey: So tell me about the anti-dumping. What happened there?

    Ms. Sandra Marsden: Under the sunset review, we ended up defending the case, and we won, of course, because there was absolutely no substance to the case. In Canada we operate on the world market. Today our world price of sugar is about 6¢, the U.S. domestic support price is in the order of 18¢, so the thought that we could actually dump into the United States is absolutely ludicrous.

    Mr. Bill Casey: What percentage of the sugar manufactured in Canada is exported now?

    Ms. Sandra Marsden: About 1%.

    Mr. Bill Casey: Only 1%? So the rest is a domestic market.

    Ms. Sandra Marsden: That's right. There's no access.

    The Chair: Mr. Hill had a comment in response to a question you raised earlier.

    Mr. Larry Hill: Thank you, Mr. Chairman.

    The CWB did not escape scrutiny either. The U.S. Department of Commerce people came to the CWB, and we were accused of subsidizing barley to the Canadian cattlemen. They, of course, found there were no grounds for these charges, but it did cost western Canadian farmers money again to defend themselves against this action. That goes back to what we mentioned in our brief. These harassing types of challenges cost us money, and it's something we'd like to see addressed.

º  (1630)  

    Mr. Bill Casey: I think it probably will be the focus of the attention of the department on anti-dumping and countervail. I think this is the fourth time we've been through this with softwood lumber. Certainly, I think it's going to give them a lot of focus.

    I happened to be in a meeting this morning, and a chap came in--I'm from Nova Scotia, but anyway--from the west and right out of the blue said, why don't we do away with the Canadian Wheat Board? How should I have answered him? Why don't we do away with the Canadian Wheat Board and let the farmers sell their own wheat?

    Mr. Larry Hill: Because the Canadian Wheat Board is good for farmers and provides the farmers with more income. In the last U.S. International Trade Commission study--and this was in the last review of the CWB--they found out that the CWB received higher prices than the Americans sellers were getting in the American market 59 months out of 60. So out of the five years, for four years and 11 months the CWB received a premium price over the American sellers in that same market. I think that's an indication that the CWB is good for farmers.

    Mr. Bill Casey: I honestly don't know enough about it, but my reaction would be, would they sell more wheat if they sold it a little more cheaply?

    Mr. Larry Hill: Would they make more money if they sold it cheaper? I guess that's the next question. The CWB's objective is to maximize returns to Canadian producers. For example, we grew more durum in the 2000 crop year than the world marketplace would handle. The question is, do you dump and be accused of dumping, or do you market through the CWB and receive premium prices? That's what we did, and I think we did get significantly higher returns for farmers.

    Mr. Bill Casey: Okay.

    I want to slip back to the cattlemen for a minute. You said 78% of the 60% of beef that's exported goes to the U.S. Is there an equivalent amount that comes from the U.S. to Canada, or do we have a surplus?

    Mr. Neil Jahnke: Not an equivalent. I think about 32% of ours comes from the U.S. We're net exporters of 32% of our production, because we import a lot of beef from the U.S.

    Mr. Jim Caldwell: To keep things in perspective, I believe Japan may have exceeded us now, but Canada, up until a couple of years ago, was the largest importer of beef on a per capita basis in the world.

    Mr. Bill Casey: Canada was? Imagine that.

    Mr. Jim Caldwell: Yes. We have a very open market. For example, we imported about 116 tonnes from Oceania, which is New Zealand and Australia. People tend to think of Australia and New Zealand as providing lamb, but it's just a drop in the bucket compared to the amount of beef that comes in from those two countries. We were also importing from South America until they had some disease problems.

    Mr. Neil Jahnke: We also import live cattle from the United States, feeder cattle, over the last few years in significant numbers, a couple of hundred thousand. We're traders, we believe in free trade, and we want free trade.

    Mr. Bill Casey: Great. Thank you.

    The Chair: Thank you, gentlemen.

    Mr. Haney.

    Mr. Ted Haney: The last absolutely complete year for statistics was 2000, and in that year Canada exported, in both live cattle and beef, just over $3 billion worth of product and imported approximately $1 billion, and that's a wide open trading environment. So on that basis, there was a $2 billion contribution to our trade surplus from this sector by itself. If I go back to 1990, prior to our industry's intent to expand sales in many markets other than the United States, on a beef and cattle basis, our exports were about 98% to the United States. Our goal on beef, not the live animal, is to balance the trade 50% to Asia and Mexico and 50% to the United States.

    To provide a market-based form of stability to Canadian agriculture that is very robust and not subject to government spending or subject to a single country disaster zone access, a very aggressive market access agenda is really required for our industry to live out its potential in all countries, as we have done so well in the Unites States. Some would say we've lived out our potential too well in the United States and have created a certain marketing risk as well.

    Mr. Bill Casey: What are the barriers you run into with Mexico and Japan?

    Mr. Ted Haney: In Japan the barrier is tariffs. Currently, their tariff is 41.8%, with a tariff escalation for value-added beef products to approximately 75%. So it encourages us to send boxed beef, but if you're going to turn it into a hamburger patty, you're going to pay 75% tariff. So any of the further value or further processing business that could arise out of the great beef we do produce goes to Japan, represents tariff escalation, and in this case, represents an export of jobs.

    Our concern with defining which tariffs should be decreased and which not comes into definition. Japan still, although they have their in-quota tariff, has a snap-back provision that would take tariffs back to approximately 75% if volumes go to a certain level, 19% higher in any one year. That, for us, is a continuing challenge, because we need the ability to have great success in another market, subject to increased consumption or decreased production. Again, market access is part of how our industry has grown over the last 25 years, and it's definitely how we're going to grow over the next 20 years. Market access is part of that.

    With Korea, once again, we've got some internal distribution issues on regulation, but the primary barrier there is their 38.5% tariff on Canadian beef, with a whole series of tariff escalations as well.

º  (1635)  

    Mr. Bill Casey: What about Mexico?

    Mr. Ted Haney: Mexico, actually, is a great example of what wide open market access through NAFTA can give us. We had 3,000 tonnes of sales to Mexico in 1995, the first year of NAFTA. That increased to 6,000 tonnes in 1997, 8,500 tonnes in 1998, the first two years we operated an office there directing and delivering market promotion activities in a free trade environment. And it reached 70,000 tonnes in 2001, between 5% and 7% of our entire production.

    That's a classic example of what market access can do for you in an industry. This is not a wealthy country by Asian standards, nor is it a country that has any higher predisposition towards beef consumption than our friends in Asia at any income level. The story of trade liberalization and market access in Mexico is a wonderful story of prosperity for our industry.

    The current possibility of free trade in the Americas providing tariff-free access for Central and South American countries to Mexico may disrupt our sales there. We believe the total imports of Mexico would go up, because of an even more competitive environment, our market share would go down. We probably would lose some market in Mexico, but we're absolutely putting support behind that, because we believe it's important to give credence to further market access and opening in Asia, and at some distant time, I suppose, the European Union as well. Prosperity comes to our industry, not just our sector, through open markets and liberalization.

    An excellent example of that as well is China. There was a question on China: what does its WTO membership mean to us? The commitment we got on market access was significant. China decreased its beef import tariffs from 40% to 25% immediately, with reductions down to 12% by 2004. Further reductions will be subjected to the current round. We believe China will be further decrease their tariffs to something between 5% and 10%, the approximate rate that's used now through the smuggling channel from Hong Kong to Southern China. In 2001 China imported only 30,000 tonnes of beef. Canada supplied 3,000 tonnes of that, a value of $10 million. That's not very much for a very big country, but by having market access improvements delivered to us through the WTO, we believe China will increase its imports to approximately 400,000 tonnes, and our share of that will be 43,000 tonnes, with a value of $135 million. That's an additional contribution of over $120 million to our industry. That's further prosperity arising out of market access.

    The Chair: Thank you very much, Bill.

    Mr. Eyking.

    Mr. Mark Eyking (Sydney--Victoria, Lib.): Thank you, Mr. Chair.

    My question is to Bob. We found out here today that we export so many of our agricultural products to the United States, and it seems most of these products the American can produce. Whenever our products are cheaper or superior, it seems they give us a whack. It happened with the potatoes, the beef, and now I think the tomatoes are on the block.

    There was talk about getting away from Washington and the lawyers and into a better international forum. Is the WTO the best game in town for this, or should we be pushing it in a different direction, so the turnaround's quicker? The P.E.I. potatoes issue pretty well shut the industry down for the whole winter. I know the farmers there, and they got whacked badly. Some of them are never going to get back up. The WTO might be the best game in town for some of this stuff, but how can we sit down with other people in this world and make things turn around more quickly? I ask you, Bob, because you mentioned that we had the tools to work with a lot of these problems. We can complain about the Americans and everybody all day, but how should we go ahead and make this thing quicker?

º  (1640)  

    Mr. Bob Friesen: You make a very good point. To go back a little bit to show even more inequity, Sandra was talking earlier about sugar access. In the last round, when countries provided the market access, they were either supposed to go up to 5% or stay at the historical level of market access. We had one sector that had a 21% TRQ, our government told them they had to stay there, then the Americans went and decreased their sugar access, all in the same time period. There's tremendous inequity there. When we talk about the anti-dump, how many of our agricultural commodities could have been vulnerable to anti-dump over the last two years, if the U.S. had wanted to do it?

    So you are absolutely right, they keep hanging onto ways they can impede market access. The potato situation in P.E.I. was one of the most blatant contraventions of the SPS agreement at the WTO.

    Our argument for keeping it at the WTO forum, for that being the place to develop fair and equitable rules, is that there, at least, Canada has the ability to build allies with other countries. I cite the Cairns group as an example. At least at the Cairns group there is growing strength in trying to force the U.S. and the Europeans to decrease their subsidies. If we're looking at something like tariff escalation--and Ted already talked about that--if we're looking at the disaggregation of market access on a product-specific basis, we feel we can accomplish those things far better if we do it in a forum where we can use other countries to do it.

    As far as improving market access goes, absolutely. In fact, in Saskatchewan at least 80% of the agriculture industry is dependent on export markets. Across Canada it is probably between 60% and 70%. We need market access. Negotiating zero-for-zero in specific commodities is a good way to try to do that. That's outside the WTO forum, and that's where Canada can negotiate with other countries. Of course, once they've negotiated the deal, they have to provide the same deal to other countries, but at least that gives them an opportunity to try to free up market access wherever they can.

    As for forcing the U.S. to comply, my only answer there is to keep it at a forum where we have the ability to make a move. A good example was in Doha, when the Americans did not want to put anti-dump on the table for discussion. I should point out that we do have two industries in Canada that are also dependent on anti-dump, and therefore it's a real challenge to make sure it's a win-win for all sectors. But in Doha we saw the insistence of other countries, who formed a coalition and forced the U.S. to back off not putting it on the table. So there is some strength in doing it that way.

º  (1645)  

    Mr. Mark Eyking: My next question is for Liam. For most of today we've been talking about exporting and free market access, but nobody has really mentioned much about marketing boards. I was waiting for Liam to mention them. He was mentioning all the different commodities. What's your take on where we're going to be in a few years with marketing boards? Should we ever bring that to the table? Is it a non-issue right now?

    Mr. Liam McCreery: It's definitely an issue. We at CAFTA talk about our interests. We represent sectors that aren't protectionist, aren't involved with marketing boards, so we limit our comments to the job we're doing.

    You brought up some excellent points in your last question to Bob. We do need to have better rules at the WTO. We do need to have better rules of market access for our products. We do need to have tougher rules on the domestic support side. Obviously, what has happened with the U.S. farm bill is ridiculous. It is absolutely bashing major industries.

    We talked a lot about red meat today, the huge exports, and the importance to the Canadian economy, but there's also the grains and oilseeds sector. We have a very progressive grains and oilseeds sector across our country. Bob pointed out that Saskatchewan exports 80% of its agricultural output. We need good international rules for any of those markets.

    Mr. Mark Eyking: And the only allies we can get are people who are in the same boat as us, like Australia and Argentina. For the Europeans and Americans, their economy and agriculture do not rely on export as much as ours, so we're very vulnerable, and we have to get allies who are just as vulnerable as we are.

    Mr. Liam McCreery: Or as strong in their philosophies. That's why we recommend that Canada continue to work with the Cairns group.

    The Chair: Bob.

    Mr. Bob Friesen: Thank, Mr. Chair.

    On that question of orderly marketing structures and whether we will have to give them up, as I mentioned earlier, with our government's negotiating position right now, if they negotiate vigorously and build allies, it does not have to be an either-or situation. We believe it can be done in such a way that we can accommodate the export interests. As I said, we have to, there's no question about it. We can't let our agricultural industry remain static, we have to grow. But we believe that we can do it both ways.

    When it comes to protectionism, many people think Canada is a protectionist country. Out of the 1,370 TRQs at the WTO Canada has only 21; a country like Norway has 245. Our TRQ fill at the WTO is 30% higher than the WTO average. At the OECD Canada has the lowest average agriculture-bound tariffs. In fact, we're one out of four countries that have lower agriculture-bound tariffs than industrial tariffs. On average in the OECD, the agricultural tariffs are 427% higher than industrial tariffs, ours are lower. So protectionists we're not, and we don't believe we have to sell one sector off for the other. Again, there's been interest expressed from other countries, so that if we use the tools we have, we can achieve our objectives in all agricultural sectors.

    The Chair: Jim.

    Mr. Jim Caldwell: As an aside to Mr. Eyking, the U.S. problems are usually politically oriented, that's where they start, and they don't really care whether there are trade rules or not. If we could get rid of the two-year terms in the House of Representatives, we wouldn't have them always running for election. But I think it's also important that you, as politicians, talk to your counterparts in the United States as much as you can, so they get to know the industry.

    From the cattlemen's point of view, we have a very good relationship with the cattlemen's association there. The group that brought the action against us was kind of a rump group, and the National Cattlemen's Association in the United States did not necessarily fully support that action, but because they were both American, they had to take the same role. For example, on country of origin labelling, the position of the National Cattlemen's Association there now is that they want voluntary labelling, but mandatory labelling is still part of the farm bill. The chance of the country of origin legislation getting passed is not as great as it would be if it had the support of the cattlemen in the States.

    So it's political, a lot of it.

º  (1650)  

    Mr. Mark Eyking: That's a good point too. We went down to Washington last spring with the softwood lumber issue, and my job was to see the senator from Louisiana about it. He had a two-by-four on his desk and said, you know, this is a Canadian stud, and he had the thing right through it. I had some figures going in to talk to him. We sold $5 million worth of lumber in Louisiana, but we bought $50 million worth of chemicals from Louisiana. So when we got talking, he knew things go both ways. I think that's really where you get this one-on-one and the idea that we're both in it together. It's one way of getting connected, I guess.

    Mr. Jim Caldwell: Just to add to that, one of the biggest allies in the U.S. we had on some of these issues was the American Meat Institute, which said, look, it's easy to do all this, but you're going to hurt us and the North American consumer. The same thing applies to softwood lumber. The person being hurt there is the consuming homebuilder. From a political point of view, they tend not to see it that way, but if there's pressure applied from that source, they may change more than otherwise, not because Canada says we're getting a bad deal.

    Mr. Mark Eyking: It's better to get along with them than fight with them in the long run.

    Mr. Jim Caldwell: Yes, we agree.

    The Chair: Mr. Casson.

    Mr. Rick Casson: Thanks.

    I apologize, ladies and gentlemen, for having to leave. I spoke in the House while I was gone on Bill C-15B, the cruelty to animals bill. I think it's something you're all pretty much aware of, and we had to put our little comment in. Tomorrow we're debating species at risk again, and these are all issues that have an effect on agriculture.

    I was going to ask about a terminal feedlot protocol, but I won't, because you've spent a lot of time on red meat already. I want to get a feeling from you all, as we've put, as a country, a lot of stock in this next round of negotiations, with agriculture being involved, on bringing higher returns at the farm gate to our producers. These things take a very long time, they're very complex. As we recently saw with the U.S. farm bill, they seem to be ready to rip and tear and subsidize grain and oil seeds, and be damned what happens. Is it realistic for us to still be indicating to our producers that there is some light at the end of the tunnel in this next round to bring higher returns, particularly in grain and oil seeds?

    The Chair: Liam.

    Mr. Liam McCreery: The deal is, Canada's a trading nation, we are exporters and importers of goods, there's no game in town for grain and oilseeds producers other than international markets. We can't put a wall up and say we're just going to play our own game, or we lose so many producers. We export $9 billion worth of grains and oilseeds out of this country, we can't just stop. We don't want to stop, we want to continue. Is it a long, arduous process to try to get better trade relations? Yes. Will we ever have a panacea of perfect trade? No. All we can do is struggle and make it better than it was yesterday.

    The Chair: Bob.

    Mr. Bob Friesen: Thank you, Mr. Chair.

    You make a very good point. As you know, in Doha we did get some very important victories in principle. We got the Europeans to at least not take the export subsidies out of the declaration. We got a little bit of movement on anti-dump, a little bit on precautionary principle, as well as multi-functionality. You're absolutely right, the WTO has to go on, we have to negotiate it, but will the WTO result in equity being achieved in domestic support over the next three years? No. The U.S. farm bill, that's the top-up farm bill, is a 10-year bill.

    When we were in Doha--I don't know if you remember this, Liam, I think it was in Doha--the Brazilian minister threatened that unless the U.S. started to walk the talk, they would pull out of the WTO, and perhaps we need countries of that sort to start making those motions. It's not that we're trying to scuttle the WTO, we support it and we want it to be effective. Somehow the Americans have to realize that a lot of pressure will be put on them. As for telling farmers that the WTO will solve the domestic support and equity problem overnight, I certainly can't do that.

º  (1655)  

    The Chair: Larry.

    Mr. Larry Hill: Thank you, Mr. Chairman.

    I would echo the comments that we need to trade. We produce far in excess of our ability to consume within our country, so trade is our only route to maximize returns to our country's producers.

    When it comes to producers in the west, I think they were oversold the benefits of trade agreements in the past. They are very wary now of what kinds of results we may achieve at this round of WTO talks. I think it's the responsibility of all farm leaders and of our politicians not to oversell the benefits to producers. You can't hold a false hope out there. We need to work as hard as we can to get as many benefits as we can, but producers have to be aware that this is not going to save them in the short run, or maybe even in the long run.

    Mr. Rick Casson: Thanks.

    The Chair: Mr. Haney.

    Mr. Ted Haney: It isn't just an either-or matter. Two of our three main priorities on trade are addressing the trade-distorting domestic subsidies and the inequities that arise out of that, which are important as a cause of major income restrictions in the grains and oilseed sectors in Canada. At the same time, pursuing a very strong market access strategy will improve returns to Canadian agriculture at any level of differential domestic support. It's less bad if we have open access to markets, especially the wealthy and growing markets in Asia and the hoped-for future market in the EU. Our financial returns will be less bad. At the best, if we're able to address the disparity in domestic support, it will be even better for Canadian agriculture if we address and are able to succeed in liberalizing market access, primarily in the form of tariffs backed by rules.

    There is light, but the intensity of that light, especially in grains and oilseeds and other sectors that may come under income pressure due to, primarily, U.S. farm bill support, will be determined in no small part by varying levels of domestic support, especially those that influence trade. But it's not either-or.

    The Chair: Pierre.

[Translation]

    Mr. Pierre Paquette: I have a very general question to which the people from the Canadian Federation of Agriculture could perhaps answer. As an aside, I would have liked the people from the Union des producteurs agricoles to be present, but they probably were unable to come because of the weather.

    We can feel a very real tension in the agricultural community in Quebec between the producers who need to export, not only to maintain their position on the market, but also to make a living, and a great number of producers who have decided to target first and foremost the local market and who are prepared to give up on exportation and keep doing what they do best.

    Of course, there is the case of supply management in the milk sector, where producers are saying that they export 5% of their production and that if, in order to keep these 5%, they must give up their whole supply management system, they would prefer to give up on this 5% and keep their supply management system. But it goes much further than that. There are even movements... In Quebec, there is the Union paysanne, which holds that one of the principles for maintaining agricultural activities within regions is that there must be stewardship of the land. That is a choice of a way of life, and I believe that is quite legitimate.

    How can we reconcile these tensions in the agricultural community? Is it possible to reject on the one hand all forms of export subsidies or support--for my part, I subscribe to that position--while at the same time giving agricultural producers who wish to do so the opportunity to simply supply the local or regional market? Is it possible?

    If the people from UPA were here, they would have no other choice but to answer.

    The Chair: Mr. Paquette, the agricultural group from Quebec will arrive at 5:30.

[English]

    Mr. Ted Haney: There's a diversity in Canadian agriculture between sectors and between individual farmers within each region. There's probably as much diversity within each region as there is between any two regions. So diversity is a fact of life within agriculture, and it makes agriculture in Canada that much stronger. Whether it's 85%-15% or 90%-10%--these percentages may be open to debate--the vast majority of producers are producing their income today in the international markets and through trading.

    Within each sector, grains, oilseeds, livestock, poultry, dairy, there are producers who make a perfectly good living finding unique markets in the Canadian industry alone. Those tend not to need any protection. They serve local needs through highly differentiated products, and they do an excellent job. But the 90% of Canadian agriculture that really drives the industry nationwide is exposed to trade and will profit through future trade. That's the part CAFTA really is oriented toward, which is a very large part of our industry.

»  (1700)  

    Mr. Bob Friesen: I think I said before that deregulating supply management will not move the bar in achieving market access for other agricultural industries. It's not an either-or situation. Further, I would no sooner suggest that we trade off the beef industry for the grain industry than I would that we should trade off the supply management industries for any other sector. We have the possibility to negotiate a deal where we can create a win-win situation. Our government has committed itself not to trade off one sector for another, and that's our position. It's clear, when we look at the difficulties in some of the agricultural sectors across Canada now, that supply management is not using the same number of tax dollars. It doesn't have to shore up that industry.

    There are many reasons it's absolutely imperative for our government to continue to maintain the ability to have orderly marketing structures. Our lead negotiator from the last round has told us many times that whether it had to be supply management or another industry was not the issue. So I believe that if our negotiators are strong, there is absolutely the opportunity. Not only that, I also listed a whole host of ways we can improve and increase market access. We can do zero-for-zero, and we don't even have to wait for the WTO to be done. We can promote zero-for-zero negotiations while we wait for the outcome of the WTO.

    So again, it's not an either-or situation, and I believe the government should never entertain trading off one sector for another. It wouldn't achieve anything on the other side and, in principle, that is just not how we should run agriculture in Canada.

    The Chair: I have a quick question. At the WTO, on the issue of labelling, the European Union were pushing through genetically modified angles, as well as environmental concerns. Really, in a sense, it's all codes for GMO products. They wanted to address this issue. As a by-product of it, the question of labelling came up, whether or not you should be labelling product, indicating all of the ingredients and so on. I wanted to have just a general feel on what the industry thought on that.

    Mr. Victor Jarjour: Mr. Chairman, I think you're hitting on an interesting point, one that has perhaps some parallels with what we would consider SPS issues and using food safety issues as disguised barriers to trade. What the European Union was seeking in some instances was to essentially label methods of production. That's perhaps not directly relevant to the CWB, but as a general comment, I think those kinds of initiatives are extremely dangerous and can have some very serious trade-distorting consequences.

»  (1705)  

    Mr. Bob Friesen: That is one of the concerns we've had for quite some time in the development of the standards for voluntary labelling. It was clear to us, being involved in the committee, that there were many people who did not understand the significance of Canada's, at the very least, developing standards that would not impede the trade relations we have built up with other countries. At one point in time they were entertaining a standard that would have clearly raised a trade challenge from the U.S. Because labelling is an informational issue and not a safety issue, the U.S. would clearly have had a legitimate WTO challenge.

    Let me also go to the issue of the biosafety protocol. As you know, that's the protocol that is meant to manage the transboundary movement of genetically modified products. What has us really concerned within the context of trade and the biosafety protocol is that, first of all, they want to ratify it before the negotiation is done. That is somewhat tantamount to signing a WTO agreement today, and then negotiating it over the next seven years. That has us really concerned.

    There are a few components in that protocol that concern us. First, we've been told by Environment Canada that they are entertaining the thought of not negotiating a tolerance level in that protocol. In other words, they will allow every country to establish its own tolerance level. That has the risk of creating tolerance levels anywhere from 1% to who knows how high; already around the world they're between 1% and 5%. So either we would have several tracks of segregation or, if we wanted only one track of segregation, we would have to achieve the lowest tolerance level, which at this point in time the industry tells us we can't achieve.

    The other added risk is--and Victor already mentioned it--that a country could decide to change its tolerance level while the shipload of grain is on its way to that country. Let's say the price drops, they decide they're going to get a cheaper price, they change the tolerance level or the testing method, because they as yet have not established a harmonized testing method. So the exporter might use a different standard for testing from the importer's, and then they could change their mind with the shipment halfway across the ocean, and the importing country would say, well, we will take it if you drop the price.

    So clearly, there are other issues regarding trade, even within the SPS, that have huge potential to create non-tariff trade barriers.

    The Chair: Gentlemen, ladies, thank you very much. This was most informative, and I want to commend you, collectively and individually, on the excellent documents that you have sent us. You have addressed all the questions we have asked of you and you were very forthcoming here with your answers to the committee. Your presentations, as well as your answers to some of our questions, will form part of the report we're going to be making public in the House of Commons, hopefully within the next eight weeks. I trust each one of you will get a copy of that.

    We're going to suspend and go into camera for a while. We still have one witness, who will be coming at 5:30. So we will suspend for a couple of minutes, and then we'll be back in session.

    [Editor's Note: Proceedings continue in camera]