Minority Opinion of
the Official Opposition Members
of the House of Commons

Standing Committee on Agriculture and Agri-Food

Introduction

The Standing Committee on Agriculture and Agri-Food held hearings into the Farm Income Crisis at the behest of the Official Opposition. The hearings were a result of an Official Opposition motion on October 8th but the government delayed these hearings until November 3rd and the Committee did not travel outside Ottawa.

The Official Opposition believes that the recommendations contained in the Majority Report do not adequately reflect the needs and opinions of Canadian producers and ignore the needs of some important sectors of the industry. For example, the Canadian Dehydrators Association has reported that high European Union subsidies have increased Spain's 1997 dehydrated forage production to 16X its pre EU levels, but this information has been excluded from the Majority Report

These high foreign-subsidies as well as the collapse of Asian markets have yielded the lowest commodity prices in decades for Canadian agricultural producers.

Low commodity prices have had the largest impact on the provinces of Saskatchewan, Manitoba, and Prince Edward Island. In these provinces realized net income is forecasted to be 72%, 44%, and 41% below the five-year average, respectively.

The fall in commodity prices has been compounded by extremely high federal-taxation. The high cost that the federal government imposes on Canadian farmers hinders their ability to compete on world markets. In addition to general taxation on income, the government's tax grab includes hidden taxes on agricultural inputs, such as fertilizer and fuel, and taxes masquerading as user fees.

The current crisis could have been moderated, or even averted, if the government had taken action when it became aware of the problem. As early as February 1998, fully 10 months ago, Statistics Canada predicted that realized net farm income would fall by 46% Canada-wide. At that time and in subsequent months the federal government did not react to that prediction in a substantive way. Shortly after that, another government department, Agriculture Canada predicted yet another 30% drop in net farm income, but again there was still no substantive long-range or short-range reaction from the government.

In addition to the organizations that made presentations to the Standing Committee, the Official Opposition has attended a number of town hall and commodity group meetings during the period of the Committee hearings. The following recommendations reflect this broader consultation.

Recommendation 1:

The Official Opposition supports an emergency compensation program. This compensation must not be commodity specific and must be seen as compensation for losses resulting from foreign subsidies.

Canadian producers' need is immediate. Farmers cannot afford to wait for emergency compensation. Many producers have expressed concern that an income-based program will not provide emergency compensation in a timely fashion. Some farmers have suggested that emergency compensation should be based on acres. Others have suggested programs similar to Alberta's Farm Income Disaster Program. The Official Opposition supports the suggestion that the individual provinces are in the best position to determine how the emergency compensation should be delivered.

Recommendation 2:

The Official Opposition recommends that the emergency assistance be provided immediately.

In addition to emergency compensation the government must introduce a long-term broader package to ensure that the income crisis does not recur. This long-term package must address the root international and domestic causes of the current farm income crisis.

Domestic Action Required

Farmers not only need lower subsidies abroad; they should have lower taxes at home. The Official Opposition believes there are three tax areas that require immediate government action.

First, the government should immediately bring forward broad-based general tax reductions. Statistics Canada reports that during the 1993 through 1996 period Canadian farmers paid over $2.75 billion in income taxes to the federal government.

Second, the Ministry of Agriculture and Agri-Food should immediately lower user fees it collects through agencies such as the Canadian Grain Commission and the Canadian Food Inspection Agency. Industry estimates that these user fees will amount to $130 million during 1998, a 28% increase over three years ago. The Minister of Agriculture does not require the authorization of other departments to act and he should release these funds to producers without delay.

Third, the government should reduce federal taxes on the manufacture, transportation, and sale of farm inputs such as fertilizer. The Canadian Fertilizer Institute has estimated that federal taxes account for up to 15% of their retail fees. This means that over $300 million, of the $2 billion farmers spend on fertilizer each year, is federal taxes.

Recommendation 3:

The Official Opposition recommends that the federal government immediately move to implement general tax reductions, lower user fees charged by the Department of Agriculture and Agri-Food, and reduce federal taxes charged on the manufacture, transportation, and sale of agricultural inputs, such as fertilizer.

Western farmers have indicated that they could receive a higher price for their wheat and barley if they were given the freedom to market outside of the Canadian Wheat Board (CWB). The government could improve the financial position for these producers by immediately giving them the ability to pursue their own marketing opportunities.

Recommendation 4:

The Official Opposition recommends that the government immediately move to give Western Canadian farmers the freedom to pursue marketing opportunities independently of the Canadian Wheat Board. In the interim, the Official Opposition recommends that the Canadian Wheat Board should make an interim payment towards the final price in order to immediately improve Canadian producers' cash flow.

International Action Required

We must have free and fair trade abroad. This means our government should take strong action to reduce high foreign-subsidies. For example:

• The European Union subsidies on barley production are more than 19 times above Canada's while U.S. subsidies on barley are more than 5.7 times above Canada's.
• The European Union subsidies on wheat production are more than 7.7 times greater than Canada's while U.S. wheat subsidies are more than 4.5 times greater than Canadian subsidies.

The impact of these high foreign subsidies on Canadian farmers is staggering. As a result of foreign subsidies last year Canada's agriculture and fish exports fell by $1.1 billion. According to Statistics Canada, this is equal to the realized net income from every farm in Quebec, Manitoba, and Saskatchewan. To put it another way, the loss of these exports is the same as closing down every farm in these three provinces.

Our farmers cannot wait until the end of the next World Trade Organization negotiations to have these subsidies fall. Many people have suggested that we enter bilateral negotiations with the United States, to develop North American opposition to the high European Union subsidies. Our farmers can compete against the best in the world and win, but we must understand that Canada's treasury cannot win against rich European and American coffers in a subsidy war.

Recommendation 5:

The Official Opposition recommends that the government move immediately to negotiate a reduction in foreign agricultural subsidies. These negotiations should include but not be limited to bilateral discussions with the United States, aimed at developing common opposition to European Union subsidization.

Our government must also ensure that our trading partners live up to the agreements they have already signed. Recent examples demonstrate that this has not been accomplished. On September 16 the government of South Dakota began stopping Canadian agricultural exports. This blockade was continued on December 6 as farmers in northern States again closed the border.

These unilateral trade actions by individual States violate the North American Free Trade Agreement as well as the World Trade Organization rules. The government must take stronger, more pro-active measures to ensure that this type of unilateral action does not reduce Canadian producers' access to export markets.

Recommendation 6:

The government should move to immediately implement the 1995 plan (published in Agriculture and Agri-Food's 1995 Estimates Part III) to set up a SWAT team at Agriculture and Agri-Food Canada that will anticipate and deal with trade problems before they harm Canadian farmers.