AGRI Committee Report

CHAPTER 5: INTERNATIONAL TRADE AGREEMENTS

As leader in international trade negotiations and the administration of trade policies, the government plays a crucial role for the entire agriculture and agri-food sector. Regardless of whether Canadian agricultural producers are efficient, processors are innovative and exporters find outlets in the global market, it is enough for market access negotiated by the government to be insufficient for all the development efforts by other stakeholders to be blocked. The Agreement on Agriculture of the Uruguay Round did not meet all expectations of Canadian farmers. In the view of producers who benefit from supply management, market access has been more of a one-way affair. Canada has opened its markets to foreign products in compliance with the spirit and letter of the Agreement, whereas many other countries have displayed a more restrictive vision as a result of which Canada does not enjoy the same open markets for quota products. Furthermore, even scrupulous compliance with the Agreement on Agriculture has failed to shelter supply management and Crown corporations from challenges by trading partners.

One message was clear from the Committee’s hearings: the next multilateral trade negotiations must be transparent and fair, but they must, above all, be based on the Uruguay agreements which will have been clarified and implemented fairly. In the view of a number of stakeholders, there is no point in negotiating new agreements if the previous agreements have not been fully implemented. Consequently:

RECOMMENDATION 19

Whereas the interpretation of the previous multilateral trade agreements has not been standardized among the signatory countries, the Committee recommends that the government and its negotiators require that the rules of application of future agreements be established with a higher degree of transparency than those of the Uruguay Round. The Committee further recommends that Canadian negotiators maintain a firm position on Canada’s ability to maintain supply management and that they negotiate market access for all sectors that is transparent, genuine and fairly administered by all member countries.

Farm income support in the United States and income increases under the Farm Bill were a constant theme throughout the Standing Committee’s hearings. In the view of all the farmers we met, U.S. subsidies are an irritant and a threat to the survival of certain agricultural sectors in Canada. In 1996, when the Farm Bill was introduced, its purpose was to make American farmers more open to market signals and less dependent on government subsidies. The Farm Bill of 2002, officially entitled The Farm Security and Rural Investment Act of 2002, reversed the trend: as a result there will be a 70 to 80% increase in agricultural spending, which could translate in additional expenditures of some US$80 billion over the next 10 years. Furthermore, not only has spending in support of traditional crops increased, but subsidies have also been extended to crops that previously received little or no subsidization.

Initial estimates show that, over 10 years, the cost of the Farm Bill could amount to US$180 billion. American farmers could receive between $16 billion and $20 billion in subsidies this year. It is worth noting that U.S. obligations under agreements under the aegis of the World Trade Organization (WTO) show that farm subsidies must be limited to $19.1 billion a year. The current level of agricultural subsidies in Canada is approximately $4 billion under the permitted ceiling.

It is easy to understand Canadian farmers’ distress when one is aware of the negative impact of the subsidies on global commodities prices and the impact this has on the Canadian agricultural sector as a whole. The depressed world price of grains and oilseeds which has lasted for some time now may be explained by many factors, but it is unrealistic to disregard the impact of agricultural subsidies paid by the United States and the European Union. Some farmers groups such as the Canadian Grain Producers, have used Agriculture and Agri-Food Canada data to assess the income losses of Canadian grain producers caused by the subsidies of other countries. According to their calculations, those losses amount to $1.3 billion a year. However, some government officials may be reluctant to acknowledge the harm that subsidies paid to the agricultural producers of other countries cause Canadian producers. According to OECD estimates, farm subsidies in the United States, the European Union and Japan amount to US$350 billion a year. In view of this figure, it is hard to conceive that such a sum would not harm Canadian farmers, who are among the least subsidized in the world. The reason given for not supporting farm incomes is that subsidies create distortions, particularly because of their tendency to be capitalized in farm infrastructure, which artificially inflates the value of agricultural operations. Also advanced is the argument that all change is healthy because it enables a sector to adjust and become more dynamic. These would be entirely valid arguments in a "normal" agricultural economy, but not in the current context. Canadian farmers currently have no way of managing the risks induced by the actions of foreign governments. If we truly want an agricultural industry as contemplated in the Agricultural Policy Framework, immediate action must be taken so that we can have a foundation on which to build that vision. Consequently:

RECOMMENDATION 20

The Committee recommends that the government provide $1.3 billion a year in bridge funding for the sectors most affected by the agricultural subsidies of other countries for as long as those subsidies unduly reduce the price of Canadian agricultural commodities.