[Recorded by Electronic Apparatus]
Tuesday, March 26, 1996
.0908 
[English]
The Chairman: Committee members, this morning there are some presentations under the auspices of the Canadian Federation of Agriculture and the Canadian Horticultural Council. I believe part of their delegation is the Canadian Seed Growers' Association. We'll ask for those presentations first, then the presentation from the Canadian Cattlemen's Association. After that we will have questions, starting with the Reform Party. Rather than have some presentations and then questions and then more presentations and then maybe a duplication of questions to get other people's views, we will try to ask the questions once and get some answers in that way.
I will ask those from the Canadian Federation of Agriculture to introduce their team. Steve Whitney, would you introduce yourself and those with you in your delegation.
Mr. Stephen Whitney (Assistant Vice-President, Canadian Horticultural Council): Thank you, Mr. Chairman.
The presenter this morning will be Bob Friesen, who is second vice-president of the Canadian Federation of Agriculture. With Bob today are Danny Dempster, executive vice-president of the CHC; Sally Rutherford, executive director of CFA; and myself, staff of the CHC here in Ottawa.
The Chairman: I believe somebody else is going to follow, Bob. Bill Robertson is going to make some comments from the Canadian Seed Growers' Association at the conclusion of your comments.
Mr. Whitney: Yes.
.0910
The Chairman: Okay. Proceed with your presentation.
Mr. Bob Friesen (Second Vice-President, Canadian Federation of Agriculture): Thank you, Mr. Chairman.
I have a short document that I would like to present. Rather than stumble and fumble through the document with casual comments, with your indulgence I'll just very quickly go through it.
The Canadian Federation of Agriculture is the largest general farm organization in Canada, representing farmers from coast to coast in all commodities. Of course our interest in the issue of user fees cost recovery is the impact on the agriculture and agrifood industry.
One of the by-products of regulatory reform appears to be the application of user fees on federal government services. Fiscal pressures accompanied by a move toward less government involvement in business and a need to determine the cost of regulation led to the opening of so-called negotiations on fees by Agriculture and Agri-Food Canada in 1994.
At the time of the decision to pursue user fees, the CFA proposed that a joint government user committee be set up to consider, among other things, who determines public versus private good; the impact of changes on services, the quality of food, and the perception of customers abroad; the impact on the competitiveness of the industry; the kinds of arrangements that should be available in determining cost-sharing options; the relationship between public and private good and the right of fee-paying users to determine the levels of services desired or required; and the creation of a review process for user fee programs and services to accommodate necessary adjustments.
This proposal, as you know, was not accepted, and AAFC embarked upon a one-sided exercise to develop fee schedules.
The fees being imposed within Agriculture and Agri-Food Canada are primarily on services presently being offered by the food production and inspection branch. These include grading, import and export permits, certification, registrations, and meat inspection. In all cases, the proportion of public versus private good has been arbitrarily calculated by AAFC and this determination has been used to set the level of fee to be paid.
In some cases the fees are minor. In others, such as genetic testing, they are projected to be at 90% within three years.
The goal of AAFC is to have the user fee system implemented by April 1996 for the first set of services.
It must be pointed out that a number of commodities have covered their own service costs for some time. The grains and oilseeds industry covers all of its own costs for grading and inspection, and the dairy industry pays the cost of inspection and grading as well.
At this point in time most commodity groups have agreed to pay some level of fees. Some have determined that the cost of paying the user fee would indeed be higher than the cost of privatizing the service and providing it themselves.
For example, this is the case of grading in the beef industry. Other industries continue to look at their options for paying on a fee-for-service basis for privatizing the service.
Other departments also are moving toward user fees. Health Canada has developed user fees for veterinary drugs and is in the process of developing a fee schedule for pesticide registration. The Canadian Coast Guard is developing a series of user fees for coast guard services and the use of ice-breakers. The list is long and is growing.
The development of user fees is the result of Treasury Board guidelines. These guidelines do not specify a specific breakdown of public versus private good. Whatever is deemed to be appropriate in a particular case is what is charged. To our knowledge, the industry has never had an opportunity to participate in this exercise.
It is our understanding that the present foray into cost recovery comes with instructions to charge as much as can be had out of the industry.
At least three specific issues arise from these discussions.
The first is the failure by government to understand the nature of business and the potential impact of the accumulation of the fees on the competitiveness of the industry.
A second and related issue is the way in which the fees have been developed and the failure of government to realize that if industry is to pay for services, then the services must reflect what industry wants and needs.
The third issue is that of the lack of coordination and consistency of goals.
On the first issue, the Government of Canada, particularly AAFC, has adopted the competitiveness or business impact test, which we understand is supposed to be applied to all regulations. In the case of the imposition of user fees, the test appears to have been set aside in a rush for dollars.
.0915
In numbers of cases, the application of the proposed fee clearly would put the industry at risk, particularly in the case of export interest by increasing the cost of the commodity to above a saleable rate or by decreasing the profit margin to the point where production is not worth the trouble. For a number of commodities such as pork, beef, horticulture products and eggs, the cost of export permits will have a serious impact on the ability of the sectors to successfully develop and maintain markets.
This is especially so in relation to the U.S. where having a level playing field is so very important. Incidentally, the U.S. does not charge for export permits for pork or beef.
This does not yet address the problem of compounded fees for the numerous services that serve to maintain an excellent reputation for Canadian products abroad. It is estimated that the grains industry, having paid for marine services, field inspection and phyto-sanitary inspections, will be looking at additional charges of over $100 million next year on top of the $750 million increase in transportation charges due of course to the demise of the WGTA.
The potato industry is facing numerous regulatory compliance charges, including plant health, seed potato, fresh fruit and vegetable, and processed product programs as well as increases in pesticide administrative charges. In the apple industry it is estimated that one major apple exporter alone is facing increased charges of $800,000 in new fees.
The refrain appears to be that a particular fee will amount to only x% of sales, but there has been no across-the-board analysis even within AAFC to determine what the cumulative effect will be. None of these charges are insignificant and they will have a cumulative effect. As I said before, none of these charges are insignificant and they will certainly have a major impact on the industry.
The second issue is that the negotiation of the fee has left a great deal to be desired. While government talks about becoming more businesslike, it does not understand the concept. In almost every case known to us, the so-called negotiations have started from the basis of paying for the existing service being delivered in the existing manner. No serious discussion has been undertaken to determine the level of service required, if any. Although there has been considerable discussion about downsizing, streamlining and cost avoidance for industry, these topics have not been on the table unless the industry has been able to force them there.
In case after case, the scenario has been the same. To quote one of our members:
- We are not convinced that the consultations are negotiations, but are more information
discussion sessions.
In the case of the hog industry, yet another series of charges was tabled early in the year in order to allow the branch to meet its new revenue targets. For example, in the feeds industry over the last12 months the expected contribution has quadrupled in value. No justification of this expected contribution has yet been made.
It should be pointed out that the reason for the need for additional sources of income is that in a number of cases the imposition of the fee has reduced the use of the services to the point where the targets cannot be reached. In the case of the feed industry association, unless government is willing to explore cost reduction and cost avoidance initiatives concurrently with cost-recovery initiatives, the industry will not be in a position to provide workable solutions that will benefit both parties.
This situation is not unique to AAFC alone. The export grains industry is facing marine service fees imposed by the Canadian Coast Guard that will rise from $20 million in 1996-1997 to $60 million in 1999-2000. Although the proposed fees will not begin to be collected until June 1, 1996, the CCG still plans to collect the $20 million it had announced it would collect for the whole fiscal year. Of course, as a consequence, the rates in place from June 1 on a per tonne or a per vessel basis will be higher than they would have been had cost recovery been in place since April 1.
.0920
Cost recovery on pesticide registration is another case in point. It is only through pressure from the industry that any detailed discussion of the proposed fee system will be discussed.
As we enter into these discussions it is still not clear what the proposed $16 million in fees will cover. We know under the new legislation there will be requirements for significantly increased public participation, but it is not yet clear who will pay for this activity, nor how much. There has been no discussion to date on the possibility of streamlining or cost avoidance. It is our fear at this time that we will be paying for the maintenance of the status quo, at a minimum.
An additional concern is that the fees on the table this year for pesticides as well as for other services may not be those on the table next year. User fees are fast becoming an uncontrollable input cost for industry.
On the third issue, despite the signing of trade deals that provide the parameters for green programming, Canadian agriculture is currently being put at a competitive disadvantage relative to its trading partners. It is true that many of Canada's trading partners and competitors do charge fees for government services. However, in many if not most cases they also provide other types of support to the industry that Canada does not provide. The European Union and Japan have made firm commitments to increase green spending and the U.S. Congress has made promises to spend an additional $600 million on green programs.
The concern from CFA's point of view is the economic impact on the primary industry. Although overall few of the user fees will be directed specifically at the primary producer, in many cases the primary industry will be impacted on significantly. Yet they are at the table only as an observer, since it is recognized the fees will be collected somewhere downstream.
The financial impact on individual sectors will be significant. Over two years, the grains industry will have to absorb the increased cost resulting from the loss of the WGTA, increased shipping costs, reduced levels of income support, and increased pesticide costs. The meat industry will face the loss of income stabilization programs, increased veterinary drug costs, the introduction of grading and inspection fees, and export permit fees, among others. The horticulture industry will face increased pesticide charges and the introduction of fees for inspection, export licences, seed imports, licensing, and arbitration. In addition, all industries will face costs for data collection.
Given the impact of cost recovery, stated government policy to promote export trade and industry self-reliance can only be seen as working at cross-purposes.
Farmers are not necessarily opposed to all cost recovery. They are concerned about the way in which it is being established and the timeframe within which it is being imposed. They are concerned about the control they will have over the determination of the services for which they are paying. As well, they are concerned about the lack of coordination in the development of user fees between departments.
So the Canadian Federation of Agriculture requests that the committee ask for an annual accounting of the fees being established as they affect the agrifood industry from Treasury Board Canada. We also request that within each department a committee with industry participation be established to review fees and their application. Finally, we ask the committee to request a list of prospective charges under consideration within AAFC and all branches so this list may be made public and it may be the basis for discussion and real negotiation within the industry.
With that, I'd like to thank you for the opportunity to present our views on this cost-recovery issue.
The Chairman: Thank you very much, Mr. Friesen.
Mr. Robertson, do you have some comments?
Mr. Bill Robertson (Canadian Seed Growers' Association; Canadian Federation of Agriculture): Thank you very much, Mr. Chairman. It's certainly a pleasure to be here today and participating in these discussions on the impact of cost recovery on the Canadian seed industry. I would like to thank the CFA for including us in their group. Rather than repeating some of the broad comments in their paper, I would suggest that we agree. We are hearing the same kinds of stories across the country as they are about the impact and the lack of coordination of some of the applications of these user fees. I would like first, though, to give you a brief word about the Canadian Seed Growers' Association.
The membership is made up of some 5,000 Canadian farmers who specialize in seed production. Members reside in all provinces but Newfoundland. Established in 1904, the association has been mandated under the Seeds Act to establish genetic purity standards for all field crops, with the exception of potatoes, and to deliver the seed pedigreeing and certification service. We are the only official pedigreeing agency for these crops in Canada. To put this into perspective, in 1995 there were about 1.3 million acres of seed crops eligible for pedigree in this country.
.0925
The organization is managed by an executive and board of directors made up of twelve growers elected by the members and nine directors appointed by the provinces. A staff of seven located in Ottawa manages the day-to-day business of the association.
The CSGA is financially self-sufficient and administratively independent of government. Historically, however, we have had very close connections with Agriculture Canada - both the research and regulatory people. Seed growers provide the technology transfer between commercial farmers and plant breeders in both the private and public sectors.
New varieties are released in small quantities and are multiplied under strict conditions through several generations for use by farmers. This mechanism is quick and efficient and maintains Canadian grain, oilseed, and forage crop on the cutting edge of new technology through the rapid acceptance of improved varieties. Canadian grains and oilseeds are well known for high quality in both the domestic and export markets. Through the subsidy wars of the 1980s, it was this quality edge that kept Canada in the export business.
The system itself is why Canada has been successful. It all starts with plant breeders, followed by seed growers who maintain the genetic purity of crops through several generations, then commercial farmers and quality verification by the Canadian Grain Commission. The variety registration system determines the minimum standards for varieties that can be produced in Canada. Quality is one of the key elements in variety registration.
Given this general background, let me move on to cost recovery. In the seed sector, Agriculture Canada historically provided many services at little or no cost. These included seed analysis, seed sealing, variety registration, export certification, field inspection, and supervision of seed processing facilities. This all began to change in 1985, during the early rounds of cost recovery. Most of the services were discontinued, and for the remaining ones, fees were introduced or increased. We are now negotiating the next round.
As taxpayers we all agree that the debt and deficit problems are severe and must be addressed. However, the rate of adjustment seems to be unnecessarily rapid in some cases. The seed industry is being asked to absorb significantly larger portions of the cost, but with little power to determine or influence the level and quality of service provided by the government.
We are willing to pay more providing there is a corresponding effort by Agriculture Canada to engage in serious cost avoidance and cost reduction. What we fear most - and this is reflected in the comments you've just heard as well - is the shift of the financial burden to industry and the maintenance of government programs with the inherent costs. The role of Agriculture Canada should be to maintain the regulatory framework through the Seeds Act and in marketplace enforcement to ensure compliance. This will provide the necessary protection for commercial farmers.
Our concern is that if too many costs, including royalties on public and private varieties, are loaded on to the seed sector, more farmers will choose to replant grain from the previous year's production rather than purchasing improved varieties. As a farm input, seed is unique in that it can reproduce itself in the hands of the consumer. The same does not apply to other inputs such as fertilizer, pesticides, farm machinery, etc.
Beyond the obvious negative economic impact on seed growers and companies, the more serious effect will be a slowdown in technology transfer and a deterioration over time in grain and oilseed quality. This ultimately affects downstream users, manufacturers and consumers, as well as the export market. Our problem is that there is no effective mechanism to share the cost with a broader group of beneficiaries. The simple method of passing costs along through higher seed prices does not work if farmers can detour around the system by replanting grain. Returns to research will soon dry up since they are now collected through the seed system.
Agriculture research and exports are two primary pillars of the ongoing success of agriculture in this country. We see both of these in some jeopardy if too many costs are offloaded to the seed industry too quickly. Much of Agriculture Canada's involvement in the seed sector is for the benefit of the country at large, so in our view the only fair way to spread this cost over the widest range of beneficiaries is via the tax system. We would hope that the government can understand this peculiar dilemma and adjust its cost-recovery policy accordingly.
.0930
In the meantime, the seed industry is proceeding to set up a mechanism to provide some approved services previously undertaken by Agriculture Canada through a process of accreditation. It will be designed to respect the Canada Seeds Act and regulations and to safeguard Canada's high reputation in the export market.
Thank you.
The Chairman: Thanks very much, Mr. Robertson.
The next presenters are Mr. Thorlakson and Mr. Caldwell.
Mr. Caldwell, would you like to introduce yourself and Mr. Thorlakson.
Mr. James Caldwell (Assistant General Manager and Director, Government Affairs, Canadian Cattlemen's Association): Thank you, Mr. Chairman and members of this committee. Ben Thorlakson, our vice-president and chairman of our animal health committee, and a feedlot operator in the province of Alberta, will be making our presentation today.
Mr. Ben Thorlakson (Vice-president, Canadian Cattlemen's Association): Thank you, Mr. Chairman. The Canadian Cattlemen's Association is pleased to be invited to present our views on the business alignment plan and its significance to the competitiveness of our industry.
We recognize the serious financial situation facing our nation and the need to eliminate government deficits at all levels of government. Our industry has chosen to eliminate all direct price and production-based support to our sector to remove any risk of trade action, along with the recognition that reductions in government expenditures are necessary to ensure our nation's fiscal viability.
In making this choice we've chosen to focus our efforts on developmental initiatives, including product improvement, quality assurance, food safety advances, research, market development, and so forth.
As you know, our industry competes openly and freely in the North American market. We now export in excess of 44% of our beef cattle and beef production and are increasingly dependent on export markets, particularly the United States, along with a steady expansion into Pacific Asian nations.
Beef and beef cattle have for a number of years accounted for Canada's largest agricultural export trade to the United States. Our industry is competitive and is constantly adapting and improving the quality and supply of the products and services we can offer to our customers. Agriculture and Agri-Food Canada has provided services, particularly in the areas of grain, meat inspection and animal health, and has been responsive to the necessary changes that have contributed to this success story.
The United States is our direct competitor. We feel it's very important that Canada's various cost-recovery and user fees initiatives do not place our industry at a competitive disadvantage with the U.S. While other countries may have different rates and levels, they do not have the same significance.
We support the efforts of the department to review its role, to streamline its operations, to operate in the most efficient manner possible and to bring policies into conformity with the new rules set out under the World Trade Organization. However, we continue to have a serious problem with the way in which production commitments for branches are being imposed. In our view, it does not recognize the redirection of our government roles that our sector desires. We have eliminated some very costly programs in order to maintain sufficient funding for key services, yet the current plan does not reflect this and calls for cuts to be evenly distributed throughout all branches. In our case, we have chosen to eliminate support programs with the desire to sustain GATT green services and programs in the areas of research, animal health and meat inspection.
In the field of animal health we're confident that our animal disease control program is the most successful in the world, and we've had an opportunity this week to discuss some of the features of that program. Its success is largely built around the ability to take a strong national approach to disease prevention and outbreak control.
.0935
The slaughter compensation program is critical to ensuring diseased animals are reported and swift, effective measures can be taken. We believe the control of certain diseases starts at the Canadian border and must be a government function.
The current program, in our opinion, conforms to our international obligations, contributes to our competitiveness, and contributes to food and animal safety. We're working on options to offer protection above the compensation schedule in the Health of Animals Act and regulations.
However, we believe the basic compensation program should be maintained by the federal government. It should be noted that we find ourselves at risk from non-agricultural sources of infection or contamination, including human, wildlife, and insect vectors.
I may take just one example here. Probably the greatest risk to the enhanced health status we have in the Canadian cattle industry is what's posed by Wood Buffalo National Park. There are 2,200 buffalo. Tuberculosis, brucellosis, and anthrax are all endemic in those populations. However, it was determined that it was a public good that those animals should not be depopulated. I think it's grossly unfair to ask the industry to accept responsibility for compensation for depopulation when we retain this huge risk to our animal population and to our enhanced disease status.
Grading.
On April 1, 1996, the Canadian Beef Grading Agency will provide the private delivery of beef grading services based on a regulated national set of standards. The Canadian Cattlemen's Association has funded the establishment of the new agency, and this will lead to a significant cost savings to the department. I think this can be an example of a real success story for your cost recovery through the business alignment program, for how industry and government can work together.
Food safety.
Food safety can and should be a competitive strength for the Canadian industry. Consumer expectations have never been higher and consumer confidence cannot be taken for granted. Again we go back to the events of the last week with BSE. Consumer confidence is what it's all about, and we must retain this and the value it is to the Canadian industry. It's truly a competitive edge that Canada has, and we must cherish and retain this.
As an industry we've found we are very vulnerable to special interest groups and even to an individual whistle-blower. Even though facts do not support their allegations, it's an issue that can affect trade and security of access.
There is a consistent message from all sectors we have spoken to that safety issues and services are considered a priority role of government. Expenditure reductions, including cost-recovery fees, should be considered elsewhere in order to maintain and improve this function.
We're currently in the process of transforming our food safety programs and inspection procedures to a HACCP-based system. That's ``Hazard Analysis and Critical Control Point''. I'm sure you're all aware of that. This will require a substantial investment by industry and will require careful management to ensure consumers recognize the benefits of this system and their level of confidence is not jeopardized.
HACCP is a long-term commitment to food safety and takes time to be fully integrated into our system. While we are confident it can result in savings in the long term, it will be important to approach it as a building process and to ensure adequate resources are available to ensure it proceeds in the most effective way possible and it instils both consumer confidence and international acceptance.
In our view, there are more appropriate areas for the federal government to reduce expenditures versus increasing the cost of meat inspection services.
I have a chart here. At this time it's not important that you're able to read the fine print at the bottom, but you will notice one of those lines protrudes a long way up the Y axis. As for that particular expenditure, if you add up all the rest they add up to just 70% of this one factor. The other factors are research, inspection, administration of capital, food aid, rural adaptation and marketing.
.0940
For all those, the sum total is only 70% of income support. These other factors are all GATT green. Income support is GATT amber, with hues that move into GATT red.
We believe there is an important role for government in the area of research and development, along with animal health and food safety. Industry is committing more resources to this area, although we've found that the current distribution of funds has seriously limited the opportunity to match funding.
We believe research funding should be made available in proportion to the commodity size and through those facilities that industry chooses. For example, your federal research station in Lacombe is recognized as a key beef research facility and carries out many projects important to our competitiveness, quality and safety initiatives.
We also believe there is a continuing role for the department in carrying out basic research. This clearly fits into the GATT green category.
In conclusion, we find ourselves in a most unusual set of circumstances. The federal government insists that our industry be part of a national safety net program that we don't want, but on the other hand needs to charge us more for services that we need. This will neither serve our competitiveness objectives nor assist us in meeting the export objectives that have been set out for our agrifood sector.
In conclusion, we ask that the process be reviewed and that sufficient flexibility be incorporated into the process to ensure that expenditure reductions or revenue generation be applied to meet the strategic needs of industry by sector, if necessary, in order to advance our competitiveness and to conform with the spirit of the new GATT.
Thank you very much.
The Chairman: Thank you very much, Mr. Thorlakson.
We will begin our first round of questioning with the Reform Party.
Mr. Hoeppner.
Mr. Hoeppner (Lisgar - Marquette): Thank you, Mr. Chairman.
It's a pleasure having these gentlemen and the lady here this morning. I see you have common problems, all probably directed at industry and government both.
I'm going to start with the Canadian Cattlemen's Association. I was wondering what your comment was on food safety and basic research. Are you telling us that should be a government responsibility, that it should not be in the cost recovery?
Mr. Thorlakson: Mr. Hoeppner?
Mr. Hoeppner: It's Hoeppner. ``Honourable member'' would have been safe.
Mr. Thorlakson: Sorry.
Mr. Hoeppner: Mr. Vanclief still hasn't got it but he will in a year or so.
Mr. Thorlakson: Pardon me.
To answer your question, the United States at this time does not appear to have any plans for cost recovery on their inspection services that we're aware of. I think food safety and the optics of a neutral government body being responsible for food safety is very important. It's been so clear over this past week that consumers need confidence in the products placed before them. We feel this is an appropriate government responsibility or a responsibility of the people of Canada.
Mr. Hoeppner: How are you making out with your Wood Buffalo issue? This somehow reflects back to Manitoba and some elk problems around the Riding Mountains that affect the cattle herds in that area. It's been a fairly touchy issue. Do you think you can persuade government on that issue or are you running into a stone wall?
.0945
Mr. Thorlakson: I think the situation with Wood Buffalo National Park and the diseased buffalo there, the fact that it is not strictly a health issue.... We have to get an agreement, a consensus, with the aboriginal people in the area.
Parks Canada seems to have a compelling desire to maintain the buffalo in this natural, diseased state.
So it's not strictly a matter of animal health.
I raised the issue to show that, taking an issue such as compensation in isolation, when it's been determined - a decision was made to maintain that reservoir of disease and that this was in fact a public good for the people of Canada - it is unfair to put the responsibility for compensation back on our lap.
Mr. Hoeppner: So we have one bureaucracy fighting the other. Is that what it amounts to?
Mr. Thorlakson: I'm not schooled in the intricacies of government.
Mr. Hoeppner: It's a big issue in Manitoba, because we're looking at elk farming. We are looking at some issues that we had in the southern part concerning TB and the suspicion that it also could relate to wildlife. So wildlife and the health problem is a very big issue. That has to be addressed before we who are in the agriculture field will be completely satisfied.
I was also wondering about priorization. Are you quite comfortable with paying the cost recovery of grading meat, inspection, and some other such services?
Mr. Thorlakson: We're quite comfortable with grading paying the cost. Meat inspection gets into the whole area of food safety. For the optics, it's very important to maintain this - as well as for our competitive position vis-à-vis the U.S.A. They don't have the situation of paying for inspection services, and we think it would be grossly unfair to burden Canadian producers with that cost.
Mr. Hoeppner: I'd like to go to the seed growers next. Here's an issue that is very dear to my heart, because in southern Manitoba we have hard feelings, strong feelings, on the issue of seed coming into and going out of Canada.
We now see Americans demanding more and more varieties that they can process.
How are you addressing that? Are you looking at that issue? The waxy hulless barley is one I would like to mention as an example.
Mr. Robertson: I think you're perfectly right. The market is segmenting and increasing.
Research in both the private and public sectors is beginning to address this. It supports our position in that we feel the only way you can deliver a discrete, authentic end-product is to start with one.
There's a system in place that will deliver this nicely through the system. The grain handling side of it, through identity preservation, will deliver those products into the marketplace.
But it has to start somewhere. If it isn't begun with pure elements, whatever the qualities you're talking about - waxy barley or specialty oilseeds or anything else - and then if it's not maintained intact, if there's contamination throughout the process, then you're not going to end up where you want to.
That reinforces what we're saying about the integrity of the seed system.
Mr. Hoeppner: To develop that kind of a mechanism.
Mr. Robertson: The mechanisms are in place.
Mr. Hoeppner: Is it too costly for you to accept that that cost has to be passed on in some way?
Mr. Robertson: The costs should be passed on. All of you are familiar with how farming works. Our problem is that if the costs get too high, if there's too much of a price gap between that and common grain, then obviously people are tempted to plant the inexpensive material. That destroys the integrity of the process right there.
Mr. Hoeppner: I've had some experience with the grain handlers or the inspection people at Thunder Bay. Are you under the same impression as they are, that we have too many cooks and not enough bottle washers in the system and that is costing us too much? They are recommending very strongly that the bureaucracy should be sized down and the number of white-coat people increased. Would you comment on that?
.0950
Mr. Robertson: That is happening. I can't comment on the grain handling particularly, but certainly in the privatization of services we feel very much like the Canadian cattlemen and are prepared and are in the process of developing a privatized, accredited system to deliver some of the services. So, yes, there will be fewer public employees involved in that and more industry responsibility.
Mr. Hoeppner: Has anybody from your organization done a cost study on the difference between total privatization and, let us say, a 50-50 government-private system. I can see some hazard in a joint system. Have you done any studies on going totally private?
Mr. Robertson: No, we haven't. What we've been trying to do is cope with the movement from a supported system to a partially supported or unsupported system. So we haven't taken it the full way.
Mr. Hoeppner: Getting back to the CFA - the Canadian Federation of Agriculture - what advice can you give us as a committee? What should we really hammer at to bring costs down? You have probably looked at the system more directly than we as the agriculture committee have, and as an opposition member, when I see something critical I hammer the government. We always have to be easy on each other so we can live with each other and not get into warring factions but rather do something productive.
So can you give me, as an opposition member, some good advice as to how we should approach the bureaucracy and the government, in order to downsize it and to make it more efficient?
Mr. Friesen: I believe I included an answer in part in my closing comments earlier. One of the things we feel is very important is that we have true consultation meetings as opposed to meetings for information disbursal. I believe that is very important.
Secondly, aside from the recommendations I had, I think it's important that the department get away from the obsession of trying to raise a predetermined target of money and help the industry in true cost saving. By that I mean if there are services the industry deems no longer necessary, don't try to make up for that lack of user fees by piling them on top of the more essential services.
Those would be two areas, aside from the recommendations I gave earlier.
Mr. Hoeppner: We've had quite a bit of feedback from the organic growers. They were self-regulating themselves up until now. Now we see government is trying to get into the regulations on a partial basis. Is this one of our problems, that we are not self-regulated enough and depend on government too much?
Mr. Whitney: I think on behalf of the horticultural industry I'd like to refrain from answering the question directly and come back to it. I think there's an important note I'd like to put forward here. If we look at the regulatory scheme that's been developed over the last 60 years with respect to the marketing of fresh fruits and vegetables - and I'll talk about the quality programs we have - it has essentially been the glue that has held the industry together, and working cooperatively, whether it's the potato industry from P.E.I., Manitoba, Alberta or B.C., or the apple industry, etc.
This regulatory network that has been put in place has largely been industry-driven. They are the quality standards, the packaging requirements, etc., that industry has said they wanted to subscribe to in order to have a quality image in the marketplace. I think the growth in our sales, both domestically and in the export market, is testimony in part to the program that's currently there.
I think when it comes down to the discussion surrounding organic, the organic growers face the same dilemma as anyone faces. When you start to put a system into place, it's a matter of who's the keeper of the gate. Unless you have some kind of standards that are put in place and that can be truly national in scope, you end up with something that's so piecemeal it means nothing.
I think, yes, there is the possibility of doing something without complete government delivery. However, I think it's very important to have that objective third-party involvement. Currently, we're looking, as well as the seed growers and the livestock and cattle industry, at taking our quality assurance program and putting it into a different delivery form, which could essentially be something where it's a privatized corporation running under an accreditation from the department.
.0955
But we're just at the beginning of that. We negotiated - and I use that word loosely - a two-year schedule of phased-in increases with the department to maintain our fresh fruit and vegetable program. That's our inspection, licensing and arbitration, which I said a minute ago is the glue. Within that time we want to take a look at what the options are for creating a new vehicle in order to deliver the services into the future.
Having said that, we recognize that there are limitations relative to the government continuing to provide the services. There can be some form of privatization that takes place. The only thing is, somewhere along the line we need that third party, an objective third party, that for many reasons is credible, not only domestically but with our international trading partners.
Mr. Hoeppner: Thank you. I appreciate those last comments. I think you're going in the right direction.
The Chairman: Thank you, Mr. Hoeppner.
Mr. Easter.
Mr. Easter (Malpeque): Welcome, gentlemen and ladies.
Ben, on your chart, in terms of the GATT green and other factors, I think that's an important observation in terms of our being competitive. I'm wondering if you have any analysis - you don't have to have it with you at the moment - that we could get that would show where we are vis-à-vis our competing trade partners internationally.
If I look at the WTO, we had certain obligations. I think we've far surpassed our obligations, but if you look at the U.S. farm bill and what's happening in Europe, they are maintaining their levels at almost maximum relative to GATT, or to WTO, and that will put us at a competitive disadvantage and put the rural sector in difficulty. I'm wondering if you have any analysis that you can table with us.
Mr. Thorlakson: Mr. Easter, the one thing I should mention that I didn't earlier is that this chart is my own assessment as far as what was GATT green or GATT amber for 1994-95. I don't have a current breakdown on what the expenditures are for this year or for the projection. I'm just assuming, and perhaps this is an invalid assumption, that because you've asked for across-the-board constant reductions the ratios would stay relatively constant.
In regard to my concern about the greenness or the hues of the various programs, I have a letter here from the minister, Mr. Goodale, dated February 9, 1996:
- At the moment I cannot guarantee that the net income stabilization account will not be subject to
trade action.
Without getting into all the philosophical discussions on income stabilization, what I'm saying is if we establish priorities - in life we have priorities of air, water, food, shelter, clothing, and somewhere down the line we're into the VCRs and televisions. I'm saying this is the air and water. This is the VCRs, and I know sooner or later you will cut these programs. You want to pull them back. The concern is that you don't make rapid adjustments and leave people out in the cold. They're tough decisions and you folks will tackle these, but I just see those as being the least hurt in the system by reducing them.
.1000
We were asked to appear here. I think we were given notice a week ago, and it's been kind of a busy week. So to answer your question, no, I don't have those analyses. I'm sorry.
Mr. Easter: I'm not critical of the fact that you don't have them, Ben, but I think you've hit on a very important issue. I think it's an issue a lot of us have been thinking about. The fact of the matter is that as an agriculture committee, or for some of us as producers ourselves, I think we have to ensure that the nation, Canada, is willing to back up its producers to the same advantage as the U.S. and the Europeans are willing to back up their producers. That may be an argument we have to have within the government.
Mr. Chairman, I think this is an important issue. I don't expect the witnesses to have all the analyses done, but I would ask that you, as chair, or the parliamentary secretary ask the department to prepare an analysis along this basis. When they come before the committee - certainly not the minister tonight - they should come with such an analysis and table it so that we can see how we are doing vis-à-vis our competitiveness with other countries in terms of these areas outlined. So I make that request.
The other point I wanted to raise was that I think you have, in terms of cost recovery, tabled a very serious concern. I'm getting a lot of complaints from my producers in the potato industry and the horticulture industry. You've touched on cost recovery and you put your hand on the nub of a problem, but I guess the big question is how we deal with it from here.
I agree with you 100%. One cost recovery in and of itself is not a problem. But when you have the multiplier effect, in agriculture alone there are potentially 42. As you mentioned, you have the coast guard, dredging, ice-breaking. We're faced at home with serious problems in terms of our ports because of cost recovery there, and we're faced with it in other departments as well. That compounding effect could be very serious, and then you tell me that you had a one-sided exercise with the department.
I just want to quote a couple of things, and you can tell me if they are correct or incorrect. If there is a problem, let's address it and do so up front.
In the estimates, the department basically says: ``Industry is working with government to select a new business arrangement''. Secondly, they say that ``The approach of this activity'' - meaning the business alignment activity - ``is to negotiate cost-sharing arrangements with each of the stakeholders''. Thirdly, they say: ``The business alignment plan is continuing to use an extensive consultative process with clients to determine their service needs''.
Are you telling me that what they're saying in these estimates as a department is not correct?
The Chairman: Mr. Dempster.
Mr. Dempster: I feel a little bit like Saddam Hussein felt during Desert Storm, relative to the term ``consultation''. I won't comment specifically on that.
I think relative to an element of cost recovery is a useful exercise to determine true need for a program. So from that perspective, an element of cost recovery is a useful exercise on which to focus that discussion.
I couldn't agree with you more relative to the cumulative effect that is being experienced in the agrifood industry. It's a combination of processes that is going to add cost to the industry.
I read a recent article in the Canadian Grocer - this is from the retail food stores - which said that in 1982, 13.2% of disposable income went to the purchase of food. I think that recently tumbled to under 10%. Therein, you read some of the concerns related to industry's ability to pay for all of these increased costs, certainly within the domestic sector.
One of the frustrations our group has had right from day one on this whole discussion, whether it's a GATT inspection or anything else, is the fact that the approach to the discussions on the business alignment plan has, from our perspective, been a fiscal regulatory debate.
.1005
I know that debate is needed. However, the issues we have consistently attempted to raise at a much higher level have been that this is not just about regulations, this is not just about fiscal issues, although they're both important. It's about marketing. It's about policy and structure affecting the industry in Canada. It's about trade relationships.
Our group, at least, has attempted to raise this issue in these discussions in terms of the cost recovery, saying whoa, user fees, sure, but what are we doing to ourselves? People have said, well, our trading partners are paying certain inspection fees. That's fine. You can look outside the country and say somebody else is paying something. But this is Canada. You have to look at the true conditions of what is happening in the marketplace.
Relative to exports, we know there's a commitment to move to $20 billion in agrifood exports. I'm sure all the industries are participating in that. The concern many in our sector have had right from day one has been if we're moving to that, with very little margins on some commodities, and we're adding costs into the system, what is our real ability to achieve that $20 billion export?
One must also recognize that if this were only an internal discussion in Canada, where you can say, well, just get the heck out of it, through deregulation, that's one kind of cost avoidance. I'm not saying it's always the best alternative, but it's an option. In many cases many of the regulations the horticultural industry is facing, whether it's in plant health or in quality inspection, are not a Canadian requirement. So whether we like it or not, we're in the game.
I didn't answer your question specifically, but I think we need to have that type of debate within the whole Agrifood departmental structure. This is not just a fiscal issue, it's not just a regulatory issue, it's a broader issue in Canadian agrifood policy. I've been waiting some time to raise that issue in another forum, and I'm pleased to have the opportunity to do that.
Some other people may wish to comment.
The Chairman: Mr. Friesen.
Mr. Friesen: Mr. Chairman, we do have some serious concerns, as I outlined before, in the competitiveness area as well as with the real motives behind the cost recovery. But directly to your question on consultation, Danny is right, ``consultation'' means different things to different people.
Mr. Hoeppner asked what can be done to improve the situation. My comment is simply that if there is a real will on the part of the department and the government to consult rather than just to distribute information, then there should be no problem with the recommendations I gave earlier, those being that we need from Treasury Board an annual accounting of fees being established as they affect the agrifood industry. We need committees within each department, with industry participation, to review the fees. Lastly, we need a list of prospective changes and charges; and that list may be used for real negotation and real consultation. If that consultation commitment is there, we feel there should be no problem with those recommendations.
The Chairman: Mr. Whitney, did you wish to comment?
Mr. Whitney: It's okay.
The Chairman: Mr. Thorlakson, did you wish to comment, briefly?
Mr. Thorlakson: Very briefly.
Mr. Easter, the interaction I had with the committee was strictly in the area of the Animal and Plant Health Directorate. But my concern was the fact that we're taking cuts there when they should have been focusing more of the cuts elsewhere. We didn't feel it was appropriate to be taking this across-the-board 10%. We thought that didn't identify the priorities. That didn't acknowledge that certain areas of our agriculture department are more critical than others. That was the point I was trying to get across.
My concern is that we're placing in jeopardy our ability to maintain the integrity of our animal health services. I think we will have a real problem two years down the road if we are faced with some of the challenges we've been faced with in the last year.
The Chairman: Thank you very much.
Now we're going to go with one round with the official opposition. Again, who's going to go? Mr. Landry is going to go first.
An hon. member: No, no.
An hon. member: Mr. Chrétien.
The Chairman: Well, you guys figure it out.
.1010
[Translation]
Mr. Chrétien (Frontenac): I have two questions. The first one is for the Canadian Horticulture Council and the second, for Mr. Caldwell of the Canadian Cattlemen's Association.
Regarding horticulture, the department is currently consulting with various industry stakeholders with a view to merging four existing acts and a program into a single new act, the Agricultural Products Marketing Act.
These are the four acts: the Advance Payments for Crops Act, the Prairie Grain Advance Payments Act, the Agricultural Products Co-operatives Marketing Act and the Agricultural Products Board Act. The Cash Flow Enhancement Program would be combined with the acts I have just listed. These four acts and the program would be merged into the Agricultural Products Marketing Act.
This act, the APMA, would have three components. The advance payment program would contain the current provisions. There would also be a community pasture program and a government procurement program.
I would like your views on the government intentions. Is it a good thing or are we being stabbed in the back?
[English]
The Chairman: Mr. Whitney.
Mr. Whitney: Mr. Chairman, in response to the honourable member's question, I think the attempt by the government to fuse all of these various acts under one umbrella, under one piece of legislation, is something most of our members don't have any problems with.
However, in practice what was happening as we saw it come to fruition here just prior to the annual meeting of the Canadian Federation of Agriculture and the Canadian Horticultural Council. The proposed approach would have distinctly changed the eligibility of certain types of collective marketing to access program dollars as they have in the past.
For instance, in the past a lot of our cooperatives such as the B.C. fruit growers would have used the advanced payments for crops as a mechanism whereby they could access interest-free loans to cover off apples being put into storage, and of course it assisted in extending the marketing season for that crop. It was a vehicle they preferred to use rather than using the Agricultural Products Cooperative Marketing Act, through which, of course, you could solicit a price guarantee based on a previous historical average.
What happened with respect to the proposed approach where the thought process was to put these all under one roof is that you have would restricted the eligibility of people who are marketing through pooling, which a lot of the co-ops do. They would have only been eligible to get a guarantee under what was formerly the cooperative marketing act component. People who were marketing on their own would be eligible to access interest-free advances under what used to be the advance payments for crops.
This caused quite a problem in our own community. It was a real concern. The preference by most of the groups out there on the collective, cooperative marketing side of the equation was to use the advance payments component. That was the preferred option. It's more user-friendly. It provides an opportunity to do things in an easier fashion and, quite frankly, it works.
We've had consultations with the department over the last couple of weeks. In fact, right now there's a draft circulating across the country relative to addressing that specific problem, so we're hopeful that it will be resolved. If it is resolved, then I would say that for the majority of the rest of the proposed changes we don't have a particular problem.
.1015
[Translation]
Mr. Chrétien: Mr. Caldwell, you talked about a disease control program in your presentation. As you know, there is a lot of talk in the news worldwide about disease control. It is to Canada's credit that only one case of mad cow disease has been officially diagnosed in Canada, and that was in December 1993.
What concerns me more this morning, is learning that the disease could be contracted through the food chain from scrapian sheep. As you know, dozens and dozens of cases of flocks infected with scrapie have been diagnosed over the past ten years.
On the international news network this morning, I heard that this disease could easily be contracted by cattle grazing in pastures where sheep had grazed a few years earlier. Talking about slaughtering a third, half or a country's entire herd of cattle is like having one foot in the grave. You can easily imagine how difficult it would be to reconstitute a herd, and so on.
I'd like to know your views on that. Do you believe that the concerns expressed over scrapie are unreasonable or serious?
[English]
The Chairman: I'm going to ask Mr. Thorlakson to comment on that and clear up some things for the record. We don't want to leave a misunderstanding of the differences between what is going on in the United Kingdom right now and the reality of the situation of the Canadian herd and the Canadian beef industry.
I know, Mr. Thorlakson, that in a way it's not pertaining to cost recovery. But, so you can clear it up for the record, since you and the vice-president of the Canadian Cattlemen's Association are here, I will give you two or three minutes to put forth your views on the situation.
Mr. Thorlakson: For the record, BSE is a foreign and exotic disease that does not exist in Canada. It is a devastating disease in Great Britain. It is a relatively new disease, having first been observed in 1985. To date they have had in excess of 160,000 head of cattle diagnosed in Great Britain. So we've established that it is a very serious disease in Great Britain, and we've all seen the repercussions of that disease.
Let's come back to Canada. In December of 1993 we had one British imported cow diagnosed with BSE - one animal. We're very proud of the action the Animal and Plant Health Directorate took. They quarantined that entire herd. They identified all animals that had come to Canada from Great Britain between 1982 and 1990. All these animals - I believe 363 in total - were seized, killed, and incinerated.
.1020
It's true that there is a link between mad cow disease and sheep infected with scrapie. I think the way the translation came through, that was in reverse. In Great Britain it's been identified. The prevailing theory is that sheep diseased with scrapie were rendered and that the bonemeal and meatmeal from those rendered sheep, because of a process in which the infectious agent was not deactivated, brought on the disease of BSE in the cattle industry.
We have a scrapie control program in Canada. Renderers voluntarily do not pick up sheep. Therefore we don't have the same situation. We don't have the opportunity for infection in Canada. We have never, ever had a BSE animal. The only animal we've had was an imported animal. We've never had a domestic case of BSE, nor do I expect it, with the control measures we have in place.
Is that an adequate explanation, Mr. Chairman?
The Chairman: Thank you very much. I think it is. I appreciate that, Mr. Thorlakson.
Mr. Breitkreuz.
Mr. Breitkreuz (Yellowhead): Thank you, Mr. Chairman, gentlemen, and delegates from the two associations, the CFA and the Canadian Cattlemen's Association. I commend the delegates for their presentations.
Ben, you mentioned at the beginning how important consumer confidence is and how important it is to maintain it for a viable industry to continue. You mentioned the current situation in Britain and cited the example of the diseased bison herd right here in our country, in Wood Buffalo National Park.
Given the size and the importance of the beef industry to Alberta and indeed to Canada, what is the CCA position - or perhaps even, if you put on your hat as the Alberta representative, the position of the Alberta Cattle Commission - on the diseased herd in Wood Buffalo Park? Maybe you could give us a percentage of that herd as against the total population of bison in the country, with the backdrop that I understand just a year or two ago the government committed $5 million - and I don't know over what span that was - to maintain that herd in Wood Buffalo National Park.
Mr. Thorlakson: On the issue of Wood Buffalo National Park, I'd like to place on the record that this is not a problem that was generated by this government. It was a previous administration. So this is not in any way a partisan statement.
The number of buffalo in that park relative to total numbers in Canada? I'd just be guessing, but I would think it's 60%, 50%. I'm not sure. There are 2,000 head there.
We approach this on a scientific basis, and the scientific basis would say eradicate, depopulate, restock. If the aboriginal people in the area....
I was asked to attend a meeting with a band chief from the Northwest Territories. They were very keen on addressing this problem, because they had very recently got into the bison-ranching business and they were concerned about the integrity of the health status. It was very important. But there are a number of bands there.
I believe the people who must be turned around on this issue are the Parks Canada people. Our position is that we look at the science, which says depopulate and restock. It sounds dangerously like common sense to me.
.1025
The Chairman: One more question, Mr. Breitkreuz.
Mr. Breitkreuz: What ramifications would there be for the Alberta beef industry if there was an outbreak or if that disease were to spread to domestic animals?
Mr. Thorlakson: It would be absolutely devastating. The concern I have is with the erosion we have in the infrastructure of the health of animals. I don't think we're in a position to effectively monitor it if we continue to chip away. And in the past year, we have of course had the added burden of the business alignment program that has been pulling off resources, so there's been a paralysis by analysis on that side. They're just short of people.
Mr. Caldwell: Could I just make a supplementary comment?
Canada is considered brucellosis and TB free, but we're not really free as long as that herd is there. And the other point is that the herd is eventually going to die. The numbers are going to decrease. Eventually they will all be gone through natural causes because of the disease. The herd is going to disappear eventually. All we're saying is that we should speed the process up rather than have this situation sitting there.
Mr. Breitkreuz: Mr. Chairman, I was going to make one request. If at all possible, could you set aside some time to examine this issue a little more closely?
The Chairman: We'll make note of your request, Mr. Breitkreuz.
Mr. Pickard.
Mr. Pickard (Essex - Kent): Gentlemen, I very much appreciate you coming to represent the industries today. Without question, I think the number one concern in our food production in this country is safety first. I'm really pleased that the Cattlemen's Association has put that forward and has clarified it, because I think it relates not only to our industries and their number one goal of food safety and quality for Canadians. I also think it's a similar concern right across the board for consumers, government and industry. We all agree that it's number one, and there's no question that we have gone a long way out of the way to preserve that protection of food for Canadians and for anyone we sell to. That's why we are the nation of export and the nation that is accepted around the world as a provider of high-quality product anywhere we go.
This brings us back a bit into the question that came forward with the Cattlemen's Association, that being cost recovery and grading - at least I think that was the question that was brought up there.
It seems to me that at this point in time, the only area the Canadian government deals with in grading is in the beef industry. We pick up approximately one-third of the cost of doing that. You're suggesting internal grading would be one area to go. Does that also bring with it the idea that the industry would totally pick up the grading cost without support from government?
I think I would also like to deal with the trade and external question. In the last two years we've increased our trade to $17.6 billion. That is an increase of between $3 billion and $4 billion over the last couple of years, which indicates very strongly that we are competitive. We are competitive with other countries of the world and we have the goal of increasing that. As I understand it, the negotiations, discussions and consultations with industry are what have led us there, so I'm a little bit concerned that I'm hearing that it has actually been a one-way communication, that there has not been consultation, that there has not been open discussion.
That brings me to Mr. Easter's point. I feel we have been in the process of working with industry along the way. We have had many opportunities to speak, so if you feel the Canadian government hasn't been listening, maybe you could be specific about what you were talking about in cost recovery. We know cost recovery is inevitable in the programs that we have at this point in time. What specific things have you recommended to which the government has not reacted? We can then take it along from the industry's recommendations in that area.
.1030
Research is another area that was brought forward. Right now the Canadian government is working well in research, and we're doing it in cooperation with industry on a matching-funds basis. Those matching funds, along with government investments, bring our research dollar in this country as high as it has been in the past, and it will go higher. We're not reducing the number of research dollars; what is happening, though, is that the research is being targeted to industry direction with matching funds. Industry is having a lot more say in where a lot of that research is moving, and, from my perspective, industry is working with the government in developing strategies that are more effective to the industry.
The Chairman: Mr. Pickard, you're running out of your own time. If you want a response, then you'd better wind up soon.
Mr. Pickard: I wanted to get that on the record.
The Chairman: Do you want the answer on the record?
Mr. Pickard: We will try to get the answer on the record at this point.
Mr. Thorlakson: Responding very quickly to Mr. Pickard's question about cattle grading, I'm sure that you will be pleased to hear that, effective on April 1 of this year, in five days, the Canadian cattle industry will be assuming not 100%, but very, very close to that.... The graders will leave the employ of the Government of Canada and come into the employ of the Canadian Beef Grading Agency. We've been very pleased with the interaction we've had with government graders, and virtually all the graders who will be under the new beef grading agency are former employees of the Government of Canada.
This is a real success story of the business alignment plan. We will still retain a grade standards officer, but we've had an excellent rapport, an excellent working relationship with Agriculture Canada.
The Chairman: I have a point of clarification, because sometimes the general public are not aware of the difference between beef graders and beef inspectors. Beef graders are exactly what they are - it is the grade of the beef - and then there are those who inspect the beef for health and safety reasons.
There is a difference, and you're referring to the beef graders, Mr. Thorlakson.
Mr. Thorlakson: That's correct.
Mr. Whitney: On the consultation side of this equation, as Danny expressed earlier there is a little bit of frustration. What is the definition of ``consultation''?
Without getting into that to a great degree, we need to go back to about the mid-eighties, when cost recovery, round one, started. I remember a letter in about 1984 from the then Deputy Minister of Agriculture, Mr. Connell, informing people that we were embarking together upon a series of negotiations relative to picking up the costs for certain services. At that time there was a defined approach relative to public versus private good - Treasury Board guidelines. In fact, it was deemed that 66 2/3% of the entire cost of the fresh fruit and vegetable program was a private good, but 33 1/3% was a public good.
According to my understanding, we've had repeated references to the public good as we've evolved with respect to cost recovery, round two; but I'm not sure, from all of the literature I've seen, that it's any longer a factor in the delivery of some of these programs, whether they be quality assurance or health and safety related.
I stand to be corrected, but the understanding I have is that at least the programs we've talking to the department about have certain costs, and those costs have to be recovered and/or reduced and/or avoided. Those are the three principles under which we have been having the discussions. I guess I would use that term, discussion, rather than negotiation or consultation.
.1035
I think the discussions have been as open as they can be, in some respects. We have attempted to piece together across the programs impacting on the horticulture side of things, which are fresh fruit and vegetable inspection, processed products, seed potato regulations, plant health regulations, pesticide regulations, what might be the similarities in approach from a program standpoint. It's been very difficult, because as you know, within the branch itself things get compartmentalized down to the point where each program is managed slightly differently, and therefore it's sometimes hard even for the officials to pull it together.
Having said that, when I come back to the issue that I think was raised earlier by Mr. Easter, there is a compounding effect here. Part of the frustration relative to the discussions, the consultations, the negotiations, is that an agenda and a timeframe have been established by government. That's understandable. The thing is that increasingly it's very difficult for industry to cope with that timeframe and to respond in a fashion which permits it the time to evaluate what the impact is going to be.
I think that's where we're finding a tremendous problem. In fact, of late we have sent out from our offices information pertaining to the second-round discussions that are beginning on plant health, seed potatoes, etc. I've had virtually no response directly back to us.
I know members around this table have been contacted individually. I know the government has been approached from the branch side of things, individually -
The Chairman: A clarification, Mr. Whitney. When you say you have ``sent out''...you have sent out to whom?
Mr. Whitney: We have sent out to our constituency, which would be the fruit and vegetable industry across Canada, including the ornamental industry, because of course they are covered off by the plant health requirements as well.
The Chairman: Thank you.
Mr. Whitney: So there has been, in some cases, very little response. In other cases there have been individualized responses. But it's hard to pull things together at a point when it's plant health, seed potatoes, fresh fruit, and vegetable inspection. As I said, the plethora of programs with which we're dealing seem to boil back down to the same constituents, which is understandable. It's really a question of how you manage this in a business-like fashion, recognizing particular targets have to be met within certain timeframes by government. It's making it extremely difficult.
I guess the big concern we have is that things may end up falling off the edge of the table and we'll lose programs before we get a chance even to have an opportunity to salvage them.
Mr. Pickard: Not the process but the speed is the problem there, primarily.
Mr. Whitney: I must say the process is also one that is very frustrating, because I don't believe there are the time or the resources internally to provide us the level of detail that some of us have asked for repeatedly over the last couple of years.
The Chairman: Mr. Dempster.
Mr. Dempster: I wouldn't want to leave anybody with the impression that the officials who go to this meeting aren't listening. They're listening. The message we have attempted to raise relative to the policy questions, the trade implications, and things like that, they are not set up to hear. Those issues have to be discussed in another venue.
So those people are out to negotiate and discuss. The issues many of this group have tried to raise relative to GATT green, relative to what this does to our trade implications, what this does to our cost competitiveness...that's not part of those officials' mandate.
That has been the singularly most frustrating issue for this sector: who is going to deal with that issue. We are prepared to talk, but we would like someone to hear.
The Chairman: Mr. Landry.
[Translation]
Mr. Landry (Lotbinière): My three questions are for Mr. Caldwell.
First of all, Canada exports 44% of its beef. Apart from the United States, who are our clients?
Secondly, is the price of Canadian beef sold to our foreign clients lower than national prices?
Thirdly, how do you explain that New Zealand sells products that are in great demand such as eye of the round and filet mignon in Canada, at prices that are clearly lower than ours?
.1040
[English]
Mr. Thorlakson: The first question was what's the disposition of our beef exports. I believe approximately 96% of our exports go to the U.S.
As for the question of price, let me give you an example of how the price discovery system works. I'm a cattle feeder close to Calgary. We feed 40,000 head of cattle. We offer cattle every week. I have bids from local packers, generally from three within Alberta. I also solicit bids from three American packers. I have chosen to sell to the highest bidder. I think I'll continue that.
The beef from New Zealand is different from the Canadian product. The product I produce is a grain-finished animal. The cattle come into my feedlot and we feed them grain for a period of 80 to 160 days. This gives us a product that is in demand in North America and that has a certain degree of marbling or fat within the steak.
The product from New Zealand is certainly a very wholesome product, but it is from animals that remain on pasture until they're slaughtered, so it's a slightly different product. I'm sure there are filets from this grass-fattened beef. Generally the animals are older at the time of slaughter and are considerably leaner as well. I'm sure there are people who may prefer this beef -
A voice: We just don't know who they are.
Mr. Thorklason: - we just don't know who they are. I'm not about to begin to rhapsodize over the merits of New Zealand beef.
Mr. Caldwell: Could I make a comment, Mr. Chrétien? Just so the record is kept straight, I'm Mr. Caldwell. This is Mr. Thorlakson. I don't want to be responsible for what one of my elected people has to say.
Some hon. members: Oh, oh!
The Chairman: Yes, but you have to be responsible for what you say.
Mr. Caldwell: He doesn't want to be responsible for what I say.
It's rather interesting that the Minister of Agriculture initiated a study just last year on the substitutability of Canadian beef with offshore beef, which is basically from Australia and New Zealand. That report has now been completed. That whole study brought all sides of the industry together. Lo and behold, we found that the processors can use some Canadian product that maybe they weren't using before. The figures show that 113,000 tonnes of Australian and New Zealand beef were imported in 1994. That dropped to about 83,000 last year. We expect that figure will be probably reduced even further this year.
So there are more processors using Canadian product than there have been in the past, partly due, I would assume, to the price of the Canadian product being much lower than it has been in previous years. It's a good sign that we're moving in that direction and that we're able to substitute some of those products.
The Chairman: Thank you very much, Mr. Caldwell. Mr. Reed.
Mr. Reed (Halton - Peel): Thank you, Mr. Chairman. For the record, I agree with Mr. Breitkreuz regarding taking another look at this issue of the Wood Buffalo National Park and the disease problem, which was brought forward here this morning.
I'm one of those who was first apprised of this problem well before my election to the House. Seeing only part of the story, not the whole story.... I think it deserves to be examined in detail. Even some of the comments made this morning raise issues for debate. I think that's good and we'll examine it.
.1045
Mr. Thorlakson, sir, you said you had some contact with one Indian band that had expressed concern about this herd because that band is in buffalo farming themselves. Some of the communication I remember was that part of the basis for the decision to maintain the herd came from pressure from Indian bands that didn't want the herd done away with. Can you tell me, just so we get an idea, whether you know of very many bands that are raising buffalo at present and that might carry similar concerns?
Mr. Thorlakson: I want to establish immediately that I know very little about the internal relationship between the.... I believe there are ten different bands in that area, and they do not speak with one voice.
I had the opportunity to meet with representatives of the Northwest Territories Canadian Bison Association and band chief from Fort Resolution. I believe there is one other band that has a strong interest, or currently has a bison ranch. I think it's a logical development for them.
The position of the Canadian Cattlemen's Association is that we have no desire to run cattle in the park or up there. We just want to ensure that whatever happens doesn't endanger the health status of the cattle of Alberta. We applaud their efforts to initiate bison ranching. We see that it is in their self-interest to address the question of tuberculosis and brucellosis in Wood Buffalo National Park. But I think it will be a political situation where the members on all sides of the House direct their pressures wherever it's appropriate to try to rectify this situation.
Mr. Reed: Just help me on this a little. Diseases of this kind obviously were in the herds over thousands of years in a diffuse state, I would have to imagine, unless somehow the Europeans or something brought them over from Europe. When a herd is in a wild state like that, it's obvious they don't totally self-destruct, ever; the disease is there but it doesn't necessarily multiply. I've raised enough pigs in my history to know the more you confine them, the more the disease potential goes up, in an exponential curve.
Mr. Thorlakson: This is the really fascinating thing about the park's initiative to retain this natural reservoir of infection. In fact it wasn't natural. Those bison were bought in the United States, maintained at Wainright in Alberta, and put into that area. There were some foci of infection for brucellosis and I believe tuberculosis. But it was an isolated herd and it grew.
So I have difficulty following the rationale. What man giveth, man taketh away. I think we could address the situation without disturbing the delicate balance of nature, particularly if we are prepared to repopulate with healthy animals.
Mr. Caldwell: Chris Mills is our consultative person on this particular committee. He has sat in on talks with the Indian bands. In the interest of time, it might better if he corresponded with you on where we are and where we can go from there.
.1050
The Chairman: I was just going to say that I'm aware we've gone off on a tangent. This meeting was to be a talk about cost recovery, but we've probably spent equal time talking about a bison herd. It's not that it's not important and of interest to us, but I think that in the nine remaining minutes we have, our comments should be more along the line of concern about the cost recovery issue. And if the Cattlemen's Association wishes to send a package of information to the clerk on this other issue, we certainly will circulate it to the members of the committee.
Mr. Reed: Thank you, Mr. Chairman. I'll relinquish my time.
I just want to say that your comments are very valuable. Thank you.
The Chairman: Mr. Calder.
Mr. Calder (Wellington - Grey - Dufferin - Simcoe): Thank you very much,Mr. Chairman. I'll stick right with cost recovery. It will be concise and right to the point too.
We in the industry right now - my particular industry is poultry - have found that there is a lot of infighting within each industry. That is directly related to the fact that each segment of each industry looks at the fact it is going to have to share some of the cost as the government gets out because the taxpayer has basically told us to stay out of his tax pocket and to start charging him up front where he can see it. That's the issue.
I think what we're talking about here with cost recovery breaks down into three questions - the how, the who, and the how much. The how: After the smoke has cleared, how is this system going to be set-up and working? The who is the parts of the system that are going to take and pay the user fees. Then, of course, there is the how much: how much are they going to pay?
What I'm asking for is sort of a follow-up on what Wayne was saying on the impact study. In the different segments of the industry that are present here today, have you done internal impact studies on proposals we have put forward in terms of how this cost recovery system is going to work? Have you done impact studies on how it's going to affect your segment of the industry? I'll open it up to anybody.
The Chairman: Mr. Robertson.
Mr. Robertson: Just let me take a crack at this one by saying a few brief introductory remarks.
On the process to date, you've talked about frustration and you've talked about process and all this sort of thing. The process at this point in time is too money-driven. Danny's perfectly right. People listen to this and they understand it. Lots of them have industry experience, but they ask where the money is.
The overall impact of these interrelated events is not being looked at anywhere, at least from our perspective. You could ask about who is looking after the interests of Canadian agriculture, generally speaking or totally speaking, and clearly the answer is no one. As you say, the process is divisive not only within the poultry industry, but among producer groups, because it's just a matter of who is going to get gored least or most. This is not constructive.
The impact study question is a very interesting one. It's pretty hard to measure this in advance, as you well know. In some industries it may be easier. You might be able to add 5¢ to the price of poultry and then predict that something will happen. But the impact studies the federal government has done in Canada have just straight-lined all the projections forward. They have said that if we charge this much, it will yield this much income. The difficulty with that argument is that people are voting with their feet. They're changing how they're doing business - things are getting bulked up together because what they're now being charged for is more expensive - or they're taking alternate routes.
The others should have time to speak to this, but in our particular case there is no mechanism by which to pass this on. So it'll be lived without, to the detriment, we feel, of the downstream industries - the grain and oil seed industry, and export as well as domestic industries - and there will be a price to pay.
So while we're caught up in health and safety, which nobody is trivializing or arguing, there are also economic risks that need to be looked at. As someone said earlier, the target for $20 billion in exports is in fact being frustrated to some extent by the harassing or humbling of the very people who are going to put it together.
.1055
Mr. Easter, on my tombstone will be the words ``Consultation even until death''. There is no lack of consultation. As a matter of fact, it's an unfair fight, because some of these are small organizations. We're not policy research groups or anything else that is similar. The department could generate a new and bright and energetic academic SWAT team every week, as they did in 1985, and it just wears the hell right out of you.
We're concerned that somebody should stand back and take a look at the whole picture and say ``What in fact is going on here? What is this going to do to the country? Can we afford it? Within the components, how are these things working for or against each other?'' Maybe that's a bit strong, but it sums up some of the discussions we've had this morning, and certainly some we've had in the last year and a half.
Mr. Friesen: I can't add a lot to what was just said. Fundamentally, we're back to what I mentioned before: what are we dealing with, what are the final objectives, and what is going to be done if the industry deems that certain services aren't needed any more. It's difficult for us to do impact analysis if we deem that certain services aren't needed, yet we have no idea of whether more cost recovery will be piled onto other services. Also, the international competitive scene is a tough row to hoe.
I'll go right back to the recommendations from before. We need to know what we're dealing with, and once we know that we need sufficient input and some good, no-holds-barred negotiation.
Mr. Dempster: If nothing else, this has been useful for this committee to get a sense of where the industry is coming from across many sectors. Perhaps it will raise the profile of the issue so we shall take a serious look at it in terms of the marketing, the policy - all those wonderful issues.
It's been very hard to do an economic assessment when the sidewalk keeps moving. We get into the cumulative effects in the horticultural sector, and you start to realize the challenges in trying to do an economic impact assessment.
Unfortunately, in some cases you're looking at the resource component of the national groups to do the impact analysis and the multitude of consultations that take place on a variety of issues.
From the horticultural sector, the industry's focus has consistently, over its 70-odd years, been on the issue of research with proper regulation. I call that the front end of the system. We've had these discussions with our sector consistently over the last five to ten years as they relate to cost and where our industry sees the regulatory field moving to.
If I may use an agricultural analogy, if one looks at those issues as a bale of hay, that's what you put in the front end of the cow and you get effective feed conversion. It sometimes concerns us when we spend more time discussing how we're going to put twelve bales of hay up the rear end of the cow.
If I may make an analogy, our focus, as it relates to this whole regulatory environment, whether we compete domestically or in the export market, is that we are toying with the bale of hay at the front end of the cow. We do not want to see our resources tapped so that we will spend more time on the twelve bales of hay that we, as a country, can't afford.
The Chairman: Mr. Thorlakson, I don't know if you want to comment on which end of the cow you put the hay into. I saw the smile on your face. You've probably fed more than Mr. Dempster has.
Mr. Thorlakson: The whole world wants to be a cowboy.
We should give credit where credit's due. We applaud the initiative, and the cattle industry is certainly willing to pay its share. I think we've shown this by the cooperative approach we've shown on grading. We've stepped up to the plate, and that's working. It's a success story that all of you can use.
We're concerned about some isolated examples. If I may mention one not within the Department of Agriculture but related to it, it is the Bureau of Veterinary Drugs in Health and Welfare Canada. They're about to initiate fees of approximately $100,000 per investigation of a new drug certificate.
Before we can have these new products to work with in Canada to keep us competitive with our American colleagues, where they don't have a charge for registering a new product, I'm sure a lot of the larger pharmaceutical companies will look at the market we have in Canada and say ``Gosh! Maybe it just doesn't warrant registering that product in Canada''. That is a real detriment to our producers, but a rather insidious one.
.1100
Now, you can plot the revenue and do the cost analysis, but as these other gentlemen have suggested, on the basis of what criteria? The strength of any economic model is the validity of its assumptions.
We have booklets available in English.
The Chairman: Once they're translated, they will be circulated, Mr. Thorlakson.
Mr. Easter: I have a point of information. I don't want to see us drop this issue. Can you as chair give us your assurance it will be dealt with at steering committee? As was said, I think a broad picture has to be looked at here. Whether we pull Treasury Board officials or whatever else before this committee, we need to have a look at it.
The Chairman: We have a steering committee tomorrow afternoon, and Dr. Art Olson, assistant deputy minister in charge of the Food Production and Inspection Branch, is before the committee on Thursday morning. That, and the information that has been presented to us in the thoughts and views this morning, I think will put the committee in a very good position, with the background views and thoughts of the industry represented here this morning through the Canadian Federation of Agriculture, the Canadian Seed Growers, and the Canadian Cattlemen's Association, to have a discussion with Dr. Olson and his officials on Thursday morning.
I thank those who have presented to us this morning. I think your comments have been very forthright, very worth while. The committee will do all it can to take them from here and improve the system.
The meeting is adjourned.