EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, May 7, 1996

.1908

[English]

The Chairman: Good evening, everyone. We'll start this evening's proceedings. We have a quorum, so I welcome everyone here tonight.

In particular I welcome you, Mr. Goodale, with your colleagues and officials, here this evening. We will turn it over to you for opening remarks, and after your comments we'll turn to the members for questions and comments. Please proceed.

Hon. Ralph E. Goodale (Minister of Agriculture and Agri-Food): Thank you very much, Mr. Chairman. To begin this evening I would like to introduce at least some of the officials who are with me this evening. I won't take the committee's time to introduce everybody in the room, but some of the more familiar faces, people who have appeared before the committee in the past, are as follows: first of all, my parliamentary colleague and the Secretary of State for Agriculture and Agri-Food, Fisheries and Oceans, the Hon. Fernand Robichaud; Mr. Frank Claydon, Senior Assistant Deputy Minister; Mr. Dennis Kam, Acting Assistant Deputy Minister responsible for Corporate Services; Dr. Art Olson, Assistant Deputy Minister for the Food Production and Inspection Branch; Dr. Brian Morrissey, Assistant Deputy Minister for Research; Madame Diane Vincent, as of Monday of this week the new Assistant Deputy Minister for MISB, Market and Industry Services Branch; Mike Gifford, also from the MISB branch, director general for trade policy at Agriculture and Agri-Food Canada; Mr. David Oulton, Assistant Deputy Minister, Policy Branch; and Howard Migie, who is in the Policy Branch and is director general responsible for agricultural adaptation and grain policy.

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As you know, Mr. Chairman, there are also a number of other officials with me this evening. I may call upon some or all of them at different times during the evening to assist in the presentation.

Since I had the opportunity to make a very substantial presentation to this committee just a few weeks ago, I think I can be fairly brief in my opening remarks this evening, Mr. Chairman.

It is always a pleasure to discuss my department's main estimates for the third year running. And running is certainly the operative word for everyone in the agriculture and agrifood sector. We have all, in government and in the private sector, had to run non-stop for the last number of years to keep up with the very rapid pace of change.

[Translation]

Last year, I reviewed the factors that brought about this unprecedented wave of change. I challenged the sector to make the needed changes on its own and thus ensure its own future, and the challenge was accepted enthusiastically.

[English]

Mr. Chairman, we need to go further to build upon our successes and to fully seize the opportunities this era of change has created.

We can do more to retool as a sector to deal with change. We can do more to increase sustainable growth through adaptation, investment, research and trade. We can do more to remove barriers to growth.

We can also do more to improve the way government functions. And, Mr. Chairman, this is exactly what we are doing by setting up a single food inspection agency at the federal level and by inviting provinces and municipalities to ultimately join with us in this effort.

We're also improving government by putting more decision-making power directly into the hands of the men and women who run this sector on a day-to-day basis through groups like the Ontario Agricultural Adaptation Council and its counterparts in Quebec and in other provinces too.

As I said in our recent budget document entitled Building for Success, I sincerely believe the agriculture and agrifood sector is a source of national strength absolutely vital to Canada's future. It is a dynamic, skilled and innovative sector that sustains and creates jobs, generates wealth and growth, contributes in a major way to international trade, and provides Canadians with the safest and highest-quality food supply in the world.

In 1994, I outlined to this committee the mission statement I would be pursuing in my responsibilities as Minister of Agriculture and Agri-Food Canada. This mission includes a positive, proactive and forward-looking role for the Government of Canada.

This includes, for example, international trade talks and the NAFTA dispute settlement process presently under way. Likewise, it includes promoting trade through Agri-Food Team Canada trade missions such as the one I recently completed in Japan, South Korea and Singapore. Incidentally, Mr. Chairman, on this trade mission we found very strong support among our customers for Canadian products and for Canadian marketing institutions such as the Canadian Wheat Board.

Government also has a role to play, Mr. Chairman, in research and development. Here our matching investment initiative is offsetting fiscal restraint and bringing in new industry dollars to help finance joint projects, while at the same time letting us concentrate internal resources on high-risk, long-term research aimed at improving the health of our crops, livestock, and our water and soil resources.

This is a good time, Mr. Chairman, to reiterate a point I've made before. The work we do at all of our research centres across the country benefits the whole sector from sea to sea. You can't put a fence around an area of research and say that unless the work is done in a certain geographic location it is no good to somebody living in or near this geographic location. Research generates valuable knowledge, and that knowledge is applied across the country no matter where it may have been generated geographically.

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As an example, research being done at our Atlantic Food and Horticulture Research Centre in Kentville, Nova Scotia, benefits vegetable and berry producers in Quebec, Ontario and British Columbia as well as in the Maritimes. There are many more illustrations of that kind.

At the same time, Mr. Chairman, on the role of government, we have reduced unnecessary regulations and have removed subsidies that no longer made sense and caused certain distortions in our overall agrifood system.

Over the winter, as members of the committee know, I held a number of round table meetings across the country to sit down in a personal way with all of our key sectoral stakeholders to identify adaptation opportunities to seize and the barriers that we need to overcome. A number of the members of this committee attended several of those round table discussions. A draft business plan for the sector is now being developed from these round table discussions, and the work is going on in very close consultation with the participants who took part in the round table process.

That round table process, Mr. Chairman, will conclude with a national conference to be held in Winnipeg, Manitoba, from June 25 to 27. There I hope to forge a joint industry-government commitment for action and follow-up, leading the agriculture and agrifood sector in this country toward the 21st century. Members of this committee are invited to attend that conference in Winnipeg. I think it's very important for all of us to hear together where the sector wants to go and how we can all help make it a success.

I would like to congratulate the committee on the work that each of you has done over the last 30 months on the various pieces of legislation that have come before you. You have a very key role to play in the legislative process and I am very keen on having your input in the future.

[Translation]

This is why I proposed that Bill C-34, Agricultural Marketing Programs Act, which was tabled on Friday 3 May, be studied by the committee before the second reading. I will undoubtedly deal with certain other forthcoming bills in the same way.

[English]

I would also like to point out that at the request of the committee, Mr. Chairman, we have changed the format of the part III blue book. My officials and I would very much like to hear your technical comments and suggestions on how we can go further to make the whole blue book system more user-friendly from the point of view of the committee and the general public.

With that, Mr. Chairman, thank you for your attention. I certainly welcome questions.

The Chairman: Thank you very much, Mr. Minister. We'll start with Mr. Hermanson.

Mr. Hermanson (Kindersley - Lloydminster): Thank you, Mr. Chairman, and thank you, Mr. Goodale, for appearing again before our committee.

You always paint a very rosy picture of what's happening in your department. I think that in reality it's good commodity prices as a whole that have created a positive atmosphere in agriculture, so I caution you not to pat yourself on the back too much for this brighter outlook for the industry.

The Auditor General released his report today and chapter 9 focuses on agriculture. On a day when we're looking at the estimates and you're here to be accountable for your department, I think the right place to start is with some of the Auditor General's comments.

In chapter 9, points 4, 5 and 6, he makes the following observations. This is point 9.4:

However, management has developed few performance indicators or other summary information to allow parliamentarians to understand and assess planned and actual performance and departmental action in response to serious outbreaks of disease and pests.

Those are criticisms of your department at the Auditor General level that I would like you to respond to.

Then in 9.5 the Auditor General says:

Over 1,100 managers, inspectors and laboratory staff deliver the Animal and Plant Health Program, at a cost of more than $100 million a year. While the Department had acted on a number of opportunities for cost reduction and cost avoidance, it continues to operate the Program and to plan future activities without rationalizing the need for the existing level of resources.

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For instance, it identifies the fact that 17 of your staff monitor the very low-risk area of brucellosis, and the Auditor General suggests that perhaps you should be marshalling your resources in a more expedient area. I'd like you to respond to that.

Then the Auditor General comments on cost recovery. It's put you in a very difficult position, because he is suggesting that you should be trying to achieve 60% cost recovery from the industry at a time when the industry has to be concerned about being competitive with the United States, where the cost recoveries are lower. I don't see where the Auditor General is seeing any way of passing this cost on to consumers.

He's also very concerned about the fact that we're not receiving and you're not generating enough income through cost recovery for exports, which he feels is benefiting our foreign customers at a cost to taxpayers. Again the concern I have is that this might put our industry on a playing field that is not level.

So I'm concerned about how you're going to balance the Auditor General's wishes that in fact more cost recovery should be drawn from the producers, from the industry itself, with maintaining a competitive industry.

Mr. Goodale: I thank you, Mr. Hermanson, for your questions. From the way in which you have phrased them, I gather that you might agree with some of the things the Auditor General had to say but that you definitely disagree with a few of his observations.

First, it is important to note that in his report the Auditor General has most definitely recognized the value of Agriculture and Agri-Food Canada's animal and plant health program. He cites in particular the successes of that program and the successes of the very dedicated people who work in that part of the department in protecting Canada's vital agrifood sector from devastating diseases of animals, such as BSE, which we've had the opportunity to discuss on a number of other occasions. He mentions several other examples of very important success stories.

It's significant to note that those achievements in preserving the integrity of our system in Canada were achieved at a time when our overall program was absorbing a 21% reduction in its resources. That speaks well of not only the program but also, more particularly, the people who work in it.

Because of the strength of our animal and plant health program, Canadian agrifood exports are welcomed in markets around the world and our Canadian consumers have, generally speaking, a higher level of confidence in our Canadian inspection system than their counterpart consumers have in the domestic inspection systems of other countries around the world.

The department also appreciates very much the Auditor General's acknowledgement of Canada's pre-eminent position as a world leader in developing and applying a scientific risk assessment model for animal diseases and plant pests.

Specifically with respect to the Auditor General's comments about the distribution of resources to certain priorities, the department welcomes the Auditor General's review of these matters and the very helpful advice that has been given about how resources can be marshalled and managed and distributed and administered in the most cost-effective and purpose-effective manner. In fact, many of the suggestions that have been made by the Auditor General concerning management and distribution are already in the process of being incorporated into the activities of the department.

To the extent that the Auditor General has offered valuable advice on how management systems can be improved and how the allocation of resources can be distributed in a more advantageous manner, that advice is most certainly welcome, and we already are in the process of acting upon many of the Auditor General's suggestions.

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On the question of cost recovery, in handling our inspection program we have had a variety of initiatives under way for many months now. It's a multi-pronged approach to try to ensure that we absolutely maintain the very high reputation I spoke about, and that wherever possible we improve upon Canada's high reputation for health and safety and, in the process, achieve efficiencies and cost savings wherever that is possible.

The prongs in our approach include, first of all, absolute cost avoidance where that is possible - in effect, the wringing of unnecessary costs out of the system. The second prong is cost reduction. Where we can find cheaper and less expensive ways to provide a service, we obviously will try to get those savings as well.

So there are cost avoidance and cost reduction. There's also cost sharing, the issue to which the Auditor General is addressing himself in suggesting we should go further than we have gone in inviting those in the private sector to share in that burden. I'll come back to that point in a moment.

I want to mention two other prongs in our approach. One is technology. In many respects we can have a cheaper, more efficient, and higher-calibre inspection system by incorporating new technology as it comes along. I hesitate to tread on this ground when Dr. Olson is looking over my shoulder, because he can certainly express this point much better than I.

Look at a new technology like HACCP, the hazard analysis critical control point system, that we are in the process of encouraging here in Canada, as are many others around the world. It is a new technique that we think will not only ultimately save money for all of us involved in the inspection system, but will in fact improve the quality of the inspection. Not only are we doing the work more cheaply, we're actually doing a better job by using the new technology and the new approaches that come along with HACCP.

Much of the inspection system as well has historically relied on actual visual, physical examination that is obviously very cost-intensive. Very often, what would be better in the system is a technical scientific test that could identify microbials, for example, actually giving you a higher level of inspection...and doing it because you're using technology more advantageously at a cheaper cost.

The final element in our approach is the elimination of overlap and duplication among different departments and levels of government. That's what the whole Canadian food inspection system is all about. We previewed that in the budget of 1995 and announced it in the budget of 1996.

There are many prongs in our approach: to maintain our high standards, to improve them where possible, to save costs in the system, and to make sure our customers at home and around the world can have absolute confidence in the quality of what Canada does in its inspections.

I would be happy to wade into the details of our business alignment plan and the cost-recovery efforts that have been launched to date if members of the committee are anxious for further details.

Let me just say in a broad way in response to your question that I share the concern you've expressed about the impact of cost recovery after you reach a certain point, in terms of the domestic and international competitiveness of various parts of the sector.

I believe the course we're on now is rational, reasonable, balanced and fair. While I hear the argument being made by the Auditor General that we should go further faster, I do sincerely believe the course we've adopted is balanced and appropriate in the circumstances. Certainly I hear from the client groups of Agriculture and Agri-Food Canada that, if anything, they would profoundly disagree with the Auditor General and might even suggest that the business alignment plan as it stands now is, shall I say, more than enough, from their point of view.

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

Mr. Easter.

Mr. Easter (Malpeque): Thanks, Mr. Chairman.

My first question relates to user fees as well. In 1994-95 Agriculture Canada collected$13.3 million in user fees from 49 specific services, and in 1995-96 they brought in $37 million.

The Auditor General says the department has made progress in terms of cost recovery over the short term, but I think producers are worried, and I know I'm worried, about the impact of cost recovery on producers remaining competitive.

In testimony before this committee, a representative of Treasury Board indicated there is no government-wide assessment process in place to determine the cumulative impact of the cost recovery programs on the agriculture sector. It's not only in your area. We have to recognize that across various departments we have cost recovery.

For instance, peat farmers in my area are facing Fisheries and Oceans costs, they're facing cost recovery under Agriculture and they're facing custom fees costs. A neighbour of mine who exports breeding stock to Mexico, for instance, is now considering quitting exporting breeding stock to Mexico, because by the time he does the blood tests, puts the seals on the trucks and on and on with cost recovery, the cumulative effect is almost forcing him to be non-competitive.

I have two questions. What I'm finding within the government as a whole... Your department, yes, has some handle on cost recovery fees within your area, but there is no process within government that I know of, unless you can inform me of one, that can look at the cumulative effect on a producer who's paying the bills.

Is any impact analysis or monitoring being done by your department relative to those costs? Is there anything overall within government itself? If we are seen to be making producers non-competitive, is there anything we can do about it?

I say that on this basis. We're meeting our GATT and WTO commitments, I think much more than we have to, by far. The Americans and Europeans are not. They're our competitors. We don't want to, in the interest of deficit reduction, put our our producers in a non-competitive position.

Mr. Goodale: Mr. Easter, I appreciate the sentiments that clearly lie behind your question. I can answer it in part, insofar as it falls within the jurisdiction of Agriculture and Agri-Food Canada. There are aspects of your question that go beyond that, where my answer will of necessity have to be a little more general.

On your point about an analysis of the impact, we have tried our very best - and when I say ``we'' I principally mean Dr. Olson and the people in the FP and I branch - to make a running assessment of what our fee changes might mean to the average producer across the country.

In this whole process we have operated on the basis of certain fundamental principles. First of all, cost recovery will not be allowed to compromise health and safety. Secondly, we will honour our international trade agreements. Thirdly, all the consultations that go into this process will be as open and as transparent as possible. Dr. Olson and his staff have conducted literally hundreds of meetings with various stakeholders to get their input into the process.

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As I mentioned earlier, the fourth point is that we pursue a blended approach, not just cost recovery but also, wherever possible, cost avoidance and cost reduction. Fifth, cost recovery needs to be applied equitably for similar activities across different sectors so there is fairness within the agriculture and agrifood sector. Finally - and this really gets to the nub of your question - the department will strive to minimize the impact of cost recovery on the competitiveness of the agrifood sector.

I referred earlier to keeping running track of how our Agriculture and Agri-Food Canada fees would impact upon the average producer. I won't wade into the detail of that tonight, but I would be perfectly happy to provide the committee with some of these illustrations.

We have worked out, for example, what the likely impact is of all of our fee changes on the average apple farmer in British Columbia, on the average beef producer in the prairies, the average grain farmer in Saskatchewan, the average hog producer in Ontario, the average egg producer in Quebec, the average seed potato farm in Prince Edward Island, and so forth across the country. When you look at these illustrations, where the numbers are actually worked out per farmer on a typical individual basis, the amount we would be recovering from the individual is relatively small compared to the overall value of their likely sales.

Now, on the basis of the information I have before me at the moment, it would appear to me that overall the impact of the business alignment plan upon the agriculture and agrifood sector is fair and reasonable in all the circumstances.

I take your point about a concern that an accumulation of fee changes or increases from a number of different departments might well have an unintended high impact in certain specific cases. I can assure you that is a matter that, as the principle of cost recovery is pursued throughout the government, I would want to monitor very closely, as I'm sure others of my cabinet colleagues will want to do as well, most particularly those in the Treasury Board who have the overall responsibility for this policy principle government-wide.

I hear your point and it's one I am very sensitive to, because in this era of new trade agreements competitiveness is a vital factor for our agrifood industry and we have to ensure that we don't price ourselves out of the market.

Mr. Easter: One of the other concerns that we certainly need to be able to assure producers on - and I think I've sent you a question related to that - is that producers are saying they're paying for cost recovery but they wonder what's happening at the management level of the department itself that they're not paying excessive fees. Keep that in mind.

As you probably are well aware, the Senate finance committee tabled a report highly critical of Farm Credit, saying that it should be merged with the Business Development Bank. I disagree entirely with the reports. The senators must have had a dream that night. In any event, I'd like to know what your position is on that and where we're going with Farm Credit.

Finally, on the hopper car fleet, when CN was before us, Sandi Mielitz made this statement. Basically she talked about the operating agreement between the railways and the government. She said that with the operating agreement with the government they have the right of first refusal in the sale of the cars and ``we also have the right to approve any sale''.

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I'm concerned about that, because the hopper car sale is extremely important to producers in the west and we have to know who's running the show here. Is it the government or do we have as a backdrop the railways pulling their string? We have to know where we sit with that and where we're heading.

The Chairman: Minister, there are two questions there. If you could be relatively brief... I know you could spend a lot of time on both those issues, but there are a number of members here and Mr. Easter took his second brief question and used all of his time. I would ask you to be brief, because I'm sure both those subjects will come up again with some other members.

Mr. Goodale: Indeed, Mr. Chairman.

On the FCC, I have seen the Senate report. The government will be preparing a formal response to the Senate report on financial institutions, including, but not limited to, the FCC.

On other occasions, Mr. Easter, I have made the point that I believe there is the potential for an expanded and more important role for the Farm Credit Corporation. I would be happy to elaborate on that when the opportunity presents itself. There may well be some smidgen of a difference of opinion between myself and the learned senators about the FCC.

On the comments by Ms Mielitz from CN Rail, I haven't had the opportunity to review the transcript you're referring to, but I think it's fair to say in any agreement there are rights and obligations on both sides. Surely it's in the interests of the government, of the farmers, of the railways, of the shippers, of the farm organizations, it's in the interests of all of us, to have the most efficient and smoothly operating grain-handling and transportation system we can possibly have. I would fully anticipate the railway companies would act as good corporate citizens and shoulder their responsibilities in an appropriate manner and would not want to be seen as difficult or obstructionist in arriving at the best possible solution with the hopper cars.

The Chairman: Mr. Chrétien.

[Translation]

Mr. Chrétien (Frontenac): Good evening, Minister. These days, we have to be extremely efficient. In 1994-95, your department was subjected to cuts of approximately 14%. This year, you were cut yet again, so a major rationalization of your operations was called for.

In reading the Auditor General's Report today, we can see that most of the regulated parasites were subjected to scientific assessments, which may account for about ten% of the cases. Your department has thus carried out an apparently scientific assessment of this ten%.

Why is it that no scientific assessment of the risks associated with diseases, weeds and regulated toxicants was carried out? Rabies, brucellosis and tuberculosis, to which your department devotes close to 90% of animal health resources for activities carried out in the country, were subjected to not one scientific assessment from a risk perspective.

Also, in the Auditor General's Report, we see that for the Plant Health Program overall, priorities and the distribution of resources are not based on scientific risk assessment.

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Does your department acknowledge that without scientific risk assessment, precious resources could be allocated to sectors where the risks are much lower than they are in other areas that have been given much less to work with?

I would like to come back to the same old problem of cost recovery. Scarcely 60% of costs are recovered. This is not a good mark on your report card. As my colleague Mr. Hermanson just said, we could turn a blind eye, but in order to be truly efficient and for the good of all Canadians, we have to take a far more scientific approach in order to get one hundred cents on every dollar that taxpayers invest in Agriculture and Agri-Food Canada.

[English]

Mr. Goodale: I certainly agree with that last proposition, Monsieur Chrétien, because none of us has any money to waste, whether it's the Government of Canada, the government of any province, or any farmer or farm organization or agribusiness. These days every dollar is certainly precious. You can rest assured that as we have made the necessary budgetary decisions within Agriculture and Agri-Food Canada, this fact has been front and centre in our minds.

On the comments that the Auditor General has made about the animal and plant health program, I would like to offer a few general observations and then ask Dr. Olson, the assistant deputy minister of food production and inspection, to provide more detail in response to this point. But let me go to your second last point first, which had to do with cost recovery.

I've heard pretty clearly from Mr. Hermanson that he has some reservations about the extent of the direction the Auditor General might suggest. That point has been repeated by Mr. Easter. I would be interested, Mr. Chrétien, to hear your thoughts on the subject in terms of whether or not there is any room left for further cost recovery initiatives. Obviously a statement made by the Auditor General has to be treated with seriousness, but there are perhaps other public policy considerations that should be taken into account, such as the competitiveness point mentioned by both Mr. Easter and Mr. Hermanson. I'd be interested in your advice with respect to the extent of cost recovery in Agriculture and Agri-Food.

Going back to the previous issue, the animal and plant health program, I think from the overall comments made by the Auditor General about this program that Canadians can be confident that their health as well as the health of animals and plants in Canada is being fully protected.

Risk assessments are only one of the many tools that the department, and particularly the FP and I branch, uses to determine the overall risk associated with specific commodities, animals or plants. Other critical factors are also taken into consideration, such as risk management, risk communication, trade agreement obligations, consumer confidence, industry interests and resource constraints. In situations where formal, scientific risk assessments have not been finalized, the department continues to make program decisions based on the best scientific data available in the circumstances.

The department will of course explore every opportunity to use risk assessments more effectively in determining program-wide priorities and the allocation of resources. As I said earlier in response to Mr. Hermanson, in that spirit we welcome the observations of the Auditor General, upon which, in many respects, we're already beginning to take action.

Dr. Olson, can you offer elaboration on some of the details of Mr. Chrétien's concern?

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Dr. Art Olson (Assistant Deputy Minister, Food Production and Inspection Branch, Department of Agriculture and Agri-Food): With regard to cost recovery, one of the key factors that we discussed at the committee meeting a week or so ago was our attempt to ensure that Canadian producers and processors will continue to be competitive. For that reason, we keep a very close eye on what the other countries that we trade with and compete with are charging for similar services. That's very much part of the reason why we have the current level of cost recovery, because we're very careful to ensure that we won't place Canadian producers at a disadvantage, particularly to their American counterparts.

I think we've been successful in maintaining that kind of comparison on an ongoing basis.

In terms of the domestic program, our success in an international environment depends basically on how good we are in Canada. If we are able to demonstrate that we don't have the problem in Canada, then as a result we have access to every other market in the world.

We depend on a variety of things. Obviously we depend on producers. We have a very sophisticated agriculture industry in Canada.

We talked about BSE a few weeks ago. I'll remind you that the producer who had the original herd was the person who identified the animal. He knew that he had a problem. He called in his veterinarian, who called in the provincial veterinarian, who called us in. So the chain of process in the surveillance and the systems that are provided by provincial officials and by the producer community was critical to our success in bringing that disease under control.

On the domestic service, I mentioned 17 persons being involved in brucellosis. We do not have mad cow disease in Canada. I can assure you that I have significant resources being devoted to ensure that we won't have it. Our continued freedom from brucellosis depends on a surveillance program. We have the potential for risk in Wood Buffalo National Park. We have the potential for risk immediately to the south of Canada, and we intend to ensure that the disease will not come into the country. That's why we're investing 17 people in that kind of surveillance program.

Mr. Goodale: I might add to that, Mr. Chrétien, in order to reinforce one of Dr. Olson's points.

Not only was that original individual in Alberta who discovered BSE in an imported animal, now almost three years ago, very responsible in the way in which he conducted himself in bringing the whole issue to the attention of the appropriate authorities, but also once our eradication program was undertaken, which involved what some would describe as some quite extreme measures - necessary, unfortunately, but extreme nonetheless - to make sure that Canada would retain its BSE-free status, we had in that process the complete collaboration and support over many months of every single livestock agency in this country, every farm organization, every provincial government, and all of the professional associations. It was an absolutely massive effort where all of the individual players, not just in government but also in the private sector, took the issue very seriously and acted with a superior degree of responsibility in the circumstances.

Because of that conduct on the part especially of farmers and farm organizations, we enjoy the BSE-free status that we have today.

Mr. Hoeppner (Lisgar - Marquette): Welcome, Minister. It's nice to see you here and to have a chance to question you a bit.

When I hear the minister talk of grain marketing panel hearings and plebiscites being divisive, it reminds me of an announcement in a church bulletin that might be relevant tonight. It said something like this: don't kill yourself worrying; please let the minister help.

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Mr. Goodale: That could be done in a number of ways, Mr. Hoeppner. I'll take it in the most positive spirit.

Mr. Hoeppner: I would like you to give us some help tonight, and maybe keep us from worrying somewhat. I know a rumour is rampant in the country saying I might not be named in the Canadian Wheat Board's will. That does worry me a little, so I'm going to take a different direction.

The Chairman: I think you're safe not to worry about that, Mr. Hoeppner.

Mr. Hoeppner: There are a few worries the minister has caused me, and I'll start with the first one, the backtracking issue. At that time you didn't seem to have the clout in cabinet to stop it when this committee said stop it, it's illegal, it's costing farmers and taxpayers money, it's tying up hopper cars.

The other one is when the committee asked for you to instigate an outside investigation into the Winnipeg Commodity Exchange. That investigation went as far as giving credence that the commodity exchange had done the right thing in closing down the June 1994 canola contract. Nothing further developed out of that. I know new legislation will probably be brought forward next year, regulating the Winnipeg Commodity Exchange. I see the Canadian Grain Commission and some other players are already lobbying who's going to take over the regulation of that. I would suggest, Mr. Minister, it should be taken away from the Canadian Grain Commission and probably given over to the securities commission, the way it's done in the United States. When you have a grain commission and the grain traders regulating themselves, or partially regulating themselves, it's not going to be a healthy situation.

I would like you to comment on that, because I would like to leave this House without dying from worry.

Mr. Goodale: I'll try to help, Mr. Hoeppner.

On the grain back-haul situation, the so-called ``scenic route'' through Thunder Bay, we discussed that both here in the committee and, I believe, from time to time in the House. The facts of the matter are that as a government we were prepared to move on that issue of the back-haul at a much earlier time than the movement actually occurred. There was no lack of decision-making or political will on the part of the government. But we were advised by the major stakeholders in the grains industry that to make that kind of change in the freight rate structure part-way through a crop year would actually cause more trouble than it would solve in the circumstances we were dealing with at the time when that issue arose.

As you remember, at the time we were fighting against a backlog in grain shipments. The feeling in the grains industry was that if a change of that magnitude, for example, were to occur during the winter or spring of any crop year, as opposed to occurring on August 1, when the next following crop year would occur, you'd actually aggravate the use of rolling stock facilities and cause the backlog to compound itself. The best advice I could receive from the vast majority of the players in the grains industry was, as much as everybody wanted to move on that situation, it would be better to wait till the next August 1 so the change could occur at the beginning of a crop year and be implemented in the most efficient manner possible.

Mr. Hoeppner: But I think, Mr. Minister, the recommendation in the spring of 1994 was that it should have stopped on July 31, 1994, and it continued another whole year. That's why I was questioning the decision. I also know the Wheat Board was probably pressuring you a lot that they wanted to continue as long as the WGTA was there.

Mr. Goodale: Absolutely not. In fact, any pressure from the grains industry, and particularly from the Wheat Board, was the other way around, on getting rid of that particular anomaly because it was an incredibly poor use of resources, tying up rolling stock by going several hundred miles in the wrong direction simply to collect a subsidy because you happen to touch a certain point and could claim the grain had passed that point and therefore the provisions of the law clicked into place. I don't think any serious player in the grains industry did or could have made a logical argument for that kind of situation to continue indefinitely.

.2000

The only discussion had to do with the timing of the change. If you remember correctly, I would want to check the dates, but I think that by the time we met with the grains industry in May 1994 and June 1994 and had the consensus such that it was appropriate to move, it was too late to get the legislation through the parliamentary process to have it come into effect for August 1, 1994. We were then into the next crop year. That was the dilemma, Mr. Hoeppner.

Mr. Hoeppner: I thought, Mr. Minister, that there was a non-performance clause in the WGTA that was being violated. It could have been stopped by an Order in Council as of July 31, 1994.

Mr. Goodale: I asked questions about my legal authority to act on that issue unilaterally. I was advised by the law officers that the only way the change could be made was by statutory amendment, which we then prepared and passed through the system as rapidly as possible. But it simply wasn't physically possible to deal with that issue between June 1994 and August 1994 because, for the most part, the House of Commons wasn't sitting at that period of time.

On the canola contract, as you know, that controversy in the summer of 1994 was fully investigated by two external examinations. As a result, a new canola contract has been formulated and implemented.

I wanted the same kind of assurance from the Canadian Grain Commission as what I think lies behind your question, such that in the discharging of the CGC's formal, professional responsibilities under the Grain Futures Act, everything that could have been done was done, in fact, to make sure the oversight responsibilities were properly discharged.

On the information that has come before me as prepared by the Canadian Grain Commission and otherwise, I'm satisfied that the Canadian Grain Commission properly discharged its responsibilities under the Grain Futures Act.

But you raise an interesting point as to whether or not, for the long term, it is appropriate for the Canadian Grain Commission to be the oversight agency with respect to the commodity exchange.

You've made reference to the possibility of...I don't think the fact, but perhaps the appearance of a conflict of interest. I'm not sure I would agree with that point about the potential for conflict.

Mr. Hoeppner: What bugs me about that, Mr. Minister -

The Chairman: Let the minister answer. You're going to run out of your time.

Mr. Hoeppner: I was just going to try to direct him toward what I really want him to acknowledge. The big players put big bucks out to the Winnipeg Commodity Exchange. It was $250,000 from the pools. The small players, the farmers, did not get one ounce of protection out of that. That's what really bothered me.

Mr. Goodale: I'm really not in a position to comment on that, Mr. Hoeppner, because, as you know, the Winnipeg Commodity Exchange is a private sector institution that operates according to its own rules and its own self-discipline. It's only in the most extraordinary circumstances that this oversight function clicks into place under the Grain Futures Act.

I think we would both agree that there needs to be that oversight function in future. The question probably is: where would it most appropriately be based or anchored? You have suggested that perhaps the Manitoba Securities Commission might be a more appropriate venue for that function to be lodged rather than the Canadian Grain Commission.

I would not agree necessarily with your argument that the rationale for doing that is apparent or there's a potential conflict of interest, but there may be other quite legitimate reasons. For example, if the Winnipeg Commodity Exchange wanted to focus in the future on commodities other than grain, that would raise the question: should the oversight function be in a piece of legislation called the Grain Futures Act and through a vehicle such as the Canadian Grain Commission if what is being traded is a whole range of potential commodities, including metals and so forth, other than grain?

.2005

As the Winnipeg Commodity Exchange matures, broadens and gets involved in more kinds of trading activity, there is a legitimate question to ask about where the oversight function ought to reside. Without a huge amount of analysis, I raise the hypothetical question: would it be appropriate to see the oversight function for that kind of institution falling potentially in the future under the ambit of a new national securities commission, as was laid out as a possibility in the most recent Speech from the Throne?

The Chairman: We'll go to Mr. Reed, please.

Mr. Reed (Halton - Peel): Thank you, Mr. Chairman.

Well, Minister, in spite of Mr. Hermanson's misgivings, I think you're doing a darn fine job.

Some hon. members: Hear, hear!

Mr. Goodale: I'm glad you're not biased, Julian.

Some hon. members: Oh, oh!

Mr. Reed: I don't want to be patronizing, but you've had to create, invent, do more with less and spend dwindling resources a lot smarter, and I think you've been able to priorize very well.

I want to zero in on one thing - and Dr. Olson answered some of this at the beginning - and that's the importance of the vigilance on some of these diseases. In my view it's not smart money to reduce the monitoring of things such as brucellosis, tuberculosis and so on. These diseases can return. I look upon that kind of monitoring as an investment. It's an investment we make because it maintains export markets around the world. When Canada's looked on as a source, we're looked on as a clean source.

Minister, I know you're probably going to have to priorize even more next year, and as you do that, I would suggest you make sure that some of these diseases that were such a scourge in the past don't ever get a chance to come back and ruin the great reputation we have going in the world.

I'm just long enough in the tooth to remember when brucellosis devastated the area where I live, and tuberculosis as well. I also remember when the process of accreditation for dairy herds came into being, how much of a hill-climb it was for those farmers who practised extraordinary control methods to finally achieve accreditation, and how worried they became if somebody else's cattle got into their yard.

So I say to the ministry through you, for heaven's sake, don't lower the priority status of monitoring those diseases, which just now are out of the picture but could, without proper vigilance, come back.

Mr. Goodale: Mr. Reed, I really do appreciate that comment. It's an important factor to bear in mind that you learn from past history, and if you fail to learn from that history, you will probably pay a penalty.

Over the long haul, the plant health and animal health systems as well as the professionalism we've been so fortunate to have within Agriculture and Agri-Food Canada, augmented by what's available at the provincial level and in the private sector and augmented by a very responsible attitude on the part of producers, farm organizations and others, have all come together to stand Canada in very good stead domestically and internationally. We will try by every means possible to build upon and enhance that reputation and not let it in any way be diminished.

.2010

That said, we will obviously take the views and the advice of the Auditor General very carefully into account. We will work hard to improve the system and to continue to allocate resources in a way that brings results and pays dividends, as has been the past experience.

I think one should not lose sight of the fact that despite the advice offered in a constructively critical way by the Auditor General, the Auditor General also had a lot to say that was very positive about Agriculture Canada, its inspection system, the quality of work that's been done, and the confidence that Canadians and our foreign customers have in that system because it has performed exceptionally well over the last many years.

I'll give you a very tangible example of that. On the trade mission to Japan, Korea and Singapore that I was recently involved in, among the 25 or so people I took with me as part of the Team Canada delegation was Dr. Frédérique Moulin, a very distinguished veterinarian on the professional staff of Agriculture and Agri-Food Canada. You might recall that the timing of this trade mission was literally just a few days after the United Kingdom found itself embroiled in that terrible controversy about BSE.

It was incredibly valuable for the Canadian delegation to have a person with Dr. Moulin's qualifications as part of our delegation. Whenever the BSE issue arose in a conversation with a government representative from one of those other countries or from the private sector, we were immediately able to present not only what I might say as official government policy, we were able to present that very professional scientific point of view expressed in person by Dr. Moulin, to indicate and to underline with a big, bold line that Canada enjoys BSE-free status.

Dr. Moulin was able to go through chapter and verse of what we have done to give ourselves that status and to protect our reputation. That's something about the Canadian system that we take for granted far too often. Countries around the world that perhaps don't have the advantage of enjoying that kind of quality in their inspection system have enormous respect for this very good thing that Canada has going for it.

Mr. Reed: Thank you.

The Chairman: Thank you. Mr. Calder.

Mr. Calder (Wellington - Grey - Dufferin - Simcoe): Thank you, Mr. Chairman.

Minister, about half an hour ago we were talking about the hopper cars. At that point you made a statement about the railways. You said you hoped they would be good corporate citizens. I want to throw an idea out to you that would probably help the railways to be good corporate citizens in relation to making sure that eastern Canada gets the proper allocation of cars.

I was wondering about putting a non-compliance clause into Bill C-101 to say that if in fact the railways did not put an adequate allocation of cars out to eastern Canada, they would have to compensate the producers out here for whatever losses they would incur.

Mr. Goodale: Mr. Calder, it's an interesting idea. You may wish to suggest that innovation to your colleagues who might serve on other parliamentary committees -

Some hon. members: Oh, oh!

Mr. Goodale: - but let me just say that there is, of course, the general obligation under legislation for the railways to discharge the responsibilities they have as public carriers. There's also another provision that is contained as a part of the budget follow-up legislation that will make the point about where the revenue goes that will flow from the freight rate increase to deal with the acquisition of the hopper cars. The legislation will make it clear that if necessary, that revenue can go directly to the purchaser rather than being directed through the hands of the railways.

.2015

Be that as it may, I suppose it's no secret that from time to time I will have a different view from what the railways will have about what should or should not happen in our railway system. If I had a simple message to extend to the railways, it would be this.

Over the course of the last couple of years, the grains industry in this country, whether it be in eastern Canada or western Canada, has gone through an enormous amount of change. There have been changes in international trading regimes, changes in safety net systems, changes in subsidy systems, changes in legislation, changes in regulations. It's been a whirlwind of change.

Grain farmers, perhaps more than any other kind of farmers, with the possible exception of the livestock industry, need to make their way and achieve their success in the international marketplace. They need to be internationally competitive. They need to be among the best in terms of competition. That means that those things upon which they depend must also be internationally the best, including the transportation system.

With the advantages the railway companies have under legislation and under regulations and with the semi-monopoly position they occupy, in some regions of the country at least, they have a pretty privileged position. It seems to me that under this new legislation they have a glorious opportunity to demonstrate that they can and will act in the public interest and that they can and will deliver the farmers' grain on time in the most efficient and cost-effective manner. I think we'll all be watching very closely for that performance.

The Chairman: Thank you very much.

Mr. Chrétien.

[Translation]

Mr. Chrétien: I hope that I misunderstood or misheard what was just said about hopper cars, Minister. I seem to have understood that monies from the sales of hopper cars would go to the buyers. Is that really what you said?

[English]

Mr. Goodale: No. My point, Mr. Chrétien, was that we have indicated that on August 1, 1998, the regulated freight rate will be adjusted by an average of 75¢ per tonne in order to provide revenue to accommodate the transaction whereby the Government of Canada would dispose of the hopper car fleet the government presently owns. The legislation will make clear how that 75¢ flows through the system so it gets to where it's supposed to go.

[Translation]

Mr. Chrétien: Minister, I would like to go back to the 1996-1997 Estimates, but first I want to hear your point of view on the sale of hopper cars.

Your colleague, the Minister of Transport, told us last week that he assessed the market value of his hopper car pool at $420 million. Consequently, he hoped to obtain the highest possible price in the tendered public sale piloted by Wood Gundy.

.2020

I asked him if he was prepared to grant specific advantages to farmers, and he said that everyone would be treated on an equal footing. Farmers would have to pay the price to obtain them; in other words, a penny more than next higher bidder. More, he said that he would not proceed by a bulk sale since he hoped the pool would be sold to a number of different buyers rather than a single purchaser. Do you share the opinion of your colleague in Transport, who said he wanted to obtain the best price and that farmers were on the same footing as any other potential buyer?

[English]

Mr. Goodale: Mr. Chrétien, I obviously haven't had the opportunity to discuss that particular turn of phrase with Mr. Anderson, but I do see a quotation attributed to the Minister of Transport over this past weekend that is consistent with the conversations he and I have had: ``We want the best package [with respect to the hopper cars] in the interests of producers, Canadian taxpayers and for our transportation system.''

I think that clearly means there are a variety of interests that have to be appropriately balanced. The government at some point will have to make a judgment call as to when that balance is correct, taking into account that the taxpayers obviously need to be protected, the producers need to be treated fairly, and we have to have a transportation system that is working at maximum efficiency.

I have one little footnote on that issue of maximum efficiency. It seems to me that it would make sense for the hopper car fleet to be maintained and operated as a common fleet. That's the way you generate the maximum efficiencies, rather than having it broken up and fragmented. I'm sure that as we see all the various proposals coming forward and have an opportunity to assess them with the professional external advice of a firm like CIBC Wood Gundy, we will be able to make rational decisions about what configuration makes the best possible sense from the point of view of the taxpayer, the farmer and the transportation system overall.

[Translation]

Mr. Chrétien: When we received Part III, like all the rest for that matter, I examined it with great interest. As a matter of fact, you can see that my copy is full of notes. I would now like to pass on to questions that I believe are more important.

[English]

Mr. Goodale: It's a best-seller.

[Translation]

Mr. Chrétien: In the French version, on page 2 of chapter 1, it says that the Canadian government guarantees all pool account deficits. How much did the federal government pay for pool account deficits? There is no mention of this. All that is said is that the federal government guarantees the deficits. Was there a deficit in the pool accounts? In the French text, this is on page 2 of chapter 1, at the bottom.

[English]

Mr. Goodale: Oh, it's chapter 1. We were looking for chapter 11 and there isn't one.

Is this in reference to the Canadian Wheat Board, Mr. Chrétien?

[Translation]

Mr. Chrétien: Yes.

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[English]

Mr. Goodale: The principle of price pooling and the government guarantee behind the initial payment, which is established under the price pooling regime, is of course a practice that dates back many years. It is very well-established in the operations of the Canadian Wheat Board.

It's significant, Mr. Chrétien, to note that since the Canadian Wheat Board acquired its modern current powers - roughly corresponding to the end of the Second World War - deficits have occurred in the pool accounts of the board only on three occasions. That's three occasions over a span of fifty years.

When you track circumstances in world grain markets, it's interesting to discern the causes for those deficits. Were those deficits created because the initial payment was set too high? No, the evidence doesn't support that. Were those deficits created because the Canadian Wheat Board somehow did something wrong in the marketplace? No, the evidence doesn't support that either. Those deficits occurred on those three specific occasions when the United States - and some of our other trading partners internationally - took some sudden, distorting action in the marketplace to totally destroy world grain prices.

One of those actions occurred when the United States essentially abandoned the old international grains agreement - that's when it happened the first time. The second time was when the United States introduced its export enhancement program. And the third occasion was when the United States, part-way through a crop year, rapidly escalated its export enhancement program.

Those are the three occasions in the last fifty years when a deficit has occurred in the accounts of the Canadian Wheat Board. They are directly attributed to external factors, and factors over which neither the Canadian Wheat Board nor the Government of Canada would have any control.

But the initial payment is established by the Government of Canada on the basis of the very best market advice that is available to us. That initial payment is guaranteed. Obviously, if there is a deficit, then the Government of Canada is on the hook for the amount of that deficit, but history demonstrates that a deficit has been created only on the rarest of occasions and not in any circumstances due to the conduct of either the board or the Government of Canada.

The Chairman: Mr. Hermanson.

Mr. Hermanson: Thank you, Mr. Chairman.

Mr. Goodale, I wish your answers were shorter in order that I could ask more questions. I'm not going to get through my list again. I notice your colleagues there are nodding off. Only Mrs. Ur has been able to remain attentive the whole time. I don't know how she does it.

But that's just a comment. I'll get two questions in here really quickly.

The Chairman: We see that a third of your delegation has left, and that's not the first time they've weakened you today.

Mr. Hermanson: It's even too much for them, Mr. Chairman.

The Chairman: You've had a bad day.

Mr. Hermanson: I know that Agriculture, your department, has made some significant reductions, as has Transport, which impacts on producers. In fact, your reductions are quite similar to what we proposed in our zero in three plan. Had other departments in the federal government reduced their spending or been a little more aggressive in reducing their spending, we could have actually had a balanced budget probably this year or next year.

I'm concerned that you haven't been the strong minister at the cabinet table in making sure that all departments reduce their spending accordingly. In fact, in some areas we've seen an increase in spending and therefore farmers are receiving a reduction of service from the federal government while they're paying their fair share of taxes. Others who receive benefits from the government have not made the same sacrifice. And that's just a comment.

Mr. Goodale: It's certainly not fact, but it is a comment.

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Mr. Hermanson: I want to comment just quickly on the Canadian Wheat Board. I want to quote from Mr. Beswick, who just resigned recently as commissioner of the Canadian Wheat Board. He had some critical comments regarding those who are not prepared to change the way the board operates or functions. He said:

They'd sooner take a chance on losing it all instead of having a reasonable compromise.

Then he goes on to say:

The last two years have shown the board can't compete for feed barley when it has only a pooled price to offer farmers. ...It has cost farmers incredible amounts of money the last two years by sourcing barley on a pool price basis.

Beswick said he thought the board was ready to support daily cash pricing and was taken aback when it told the grain marketing review panel it wanted to offer a cash price on an emergency basis only.

Mr. Goodale, I would suggest that in fact you're using the Western Grain Marketing Panel as a delaying tactic to avoid reforms to the board, or suggesting or implementing reforms to the board prior to the next election, so you can say, yes, you're looking at the potential for change, but no, you're not prepared actually to do something. In fact, if the board fails and continues to lose support from the industry, you will be the minister who caused the downfall of the board rather than making it a stronger institution.

I want you to comment on that.

The other issue I do want you to comment on is the whole western grain transition payments program, which has been a real disaster and seems to be getting worse rather than better. We called there today and there are still 24,000 applications that have not been dealt with. Here we are well into May. As you know, you promised producers they would receive the initial payment in January and the final payment would be issued in July. You've missed your target something terrible. Many producers have no idea when they're going to receive the first instalment. Are you still projecting the second and final instalment in July, or is that now postponed until December? How can you account for the terrible mismanagement of this whole program and these awful delays?

Mr. Goodale: Mr. Chairman, this answer is going to be lengthy.

First of all, Mr. Hermanson, I'm just amazed at how you can be so impervious to the truth. If you examine the estimates of the Department of Agriculture and Agri-Food compared with those of virtually all the other departments of government, you'll find the cost burden we have had to absorb in the government's battle against the deficit is roughly in the middle of the pack. There are departments that have been called upon to do more in terms of savings. Many departments have been called upon to do more, including Industry, Environment, the central agencies, international assistance, Human Resources Development, Transport, and a variety of others.

The fact of the matter is that by and large the deficit reduction savings have occurred in the economic portfolios of government and less so in the social portfolios of government. Agriculture is one of the economic portfolios. Compared with the whole list of all the departments of the government, you'll find the burden we have had to absorb in deficit reduction is very near to the average - in the middle.

What I think is even more important, Mr. Hermanson, in making some of these difficult decisions about where to make the savings, is that we have not taken the meat cleaver, across-the-board approach. We have been, we think, thoughtful and selective in making appropriate decisions.

For example, in our research branch we have had to find savings that total about $50 million, not only from the budgetary decisions made by this government but by the previous government, before 1993. We have found those savings in excess overhead and infrastructure costs. We have found those savings in programs that had previously been undertaken in research activities where the results were, in the language of the scientists, ``totally portable'', so we would not have to do that research work ourselves but in fact could have access to the research work done by others, which means we could concentrate our resources on things that are considered to be priorities.

The fundamental priorities are in fact those things I mentioned in my initial remarks this evening, the fundamental, basic kind of research Agriculture Canada is famous for not only within Canada but around the world. We have found a way, through our eighteen centres of excellence, to focus our expertise in the most cost-effective manner and the most scientifically efficient manner.

.2035

In addition to that, we have recycled many of the savings through the matching investment program, which means that we are leveraging a limited number of government dollars to secure an increase in funding from the private sector.

When you add all of that together, at the end of the day, because of the decision-making process that we went through with respect to our research branch, in the long run we will actually have more, not less, research and development activity being undertaken.

That was a difficult circle to square, but through the professional conduct of our research branch we have been able to do that, and the research standards of agriculture and agrifood in Canada will continue and in fact increase.

So I simply do not accept your premise that this department has in some way been abused by the budgetary process. Have we made a contribution to deficit reduction? Indeed, we have. Have we contributed our fare? Yes, we have - not more than we should have, but not less either. Agriculture is doing its part to contribute fairly and equitably to deficit reduction in this country.

It certainly stands out in distinct contrast to the proposal I saw contained in a document called ``20/20'', which would appear to be the Reform Party's platform, that called for the elimination of the agricultural jurisdiction at the federal level and total devolution to the provinces. Believe me, from the farm constituents I talked to across the country, I think that notion would go over like a lead balloon.

With respect to Mr. Beswick, obviously I believe it's regrettable when a commissioner of the Canadian Wheat Board leaves at any time, under any circumstances, but I do note some of the very careful comments Mr. Beswick had to make at the time of his departure. Yes, in some ways he was critical of board operations, specifically on the issue of barley pricing. It seemed to me, from what I saw and heard and read, that his criticism was expressly limited to that point about barley pricing.

I note that in the message he circulated to the staff of the Canadian Wheat Board on the day of his resignation, amongst the other things he had to say that were critical he also said this:

From a marketing perspective, the Canadian Wheat Board and its staff do not deserve the abuse so commonly received.

He went on to say:

I wish the Canadian Wheat Board well in its difficult struggle to represent the marketing interests of all western farmers.

So I think there was an effort on Mr. Beswick's part to be fair and balanced in his commentary and to point out that despite the criticism he had to offer, there were also some very good things to take note of in the Canadian grain marketing system, of which the Canadian Wheat Board is the anchor in western Canada.

With respect to the western grain transportation payments program, you will know, of course, Mr. Hermanson, that this is an absolutely massive program. It involves over 240,000 applications. It affects very nearly 80 million acres of farmland across western Canada. It involves 13 different soil classifications to be taken into account in the productivity calculations. Over 900 different delivery points need to be taken into account, and ultimately it touches upon the interests of grain producers in five different provinces. So it is a massive program, the largest of its kind in Canadian history, in terms both of complexity and of the dollar value involved.

It has involved the establishment of the largest and most complete database on western Canadian agriculture that has ever been assembled. For the future that database can be quite valuable, I would think, in assisting farmers in a great variety of ways, now that the data has ultimately been collected and computerized in a usable form.

The program depended on the cooperation of those who were supplying data, and the program benefited very substantially from the cooperation of municipalities across western Canada that provided a great amount of the input in terms of local tax roll information and so forth that was vital in the program's administration.

.2040

In any event, despite its complexities, the administration has moved along as rapidly as possible, and at this stage about 90% of the interim payment we promised has been completed. That is, a total of some $976 million has been distributed across western Canada out of a total in the interim payment of just under $1.2 billion. We are closing in very rapidly on the end of phase one of this program. Admittedly, it's a program that in its distribution has taken longer than we anticipated.

Let me go back to your original question this evening, Mr. Hermanson, about the Auditor General. The Auditor General expects there to be administrative standards and practices that are particularly high, when you're handling the public's money and especially a program of this complexity and magnitude. We have taken a little bit of extra time in the administration to make sure that to the extent humanly possible, the kinds of problems that have plagued other programs like GRIP in Saskatchewan are not repeated in the context of this program.

The cases of those applications that remain to be processed are the ones where there are some peculiarities with the application itself. For example, two people claiming the same land may have their own legitimate reasons for believing they are the one who is entitled to file the application. That obviously needs to be sorted out.

In some cases, land descriptions are sometimes obscure. In a couple of cases we've had land claimed in the middle of a PFRA pasture, which is obviously ineligible, land claimed in the bottom of a lake, which is obviously ineligible, and so forth. Those are the kinds of problems that remain to be sorted out. With 90% of the program distributed at this stage, we're obviously closing in very rapidly on the end of phase I.

I'm very pleased to see that the numbers from Kindersley - Lloydminster are particularly positive, representing I believe the largest number of recipients and the largest dollar value overall of any federal constituency on the prairies. Congratulations, Mr. Hermanson.

The Chairman: Thank you, Mr. Minister.

Mrs. Ur.

Mrs. Ur (Lambton - Middlesex): I want to go back to the question regarding the hopper cars, Mr. Minister. We've had briefings from CN and CP, and CN gave us a really glossy briefing that was really well put together. I was taken aback when I got to the back page and saw that Canada ended at Thunder Bay. We do have a little bit past Thunder Bay, and I think Wayne will attest to that as well.

Mr. Goodale: He's way past Thunder Bay.

Mrs. Ur: With that in mind, I agree that we have to watch how it flows. I think our producers are wanting some kind of assurance or some kind of possible regulation or legislation that, as Murray has said, will give them a bit of level playing field. When we had questioned both of these presenters, it was kind of matter of fact. Should we have some extra cars? That may be a good idea. As you say, we expect them to be good corporate citizens and I presume they will be. On the other hand, they also hold the trump card. They have the railways.

We're going to have to work with them and I realize that, but I think we probably aren't on a level playing field if we're looking at trying to compete with them or whatever, especially when we have prices estimated at $420 million and they're looking at perhaps a $100 million sale. Well, I love auction sales and that looks like one I'd like to go to, but I really don't have a great use for railway cars.

Mr. Goodale: It's not an auction sale, it's a garage sale.

Mrs. Ur: It's a fire sale. I'm really concerned about that.

Is it the Ag position that this is going to be just as effective or as heard as the transportation aspect? Are we going to have a parallel approach, parallel meetings, with the fact that we can come to some agreement that our concerns will be addressed equally with those of transportation?

Mr. Goodale: Mrs. Ur, I don't think we need to totally duplicate processes, but I do take very serious note of what was said in the budget documents and what Minister Anderson has said on several occasions in the last little while, as I have said, which is that the interests of producers need to be fully taken into account as this decision is made.

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In that regard, I have encouraged producers east and west to make sure they cooperate and collaborate with each other in dealing with the notion of a potential hopper car transaction. Obviously there is some divergence of interest between the western producers and the eastern Canadian producers, but ultimately they both want the same thing: the fastest, cheapest, most efficient grain transportation system they can get.

As the government receives the various propositions that will come in about the hopper car transaction - and we have indicated we will fully entertain and indeed look forward to propositions coming forward from producers and producer-related entities - I would think it makes good practical sense for the various producer entities that might want to become involved to consult with each other, to collaborate with each other, and if possible, to have a collective approach.

I think it just makes a stronger case if all of the producer entities are arguing the same side of the brief, if you will, rather than fragmenting each other and potentially competing with each other.

Mrs. Ur: Is your ministry going to offer some kind of newsletter or information to these producers as to how they can collectively put in a bidding?

Mr. Goodale: The process will obviously be administered by the Department of Transport. One of the things Minister Anderson wants the Wood Gundy consultant to do is assist in the consultative process to make sure that all of the potential stakeholders and interest-holders in this situation are consulted as the process itself is put together between now and June, and that everybody is fully informed and brought into the loop in terms of information and the various terms and conditions that might apply to the sale and so forth.

I fully expect that the communications effort to be undertaken by Transport Canada and Wood Gundy will be quite extensive, so nobody will be left out. But if there is any information gap, I would be more than happy to try to fill it and make sure this is conducted in a full, fair and open manner and everybody's point of view is adequately ventilated and taken into account.

This is a $400 million asset; 13,000 individual hopper cars are moving a multi-billion dollar crop to market every year. This is a very big enterprise. This whole transaction must be treated in a very serious fashion, because ultimately the health of the Canadian grains industry - whether it's in western Canada or in eastern Canada - depends on a transportation system that is functioning at top-notch capacity.

We have enough minor glitches in the system. We don't need a major one.

The Chairman: Thank you very much, Mrs. Ur.

Mr. Minister, before we conclude, I wonder if I might take the liberty of the chair and get your opinion or a clarification.

I have a question on the 75¢ average increase in freight rate that was outlined in the budget, to take place after the sale of the hopper cars. If we take the assumption that in the west about 32 million tonnes or so of grains are moved a year, that would bring in $24 million or $25 million a year. Do you see that additional freight rate staying in place long enough to return the original cost?

If I could, I'll just throw a figure out as an example, not that it could be or would be the price. If the cost of the cars was $250 million, it would be $25 million a year and it would stay in place for ten years. Or if it was $250 million with 8% accumulating per year, it would take 20 years to pay off this mortgage or this $250 million.

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How do you see the determination for this additional freight rate to stay there?

Mr. Goodale: Mr. Chairman, it obviously does depend, at least in part, on the ultimate purchase price that is settled upon. This is a matter that will be determined in the negotiating process. I appreciate your example is a hypothetical one.

But the language of the legislation would make it clear that the 75¢ is associated with the costs of this particular transaction. One would logically assume that once the costs of this particular transaction have been recovered, then there is no further need for the 75¢.

The language of the budget bill, as I understand it, directly links the 75¢ to the cost of this transaction. So it would be in place for as long as necessary to deal with this cost factor. And the ultimate cost factor is a function of the transaction, which remains to be negotiated.

The Chairman: Do you mean the cost is the original basic amount or the cost with the accumulated carrying cost of that over a period of years with the -

Mr. Goodale: There would be some present value calculation applied to it, Mr. Chairman. Again, I hesitate to speculate about what the structure of the transaction might be. With so many variables and combinations and permutations, it's tough to be definitive at this point.

But a simple transaction might be that XYZ farm organization agrees to buy the hopper cars for a certain price. On August 1, 1998 they write a cheque for this price. The cheque goes to the Department of Transport and the XYZ farm organization is now the owner of the hopper cars.

First of all, how will XYZ farm organization write the cheque? I presume they'll have to float a loan with an institution like the Farm Credit Corporation or any other they may choose to deal with. Then they will have to pay back the loan. Over time the stream of revenue from the 75¢ will provide them with the cashflow necessary to pay back their loan.

Mr. Chairman, just for the sake of clarity, I would also point out that beyond the grain traffic falling under the regulated rate to which the 75¢ would apply, there is also grain traffic outside of the regulated rate for which those hopper cars might be used from time to time. This brings external revenue into the equation. So not all of the purchase price need necessarily come exclusively from this 75¢. There are other sources. And this is where some real creativity needs to come to bear on this transaction, because I think in the final analysis it can be a very good transaction for all of the players.

The Chairman: On behalf of the committee, Mr. Minister, I'd like to thank you.

Mr. Taylor, would you like to ask a brief question?

Mr. Taylor (The Battlefords - Meadow Lake): Yes, I would.

The Chairman: Go ahead.

Mr. Taylor: Thank you very much. This question is about the hopper cars. I was thinking during the minister's answer to your question, Mr. Chairman, of the comments made by the various groups in front of the joint committee last week.

The railroads and the producers talked about replacement costs, not just the original costs. Given the age of the hopper car fleet, they also want to find value in the deal in order to ensure replacement costs for those cars. We can't write this out of the equation. My question -

Mr. Goodale: I think this is an important point, Mr. Taylor. Let me just say there is a way to view these cars as an asset with a certain value today. This value will depreciate over a period of time. This may be 10, 15 or 20 years or whatever the life cycle of the cars is. And then it's moved from$400 million, for example, down to zero.

When you get to zero, what do you have left? I think it is very important to think this through in advance.

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If I were putting together a proposition to acquire the cars, I would not only want to consider the flexibility necessary to regenerate the fleet so it stays in the neighbourhood of 13,000 cars and moves from what is now really old technology to the new technology of hopper cars. This technology has advanced quite considerably since these cars were purchased. I would want to have the flexibility necessary to regenerate the fleet as required, acquire this new technology and if possible expand the fleet.

We always get into this conundrum when we have a huge backlog in the grain system. In a crisis situation, where are we going to get more hopper cars? We look south of the border and pay lease rates of $800 or $1,000 per day, or per week, to get a hopper car into the Canadian fleet. I think we should at least look at whether a producer entity can own a fleet big enough to handle the surge capacity problems. And when you have excess capacity in the fleet, maybe it's the farmers who do the leasing to somebody else for a change and generate extra revenue by reversing the lease equation. I think we should be innovative in this.

Mr. Taylor: I would like, then, to ask my question. A prospectus will be put together by Wood Gundy Limited. The Minister of Transport made it fairly clear the criteria for the purchase of the cars will be developed by Wood Gundy, which has a fair bit of expertise in share offerings and what not.

But your comments indicate to me that you have a bit of a preference for producer ownership or rule-based ownership rather than corporate ownership of the cars. Would you, as Minister of Agriculture and Agri-Food, find it useful if the firm Wood Gundy was provided with some criteria or guidelines from the Minister of Agriculture and Agri-Food and from the farm and agriculture side to guide them in their prospectus building?

Does the government not want to indicate to Wood Gundy that this shouldn't necessarily be a straight financial share package similar to banks getting rid of buildings or a major equipment dealer selling off certain pieces of equipment where it didn't matter who the purchaser was? Would it be useful for the minister to provide information or guidelines to Wood Gundy?

Mr. Goodale: As a matter of fact, Mr. Taylor, in recent correspondence the Minister of Transport has suggested the two of us should find the time for a specific meeting between us on this very point and on the kind of agricultural input that needs to go into this equation. I gather from the Minister of Transport's comments, which I referred to earlier this evening, that he wants a balanced package protecting the interests of the taxpayer - this is obviously important and a responsibility for all of us - but clearly takes the producer interest into account and results in a transportation system that really delivers for the producer.

I would want to be satisfied, in the terms and conditions of the sale and even more importantly in the analysis of the propositions coming in after the fact, that fair balance with the producer interest is very much a part of the equation.

The Chairman: Thank you very much, Mr. Minister. On behalf of the committee, I would like to thank you and your officials for spending time with us this evening. We appreciate your efforts and comments to the minister.

Mr. Goodale: [Inaudible - Editor] ...the opening remarks?

Some hon. members: Oh, oh!

The Chairman: Also in closing, Mr. Minister, I would like to congratulate you on the length of your opening remarks. But I also noted that there were other times during the evening when you made up for them.

Some hon. members: Oh, oh!

The Chairman: This meeting is adjourned.

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