AGRI Committee Meeting

STANDING COMMITTEE ON AGRICULTURE AND AGRI-FOOD

COMITÉ PERMANENT DE L'AGRICULTURE ET DE L'AGROALIMENTAIRE

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, October 29, 1998

• 0902

[English]

The Chairman (Mr. John Harvard (Charleswood St. James—Assiniboia)): Order. Members and witnesses, we will begin our meeting. We have the necessary quorum to hear witnesses.

I would like to call the following witnesses to the front: Mashoud Janjua and Mike Dungate, from the Chicken Farmers of Canada; Robert de Valk, from the Further Poultry Processors Association of Canada; and from the Canadian Egg Marketing Agency, Neil Currie, Félix Destrijker and Laurent Souligny.

Gentleman, I gather that each organization has decided who is going to be the lead-off presenter for their group. Mr. Dungate, are you leading off, or is it Mr. Janjua? Mr. Janjua? Okay, then if I might be arbitrary, we could start with Mr. Janjua, followed by Mr. de Valk, and number three will be someone from the Canadian Egg Marketing Agency—Mr. Destrijker. After we've heard from you, we'll then get to questioning.

Mr. Janjua, we would hope that you can keep your presentation as short and concise as possible. There will be plenty of time to expand on your views when it comes to questioning. And welcome, by the way, it's nice to hear from you.

Mr. Mashoud Janjua (First Vice-Chairman, Chicken Farmers of Canada): Thank you, Mr. Chairman, and good morning.

• 0905

I shall begin with a fundamental question: what is our objective in entering the WTO trade negotiations in 1999?

We must never lose sight of the simple fact that trade should be about more than enhancing the bottom line of a nation: it must be about enriching the lives of its people. We do not seek freer trade for its own sake: we seek it because it will provide our people with rewards for their labour, markets for their products and hope for their future.

This is not my answer, but that of the Honourable Sergio Marchi. Let me say this once again, because it is fundamental to how Canada develops its negotiating position:

We do not seek freer trade for its own sake: we seek it because it will provide our people with rewards for their labour, markets for their products and hope for their future.

What is our objective in entering WTO trade negotiations in 1999? I share Mr. Marchi's view, but I ask this simple question because I believe many key players in the agrifood industry have not taken the time to think about it, let alone answer it. Many identify trade agreements as the miraculous panacea, but as the minister knows, trade is not an end in itself.

I will tell you what the objective of Chicken Farmers of Canada is in entering WTO trade negotiations in 1999: fair and effective trading rules for Canadian farmers, rules that respect their values, realities and needs regardless of commodity or market served. We want a WTO agreement that gives us the opportunity to continue to evolve our industry to meet market demands, to build on our successes, and to enhance our contribution to the Canadian economy. Basically, we want what works for Canada. It is as simple as that.

Canadian farmers are the backbone of many rural communities and contribute significantly to the success and standard of living of an important number of Canadians. In fact, the future of many of these communities is tightly intertwined with the future success of the Canadian agricultural sector. In 1997, the chicken industry generated an equivalent retail value of $3.2 billion. Chicken is definitely a growth industry. Production is up 45% in the last decade. More than 15,500 people are employed directly on farms and in processing plants across the country. In addition, thousands of other Canadians are employed in spinoff jobs in hatcheries, feed mills, transportation, and the food service and retail industries. That job creation process benefits rural and urban communities in all regions in the country.

This continuous growth has been made possible in part because of Canadians' increasing appetite for chicken. Exports have also contributed to the production increase. In 1998, we project to export 6% of our production, up from less than 0.5% cent in 1993.

The major part of our success has been a result of the significant changes we have made over the past years in a collaborative effort to improve links between all partners of the chicken industry. We have crafted a new supply management system over the past four years. It is one that is adapted to our current environment and that brings more flexibility between provinces.

The CFC board of directors has been expanded and now includes two processors, one further processor, and one restaurateur. A bottom-up approach for determining the level of supply needed has been enshrined in a new national allocation agreement.

• 0910

An export policy fully consistent with WTO obligations has been developed in close consultation with the chicken processing community. It allows exporters to take advantage of export market opportunities, while ensuring that the domestic market is not disrupted. Processors are taking advantage of the world's growing demand for chicken, and the policy allows the Canadian chicken industry to become even more competitive both on the farm and in the plants.

CFC's board membership, export policy and national allocation agreement are all examples of our progressive and entrepreneurial spirit in developing policies that meet the requirements of our customers in Canada and in export markets while preserving the integrity and long-term sustainability of the Canadian market for chicken.

So what do we want from trade negotiations? The most significant impact on the Canadian chicken industry from the Uruguay Round was the conversion of import quotas to tariff rate quotas, a conversion process commonly referred to as tariffication. The federal government must pursue a WTO agreement that preserves the ability of Canadians to continue supply management and those marketing structures necessary for the stability and profitability of Canadian agriculture. For the Canadian chicken industry, this means that tariff rate quotas must be maintained.

The intent of tariffication was to provide a level of market access equal to that provided by the previous import quota system. That objective is still valid today. We must maintain Canada's right to administer TRQs in a manner that best suits the requirements of our domestic market and agrifood industries. We must be able to designate the market segments that receive these imports, in accordance with a sound economic development strategy. This is the key issue for our further processing sector. Unlike many WTO members, our country provides real within-quota access that is already well beyond WTO requirements. For 1998, the access to the Canadian chicken market through the TRQ is equal to 10.7% of our domestic consumption during the 1986-88 base period, more than double the level of our WTO obligations.

Before entering into any new commitments, Canadian negotiators must ensure that all WTO members have fully implemented their existing WTO commitments and that, in particular, other countries provide that same level of real market access before Canada considers any further opening of its market.

As I said, Canada has provided real market access. Canadian imports of chicken have risen 85% in the past ten years. In 1997 we imported 67 million kilograms, which is more than the entire chicken production in Canada's Atlantic provinces. Furthermore, these imports from the United States enter Canada duty-free. As a result, Canada constitutes the third most important market for the United States. As you can see, we are not as closed a market as some would like you to believe.

However, since the chicken industry has entered into export markets, we have realized that other countries are not always playing a fair game. Last summer, the United States revived its export enhancement program for poultry products going to the Middle East. European Union market access for chicken is less than 1%. Some Cairns Group members, officially so much in favour of freer trade, do not even apply their own principles. The Philippines apply a 50% in-quota tariff for chicken. Last November, Australia introduced regulations that all imports of chicken be cooked at a temperature of 70° centigrade for 143 minutes—dog food, in other words. Such examples highlight the fact that real market access must be our objective.

• 0915

What do we need to do to succeed? We need to work together. We need a credible negotiating position. Most importantly, our negotiating position needs to be credible to the Canadian farmers. Secondly, it needs to be credible through its consistency of logic—that is, it must be sellable. And thirdly, it must be credible to the principal negotiating countries—that is, it must be a position that is achievable. These three conditions must be met for Canada to have a credible negotiating position that will enhance the competitiveness of Canadian agriculture and promote what really works for Canada.

Chicken Farmers of Canada is committed to working towards a national consensus on an agricultural trade position through our active participation in the Canadian Federation of Agriculture, and through direct contact with other agricultural and agrifood organizations. We firmly believe that the Canadian agriculture industry can work together on a position that encompasses the key interests of all Canadian agriculture.

In conclusion, while events are unfolding on the international scene, the Canadian chicken industry is quickly evolving. We are not the industry we were twenty years, ten years ago, or even five years ago. The chicken industry is a good example of what supply management means to the Canadian economy. Our orderly marketing system has provided jobs, stability and growth to rural and urban communities in all ten provinces. It has also provided a solid base from which the industry has been able to expand in Canada and, more recently, beyond our borders.

As the Canadian chicken industry continues its efforts to be more efficient, it is imperative that government support for our orderly marketing system be maintained through the pursuit of an aggressive negotiating position to enhance the competitiveness of the Canadian agriculture industry. Such a stable policy environment will allow our industry to continue to grow its valuable contribution to the Canadian economy.

Thank you, Mr. Chairman.

The Chairman: Thank you, Mr. Janjua. We appreciate that.

We'll now turn to Mr. Destrijker. Welcome.

Mr. Félix Destrijker (Chairman, Canadian Egg Marketing Agency): Thank you, Mr. Chairman. It's a pleasure to be here this morning. I have with me Mr. Neil Currie, the chief executive officer of the Canadian Egg Marketing Agency, and Mr. Laurent Souligny, the vice-chairman of the board and an egg producer in Ontario. I myself am an egg producer in Quebec, and whereas we have the technology, I will request the opportunity to speak in French.

[Translation]

Thank you, Mr. Chairman. The Canadian Egg Marketing Board is pleased, on behalf of the 1,300 regulated egg producers, to provide this submission to the House of Commons Standing Committee on Agriculture as part of its "Take Note" hearings on the World Trade Organization negotiations for agriculture.

Canada's egg producers feel that we must approach the coming negotiations realistically, fully understanding the nature of the global egg industry and how Canada's egg industry interacts with it. We must also understand what the domestic industry contributes to Canadian society and ask ourselves if these contributions are worth maintaining. The answer is obviously yes.

Canada's regulated egg farmers, who produce eggs under the rigours of supply management, are found in all provinces. Membership by the Northwest Territories is imminent, and we anticipate membership by the Yukon in the not too distant future. Numerous pockets of family-operated egg farms throughout all regions of Canada provide safe, fresh eggs to consumers using local inputs.

• 0920

The vitality of unique local economies is enhanced. These economies are just as important to the citizens who are supported by them as are the larger urban economies to city dwellers.

Eggs produced under the national egg marketing plan add approximately $460 million to the Canadian economy annually, $620 million together with our partners in the egg grading and processing sectors. Approximately $21 million of this is generated from the export of processed eggs. Canadian egg farmers purchase over 700,000 tonnes of grain annually, valued at over $200 million.

Clearly our national industry has a major stake in the World Trade Organization negotiations. So, too, do the communities of rural Canada benefiting from local egg farms and grading operations. As we prepare for the negotiations, we must be mindful of the nature of egg production in other countries, countries that, with the same determination as Canada, will be entering negotiations to enhance their own agricultural sectors.

In 1997, the national flock size in the United States was 246.4 million, while in Canada, it was 17.2 million. Fifty-nine producers in the United States have one million or more laying hens. Canada has no producers with at least a million laying hens. In fact, one business alone in the United States, Michael Foods, produces more eggs in one year than all of Canada's egg farmers produce in a year. Our farms, on average, are one one-hundredth the size of those in the United States.

Despite our size, the Canadian egg industry has served a vital purpose feeding Canadians and buoying rural economies. The stark contrast does serve to demonstrate just how effective supply management for eggs has been in promoting rural diversity while providing fresh, nutritious Canadian products to Canadians.

Already the third largest market for U.S. eggs and egg products, Canada can expect to face increasing pressure for access. With India and China now looking for increased export markets for eggs, the U.S. could lose traditional customers. Facing ever- increasing global competition, egg producers are lobbying their government for Export Enhancement Program subsidies.

In the meantime, the European Union has made it clear it will preserve its agricultural base by restricting imports or increasing direct government payments to producers. Such measures will be undertaken to support their rural communities and to counter the competitive effects of imports produced by countries with lower production standards or lower costs. Eco-dumping, genetically modified organisms, livestock and animal welfare, in general, are issues that have become near and dear to the hearts of citizens in the European Union and to their governments. It would be unwise for us in Canada to say these issues are irrelevant to trade, because they are very relevant to one of the two largest players in the negotiations.

This is the reality of the world egg industry: One of the largest players in the negotiations will aggressively seek new markets, indeed raid them using export subsidies. The other largest player will keep imports out using environmental and production arguments. And countries who traditionally import eggs will require fewer and fewer imports as they develop their own domestic egg sectors to feed their people and promote rural development.

• 0925

Within this global context, Canada's egg industry will continue to need a stable structure, a structure that manages domestic supply and limits access by foreign countries to domestic markets. Such a structure ensures consistent supply and quality for our customers and is a structure that returns costs of production to producers in exchange for high quality, safe eggs.

The Canadian government's goal of $40 billion in exports is indeed an admirable one and Canada's egg industry participates to help Canada achieve that goal whenever possible. As Canada moves forward to realize this objective, the Canadian Egg Marketing Agency asks this committee to keep in mind the significant contribution eggs have made under an orderly marketing system.

Eggs are not unlike other commodities such as grains and hogs. Our egg-producing cousins in other parts of the world report excess supplies and depressed prices. Imagine the impact on our farm communities if Canada's egg industry too, were suffering from depressed prices.

As we move closer and closer to the day Canada must establish a trade position, we must ask ourselves what kind of agriculture we want in Canada. But that is not all. We must ask ourselves what we want for rural Canada, for its farms and for its towns and villages and for its society as a whole.

Canadian egg producers say, without doubt, that we want to preserve and strengthen our supply management system. We want to work with government to develop trade policy to ensure Canadian egg producers continue to contribute to their local economies by recovering costs and reasonable returns from the market.

[English]

Mr. Chairman, we appreciate the opportunity to make this presentation. Thank you.

The Chairman: Thank you very much. I appreciate that.

Now we'll go to Mr. de Valk. We'll hear your presentation and then we'll get around to questions.

Welcome, sir.

Mr. Robert G. de Valk (General Manager, Further Poultry Processors Association of Canada): Thank you, Mr. Chairman. Good morning, committee members and fellow participants.

I want to thank the committee for the opportunity to appear. We asked for this some time ago and we weren't quite sure how it was going to happen. I certainly appreciate the kind of format you've put together here because I think it allows for some dialogue that I hope will be useful to the committee members in coming to grips with some of these issues.

I think the next round of the WTO will be a very interesting one for Canada. Canada will play a leading role in determining its outcome, because on the world stage leadership is sadly lacking, and Canada has always had a pretty reasonable voice on agricultural trade issues.

We want to make sure Canada can again follow up on what it has done and build on it. It's no accident that Canada goes into this round in a strong position because Canadian agriculture has achieved and even set a new objective for exports. I think that is because Canadian agriculture has such a strong base, and we're lucky in this country to have that.

We have a responsibility in the world to ensure that Canadian food goes to those places where it's needed and people in the world do not go hungry. That's another thing we sometimes forget, because we always centre around profits and prices. But certainly Canada has been blessed with agricultural resources and we have a responsibility to ensure they're managed well.

You'll notice that thrust is part of the reason we're taking the positions we do. I think the last time we met with this committee, Mr. Chairman, was when you were discussing vision. We thought that discussion was a very useful one to have and appreciated the committee's involvement, because the government often makes these visions on their own and doesn't consult your committee as much as it should. So we were happy to see that. As a result of that discussion, you came out with a very bright vision of Canadian agriculture. We continue to hold that same vision and think Canada has a very bright future, and the WTO is part of that.

• 0930

Before expanding on our theme, I want to briefly update the committee on who the Further Poultry Processors Association is, because there are new committee members here. Some of you have survived the process and are here again, which is good too because we need some continuity.

The Chairman: We haven't been eviscerated yet.

Mr. Mike Dungate (General Manager, Chicken Farmers of Canada): It's all right. He doesn't eviscerate.

Mr. Robert de Valk: We just add value, Mr. Chairman.

The FPPAC is a trade association where manufacturers of value-added products have opportunities to share visions and concerns. The association was founded by three independent further processors—and by “independent”, we simply mean to distinguish them from other further processors that might be integrated, so an independent is one that doesn't have a slaughter facility—in August 1985, so we have some history and have been involved in many issues relating to how agriculture unfolds in Canada.

The common cause that brought our members together, then, was the concern over adequate supply of raw material, and this today still remains a key concern after all these years.

Our members are engaged in satisfying consumer demand for convenience. We're right at the cusp of the market. We're right next to where the action is. This is achieved by adding value to chicken, turkey and fowl meat—we use a lot of fowl meat for reasons we maybe can elaborate on later—by way of sizing, marinating, cooking, forming and adding other ingredients in order to make ready-to-eat or cooked poultry products and meals.

A number of our members manufacture FDA products, and by that we mean products that contain chicken and turkey meat that can be imported freely into Canada. That's part of the free trade agreement we made with the United States—or the managed trade agreement, as many of you refer to it. One of the things we said is you can bring these dinners in freely because they were allowed in freely before.

Such products are more commonly known as poultry dinners or what we call Kiev-type products. Those products are growing in demand in Canada and the imports of those products are increasing. But as an industry we've been able to maintain our share of that market, even though it's growing, because a policy was put in place by the government to ensure that happens.

Further processors are a key element in the growth we've seen, and you've heard that this morning from the Chicken Farmers of Canada. They said the chicken industry has been growing. It certainly has, but a key component of that has been the further processing side. We both benefit from that, of course, and we want that to continue.

Currently our association is made up of 28 active further processors from across Canada. Our membership accounts for sales of about $560 million, both in retail and food service. We employ over 2,500 full-time employees and are also active in the export market. We've even been successful in exporting to the United States, as well as Russia, Cuba and South Africa. The association is managed by a board of directors, of which Mr. Fred Williamson of Pinty's Premium Foods is currently the chairperson.

Our sector of the industry exists because we provide customers with service and products that others do not provide. In other words, we wouldn't be in this business if we weren't providing a service that was needed in the marketplace. The specifications for our products are often very exact, and we make our money—that's our bread and butter or niche—by responding to those exact specifications. Many of our products have to be competitive with U.S. landed costs, and we have to guarantee prices as long as six to twelve months to our customers.

In order to respond to the specific needs of our customers we rely on raw material from both Canada and U.S. suppliers. It was mentioned earlier this morning that the TRQ and how it's allocated are very important to our sector, and that's certainly correct. We're concerned as a trade association with not only how trade is managed in terms of exports, but how trade is managed on the import side, so we're on both sides of that equation.

• 0935

The foundation of our trade policy rests in the belief that Canada is one of those fortunate countries that has the land base to give us a comparative advantage in the production of many agricultural products. We can grow and manufacture much more food than we can consume, so Canada has that role to play in the world.

It's our belief therefore that free trade, or freer trade, and trade in itself are key components of Canadian agriculture. In other words, we have to be a trading nation because of our position and we have to care about access around the rest of the world in order to keep our agricultural community thriving and achieving its full potential. That includes chicken, turkey, eggs and dairy. In other words, I don't think the supply managed sectors stand separate from those and do not need that kind of exposure. We'll try to explain that to you.

Since Canada can export grain competitively to most world markets, and since as much as 60% of the cost of raising poultry is the cost of feed, it should follow that Canadian poultry can also be exported competitively to most world markets. Our members have proven this to be the case, even in the very competitive U.S. market. This demonstrates that many of our processing and further processing plants are operating cost-efficiently, and as cost-efficiently as those in the United States. Indeed, some of our members, believe it or not, purchase raw material from the United States, bring it into Canada, manufacture it into further process products, ship it all the way to Florida and market it at a profit. So if we can do that, it tells us something.

Perhaps some people in this room do not agree, but we strongly believe Canadian poultry growers, processors and further processors can compete with the U.S. and other major poultry producer countries around the world, providing competition is fair and based on costs without subsidization. In other words, if we let comparative advantage percolate to the top, we have a good chance of being competitive around the world. There's no reason to take second place.

So what are the key policies Canada should be working toward at the next round? One of the things we started at the last round that needs to be continued is to ensure that competition among food-producing nations is fair and based on actual costs. We made progress at the last round, but it needs to be continued. We encourage the Canadian government to be a leader in eliminating all remaining forms of subsidization for both export and domestic production, including the use of attractive credit arrangements. This Brazilian situation on the airplane side is just an example, but those kinds of credit arrangements also exist in agriculture.

At times countries request assistance to help supply food to those in need, and such aid should be provided. But at times the difference between food aid transactions and regular business is marginal. Canada should work hard to ensure that comparative advantage can percolate to the top. Doing so is clearly in Canada's advantage. This fact is well recognized by U.S. agriculture, and that's why they have pushed so strongly to give the President fast-track authority. They know they're going to be winners in a world where comparative advantage can percolate to the top. We're part of that. We're in North America and have similar conditions here in Canada.

Even when subsidies are removed, trade flows can be prohibited and restricted due to border controls, by way of either direct controls like quota systems or non-tariff barriers such as labelling and health requirements. Since tariffication of import quotas has been put in place, we've noticed an increase in the use of non-tariff barriers to try to control and restrict the entry of poultry product around the world, as well as other agricultural food products.

• 0940

At the next WTO, therefore, Canada should press vigorously for the elimination of the remaining trade barriers and propose quicker means of dealing with non-tariff trade barriers, which are not scientifically based.

The current dispute settlement mechanism has worked well. It probably can be improved and strengthened. We need to come away from this round with a more predictable set of trade rules so that export markets cannot be closed overnight and border action serves the agenda, which is a political agenda perhaps more so than anything else.

The volatility of export markets is a risk that most firms are prepared to accept, but a sudden change in the rules governing the trade of poultry products for political reasons cannot easily be factored into business risk. I'm sure you can appreciate that. This is where the Canadian government has a responsibility to reduce the risk of doing business internationally.

Economy of scale is another issue that comes into the trade question. Some may ask, if the export market for Canadian poultry is so volatile, why export at all? There are two compelling reasons why we think we need to do this, in addition to the ones we've already mentioned.

The first is that exporting is necessary to balance the Canadian chicken market and turkey markets. Canadian consumers, on average, prefer white meat over dark. Yet when chicken and turkey are grown, nearly as much dark meat is grown as white.

When we try to explain this to people, sometimes we don't succeed. Yet when we try to explain it by way of dairy, they seem to understand. So let me try it on the dairy side. When you produce butter in this country, you produce butter and skim milk powder. You just can't get away from it: when you do one, you do the other. We know that we set our dairy requirements here to meet our butter demand, but our skim milk powder demand in Canada is not equal to the amount of skim milk powder that comes out when we do this, so we have to export the skim milk powder.

It's exactly the same thing with chicken and turkey. When we produce white meat, we try to set our quota so that all our white meat demands are produced by Canadian producers. This is done to the extent we can, except for the white meat that comes in on the import quota. But then we have a surplus of dark meat. We have to do something with that. Therefore, we need to have a trade component to our industry. We have to get rid of that meat. Luckily, many other countries around the world want dark meat. So it's a natural.

The same goes through for mechanically separated meat. For those of you who don't know what that stands for, it's really a by-product also of boning. It's the stuff that you often get in sausages or other products. It's a ground meat product. That product is also produced in excess of our demand here and needs to be exported.

So MSM and dark meat are examples, on the international market, of the cheapest source of protein that human beings can buy. As a result, Canada is having great success in opening up markets, because there are lots of people around the world who do not have the income to buy the higher meat cuts. Cuba, for instance, is one of Canada's biggest customers. We provide Cubans with that little bit of protein every week. A lot of Cuban children benefit from that program that we have with them because mechanically separated meat is their only source of protein.

The second reason for exporting is that most of our further processing plants need more volume so that the plants and equipment we have can be used to the maximum. For most firms, economies of scale cannot be achieved by serving only the Canadian market. To maintain our share of the chicken and turkey market here in Canada, further processors need to be as efficient as possible, and export volumes often help to achieve that. You can imagine that if we just get one account in the United States, all of a sudden we get more volume from that one account than we do sometimes from all of Canada. So that's why this exporting component is so necessary.

For Canada to be successful at the next WTO round in eliminating subsidies, increasing access, and removing barriers, the Canadian government must also be prepared to adopt similar policies for the Canadian agriculture sector. In other words, there has to be some consistency. In many sectors, Canada is making good progress in this regard. When you look at all the countries at the WTO, Canada is probably one of the more consistent ones.

• 0945

But for supply-managed commodities, high tariffs remain in place. We expect that at the next WTO the high tariffs put in place as a result of tariffication will be the subject of discussion. If this occurs, Canada should be ready to accept the gradual phase-out of these tariffs—and this is where I suspect I differ with my colleagues this morning—so that a suitable transition period is put in place. Since the value of the Canadian dollar is providing considerable additional protection that we didn't expect, the next WTO round is a good time to begin this process.

During the next WTO, countries, including Canada, may be presented with the opportunity to trade off some access for a longer transition period. In other words, increase your access, and we'll give you a longer transition period. We would discourage such trade-off if the increase in access expands beyond the current access for chicken, for example, because significant increases in access could undermine the quantitive border restrictions we now have in place, and therefore cut short the transition period. So I think we have to keep that in place.

Some of our members have discussed a transition period similar to the one that was agreed upon between Mexico and the United States. That was a ten-year phase-out, with a six-year straight line. Our members would encourage the Canadian government to work toward a goal of eventual elimination of tariff protection for chicken and turkey. We do not know what the exact period should be, but this is something that needs to be discussed. Maybe we could start that process today.

To argue, however, at the WTO, that Canada needs high tariffs to protect its poultry industry forever is to take a position that the Canadian poultry industry can never be competitive, and we don't agree with that. I think this will be a difficult position to sustain internationally.

In 1994, this standing committee developed a positive vision for Canadian agriculture. This vision included expanding Canadian agriculture and agrifood exports significantly. It was always our impression at that time that chicken and turkey and dairy were among those commodities and that vision. To achieve the export targets for Canadian agr-food products, we need a transparent and uniform set of trade rules. With Canada's leadership, this can be achieved.

Thank you, Mr. Chairman.

The Chairman: Thank you very much, Mr. de Valk.

We'll get to Mr. Hilstrom in just a second.

If I can get one piece of clarification, Mr. de Valk, you said you want greater access to international markets for your products, and you're willing to give up tariff protection to that end.

Mr. Janjua, I think you said you want greater access to international markets coming out of the next round of WTO, but you want to hold firm on the tariff rate quotas. Usually in negotiations it's a matter of give and take. So Mr. Janjua, if you want greater access to world markets but you're not prepared to give up, say, any of your tariff protection, what would you be prepared to give up?

Mr. Dungate.

Mr. Mike Dungate: If I may, I don't think it's necessarily a question of give and take on tariffs. In a certain sense, if you look at access that we're already providing in Canada...and I'll go strictly to our sector. The U.S. is the largest exporter of chicken in the world. They are three times larger than the next largest, which is Brazil. Yet we're the number three market for the U.S. They're the largest exporter of chicken in the world, and we're their number three market.

Our imports from the U.S. have increased 85% since 1987. We have access. If you look at the access commitments in the WTO, our access is at 5% at the end of the implementation period, but our access increases every year. The more we produce in Canada, the more we produce for export. For every 100 kilograms we export, the U.S. gets seven and a half kilograms more access to our market. I think they like that we're getting into the export market, because they're getting more access here.

• 0950

We need other countries to get up to the access level that Canada is providing in chicken before we're prepared to move. Why do we want to open ourselves up any further when we can't get access into the EU, where they're at 1%? The Australians are putting up phony science as soon as the barriers start to come down. If we're only going to replace tariffs with non-tariff barriers, we're not going to win. Our focus is on real access.

The Chairman: I'm sure other members will want to pursue this further, Mr. Dungate. I'll go now to Mr. Hilstrom for seven minutes.

Mr. Howard Hilstrom (Selkirk—Interlake, Ref.): Thank you, Mr. Chairman. You certainly got us started off, I guess.

In recognizing in all these negotiations that the agriculture economy of Canada is widely diversified and spread out, our grain farmers are certainly hurting a lot, and they produce a lot of the input for the chicken and feather industry. Mr. de Valk, you mentioned the reduction of subsidies, non-tariff trade action and movement more towards free trade. You also mentioned comparative advantage. I'd like to ask whether or not Canada can remain competitive by going into supply out of the Yukon and the Northwest Territories, areas that may not have the comparative advantage. Why would the industry be doing that?

Mr. Neil Currie (Chief Executive Officer, Canadian Egg Marketing Agency): I think the Yukon belongs to the egg industry, so I'll respond to that if I may.

It wasn't the industry's choice per se with egg production in the Northwest Territories. Egg producers from Alberta determined that they would like to produce eggs up there. I understand that they do have some advantages with feed from the Peace River district, particularly with the elimination of the Crow rate, but their costs of production are reasonably comparable to those in the rest of Canada.

In terms of comparable advantage overall, we do have a readily available supply of grain, but we are small production units scattered from coast to coast in the egg business. There may be some economies of scale, as we see in the U.S., where they're a hundred times larger. That, however, is not our choice, not our policy. It's not our intent to move to the large integrated operations. One or two egg producers in the U.S. could theoretically supply the entire Canadian market, and that simply isn't our choice.

We have been developing exports. We do not see the commodity market in processed egg products as a particularly good market. We are looking for other niches in egg derivatives, as we call them—extracts from eggs. Highly value-added products from eggs is where we would like to focus our efforts.

Mr. Howard Hilstrom: So just on the competitive advantage of Canada compared to the U.S. and other countries, would you ever be able to reach a pure competitiveness without supply management?

Mr. Neil Currie: If we had an operation in Manitoba or Saskatchewan with 20 million birds, we probably could.

Mr. Howard Hilstrom: Okay, thank you.

The other question I have is for Mr. Destrijker. In your presentation, you talked of definitely limiting access to the Canadian market. That seemed to be a pretty strong bottom line type of thing. You also mentioned social considerations in terms of rural Canada in that. Is it the industry's suggestion that you want to move to a European style in which there are all kinds of social and rural issues factored into production of chicken, turkey and that across this country? Is that what you're suggesting? The Europeans are saying the reason they have all their subsidies and so on is that they want to keep a certain rural flavour, they want the environment issues, they want.... Do you understand what I'm saying?

Mr. Félix Destrijker: Yes.

Mr. Howard Hilstrom: Okay, then could you comment on that, please? Is that where the industry wants Canada to go?

Mr. Neil Currie: We've actually had some meetings with the Europeans, and we're very interested in their approach to agriculture. As we understand it, they want to protect the agricultural community, and small farms in particular. The notion of multi-functionality is looming quite large in terms of international trade discussions, where they appreciate the multiple roles of agriculture in their society. It is not just producing food. It is not just earning money. It is about preserving the rural landscape and respecting the environment, and so on.

• 0955

We find that very interesting and we also find it very close to our way of thinking. Supply management was created as a domestic agricultural policy to preserve, in a way, the rural landscape in Canada, to preserve the smaller production unit, and that is exactly what we want to continue doing.

Mr. Howard Hilstrom: I would like to pass to my colleague, please, for the last few minutes.

The Chairman: You have two minutes, Mr. Hoeppner.

Mr. Jake Hoeppner (Portage—Lisgar, Ref.): Welcome, gentlemen. That wouldn't give me much time.

Do the European egg producers pay the domestic price of barley or feed or do they get the subsidized price? I have a producer in Manitoba who is building a 1.5-million bird operation just for export as far as eggs are concerned. What's going on here? I just can't quite figure this. We know it is $119 a tonne export subsidy on the feed, and you say 60% of your input costs are feed. Somebody is going to go broke very fast if he is depending on the export market at the prices we're getting. You can't pay $300 or $400 a tonne for feed barley to produce those eggs.

Mr. Neil Currie: The European egg community is losing money in fact in international trade, and they repeatedly tell us that year after year. The egg prices to farmers in Europe are extremely high. The retail prices may be double or triple that of Canada. Then there is direct income support as well, as you're probably aware, to European farmers, including egg farmers. They have income insurance programs. Supply management is our income assurance program. We earn a reasonable income from the market itself through the policies of supply management.

There are individual entrepreneurs in Canada—in your riding, I understand—who are prepared to assume a considerable amount of risk producing eggs for the export market.

Mr. Jake Hoeppner: Aren't they going to take over from the supply management if they're successful? To me that sounds astronomical. He has 1.5 million birds for just export; he isn't even looking at domestic.

Mr. Neil Currie: Yes, the correct number actually is 0.5 million birds. He is a domestic egg producer, he does have quota, and he quite enjoys producing eggs under the quota system and wants to maintain that. He is also taking a risk in looking...in a very entrepreneurial way, and we're not sure it will be successful. He wants to feed his own grain and see if he can produce eggs through the processor for the export market.

The Chairman: We're out of time for this round. Thank you, Mr. Hoeppner.

Madame Alarie, seven minutes, please.

[Translation]

Mrs. Hélène Alarie (Louis-Hébert, BQ): From all the presentations I have heard this morning, it appears—correct me if I am wrong—that, basically, people want open and consistent rules for international trade. However, at the moment, following the latest negotiations, not everyone is playing by these open and consistent rules. We need only think of the export subsidies or the direct payments made to producers. In real life, things do not necessarily work the way they are written on paper. As all these negotiations are going on in an attempt to settle differences, certain sectors of the industry are suffering.

There is another element you raised in certain respects, and I would like to hear more from you on that. I am talking about non tariff barriers. Are concurrent efforts being made to try to understand these non tariff barriers? Are efforts being made to standardize a biotechnology code for the environment internationally, for example? Is something being done in parallel?

[English]

Mr. Mike Dungate: Madame Alarie, I think you're absolutely correct. We were just at a meeting last week in San Diego between North American and European Union farm leaders. I think it is without a doubt that we are at the precipice of opening up the Pandora's box of trade barriers. The tariffs you can see; they're visible, you know what the access is. We're talking about environmental issues, labour issues, and biotechnology issues—what they call genetically modified organisms.

• 1000

Those are issues that are really access barriers. If you talk to the Canadian cattle industry, their biggest barriers are not tariffs. They can't get hormone-treated beef into the EU. If you ask them if they preferred to get a 10% reduction in tariffs, and if they obtained it would they agree to it if they weren't allowed to trade hormone-treated beef, I think their answer would be no. That's where the real barrier is.

If you look at pork going into the EU, it is sanitary issues that are keeping them out. For the cereal people going into the EU, it's protein content requirements. That's where we need to focus our energy—what are those barriers that are affecting our export-oriented agriculture? And I'd challenge to say that it's not tariffs. It's all those other things that are happening out there. When people have reduced their tariffs their industry has complained, as the Australians have, and now the Australian pork industry is pushing their government to have sanitary requirements. As soon as they lose their tariff protection they're just transferring it to another means.

If you don't address the non-tariff barriers there will be no increased access, no matter how much you reduce the tariff barriers.

Mr. Robert de Valk: Madam, I'd like to add that Mike is very much correct on this point, but Canada has been pretty good at dispute settlement mechanisms and we've had a good experience with the United States in the sense of some of these dispute settlement-type operations. And we need to be alert that non-tariff barriers are definitely going to be there and at the next round we won't be able to cover them all. There will always be new ones popping up, but if we have a good dispute settlement mechanism that can take care of these things quickly and let science be the deciding factor through the Codex Alimentarius, then I think we have a pretty good opportunity of getting rid of some of these things over time.

So I think that needs to be done. Canada has to be aware that the dispute settlement mechanism has to come out looking really good, and working quickly and be science-based, and then we have some predictable rules. It won't be perfect but it'll be an improvement.

The Chairman: Thank you.

Now we'll go to Mr. McCormick, seven minutes.

Mr. Larry McCormick (Hastings—Frontenac—Lennox and Addington, Lib.): Thank you very much, and thank you all for being here.

I wanted to follow up on the Manitoba story with the egg marketing agency. But, first, to make sure I understand...you mentioned that there are numerous pockets of family-operated egg farms throughout all regions of Canada. I too appreciate having the best food available anywhere in the world, and the safest, and I think we have that at home when buying local eggs. But how are these local producers controlled if they're controlled under the supply management, and what size of flocks are they allowed if they're outside of supply management? Could I get that clarified, please.

Mr. Neil Currie: Under the national system we allocate quota to provinces and the provincial boards in fact allocate it to their producers. We have production in all ten provinces, and the individual producers would have a quota assigned to them, either through trading of quota or as new entrants into the system. The quota levels vary significantly from producer to producer. The average quota size in Canada is moving up slightly through some consolidation in the industry and probably stands now at about 15,000 birds per producer. That's our figure of 1/100th of the average U.S. flock size.

Mr. Larry McCormick: Thank you. This person or company who's building this new facility in Manitoba has a quota, and they're doing this separate facility for exporting—

Mr. Neil Currie: That's correct.

Mr. Larry McCormick: Is it possible today for a person without a quota to produce solely for exporting a product?

Mr. Neil Currie: No. This is a new situation for the egg marketing agency.

Mr. Larry McCormick: But my question was very clear. Is it possible for me, without a quota, to produce eggs for export?

Mr. Neil Currie: No. It is not.

• 1005

Mr. Larry McCormick: Thank you.

To go over to the processors just for a moment for my next question, I know as you bring products back and forth across the border it's very complex, and you're very successful in many ways. Yet we have the two different sides here, and I'm glad to see you're both here at once.

I wonder if you can give us briefly what percentage of your sales of your finished product are made in Canada, and approximately what percentage of the input of the Canadian sales would come from Canada and the United States. Then, could you give us the same with your sales going into the United States, approximately what percentage of that product comes from Canadian suppliers and what percentage comes from American suppliers?

Mr. Robert de Valk: Those percentages are not something I can just rattle off for you, but—

Mr. Larry McCormick: Approximately.

Mr. Robert de Valk: —let me try to address it.

Exporting to the United States is a relatively new phenomenon. It hasn't built up a lot of business. The number I gave you, $560 million in sales, is all product produced in Canada for the Canadian market, pretty well.

We have a program that Foreign Affairs sets up for us, which we call the import to export program. That allows us to buy U.S. meat to bring into Canada, add value to it, and then ship it back out to be competitive in the U.S. market or any other market around the world. Most of the U.S. exports that are occurring right now are done under that program. In other words, there would be almost 100% U.S. meat in those exports. But we are working with people in this room to try to set up a domestic program much like the dairy program, if you're familiar with that. They have various classes, and they have set up a way that domestic milk can be used to make sure we're competitive and allow exports.

There is an export program already in place for pure exports, but to replace the import to export program, a special program needs to be put in place, and attention is now being paid to that so that in the end we can go to a Canadian manufacturer and give them the opportunity to do that. We're saying, why do we need to give a U.S. manufacturer that opportunity? We should try to do that in Canada. We're working on that, and we're pretty optimistic that can be put in place.

Mr. Larry McCormick: Thank you.

A few short years ago it hit the mainstream publications here and there that you people, or somebody, were wanting to buy more chicken from the United States because Canadian producers could not provide the chicken that McDonald's wants. A lot of people had a hard time swallowing that because of all the excellent production we have available here.

My question is, if there is the gradual elimination of the tariffication, in time, when that time arrives, would you then be able to buy all your product here in Canada from our producers, if enough was available? Or are you still going to want to import?

Mr. Robert de Valk: No, I think when that time arrives—and by the way, I think that time, even with a gradual reduction, will not be until the year 2018 or so. Leading up to that time, we will develop these kinds of domestic programs so that basically, as further processors, we will have the benefit through our import system and through our domestic programs to have a choice between a Canadian manufacturer for a particular product or a U.S. manufacturer.

The advantage of that for the Canadian industry is that we'll be able to source something like a tender, for example, where the Canadian manufacturers may not have enough of that product, because it's a by-product of the breast. It's a little sliver on the breast that some of you may have noticed sometimes sticking out a bit. It's that little tender breast meat. We use more tenders in Canada than we produce—away more. We also eat more wings than we produce. If we could produce birds with three wings, we'd be better off.

So you can see where the benefit to the further processing of having access to both the U.S. and Canadian market for supply can make our industry pretty strong. Then we can pick the product we need and sell it in the markets where there is demand.

The Chairman: Thank you.

You're out of time, Mr. McCormick.

Mr. Proctor.

• 1010

Mr. Dick Proctor (Palliser, NDP): Thank you very much, Mr. Chair.

I just have one question, but I would like to hear from all the groups represented here this morning.

I think each of you has said in your own way that Canada should work to eliminate any remaining subsidies for export and domestic production. I guess my question is this. If we're unsuccessful in the next round of the WTO in reaching that objective—I note that the CFC's brief says that Canada cannot compete with the public treasuries of those two large players—what's our fallback position? In other words, if the EU and the United States in effect tell Canada to go suck eggs on this question, what do we do? As I said, I'd like to hear from everybody, if I could.

Mr. Mike Dungate: I think it's an extremely valid question.

We've done export subsidy elimination in Canada. The U.S. likes to say—this is the term they like to use—we “unilaterally disarmed”. We don't have the export subsidies any more.

They still have the export subsidies in the EU and the U.S. They said they were going to phase them out, and they did. They're still within their commitments, but as soon as there was the need for them, they reinstituted those export subsidies. You have the largest chicken exporter in the world, which is in the U.S., using export subsidies of $1,500 per tonne to go into the Middle East. So I think it's a very valid question.

Look at domestic support. We had a fiscal situation in Canada that we tried to address. We reduced government spending. Agriculture has taken the big brunt of that.

In the U.S., the minute there's a farm income problem.... Last week we saw $6 billion going to U.S. agriculture. Their government is right there ready to put it in. The reports we got at San Diego said that they didn't give agriculture enough money to give them maybe a medium income over 10 years, but this will provide the highest-ever farm income in the U.S. So you have a government that says, in one sense, they're willing to have an open and fair trading system, but then, as soon as it pinches, they're willing to spend the money.

We're not asking for that system in Canada, but if that's what you're up against, you have to think about how you're going to approach it.

The Chairman: Mr. Currie or Mr. de Valk, do you have an answer to this? Mr. Currie.

Mr. Neil Currie: Thank you, Mr. Chairman.

The egg industry in Canada is primarily involved in the export of processed products, so we don't usually deal in the same markets as those in the U.S. Direct export subsidies in the U.S. have been devoted to the export of shell eggs for the consumer market. Therefore, the world price is quite depressed by that.

I think the main position of the major players, at least, is the elimination of export subsidies superficially. As we see with import barriers and so on, I'm sure we'll find new and creative programs for a trade advantage vis-à-vis export subsidies. It doesn't necessarily directly affect the egg industry. It certainly has the effect, either with the obvious export subsidies or the underlying export assistance programs, of depressing the international egg market.

The Chairman: Mr. de Valk, do you have an answer?

Mr. Robert de Valk: One of the realities we must keep in mind is that although the United States is pretty quick to throw subsidies around, that does have an indirect benefit to us in the meat industry. Those grain subsidies often wind up with lower grain prices in the United States. Our feed grain market very much comes off Chicago. Our corn, for instance in Ontario, is now on an import basis. Our corn price is directly related to the Chicago price. So as a result, our input costs actually reflect that situation.

The other thing to remember is that the United States, with a lot of their promotion money and subsidy money, does also open up a lot of markets for us. We're into the Japanese and Korean with chicken. Why? Because the United States opened up those markets.

So there are some benefits to this even if it still remains, but I think we need to always be cautious that if the United States and Europe.... Remember that these are only two countries. Canada can find a lot of partners to take on those two, but if those two countries are stubborn, then I think the rest of the world has to take a hard line on that too and say, okay, if you're doing that, then we're going to do something else.

• 1015

The Chairman: We're out of time, Mr. Proctor.

I just want to pick up on this, Mr. de Valk. The American poultry exporters built up a strong market in Russia, but in the summer the ruble was devalued and the bottom fell out of that market. The Americans, as I understand it, are looking elsewhere, at places like China and so on, but at the same time they've turned to Washington for help—export credits. Does this have any ramifications at all for Canada? Is that of interest?

Mr. Robert de Valk: Yes, I think I mentioned that in my presentation.

The availability of easier credit by international customers is definitely a factor that limits the ability to market products in competition with the United States because they definitely have more imaginative credit programs. But remember—I think Neil alluded to it as well—a lot of these credit arrangements are for specific products and they tend to be commodity-like products. We very much like to focus on developing our exports in areas other than just commodity-type products, so it may become less of a factor there. But certainly in Canada we have to become a little more imaginative in how we help our exporters internationally.

The Chairman: Thank you.

Mr. Borotsik, five minutes.

Mr. Rick Borotsik (Brandon—Souris, PC): Thank you, Mr. Chairman. I just have two questions, one for Mr. de Valk.

I'm very interested in the import to export you talked about when you said you purchased raw materials in the U.S., processed them in Canada and then had them marketed in Florida. Can you tell me what the value of that import to export is currently within the processors themselves? Do you see an expansion of this particular type of import to export?

Mr. Robert de Valk: The value is just under a couple of million dollars.

Mr. Rick Borotsik: So it's a very tiny part of it.

Mr. Robert de Valk: As I said, it's just in its infancy, but the fact that it can be done is interesting and it's expanding.

Mr. Rick Borotsik: Do you expect substantial growth?

Mr. Robert de Valk: We expect growth, but we don't know how substantial it will be. The United States is not standing still. They're watching this very carefully as well.

Mr. Rick Borotsik: I suspect our producers aren't standing still either on this one.

Mr. Robert de Valk: No. I think our producers are saying there's an opportunity for growth there and they'd like to get involved in producing the chicken for that kind of product.

Mr. Rick Borotsik: Are you finding that the cost of the raw material is below the cost of your raw materials on the domestic side into the import-export?

Mr. Robert de Valk: Yes, that's true if you're comparing U.S. raw material to what we regularly buy.

Mr. Rick Borotsik: How much?

Mr. Robert de Valk: It varies on the item.

Mr. Rick Borotsik: Okay, good question.

Mr. Mike Dungate: In 1996 we sat down as a whole industry in chicken. We hammered it out for a year and put in place an export policy. We now have more than 30 chicken processors actively exporting under a national export program. We've driven exports in this country from less than 0.5% to 6% of our production. We're exporting, as Mr. de Valk said, that dark meat component and we're balancing our market.

The result is that a processor doesn't have to get all his revenue from the white meat in the Canadian market. By getting revenue from the dark meat in the export market, we're actually lowering the price of white meat to consumers in Canada by exporting.

Mr. Rick Borotsik: I would like to see some of the comparisons between the consumer prices in the U.S. and Canada, but I won't play devil's advocate on that because I have another question right now.

A letter was sent by Charlene Barshefsky, who is the trade representative in the U.S., to our trade minister dealing with trade irritants. It just happened in October with respect to the South Dakota issue. As part of those trade irritants, there was no mention of supply management. I don't know if that was an oversight or if this is going to be a major discussion point in the next WTO agreements. Can you explain to me why that was not part of the trade irritants?

I'm sorry, I know you're not Charlene Barshefsky, but can you explain to me why that wasn't there? I'd like to hear from the processors as well. Does this mean we don't expect any problems with the supply management of WTO?

Mr. Neil Currie: It doesn't take much to irritate an American when it comes to trade, but we have regular meetings with our counterparts in the U.S. and they understand our system. In fact, they admire our system. Our exports are not going into the U.S. market per se. We trade processed eggs into Asia. We trade processed eggs into Europe to some extent.

• 1020

They definitely want access to our market. We're moving up to 5% access, wholly devoted to the American suppliers. In fact, our access is now roughly 7%, because our processors are requiring more product for their growing market, and we're slowly displacing that latter 2%. So they're quite happy with that, and we'll continue to work with them to try to engage them in a supply management system for North America.

Mr. Rick Borotsik: So I'm to take from your answer that supply management is not going to be a major issue and irritant at the WTO.

Mr. Neil Currie: I think you would have to ask Ms. Barshefsky that.

Mr. Rick Borotsik: Your answer gave me that indication.

Mr. Neil Currie: I hope the answer is yes.

The Chairman: Thank you.

We'll now go to Mr. Calder, followed by Mr. Hoeppner. I should just remind you here, members, that I have five names listed for questioning these gentlemen, and we have three groups after this.

Mr. Calder, you have five minutes.

Mr. Murray Calder (Dufferin—Peel—Wellington—Grey, Lib.): Thanks very much, Mr. Chairman.

The national export policy has been put together, and I'm curious as to how it's going. We obviously had to be green within this, but one of the things I do want to look at with us internally here...because I know why we're exporting dark meat; we have a surplus of it. That's it in a nutshell. The boomers are about 9.8 million people within Canada right now, and we're worried about cholesterol, fat, and all that good stuff, but our kids, who are about 5.5 million, aren't. They're coming up to their earning potential fairly soon, so there could be a resurgence, a demand for dark meat, and I wonder whether the industry itself has looked at it, or whether the processors have looked at it.

Mr. Robert de Valk: Yes, he's correct. We are noticing there is in the younger generation less of a distinction between white and dark meat, and as a matter of fact, in some cases there is a preference for dark meat.

So you're right, Murray. We have to be alert to that possibility, and we're always looking for new product opportunities in the dark meat side, because if we can sell it here domestically, that saves a lot of problems.

So we're alert to that. That will happen, but it will happen over time. But you continually need the export market to kind of balance that. So it always will be an opportunity in terms of selling it on the foreign market, as well as the domestic market, and you're going to use whichever gives you the best opportunity, but you have to have both options available to maximize your planning opportunities.

Mr. Murray Calder: In that situation, then, we've seen exports increase to 6%. Would that be a cap percentage? Would we see a possible decline if there's a resurgence of demand for dark meat domestically, or are we going to aggressively go farther with exports?

One of the things I have a bit of a concern about is that when we went through the negotiations in 1993, one of the strong points with us was that we are supply managed, we feed a domestic-only market, and we're not causing any problems internationally, because we don't export.

Mr. Robert de Valk: I think you want to look to the United States to see the template that's reasonable.

In the United States about 16% or 17% of their meat is exported. Mind you, it's all leg quarters and it's dark meat, but that's roughly where it sits. In Canada we can probably balance our market with significantly less, because we have the import quota. We use the import quota to bring in mostly white meat. That's 7%. So right away you can say, if our consumer population balances out roughly the same in white and dark as the United States, our maximum would probably be around the 10% level. So we're not that far off where we should be in terms of balancing.

Mr. Murray Calder: One of the things I'm concerned about here is, Bob, you made the statement that Canada should work to eliminate any remaining subsidies for both exports and domestic production. I know in the United States, for instance, that is not true, because they put EEP on a shelf, and they've dusted it off again and they're using it. They have the U.S. Farm Bill, which is $35 billion over seven years—$5 billion a year. They just came out with the U.S. farm aid package. It's $6 billion. In fact, there's $3.1 billion that goes directly into crop subsidies, and it's stated as such.

• 1025

I also know that no matter what the United States says about supply management, they also look at that in a favourable way because they have it for sugar beets, peanuts, and cotton. In dairy, you have the New England Interstate Dairy Compact within Wisconsin. So they're using supply management themselves, too.

It concerns me when you make a statement like that. I said before that this is almost like going into a game of strip poker in which we already took our shirt off.

Mr. Robert de Valk: I'm not suggesting that the positions we suggest to you today be Canada's negotiating position on a piece of paper that we send to Geneva ahead of time. I'm saying that Canada has to be prepared and should set some objectives. The objective, if you look at Canada's agricultural system, should be to maximize, as one of our participants said earlier, our industry's potential in the world. To do that, we need a world with predictable rules and no subsidies. We may not achieve that world even in our lifetime, but it's a worthwhile objective, and one that Canadian agriculture can benefit from. So as was said earlier, we have to be alert that if a certain set of subsidies still stays in place, then Canada's agriculture should not be disadvantaged or hurt by that.

So don't get me wrong, I'm not saying we should just go out there and say Canada is going to unilaterally eliminate all subsidies and hope the rest of the world will follow. That's not the strategy to take.

The Chairman: Thank you.

Mr. Hoeppner.

Mr. Jake Hoeppner: Thank you, Mr. Chairman.

I want to continue on the issue of what McCormick brought forward about how you can compete. Mike Gifford told us the other day as a witness that in 1997, I think it was, the Americans had domestic and export subsidies of 16% given to their farmers; Canadians were up to 20%. So the Americans are not really over-subsidizing compared to us.

Now, isn't the big issue that the domestic and export subsidies on grain the Europeans give is really the trade-distorting factor? If that will provide a level playing field around the world, then your meat and egg production would fall right in line and be regulated by a true market-driven economy. So the base product, as far as I'm concerned, is what's distorting all the other products. Am I wrong on that or am I right? I have feeling that in a utopia, a perfect world, if subsidies were done away with, no matter whether they were European or Canadian, everything else would follow in step. Am I wrong?

Mr. Robert de Valk: I think you're very close to where we should be focusing. In other words, if Canada had some priorities, then getting the subsidies off the grain side would get rid of more distortion than focusing on something else. So I think you're right about that.

Mr. Jake Hoeppner: Thank you.

Mr. Mike Dungate: I just wanted to respond to that. From the analysis we've done at the level of the Canadian Federation of Agriculture on domestic support, this depends how Mr. Gifford reported it.

Say you talked about green box support, which is supposed to be non-trade-distorting policies. Look at the last round. While Canada reduced its trade-distorting domestic support—it just got rid of it—the U.S. just converted it all to decoupled support. Those farmers weren't getting a penny less, they just got it in a different way. If you look at green box support in Canada, ours is 8.1% of the value of production, while support in the U.S. and EU is 24% and 28% respectively. We're way down in comparison to them.

Mr. Jake Hoeppner: I appreciate that.

Mr. Mike Dungate: Yes.

The Chairman: Mr. Breitkreuz.

Mr. Garry Breitkreuz (Yorkton—Melville, Ref.): Thank you, Mr. Chairman.

I've quite a few questions. I hope I can get through them.

I want to make one observation in reply to Mr. McCormick's questions. There seems to be a real glaring contradiction here. If it's not possible to produce export products without a quota, why would anybody even want to do it? As for one area subsidizing another, it seems to me there's a real problem in the answer there.

But the key thing I want to zero in on is that we have a problem with the net income to prairie farmers on the grain side. You cannot separate what we are doing here today in this discussion on marketing boards and so on from what is happening in other sectors of agriculture. We hide our heads in the sand.

I noticed somebody said here that we must never lose sight of the simple fact that trade should be about more than enhancing the bottom line. We know that one of the key trade irritants—and we can't really dispute this—is that other countries can point to the tariff spikes we have, and it really hurts us when we are trying to get rid of subsidies that other nations, such as the Europeans and Americans, have on their grains. You cannot deny that there is a direct link between your segment of agriculture and all the other sectors of agriculture when it comes to negotiating, can you? We can sit around this table and we can defend our position to ourselves, but it doesn't help when we go to the World Trade Organization talks to try to redo subsidies of other nations.

• 1030

The Chairman: I want to remind you that you're working through Mr. Hoeppner's time and there's only about 90 seconds left.

Mr. Neil Currie: As a clarification on production without quota, it's true you can't produce eggs in a sizeable operation without quota in Canada, but we're working to develop export quotas, refining our export policy that has been in existence for actually 20 years. We are part of agriculture and therefore in some fashion linked with all other parts of agriculture. The consumers of eggs in Canada are certainly benefiting from lower grain prices, it's unfortunate for the grain farmers. We're advocating that the Government of Canada support the grain industry and the red meat industry through the elimination of export subsidies to improve their market, possibly through an income insurance scheme.

I would point out that all other countries support their agricultural industries in many different ways. Our choice of policy in Canada, to our benefit, is supply management rather than income insurance schemes in the poultry and egg sectors. That is our policy of choice and we would like to maintain that through the negotiations.

Mr. Garry Breitkreuz: Yes, but the point is that there's no equity between the various areas. You have protection in one area but you don't have—

Mr. Neil Currie: We're playing by exactly the same rule book as everyone else, and our tariff rates were calculated using the same modality as all other countries. In fact, it's significantly lower than many other countries' in other products.

Mr. Garry Breitkreuz: The point is that we can't protect the other sectors because of the high tariff spikes in one sector.

Mr. Mike Dungate: In the WTO agreement we didn't push for tariffication, we wanted to get article 11. We went with tariffication because that's what the EU and the U.S. wanted. They pushed for it, we accepted it, and we converted our tariffs just like others. We have 21 tariff rate quotas; there are more than 1,300 around the world. We don't have to defend ourselves; we have to put the others under the light and be aggressive in pursuing Canada's interest not in trying to defend our policies.

Mr. Garry Breitkreuz: You bet.

The Chairman: Thank you very much.

Mrs. Ur, five minutes.

Mrs. Rose-Marie Ur (Lambton—Kent—Middlesex, Lib.): I'd like to continue on the line of questioning from my colleague Murray Calder to Mr. de Valk. Has your industry basically bartered away all the chips already, compared to the United States? They have three chips ahead of us. What have we left to barter here in Canada?

Mr. Robert de Valk: I'm not sure if I understand the question, in terms of what we've bartered away. Could you explain that?

Mrs. Rose-Marie Ur: The fact of the matter is they have these enhancement programs with dollars that have been added in. Our Canadian farmers don't have that presently. So when we go to the WTO, what can we offer as a bartering? We basically played fair game from day one, and the U.S. hasn't, of course, so what can we give away when we've already been the good corporate citizens?

Mr. Robert de Valk: If your view is that Canada is already behind the eight ball and the rest of the countries have to catch up, then I suggest you bring that view to the WTO and see how far you get.

Mrs. Rose-Marie Ur: Another debate is that our sector of the further processing industry exists because we provide our customers with service and products that others do not, and I congratulate you for that. We have to ensure that we're constantly extolling the great virtues, that our exports are up, but we have to remember whether our primary producers can say the same thing with the export markets going up. It's well and good to have the further processing, and one can't survive without the other, but are you taking this into consideration when you're looking at your industry?

• 1035

Mr. Robert de Valk: Yes, we're coming to a crunch now, and this summer is a very good example of how dependence on the United States for some of our materials can be disastrous, because certainly Canadian further processors are not number one on their list. They have their own industry to worry about, and when they get in tight supply we're in trouble. That's what happened this year because of a hatching-egg situation in the United States.

So it was a wake-up call for us. We've perhaps become too dependent on U.S. material to some degree. Also, the FTA access has been running out and we need to replace that with growth. So we're definitely excited about the prospect of getting a domestic program in place and ensuring that we can have a domestic alternative so that the growers and the processors, and the feed manufacturers and the truckers, in Canada can share in that growth we're developing in the export market.

Mrs. Rose-Marie Ur: In your particular industry, do you have a more level playing field, compared to our primary producers, with the United States?

Mr. Robert de Valk: Our further processors are competitive with the further processors in the United States, yes. There's a fairly good level playing field if you look at everything other than raw material costs.

Mrs. Rose-Marie Ur: Also, you stated that increased and improved access of the current dispute settlement mechanism has worked well, but we could probably improve and strengthen it. That's a statement you've made. Can you expand on what you were actually intending to say?

Mr. Robert de Valk: I think the biggest problem with dispute settlement mechanisms is that they all take time, and if we could shorten the amount of time that's involved in these kinds of things and also clarify the rules in terms of evidence that will be considered, much like we have with the United States in terms of the free trade agreement there, I think that's a good model to build on. And internationally it would be helpful if we could clarify those rules and shorten the timeframe.

Mrs. Rose-Marie Ur: Finally, should we be matching the U.S. subsidy for subsidy?

Mr. Robert de Valk: No, I don't think that's a good strategy. The United States always has more dollars than we do. We have to be smarter about what we do. We can out-guess, out-work and out-muscle the United States in a lot of areas. We're smarter in some things we do. We're better than them, for instance, in making fowl products, and we're better than them in MSM products. We have a good reputation internationally. We just have to show up in some markets and we'll get a share of it.

We have to work together as an industry and target where we want to go and be smart about it. The subsidy-for-subsidy game is one that will lead us down the road where we can't win.

The Chairman: You have one more minute.

Mrs. Rose-Marie Ur: I have one more question. The Ontario Egg Producers have stated they: “...can meet the needs of our consumers and feed our citizens. We must not allow other countries to step in and do this for us.” And you said we must ask ourselves what kind of agriculture we want in Canada. What kind of agriculture do you want in Canada?

Mr. Neil Currie: We want supply management.

The Chairman: Thank you very much.

Four members have indicated they have more questions. If each member takes his full time allotment, that'll take us to the top of the clock and then we will have to finish this particular discussion with these groups and then we'll bring in three more groups. We do have the room until 1 o'clock.

So we now go to Madame Alarie for five minutes.

[Translation]

Mrs. Hélène Alarie: I have another brief question, along the lines of the one Ms. Ur asked last. From the briefs I have heard this morning, production and processing philosophies differ. Based on that, I would like more discussion of the question posed by my colleague. In the negotiations, our objective can be to significantly increase Canada's current exports. But should we not have as an underlying philosophy that Canada must not become dependant on other countries to feed its people? This harkens back to the concern expressed by the Canadian Egg Marketing Agency, which is very anxious about quotas and maintaining a healthy rural economy. I would like to hear more about these two philosophies, please. What do we really want for this country? That is the question.

• 1040

[English]

Mr. Neil Currie: It's a very good question. With respect to the desire to increase agricultural exports, we agree with that completely. We are participating in the development of further value-added exports through our processing sector, and we hope that the producers can form alliances with the processing sector to actually get the benefit of that value-added export product.

But that's macroeconomics, and a $40-billion improvement or $40 billion in agricultural exports doesn't speak to the communities in Canada that depend on the independent businesses in their rural communities, the independent businesses that supply management allows to buy local inputs and use the local banker.

It's very easy to set up an egg operation and perhaps a poultry operation in Medicine Hat, for example, that might feed the entire west with all the eggs it needs, providing you can distribute them. But that's not what we want for Canadian agricultural policy; we want the small, diversified egg industry that we have today.

Mr. Mike Dungate: I think what we can't lose sight of is how interrelated the whole industry is. We have to work together as a whole industry—producers, processors, further processors, restaurateurs. In most provinces in this country, there is one processor in that province. If that processor is not competitive, if he doesn't get competitive inputs from farmers and that processor goes out of business, those farmers are out of business too.

I'll give you a case in point. Lilydale is closing its poultry processing facility on Vancouver Island. There's one feed mill on that island. If there's no poultry processing on Vancouver Island, the chicken farmers will leave. But now the dairy farmers and the other farmers are being affected, because now that feed mill doesn't have enough capacity to stay in business.

There's a linkage between all of agriculture. If we start chipping away at it, at one point we're going to lose that critical mass in our rural communities, and those rural communities will shut down. We have a big land mass across this country. That's the reality we have to deal with.

The Chairman: Okay, thank you.

Mr. Coderre, you have five minutes.

[Translation]

Mr. Denis Coderre (Bourassa, Lib.): If Mr. de Valk could come back, I would like to ask him a question. Saved by the bell. I am what they call an urban cowboy, but I eat a lot of chicken and eggs. When she was pregnant, my mother had two cravings: she ate a lot of chicken and a lot of french fries. That should help you a bit.

A people's sovereignty lies in their ability to feed themselves. From what I have heard, there are two distinct philosophies. There are the real producers, the people on the land, those who work right with the cows, who are there everyday and who feed their livestock. And there are the processors, who make use of the producers, but who belong most of the time to the American multinationals. If I am mistaken, please tell me. I am young and prepared to learn. Mr. de Valk, how can you talk about protection of Canada's interests, when most of your members belong to American multinationals? Is that why you oppose supply management?

[English]

Mr. Robert de Valk: Well, you made a couple of mistakes there.

Mr. Denis Coderre: Go for it. Talk to me.

The Chairman: For Denis, that's a good day.

Mr. Robert de Valk: First of all, most of our members are not part of American nationals; they're Canadian companies. As a matter of fact, only two are.

Also, to say we're against supply management is wrong.

Mr. Denis Coderre: So you're for it.

Mr. Robert de Valk: We are part of supply management.

Mr. Denis Coderre: Okay, so you support supply management.

Mr. Robert de Valk: We're part of this group that's right here. Supply management is part of the environment we work in.

Mr. Denis Coderre: So if I'm asking you whether you support supply management, the answer is yes.

Mr. Robert de Valk: Yes.

• 1045

Mr. Denis Coderre: Okay.

Mr. Dungate, I'd like your reaction on that, not on my rage but on my statement.

Mr. Mike Dungate: On whether he supports supply management or not?

Mr. Denis Coderre: He does. Am I making mistakes or what?

Mr. Mike Dungate: His membership, for the most part, I agree, is Canadian owned. There are a few multinationals in that membership. They're generally smaller companies, because they don't have slaughter facilities; they don't have that integrated capacity.

His members don't have the capacity to buy our product. It has to go through someone else. Unfortunately, that someone else isn't here today, and that's a key player in our industry, because—

Mr. Denis Coderre: If we get rid of supply management, does that mean it will be easier for an American company to get in?

Mr. Mike Dungate: If we get rid of supply management, it's not easier for an American company to come in here, in a certain sense, because we've now disconnected supply management from tariffs. With GATT article 11 gone, that's a decision on.... We can have supply management in Canada if we don't have the tariff protection...or not tariff protection, if we don't have the ability to regulate supply both domestically and internationally. You need it from both components. You can't have unlimited supply in Canada, and you can't have unlimited supply internationally. The tariffs are there to regulate the amount of access.

[Translation]

Mr. Denis Coderre: Do the eggs want to respond?

[English]

Mr. Neil Currie: After all that, I can't remember what the question was.

In regard to the egg business, here are a couple of points that may not be directly related to your question.

We're slightly different from the poultry business. We have very good relations with our further processors; in fact, they benefit tremendously and have grown tremendously with supply management. We are contracting with them directly and, as I said, creating alliances with them in order, hopefully in the very near future, to become part of that industry as producers and share in the further value added.

I can only repeat and emphasize what Mike said. Supply management and the distribution of income across egg producers in the whole country relies almost exclusively on cooperation domestically and the management of domestic and international supply. It's critical to us.

The Chairman: Okay, thank you very much.

We'll go to Mr. Borotsik, and then the remaining time will be divided between Mr. Breitkreuz and Mr. Hilstrom.

Mr. Borotsik.

Mr. Rick Borotsik: Thank you.

My question is to the egg producers. You had indicated that you were looking at export quotas. You're involved obviously in domestic quotas right now in your industry. Why do you feel that you have to be involved in the export quotas, as we talked about a producer in Manitoba right now looking at the export market? Why does your industry or your organization feel that you have to be involved in export quotas?

Then I have another question of Mr. Dungate, if I could.

Mr. Neil Currie: As we were suggesting earlier, the value of product on the export market is less than that in Canada, therefore the quota is a matter of managing the supply and the security of that product to ensure that the producers aren't really trying to get into the domestic market inadvertently.

Mr. Rick Borotsik: So it's protection for your own organization, then—

Mr. Neil Currie: Yes. It's part of our supply management system.

Mr. Rick Borotsik: —more so than the producers who want to get into that risk. You said there was very high risk in that export market.

Mr. Neil Currie: Yes.

Mr. Rick Borotsik: You don't care about the risk for the individual entrepreneur; you're more concerned about—

Mr. Neil Currie: We are very concerned with the risk.

Mr. Rick Borotsik: Your own.

You gave a passionate plea, Mr. Dungate, and I really appreciate it, about the rural communities. You gave an analogy between the one feed mill and all of the rest, the trickle down. I appreciate that. I come from a very rural community.

In saying that, why would you then not want to expand your base of producers? The smaller producers are having difficulty in being able to get quota, quite frankly, or for that matter, a non-quota producer, a small producer of the 499 variety, with chickens. Why wouldn't you expand that base and let more producers get into the industry, as opposed to less right now? It's a very small, protected marketplace that you have of producers. Why wouldn't you get more producers in there?

Mr. Mike Dungate: Just because I have a handy fact book here....

Mr. Rick Borotsik: Perfect. I asked the question; I expect the answer.

The Chairman: Throw the book at him.

Mr. Mike Dungate: All right.

Mr. Rick Borotsik: I'd like to hear the answer.

Mr. Mike Dungate: We have been fairly consistent in size in the last four years, but probably in the last decade we're up about 25% in the number of farms.

• 1050

Mr. Rick Borotsik: Could you give me numbers? What does that mean?

Mr. Mike Dungate: We've gone from about 2,100 farms to about 2,800 farms. That's our quota holders in chicken.

I suspect it's relevant to Manitoba, so I'll answer it from a Manitoba perspective. They've expanded in Manitoba quite dramatically. Our system has been flexible enough to allow Manitoba to expand at a greater rate than other provinces.

Mr. Rick Borotsik: It had a lot to do with the Crow rate.

Mr. Mike Dungate: Okay, but that someone else's issue.

In a certain sense, we've just sat down. One of the highest cost factors we have, where we figure we can save money, is in getting chicken from the barn to the processing plant. There is a uniform size. You need at least a certain size of production facility so that the truck going out to pick up the chickens is full. It's not going out half empty to that little barn there, half empty to that barn, half empty to that barn. That's a huge cost. We want to try to have, and we've worked with the industry to try to have, larger production units because that's more efficient. We've tried to locate them closer to processing plants.

Mr. Rick Borotsik: But isn't that a contradiction? You want larger production units, but you just said that there's a need to retain the rural influence, and that in fact comes from a lot of smaller production units. Isn't that a bit of a contradiction?

Mr. Mike Dungate: They're all growing. They're all growing.

[Editor's Note: Inaudible.] ...will be decided on Friday.

The Chairman: Thank you very much.

Mr. Rick Borotsik: We'll have a discussion. I'd like that.

The Chairman: Thank you. Mr. Breitkreuz and Mr. Hilstrom can share the next five minutes and that's it.

Mr. Gary Breitkreuz: Thank you very much.

I thought urban cowboy over there would be asking what effect the world trade negotiations would have on his constituents if the marketing boards were phased out. How much would the price of eggs and chickens come down?

Mr. Rick Borotsik: I'd love to get you on a bucking Brahma bull.

Mr. Gary Breitkreuz: Anyway, we won't pursue that.

You've told us that Canadian processors are importing U.S. meat and exporting the final products back to the U.S., as far away as Florida. I find that very interesting, because when this happens, the Canadian producer is competing directly with the U.S. processors, is that's right? They're buying the same birds and they're selling their products to the same customers. Now, my question is, why don't Canadian processors buy Canadian birds?

I think there are three factors here, and I'd like you to comment on them. Is it due to the country of origin rules, which might impose a tariff or a duty? Or is it because Canadian birds aren't currently competitive? Or because you can't get what you need here? Are these factors in the decision? I'd like you to comment because I find this a very interesting situation.

Mr. Robert de Valk: Yes, the last two you mentioned are the key.

Often there are cases where we need a particular raw material. It's not birds. If it was just strictly birds, we wouldn't have a lot of problem. But it's a tender, or specific size of breast, or it's a wing that isn't available in Canada, so we get it in the United States.

But the other element is, of course, the competitiveness. We do not currently—although the export program is now getting close to it—have a special program, like the one the dairy people have, that allows us to purchase the product we need on a competitive basis for that export. We have the Foreign Affairs program in place, which is import to export, and this allows us to be competitive.

As this market develops and we get beyond two million in sales—and we get four, five, six, seven, twenty, thirty million—there's obviously going to be more and more interest for Canadian growers and processors to get involved. And we recognize this, and we're encouraging and involved in discussions right now to develop a program to take advantage of this, so we can get Canadian processors bidding on those meat needs as well.

The Chairman: Mr. Dungate, do you want to say something?

Mr. Mike Dungate: I guess the point here is that he is not buying from a U.S. farm. He is not buying a bird. He is buying from a processor in the United States. This isn't a result of, or caused by, supply management. This is the result of the situation in Canada where an independent further processor is competing directly in the market with an integrated processor who has both slaughter facilities and further processing facilities.

The supply problem that Rob talks about is more a question of whether that integrated processor, to whom we can only sell our birds, is willing to sell product to a competitor who doesn't have the advantage of having slaughter facilities. That's where the issue needs to be worked at, not at the initiative of supply management. If he's got a market, we're going to grow the birds for it.

• 1055

Mr. Garry Breitkreuz: He said he's supportive of supply management.

Mr. Mike Dungate: I heard that, too.

Voices: Hear, hear!

Mr. Garry Breitkreuz: Okay, we could go on and on here.

Mr. Robert de Valk: That shouldn't be such a surprise. We were here in 1994 and said the same thing. Come on, guys.

The Chairman: The chair acknowledges Mr. Hilstrom.

Mr. Howard Hilstrom: Just to wrap up on this, rural Canada is going to survive without a chicken farm in each and every town and each and every rural area. Really it isn't a good concept to bring out, because if it didn't have a chicken farm or producer, rural Canada would adapt and produce something else on that land. If the consolidation of the chicken industry ended up with larger production units, rural Canada isn't going to suffer that much.

The U.S. has some 350 million people down there. We have 30 million. Is the chicken and poultry industry not interested in accessing fully that 350 million people market through the freeing up of bilateral trade with the U.S.? I don't know whether it's under the free trade agreement access. Is that not an ultimate goal of the industry?

Mr. Robert de Valk: Mr. Chairman, we have our eye very much on that market because we can see niche markets down there. In Florida, for one example, if we can develop a product for only a very small section of the U.S. market, our volumes go up dramatically. He's certainly correct that the U.S. market is very similar to ours, and when we make products for our Canadian consumers, there's a good chance that U.S. consumers would like them as well.

Down there, they actually have such large-scale plants that they can produce thousands of the same dinners in an hour, whereas we have the good skill of producing a different dinner one hour, and another dinner another hour. We've become good at that, and we can niche market in the United States and have that.

What we're concerned about, of course, is that the moment we start increasing our exports in the United States they will very quickly start to find somehow some non-tariff area so that our chickens can't get into their market. Right now we basically have free entry into the United States. There's nothing to prevent our poultry from going into the United States, but we have controls coming back.

We're very leery of being kept out of the U.S. market. That's why I think Canada really has a choice at this next WTO. The choice we're facing here, and where I think we need to provide the government with some guidance, is on whether or not we want to let market forces decide the structure of our supply-managed industries. That's the crossroad we're at right now. There are a lot of market forces, and we've discussed it. Manitoba's one of them.

Do you want them to manage the adjustment process, or do we want to manage it? We are on the side of the people who say we want to manage that restructuring process, don't just let market forces do it. Part of this means you have to have a phase-out of your tariffs. That's part of managing it. Just letting the tariff sit there is basically letting market forces do it.

The Chairman: Thank you. You have your eye on the market. I have my eye on the clock. Do you think you could respond in 30 seconds, Mr. McCormick?

Mr. Larry McCormick: Mr. Dungate, here in Ontario some egg producers and chicken producers could share the concerns of the dairy industry that getting into these non-quota businesses could help destroy the supply marketing system from within. I just wondered if you had a closing comment on that.

Mr. Mike Dungate: I'll just say quickly that the policy we have on export states that regulated producers will produce the export production. The reason is that we want the whole industry growing together. We don't want to divide the industry into some who are completely export oriented and some who are completely domestically focused. If we're going to move together and advance as an industry, it's going to be together.

The Chairman: Thank you very much.

That will have to be all for now. I want to thank all the gentlemen.

Members, we'll take about a two-minute break and then we'll bring in three more groups.

• 1059

• 1109

The Chairman: Members, it's time to resume our questions, so I would ask you to take your seats. We have the room only until 1 p.m. and we have to hear from three more organizations.

With us now are representatives of the Canadian Broiler Hatching Egg Marketing Agency, Martine Mercier and Paul Jelley; from the Canadian Turkey Marketing Agency, John Stolp, chairman, and Phil Boyd, executive director; and from the Ontario Egg Producers, Henry Koop and Brian Ellsworth. I think that's an appropriate name—Koop. We'll let you out of your coop today and you can roam around this yard for a while.

• 1110

Mr. Howard Hilstrom: I have a point of order, Mr. Chairman. I'd just like to confirm from our conversation outside of committee that my motion to have the hearings in regard to the income question was passed in whole.

The Chairman: That's my understanding, but I'll check with the clerk.

Mr. Howard Hilstrom: Could you confirm that it was totally passed?

The Chairman: Yes.

Mr. Howard Hilstrom: Thank you very much.

The Chairman: Your motion has been passed, and the first meeting will be held next Wednesday between 3.30 p.m. and 5.30 p.m.

If I may be arbitrary, I'll start with a representative from the Canadian Broiler Hatching Egg Marketing Agency. As you know the format, Ms. Mercier, we'll hear from you and then the other two representatives. Then we'll go to questions. Go ahead, please.

[Translation]

Ms. Martine Mercier (Chair, Canadian Broiler Hatching Egg Marketing Agency): Thank you, Mr. Chairman. I congratulate you on your chairmanship.

I am delighted to represent my 300 or so fellow hatching egg producers, a sector that represents about $168 billion a year.

Before getting too far into today's subject, I would just like to say that current market conditions in hatching eggs provide proof positive that supply management does indeed work, that it does benefit the consumer as well as the producer. This was mentioned a bit, earlier.

Due to tight market conditions in the North American market, there is evidence of US product being brought in at prices as high as $7 - $8 US a dozen. Meantime, despite the tight supply, our price remains constant at $3.50 per dozen, Canadian. That, to us, is clear evidence that supply management works both ways.

Given the chaos in today's financial markets, there is wisdom in ensuring there is a solid foundation; that the rules are in place. As the finance minister said recently: "Everybody was too busy making globalization happen to spend any time making globalization work."

We feel we have the same situation in agriculture. The 1994 World Trade Organization agreement has resulted in some strange and unbalanced rules. For instance, a country with no primary interest can take another to the WTO court. Witness the Americans requesting and winning a panel on whether the European Union should buy its bananas from Caribbean countries or Latin America. The Americans have no primary interest. Then there is the Blair House agreement, which ended up to be the final result of the Uruguay Round. It was a bilateral agreement, to which we finally agreed.

I have just returned from a European Union/North American farm leaders meeting where we learned that neither the Americans nor the Europeans will, in all probability, be ready to negotiate in keeping with the Uruguay Round built-in agenda, i.e. in 1999. American agricultural experts say that fast track will not be a reality until 2001. The EU farm leaders say that reform of the Common Agricultural Policy will be extended to at least the fall of 1999 and possibly longer.

So, it would appear that Canada has more time to formulate its trade policy. This time, we would encourage Canada to set and enunciate to the primary sector its goals and objectives for the round. Possibly, with them set, we will fare better than was the case in 1993. The evidence is really somewhat overwhelming. The world enjoys free or near free access to the minimum access volumes of Canada's sensitive industries. Meantime, Europe maintains tariffs as high as 400% on its minimum access commitments. The Americans have, at last count, only 66% fills on their minimum access commitments—Canada is at 100% or more on all its commitments.

Where does Canada want to be in 2020? The OECD predicts that agricultural import penetration will reach 20% in OECD countries because of lower tariffs. We in hatching eggs are already at 21.1%—we therefore take some comfort from that prediction. However, it puts us at a disadvantage with respect to the sectors we supply. We of course would really appreciate Canada's implementation of the Uruguay Round commitment, which, just as the Americans did to us in sugar, should actually reduce their access.

As we said earlier, there are more than 1,366 agricultural Tariff Rate Quotas resulting from that round. Those TRQs were declared by 36 countries, with Europe considered one in the negotiations. Canada has only 23. That's only 2% of the total.

• 1115

There are those who claim it's difficult to be protectionist and a free trader at the same time. If that's true, then those responsible for 98% of the TRQs emanating from the Uruguay Round should be expected to have more frequent bouts of schizophrenia than Canada.

The US has 24 TRQs on milk—Canada, 11. The EU has 24 on meat—Canada, 4. Canada has no TRQs on fruits and vegetables, the US has 24.

Perhaps the best example of the two faces of trade appeared in the publication Inside US Trade a couple of years ago. One page featured a story where the US trade representative claimed victory in getting Japan to open its market to US tomatoes. On the very next page, there appeared an item where the US was contemplating a series of measures to protect Florida tomato producers from a surge of Mexican imports. They've since made a managed trade arrangement to protect Florida growers. This is not the first time they have talked out of both sides of their mouth at once.

So what should Canada's goal be going into this round? The last time, we sought a level playing field and came out fighting an uphill battle. Having a level playing field as a goal is like going into a hockey game seeking a tie. You guarantee yourself no opportunity to drink from Lord Stanley's Cup.

If we might be so bold as to offer a goal, we would suggest that Canada should charge its negotiators with the goal of seeking advantage for all Canadian agricultural producers.

And with that as a goal, Canada should look at its negotiating strategy. Is Canada, with its parliamentary, party-discipline, form of government reducing the effectiveness of its negotiators? The Americans certainly use the fact that Congress must vote for any trade deal that is to their advantage. In Canada, we have a directive from Cabinet going into negotiations and Cabinet approval coming out. The package then gets incorporated into an omnibus trade bill, which gets voted on along party lines.

Is that good international strategy? If the Europeans and the Americans use a higher authority, then shouldn't Canada. Perhaps the solution is a free vote in the House or perhaps it is intensive public hearings by this committee and a requirement for its favourable recommendation to the House.

During the implementation of the Uruguay Round agreement, we had consultations with a multi-departmental task force in May 1994 over the issue of a mid-level tariff on supplemental imports. We heard nothing more from that committee. We realized we weren't heard in November when the WTO legislation received first reading. As you know, it is extremely difficult to get amendments in this place. In this round, we will fully expect the provision for a mid- level tariff in the omnibus trade bill.

Another area in which Canada's strategy was lacking last negotiation was in its failure to recognize the inherent linkage between fiscal and trade policy. As a matter of fact, Canada's grain producers can probably attest to the fact that they are still living with the consequences of that failure. CBHEMA had, in 1993, indicated that failure to link the two policies could have disastrous consequences relative to farmers' ability to compete. Canada nevertheless came out of Geneva agreeing to a whole series of green and blue programs, which it then tried to off-load, cancel or cost recover during the course of the next three years. Meantime, some of Canada's major agricultural competitors are actually increasing their agricultural support; witness the $6 billion mentioned earlier, which was allocated to American agriculture in last week's US budget bill. That bill demonstrated that decoupling doesn't work. For instance, the US dairy industry is experiencing record incomes, yet Congress decided to allot some $200 million to this industry.

That's where, in this round, Canada must insist on laying a solid foundation. If Canada is not prepared to pay, then it had better ensure that it wrestles away the ability of others to do so. Canada must ensure that it regains the losses experienced in the last round. It must, at the very least, hold still until the others catch up.

Hatching egg producers are not unlike Canada's national hockey league teams. We are under no delusions that we can compete. We also know that we are in the same situation as the hockey teams in that our inability to compete is due to factors beyond our control. We produce just as many or more hatching eggs per hen housed as do the Americans. We are just as efficient, we are just as productive—We, like you, just happen to live in the north. The cost of an American barn, for instance, is exactly 1/2 our costs. They have 16 and 24 foot centres where we have 24 inch centres.

• 1120

Our counterparts south of the border get $6.37 an hour return on their labour. Our children, working part time in retail and fast food and with no investment, do as well or better. It's time Canada, in formulating its trade policy, looked at what kind of country, what kind of opportunity, what kind of commercial and social policy it really wants.

Thank you, Mr. Chairman.

[English]

The Chairman: Thank you, Madame Mercier.

Now we'll turn to the representative for the Canadian Turkey Marketing Agency, Mr. Stolp.

Mr. John Stolp (Chairman, Canadian Turkey Marketing Agency): Thank you very much, Mr. Chairman and members of the committee. When we get to the question and answer period, Phil Boyd, who is our executive director, and I will do our best to tag team to try to answer questions.

On behalf of the 600 registered turkey producers, the 2,300 people employed in production and processing, as well as the thousands of other Canadians who directly benefit from the $520 million in retail sales, we at the Canadian Turkey Marketing Agency—and I'll refer to it as the CTMA—would like to thank the standing committee for this opportunity today to share our views on agricultural trade and agriculture and agrifood policy.

The CTMA at its roots is a producer organization with eight provincial members but also, by proclamation, includes three members—two primary and one further processor. Attached to this submission for your referral at a later time is the CTMA's trade policy position for the upcoming WTO round, which was adopted unanimously by all 11 members this past March.

The question of a vision of the future of agriculture and the agrifood industry goes right to the core values of CTMA. As a producer organization we are committed to participating in partnership with the other stakeholders in our industry. We are committed to ensuring that the development of a competitive industry is shared equitably by all levels of the industry. We are committed to maintaining a marketing system that promotes a viable production sector and contributes to a strong rural economy.

Farming is a business. It is a very big business. In the U.S., the poultry industry is controlled by totally integrated agrifood companies with one profit centre, and with all the profits occurring to the shareholders, most of whom have never set foot on a family farm. In Canada farming is also a business, but it is more than that; it is a way of life. Unlike other industries, agricultural production in Canada is carried out by a large number of individual family farms, each of which has a direct impact on their local rural economy.

The majority of commercial turkey production is spread geographically across eight provinces, not including P.E.I. or Newfoundland. Turkey production in January 1997 generated about $260 million in farm cash receipts. Of that total, approximately $165 million was spent on the purchase of feed, directly supporting both the feed mill operators and grain producers throughout this country. An estimated $33 million was spent on the purchase of turkey poults or day-old birds, again supporting rural Canadians employed in 19 registered turkey hatcheries.

But this is more than just a rural issue; it is also an urban issue. I'll just use my own farm as an example, if I may. I went back through my farm receipts for the last year and looked at the addresses of places where I had bought capital equipment. For example, I went to Ingersol to buy packaging equipment. The steel for my new barns came from Hamilton or Nanticoke. In Guelph I used the lab services for blood testing and other veterinarian services. My implement dealer comes from Caledonia. We always talk about the strength and importance of the rural economy, but if the rural economy is strong, we contribute to the urban economy as well. That vision for the future is articulated in CTMA's core values, and is exemplified by the above figures. It is a vision we would like to uphold.

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Let us be clear that our vision does not preclude the negotiations of fairer trade rules, nor does it preclude increased exports—our exports in our industry represent possibly 13% of our production—additional processing activity, additional value-added activity, or potential double-digit growth rates. The question is how to pursue these goals without sacrificing the current way of life for rural Canadians, and without moving toward the indentured servant or assembly line model that predominates processor-farmer relations in the U.S. industry.

For orderly marketing systems to work effectively, discipline is required both internally and at the border. Having negotiated away article 11 for tariffs during the Uruguay Round, Canada should not turn around and relinquish this right as well in the next round of the WTO negotiations.

In our view, liberalization of agricultural trade should not be regarded as an end in itself. Canada should support agreements for agriculture only if they will result in a better functioning of international markets and will contribute to the improvement of farm incomes, profits and returns for agriculture and the agrifood sector. Unfortunately, during the Uruguay Round negotiations, liberalization became the object of the negotiations. The essential goals, those being improved farm incomes and international market stability, have not really materialized.

The marketplace is not a panacea. If it were, we would not require governments to regulate its conduct through things like competition policy and anti-dumping laws. In order to ensure the proper functioning of primary agricultural markets domestically and internationally, it is vital that primary producers have the power to work collectively if they so choose. Future trade agreements must recognize the role that supply-managed marketing boards and other collective producer marketing institutions play in protecting the interests of producers and in contributing to market stability in the face of uncertain world markets.

The function and role of agricultural cooperatives and other collective producer marketing institutions, including supply-managed marketing systems, must be respected. Further trade agreements must clearly confirm the right of countries to provide such bodies with the necessary legislative power to regulate both the production and the marketing of agricultural products, and to operate central-desk selling into pool returns. This also goes directly to the issue of tariffs as a tool for maintaining order in the domestic market.

The liberalization of international trade has also increased the awareness of the lack of core environmental, health and safety and animal welfare standards and practices in both developed and underdeveloped countries. Given the impact of such standards on producer and industry costs and market access, it is vital that international standards be developed along with clear rules governing the application of WTO trade actions to encourage compliance. However, until such standards and rules are developed, countries must be permitted to act unilaterally in deciding whether or not such products meet domestic standards, and also to ensure that imports are equally safe.

It is essential that current WTO commitments negotiated during the Uruguay Round be fully implemented by member countries; that programs of other countries related to internal support, government procurement, export credit and export promotion in food aid not subject to reduction commitments during the Uruguay Round be fully evaluated; and that effective rules governing the use of these programs be developed in order to prevent such measures from being used as disguised subsidies.

It must be recognized that, for some sectors, more priority is required for the development of WTO consistent standards with respect to sanitary and phytosanitary standards and other technical barriers to trade, the application of trade remedy measures, and the full implementation of the Uruguay Round commitments. They will do more for trade liberalization and increased access than will the further elimination of tariffs.

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In conclusion, Mr. Chairman, the federal position with respect to the upcoming WTO trade negotiations must centre on the development of fairer trade rules, not freer trade rules or increased trade liberalization. It must also allow countries to provide their producers with the legislative means and power to act collectively to offset the increasing concentration of market power of downstream stakeholders in the agrifood chain.

Canadian agriculture, unlike other sectors of the economy, is extremely diverse, both regionally and in structure. This diversity needs to be strongly embraced in the negotiating position that Canada takes forward to the next round of the WTO.

Finally, this position must be credible to farmers regardless of their commodity and enterprise. It should seek to strengthen the rural economies, making them less dependent on large, fully integrated mega-corporations, not more dependent.

Thank you very much.

The Chairman: Thank you, Mr. Stolp.

We'll now turn to Mr. Koop, who will speak for the Ontario Egg Producers. Thank you very much, and go ahead.

Mr. Henry Koop (Chairman, Ontario Egg Producers): Thank you, Mr. Chair, and good morning, members of the committee. My name is Henry Koop, and I am chairman of the Ontario Egg Producers. And no, I didn't change either my Christian name or my surname to fill the occupation.

I am an egg producer, and today I will be presenting with Brian Ellsworth, our general manager. Also, our presentation will be in English. We have Laurent Souligny, an Ontario producer and a board member, with us. If you wish to ask your questions in French, he'd be willing to assist with them.

We are pleased to have this opportunity to provide our insight into discussions surrounding Canada's position heading into 1999. Since eggs are an important agricultural commodity, Ontario Egg Producers are particularly interested in the outcome of the upcoming negotiations.

Our producers supply top-quality, as well as affordable, predictable prices for the consumers of Ontario without one penny of government assistance. The system under which we operate is working, and it is working well. Our organization is made up of 458 regulated egg producers and 177 pullet growers who account for 40% of the total egg production in Canada, a considerable contribution.

Our mandate is to provide consumers with high-quality eggs at reasonable prices. This is accomplished through the efficient management of production and marketing of eggs, and it allows our producers to receive a fair return for their labour and investment. The majority of Ontario eggs are produced by our members on family-owned farms—people like Bryan and Mary Grace Durst, from Clinton, and Elwyn Embury and his daughter Pauline, from Newburgh.

The average flock size in Ontario is 15,000 birds. Our industry employs 3,000 people at grading stations, egg breaking plants, feed companies, hatcheries and food processors, as well as in marketing, education and research, manufacturing and transportation. The egg industry is a solid contributor to the Ontario economy, with an impact of approximately $300 million annually. In 1986, Ontario Egg Producers established the research chair in egg materials science at the University of Guelph in order to promote development of new and better usage of eggs, a joint project coordinated with Natural Sciences and Engineering Research Council. As well, an annual graduate student scholarship is awarded for poultry research.

In addition to time spent on the farm, Ontario's producers are keenly interested in consumer awareness and understanding of farming. People such as Carolynne and Art Griffiths, from Alvinston, and Ken and Geri Rounds, from Elmvale, often volunteer to speak to school children to teach about farming and agriculture. They also set up displays at community fairs, thus providing consumers with the opportunity to ask questions and learn more about the industry. Through these activities, producers are able to provide not only a product but also an education to consumers. They are not just farmers, they are ambassadors.

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Let me take a few minutes to describe our industry and our business to you.

Canadian egg production is based on projected national annual consumption and is allocated to the provinces. In 1997, Canadian egg producers supplied 430 million dozen eggs for the consumer and processed food markets. Ontario's producers supplied 40% of these eggs, or 172 million dozen. Foreign countries, primarily the United States, were then allowed to export 16 million dozen eggs into Canada. Uniquely Canadian, this process ensures that consumer demand is met, that Canada is self-sustaining in egg production, and that the system is not subject to the fluctuations of the foreign exchange markets.

The current agreement allows for up to 5% of Canadian domestic egg consumption to be imported into the country. Once the 5% access figure has been reached, all further imported eggs are subject to a tariff level designed to protect the Canadian egg market from being flooded by foreign eggs. Because Canada represents a relatively small national market for eggs, large foreign suppliers could easily supply part or all of our country's needs. For example, there are two operations in Ohio, one with a flock of 10 million birds and the other with a flock of almost 8 million birds. Remember, the Ontario flock is 15,000, so those two operations alone could supply enough eggs for the entire Canadian market.

In 1994, a base tariff level for imported eggs was established at 192.3%. This level will be reduced to 163.5% by 2001. Ontario Egg Producers have accepted an abided by these tariff schedules.

Mr. Brian Ellsworth (General Manager, Ontario Egg Producers): I would like to now outline our position to the committee regarding Canada's position for Geneva.

Ontario Egg Producers recognize and respect Canada's commitment to actively participate in the World Trade Organization talks in 1999, but trade must be fair and equitable among all partners. We recognize that the goal of international trade is to increase market access and reduce tariffs, and Ontario Egg Producers have accepted this and adjusted to the changes agreed to in 1994.

We also acknowledge that Canada must participate in the negotiations on those provisions in order to keep its commitments to the world trade community. However, until Canada's trading partners follow Canada's lead in complying with the commitments reached in 1994, the government must not make any new commitments. Fair international trade agreements depend on all partners living up to their commitments.

Our egg producers can meet the needs of our consumers and feed the citizens of Canada. We must not allow other countries to step in to do this for us. Any increase in access to Canadian markets will invariably lead to an increased supply of foreign eggs. Canada must not allow itself to become dependent on another country to feed its own citizens. By saturating our markets, we will be driving our own producers out of business.

In Ontario, most eggs are produced on small family farm operations. Americans, the primary importers, produce eggs in large corporate operations. The two systems cannot be compared, and they cannot fairly compete against each other. It may be that an Ohio operation could supply our needs, but do we really want to become dependent on an American supplier? For example, take Ontario producers Eugene and Irma Baumlisberger, from Grand Valley. They don't want it, and according to surveys, consumers don't either. Negotiated access provisions must therefore respect and protect Ontario's rural population.

Egg quality and safety must not be compromised. Canada has set the highest standards for the quality and safety of our eggs. Any product that does not meet our high standards should not be allowed into Canada. Consumers are confident in the quality and safety of their eggs, and this cannot be compromised. All of Ontario's producers must conduct salmonella testing of their flocks. This, along with a mandatory program of inspection and control to ensure the safety of their product, and strict monitoring of the processing, grading and packaging operations by the Canadian Food Inspection Agency, guarantees Ontario consumers that they are getting the highest-quality eggs available. No such mandatory programs exist in the U.S.

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We believe that the current system for producing and marketing eggs is working. Canada has developed a unique system for balancing supply and demand. It means that consumers get reasonably priced eggs of high quality, and producers receive a fair return.

Ontario's 635 egg producers and pullet growers maintain a consumer-responsive marketing system. We can and do meet the needs of Ontario consumers. We continue to make changes to become even more competitive. The system allows Ontario producers to be self-sufficient. No taxpayer dollars, neither federal nor provincial, are necessary as safety nets.

Mr. Chairman and members of the committee, over the coming weeks you'll be hearing from many industry groups such as those you had earlier. The task ahead of you may be long and difficult, but it's very important. The recommendations that you put forth will no doubt form the basis of Canada's position at Geneva.

It's your role to consider the opinions of all these groups as you develop a position that will meet the commitments of Canada's international trading partners. But we ask that you also consider the economic effects your decisions will have on both consumers and producers who dwell in your constituencies in all the years ahead. Consider an industry that provides a high-quality product, a stable supply, and a reasonable price, all without one penny of government assistance. Our producers have proudly accomplished this goal, and we want to be able to continue to do so.

Again, I thank you for this opportunity. We would be pleased to answer any questions you might have.

The Chairman: Thank you very much, sir, and thanks to all of you for your excellent presentation.

Just before we get to Mr. Hilstrom, who will lead off the questioning, I have an observation, or perhaps a question, for Ms. Mercier. In your presentation, you cast some doubt on our parliamentary system in pursuing a trade deal that is favourable to your industry. You indicated that perhaps you would rather take your chances in what I would call the messy congressional system in the United States.

I would say that both systems offer fair hearings. That's what you're getting, I would hope, right now. But at least in Canada, under a parliamentary system, if you can get your government to adopt your position, or at least most of it, and if the government has a majority, you have some hope of the government remaining focused and on track.

That's not the case in Washington, where the administration can't push anything through on its own. It has to count on the mercies or blessings of the House of Representatives and the Senate. The administration can't even consummate an international treaty; that's the job of the Senate.

I should remind you that just in the past few months, Mr. Clinton asked for fast-track authority to negotiate international trade agreements, and he was turned down, rejected. When you don't have up and down authority on votes, that means any package can be picked apart by Congress.

So I simply say that when you indicate your favourableness toward the congressional system, I would have a lot of doubt about that.

Did you want to say something? If not, I'll turn it over to Mr. Hilstrom.

[Translation]

Ms. Martine Mercier: I was not questioning the entire Canadian system. These were questions I raised following the latest negotiations. When we wanted to inform our negotiators we said: "We cannot raise that, because the Americans will reject it." Once there was no doubt that all the Americans would reject it, it went nowhere. This is the way we put a question. If the rest of the negotiators knew that for one reason or another Canada could not agree to it, why would we too not support it? If it did not suit Canada, there was no point in negotiating. It would not fly. That is what I mean. I was not questioning the integrity of the negotiators.

[English]

The Chairman: Good, thank you. I think that clarifies it a lot. Thank you very much.

Mr. Hilstrom, seven minutes.

Mr. Howard Hilstrom: Thank you, Mr. Chairman.

You certainly set out that the government in power certainly has the absolute authority to move either on the fast track or on the slow track in anything.

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To start this off here, I'd like to give each of you an opportunity to say more or less yes or no, would you as a representative of your industry or as your industry, if you had your choice, rather not even be at the negotiating table? Would you just as soon your industry was not part of these upcoming talks? Your presentations indicate very strongly that you don't seem to want to see anything changed from the way it is right now. Is that a fair assumption of what you're saying? Would you comment around each of your representatives?

You can comment. If there is something you want to see changed, tell us specifically what it is so we can push the government for that.

Mr. John Stolp: I think in our presentation our greatest concern is whether or not the round that was last worked on has been fully implemented. There is a lot of question as to whether it is or isn't. There has been a lot of question, as was brought up this morning, with what the U.S. has done just recently with putting more money into their programs.

Are those the sorts of things that need to be solved first, even before we decide on whether or not we're going to try to negotiate further what as Canadians we've done up to this point, if we're not at all comfortable with what the other members to that round have done on the last round?

Mr. Howard Hilstrom: So then basically you'd just as soon see the government not move forward with anything until that's done up from the past round.

Go ahead.

Mr. Paul Jelley (General Manager, Canadian Broiler Hatching Egg Marketing Agency): If I could, from our perspective, the commitment last time internationally was 3% to 5% minimum access. We don't see that as having happened, yet we're allowing 21.1% access.

So if you're asking us if we want to go to 25% while everybody else goes to 2%, the answer is quite obviously no. We'll wait until the rest of the world catches up to us. So we wouldn't mind missing this round, actually, because the OECD says by 2020 the OECD will be at 20% because of lower tariffs. We could obviously save a lot of effort and time and wait until 2020 when the rest of the world catches up to us.

Mr. Howard Hilstrom: Okay. I'm glad to have given you a chance to give your comment.

Mr. Brian Ellsworth: As far as the egg people are concerned, we're not naive enough to know that our government isn't going to be there and going to negotiate, and what we're trying to remind them is that our system is working very well. The old cliché is don't throw out the baby with the bathwater.

We think it's working well. Let's hold onto it. We have adapted since the last round. Heaven forbid, we may have to adapt a little more. We're not that naive that we can live isolated, but let's make sure all our partners live up to their commitments, as well, before you burden us with a few new changes.

The Chairman: If I might interrupt, to sum it up in a couple of words, you seem to be saying you have more to lose than to gain.

Mr. Brian Ellsworth: Yes.

Mr. Howard Hilstrom: Could I pass to my colleague, please?

Mr. Jake Hoeppner: Thank you, Mr. Chairman. It's getting very interesting, and again I want to point out that at the next trade negotiations we had better be in sync with the Americans or we won't have any clout to deal with some of these irritants.

My question is to Madame Mercier. I see she says that we have 2% of the TRQs that are still left. What are the American's TRQs? I don't see the number on that. Do you have that? If you don't have it, you can pass it to the committee later on.

[Translation]

Ms. Martine Mercier: In my document, among other places, we mention 24 for milk and 24 for fruits and vegetables. I do not have the percentage, but there are...

[Editor's Note: Inaudible] in all.

[English]

Mr. Jake Hoeppner: I'd appreciate it. I'd like to see the total amount, to see how much the Americans really have an advantage over us.

The other question I have is on the hatching eggs. We see some being brought in at double the price that our producers are getting. Were these eggs that price because of a shortage, or do these eggs develop a specific bird that the producer needs?

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[Translation]

Ms. Martine Mercier: It is the result of a disease, known as leukosis, which exists worldwide, among other things. The other group mentioned it briefly earlier. It has reduced the market by 3% to 4%. When it hit, it hit many of the flocks, with the result that there is a worldwide shortage of eggs, because a minimum quantity does enter the US. They supply their market first. They are already short. When hen houses import eggs, they pay full price, with quality to match.

[English]

Mr. Jake Hoeppner: That brings me to the next question.

In their support programs, you say $200 million went to the milk industry. Was that because of the price of milk, or is that because there were certain disasters in feed supply to certain areas in the milk industry?

Mr. Paul Jelley: According to the way the U.S. industry explained it to us last week, it was because the representative from Wisconsin found he wanted $200 million.

Mr. Jake Hoeppner: Good explanation.

Mr. Paul Jelley: The milk industry in the U.S. were saying they are experiencing record prices and they don't know what to do with the $200 million, but they said, leave us two years and we'll oversupply the market and then we'll have something to do with the $200 million. They cited it as an election thing.

Mr. Jake Hoeppner: These are things that are trade irritants, and we'd better make sure we know what they are and that we make them known to the Americans as well, as they try to always hit us with these. That's why I'm saying I think we have to have a very strong continental agreement on how we're going to handle the next trade negotiations with the World Trade Organization. If we don't, as you people say, we'll lose more than we gain, and that's what worries me.

I farm three miles from the U.S. border, and when I talk to those grain farmers today, they're going bankrupt as fast as we are even with the supports they're getting. So there are some really tough issues to work on between ourselves before we go to the trade organization. I would just like to remind you of that.

I have to leave the meeting, and I feel sorry for it, and I want to excuse myself. I have another meeting.

The Chairman: Thank you, Mr. Hoeppner.

Yes, madame.

[Translation]

Ms. Martine Mercier: Mr. Chairman, I explained why the American price for hatching eggs had increased so much. It is usually lower than Canada's. What we wanted to point out too was that, while there is a shortage in Canada, we did not want to use it as an excuse to raise our prices given that we have the advantage of supply management. We do not want to use that ill- advisedly since it could prove advantageous for us. This is what we were trying to show as well here.

[English]

The Chairman: Thank you.

We'll now go to Madame Alarie.

[Translation]

Mrs. Hélène Alarie: According to your documents and your remarks, their is some dissatisfaction with and concern about the negotiation strategy chosen earlier and what the strategy might be in the future.

The brief submitted by the Canadian Turkey Marketing Agency concludes as follows:

ensure the consultation process leading to the development of Canada's WTO negotiating position is broad-based and transparent;

There is also a concern about maintaining, conserving and even improving Canada's primary sector. I heard one of the participants say this morning that trade should not be liberalized for the sake of liberalizing it.

In all of that, do you have solutions or specific expectations of the committee or the government, who will negotiate?

[English]

Mr. John Stolp: I think that expectation would certainly be to fully understand and to make sure that what was committed in the past has happened. As we've mentioned, why would you start negotiating issues and negotiating things to possibly change Canada's position, when you're not at all comfortable that the other members have gotten to the point of the last one? And I think if there's a strategy, the push and the pressure should be on making sure the last one was in fact fully implemented.

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[Translation]

Mrs. Hélène Alarie: In truth, you are after a statement before a new round of negotiations begin to ensure that no points are missed or at least that those that have have been identified.

[English]

Mr. Brian Ellsworth: I would like to answer on that particular question that we feel our system is working. Why should our government negotiate it away for the sake of some other industries? I think that's the important part of the message we want to give to you, the committee, and we want the committee to emphasize to the government that we have a good system. We have a unique system.

In the egg business I've travelled to many other countries and met with egg producers and processors in those countries, and they marvel at our system, that it gives an adequate return to our producers. But on the other side, look at the price of our product in the stores. Ours is one of the lowest across the country. We feel that our system is working, it is working well, and we don't want it tinkered with. We realize that you have to go to these international negotiations, but be careful. Don't be the traditional Boy Scout that Canada is famous for being and lay down all your cards at once.

The Chairman: Mr. Boyd.

Mr. Phil Boyd (Executive Director, Canadian Turkey Marketing Agency): Thank you very much, Mr. Chairman. In relation to the last comment, certainly as you indicated in terms of understanding our views collectively this morning, there's a whole lot more to lose than gain.

As Mr. Ellsworth has said, the system is working. Canada in fact has shown some leadership in terms of income assurance programs, which Mr. Currie mentioned earlier this morning, in terms of designing programs where farmers can sustain themselves out of the marketplace without dipping into the public purse.

The other thing we wanted to comment on is that we heard a few moments ago from one of your colleagues on the committee that grain farmers are going bankrupt right and left regardless of what side of the border they're on. It is something we want to be clear on. There are a number of our members, registered turkey producers, who are also grain farmers. As far as CTMA is concerned, the grain prices right now are deplorable, the farm income is not valid. And we heard that is of benefit to the processing sector. For the farm community, those prices are not substantial enough and we don't like them any more than a guy who's in just the grain business.

What is the root of that? What does that have to do with it and how does it trace back to the existing WTO agreement? I don't have the answer to that, but I think it's a question for reflection as the government pursues the development of its position.

Thank you.

The Chairman: Madame Alarie, you still have two or three minutes left.

[Translation]

Mrs. Hélène Alarie: I will take a couple of minutes to ask Ms. Mercier to tell us more about the linkage between fiscal and trade policy, which Mr. Boyd mentioned briefly.

Ms. Martine Mercier: That is too technical for me.

[English]

Mr. Paul Jelley: I think last time we tried to get the negotiators to realize there is a linkage between fiscal policy and trade policy. We kept getting the answer back, “I'm responsible for trade policy; fiscal policy is over in Finance.”

What we'd like to do is somehow have the trade negotiator talk to the Finance officials to know what package Canada can possibly have on the fiscal side before you go into trade negotiations. If in fact you have a big fat wallet, then you can obviously negotiate a bigger green package. If your wallet is small, then you should be seeking a smaller green package. What we have seen coming out of this is a wide blue box and a wide green box, and the fiscal policy that didn't allow us to fill it.

The Chairman: Thank you.

Now we go to Mr. Calder. You have seven minutes, Mr. Calder.

Mr. Murray Calder: Thank you very much, Mr. Chairman. What I want to deal with is what I was dealing with in my questioning in the last round, that is, basically, the TRQs we're working with right now. First, let's establish that when we go into trade negotiations, let's call it what it is. It's the barter system. You have something, I have something, and we're going to barter.

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So to go by what Ms. Mercier has said here, there are 1,366 agricultural TRQs. That was declared by 36 countries, with Europe considered as one. If you average that out, there are about 38 TRQs per country, and Canada has only 23. Now, that's a difference of 15 TRQs on the average. If we use the premise I've already established, that trade negotiations is a barter system, we're already behind by 15.

So I guess the question that now begs to be asked is basically do we hold still while the other ones catch up? How valid is that? Any one of you may answer.

[Translation]

Ms. Martine Mercier: Well, I think the response is yes. Why go further? This is connected somewhat to the policies Paul explained earlier. I think we are still playing fair. We are still very transparent and very open. We are still expecting the others to play the same game, but when we look at the results, we realize this is not quite the case. We also know Canada's economic position. Why are we using such open rules, when we lack the finances to play in the others' league? If we cannot do it, I think we should wait for them to come to our level before we proceed. In any case, we are simply going to be backing up a little further, because we will remain transparent and we will play fairly in relation to the other stakeholders.

[English]

Mr. Murray Calder: You're saying to me that the United States, being the nice fair players they are and everything else, have the export enhancement program. When I debated it two and a half years ago, Pat Roberts down there said it was on a shelf and would never be pulled out again. I asked him why they hadn't just done away with it. Guess what? They've dusted it off, it's back out and they're using it.

They came out with the U.S. Farm Bill, which is $35 billion total over seven years, so that's $5 billion a year. Then because there's a commodity crisis right now they just came out with a farm aid bill of $6 billion. So even just in one year they're pumping $11 billion into their farmers right now through a number of different avenues. For us to counter that, we would have to come up with $1.1 billion worth of aid. We would have to come up with $310 million right off the bat to come up with a crop subsidy, because they've already pumped in three point one.

I'm sorry, I can remember what these negotiations were like in 1993 when I first came into this game, and I'm not quite as trusting as you are when we get into these negotiations. I'll be honest with you. I still look at the aspect of it—even with the information that's in front of us—that on the average we are 15 behind and we say we're going to hold still and let everybody else catch up to us. I'm not totally convinced.

I'll throw another idea out to you right now. I'm almost wondering whether we as a government right now should start matching the United States subsidy for subsidy. We don't necessarily have to attach money to it, but we could put legislation in place so we could attach money to it. That's an option. Then when we go back to that barter table they call a negotiating table, we can say “Okay, we'll cross this one out if you cross that one out” and so on and so forth, because that's basically the process that's been done in the past.

I'd like your comment.

[Translation]

Ms. Martine Mercier: I do not think we are behind the others in tariff quotas. I think we are ahead. We have eliminated more than they.

[English]

Mr. Murray Calder: That's my point.

Mr. Paul Jelley: The only comment I'd like to make is that you left out one of the most important programs the U.S. uses for supply management, and that's the $19-billion school lunch program. That is their supply management program. That's a lot of money. That's one program we forgot to mention.

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As far as the TRQs go, if you're talking about a barter system in TRQs, the degree of the TRQ is more important than the number you have. We're just trying to say on that point that Canada shouldn't be embarrassed by the fact it has 21 TRQs. There are 1,366 out there, so don't be embarrassed by that fact. As far as the number of TRQs we have versus them, I think the importance is the degree of the TRQ and how you come down. A very important point about negotiations is how you come down. If I'm at 300 and the other guy is at 600, you don't bring us both down the same way. The 600 comes down to 300 and then we move together.

Mr. Murray Calder: That's basically the point I'm trying to make here. I'm still concerned they have more to trade than we do. Basically we're taking a Boy Scout approach here again that we'll be nice guys and just march time while they catch up to us and everything, when we know full well that's not the way it has been in the past.

You are talking to a chicken farmer here right off the bat; I'll clarify that. As far as I'm concerned, supply management is one of the most efficient systems, because we have learned how to flatline the farm gate price, and by doing so we've also flatlined the wholesale price. From that we've basically flatlined the retail price in the store, which makes our commodities—the SM-5—one of the cheapest you can buy in the grocery store.

I've watched everybody else around us that are not within this because they go through a boom-bust cycle. I always refer to it as a three—step syndrome, because when there's a glut the prices will go down, when there's a shortage they'll go up three steps, and when we hit that glut again they'll maybe go down one or two steps. So with each cycle you go through, you gain either one or two steps each time in the retail price.

The Chairman: I would like to get a final answer in this round. Go ahead.

Mr. Paul Jelley: I'm in retail as well and I've never lowered my retail price because my input cost was less. My consumers have already figured out they're prepared to pay that. I'm not going to give them a break because I got a break, on that point.

I think you have a good point about your deck of cards, and you had better ensure Canada puts some more cards in the deck or you're going to run short before everybody else.

Mr. Larry McCormick: On a point of order, Mr. Chair.

The Chairman: Yes, go ahead.

Mr. Larry McCormick: Could I just ask Mr. Jelley to clarify something? I'm sure all players are here for the right reasons today, but I just want you to clarify what you said about the input costs, the cost of a product, and how you don't lower your prices.

Mr. Paul Jelley: Even in restaurant pricing you can watch the input costs going up and down. The restaurant has to set a menu and they're only going to print so many menus so many times a year, or so many times every five years. Their prices will stay constant over the up and down of the input.

The Chairman: Just before I go to Mr. Proctor, Mr. Jelley, would it be fair to say that any international round of negotiations—and of course that would apply to the next round of the WTO—is all about liberalizing trade, relaxing the rules of trade and making it easier to trade between countries? Is that process and quest, if I can put it that way, to some extent inimical to supply management and the two really just don't mesh, so when countries get together to liberalize trade and get into the process of give and take, at the top or near the top of potential victims is the supply management system?

Mr. Paul Jelley: I think there are many things that would be at the top of the liberalization agenda if you were going after it. It wouldn't just be supply management, it would be Japan's rice program, the European CAP program, the American sugar program, the American cotton program and the American tobacco program. There are lots of programs out there, and they're all there with 1,366 TRQs.

• 1210

So if the goal is pure trade liberalization—and I thought when we started this in 1986 it was about getting rid of export subsidies and it wasn't about liberalization—we've now changed the agenda a little bit. We're now on liberalization.

I still think the agenda should be farm income. I don't think trade liberalization should be a goal in itself, and some people have made it a goal in itself. I think your goal should be farm income.

The Chairman: Thank you.

Mr. Proctor.

Mr. Dick Proctor: I'll pass on this round.

The Chairman: Mr. Borotsik, you have five minutes.

Mr. Rick Borotsik: Thank you, Mr. Chairman.

I have to admit that the last panel was a little bit more balanced. We have a bit of a mutual admiration society here for this particular trade. I felt it was a little bit more balanced, but that's fine; I can deal with the others when they come to speak to this committee.

I have a couple of questions, and the chairman kind of talked to it.

In March 1998, the chair of the Canadian Dairy Commission, Guy Jacob, had suggested:

We've sort of been hiding from the fact that eventually, it's going to happen. It will not happen in the next couple of years but it will happen.

Obviously what he's referring to is the supply management being negotiated out with respect to trade. In fact, he suggests that he is preparing his dairy producers for the inevitable.

I sit and listen to the organizations in front of me today, and I seem to hear that the inevitable is status quo, that your organizations are all very happy with what's there in place at the present time and, quite frankly, don't want to make changes and are not prepared to make changes. Could you comment on that? I'm a little concerned, quite frankly, because this is maybe bigger than each one of the organizations in supply management.

Mr. John Stolp: I guess the question is, why does it have to happen? Is that the only result that has to occur here, that the liberalization has to occur? There is no choice on this; at all costs, liberalization must occur. Is that the only choice we have?

Mr. Rick Borotsik: It was my question, and you've answered a question with a question.

Let's assume...and we can obviously see that with what's going on in the marketplace right now. We know the Americans are taking us to task with the dairy side it, with the 301 to the WTO. We know that's happening, yet every one of you sat here and said go to those trade negotiations and stay with what we have; stay with status quo.

Let's assume that can't happen. Are you preparing for, as Mr. Jacob says, the inevitable, or are you just sitting back saying it's never going to happen, that supply management will always be the way it is right now?

Mr. John Stolp: What I'm saying is go to the trade negotiations saying supply management is very good for this country. It's a good thing.

Are we as an industry preparing? Our industry is constantly going forward and looking at ways of improving the way we do business. Over the years we work with cost of production; we develop cost of production to see how we're doing. It constantly improves. The cost of our producing a turkey and shipping that bird constantly improves.

Mr. Rick Borotsik: But with the consumer and the retail price, we heard earlier that it doesn't reduce.

Let me give you another quote. We talked about prices. It's suggested right now that Canadians pay 44% more for whole fresh chickens, 33% more for eggs, 50% more per gallon of milk and 167% more for butter, based on our domestic supply side management. Do you think with those numbers, if in fact they're true—

Mr. John Stolp: Where did you get those?

Mr. Rick Borotsik: I have that in a Financial Post article, actually.

You don't agree? Do you mean to say you don't believe what's written in the newspapers?

So you're saying that your prices are equal to the Americans prices. Can you prove that? Can you show us statistics that show that's exactly the truth.

Mr. Brian Ellsworth: Yes. Our prices, on the whole—

Mr. Rick Borotsik: Could you table that?

Mr. Brian Ellsworth: On the whole, especially with our low Canadian dollar, our prices are equal or sometimes lower than the U.S., at the store. But the point we want to bring out to you is that our system—and they talked about farm income, and that will be another time—allows the producers to get a larger share of the consumer dollar than any country of the world. I think that's the beauty of it.

You want to know about what we're doing. We're not just sitting on our hands complaining, we're covering both sides. We're asking the parliamentarians to look out for us, but we're also telling our own producers that they have to get more efficient, have larger units, and update their equipment. They have to be able to take a little more, because that may happen. There's the U.S. down there, and they're a threat. We're saying we have to adjust for it, so we're doing this.

• 1215

Mr. Rick Borotsik: Do you think this is happening with the turkey producers?

Mr. John Stolp: Absolutely. As I was saying, the cost of doing business is constantly going down. That in itself indicates that our producers are always trying to be more efficient in producing their product.

Do they always sit there and say that this is our biggest threat and this is the price here? It's just good business sense to always try to do better no matter what ends up happening. Say this government holds firm and says we have a really good system here. Our producers are going to do well and they're going to be able to be good, strong producers. That's a good thing, but at the end of the day, is price the only goal?

The Chairman: Okay, we're out of time.

Thank you. I think you started something there, Mr. Borotsik. I gather you're trying to be more competitive, which is good, you're not just trying to feather your own nest.

Where do we go from here? We'll go to Mr. McCormick for five minutes.

Mr. Larry McCormick: Thank you very much, Mr. Chair. Thank you for being here, folks.

Ms. Mercier, I want to ask you and I guess all the players at the table whether in this case in 1998 with the oncoming negotiations you feel you have been involved up until now. I want you to confirm this as we look to start this. It's not just a political question because of my friends Joe or Rick here. I want to ask whether you think you're in as good a position as the one you were in the last time. Do you perceive that you will be involved with negotiations? We just can't turn our back on negotiations. Do you feel you're going to be involved with this? Do you have an opportunity to be kept abreast of all this?

[Translation]

Ms. Martine Mercier: Yes, because we will keep abreast and continue to try to influence you positively.

[English]

Mr. John Stolp: The fact that we have this process here today tells me we're involved in it. Our administrators definitely say we'll be involved in it. So we have to say that yes, we'll be involved in it.

Mr. Brian Ellsworth: Larry, I would like to remind you that you had one of your supposed negotiators before this committee. He talked about where the negotiations are going as the government directs him. But I heard him at other times say that we need to have more access and should lower the tariffs.

I think it's incumbent on the government to make sure of what they want to do and what they want to trade off. Do they want to trade off a system that's working? If they do, are they then going to let the U.S. produce product for us? I think it's very important.

Don't be naive that just because we come to make a presentation the government is going to exactly do what we ask. As you say, they have to negotiate, but don't forget about us. That's all we're trying to say. We have a system that's working. We're willing to change if it isn't too much. Just give us time to adjust.

Mr. Larry McCormick: Thank you for those comments. If you check the records, we challenged that same negotiator, who was here last month at another meeting, as to what he said. I think we got a somewhat sufficient answer.

We have to be there for you because supply management is very important in Canada. It's not just the 72,000 or so producers involved, it's the whole face of Canada that's affected. The fact that you're successful business people giving the best product in the world is very important. In fact, I challenge other political parties to let us know whether they support supply management as we go on from here with this.

The Chairman: I think Mr. Boyd wanted to say something. Larry, do you mind?

Mr. Phil Boyd: Thank you very much, Mr. Chairman. I have about three things. I'll be very quick.

First of all, on the issue of prices and the differences in them between here and the States, the only thing I can comment on—I haven't seen the data so I don't know it—is the CPI for turkey in the period from 1986 to 1996, which was 111.4; for all food items, it was 128. So it begs the question, are Canadian consumers getting hurt with the prices of foodstuffs from supply-managed commodities?

• 1220

Secondly, in terms of the quote from the Canadian Dairy Commission's Mr. Jacob, I'm not sure what the Dairy Farmers of Canada would have to say about it. I think they may differ, and I think they're the farmers whose income we're concerned about on that particular issue.

In terms of whether we're part of the process, we're all members of the Canadian Federation of Agriculture. We're committed to that organization as it represents Canadian farmers. We're working hard in that arena with the negotiators and with the technocrats out of the department so that we're clearly understood. So are we a part of the process? Yes, we are today, and yes, we are through the general farm organization.

The Chairman: Larry, you still have time for one more.

Mr. Larry McCormick: Mr. Chair, one of those answers was for a previous question, so I appreciate the fact that you're going to let me expand on my question.

The farm crisis is real. We are having the first of our meetings I believe next Wednesday, and I expect it'll be non-political as we ask the people, because it's so important.

But the low prices of commodity, I'm thinking especially of grains, should be, according to my perception or the consumers' perception, a benefit to the egg industry. And we often see prices go up but we don't see them come down. I expect Mr. Jelley was referring to the restaurant industry, but what about the grocery stores? Here we have these prices of commodities going down drastically with supply management. Do you react and have you reacted, and will you react? There could be an opportunity there.

Mr. John Stolp: Yes, I think two years ago the price we paid for our feed was probably the highest it's been in a decade. And we were able to—within our system, with how we negotiate with our processors—capture a very good portion of that price increase in our feed. So under the supply management system, whatever happens to our feed costs, we're able to make adjustments accordingly.

When you look at it at the retail side, it's awfully difficult to try to translate what happens to us at the farm gate, what even happens to the wholesale price, and try to draw a line to what happens at the retail price. We all know it happens where turkeys show up at Thanksgiving for 99¢ a pound in the store, which has absolutely nothing to do with what the farm price, the retail price, the trucking price, or the processing price and the trucking price were. It has nothing to do with it.

So to draw the conclusion that whatever happens to us on our farm or at the processing plant is going to somehow effect the retail prices—

Mr. Larry McCormick: What about the case of eggs? Are we going to see any reflection with eggs on the market, for my breakfast?

Mr. Brian Ellsworth: The situation basically has been that we adjust the price to the producer as the feed prices go up or down, and lately they've been going down and our prices have been going down. But I think any of you who shops regularly will know that the chain stores are into every day what they call “low pricing”, which means they don't change the price. So the farmers' income can go down, and the chain store price is the same.

And so we react to the costs, and we feel it's another feather for our system that we're not gouging the consumers. If you want to get onto why food is so high priced, then go talk to your chain stores.

Mr. Larry McCormick: Thank you.

The Chairman: Thank you. You got your extra minute, Mr. McCormick.

Mr. Breitkreuz, five minutes.

Mr. Garry Breitkreuz: There's really a lot of politics involved in this whole discussion. And I've been listening to all of the arguments you've put forward. If in fact all of those arguments have any validity, why do we not see the other sectors of the agriculture industry beating the doors down of this place to also have supply management in their industries?

The Chairman: Who wants to answer that?

Mr. Phil Boyd: A couple of things come to mind, and I think it's a valid question. We know that Canada in terms of its grain production is a big producer. We're a population of 30 million people; it would be really difficult I think for me to understand why the grain growers in this country would want to limit their production to feed the domestic population. It doesn't make sense, given the land base we have. That's one answer that comes to mind.

• 1225

The second answer that comes to mind in the poultry business, and especially in the turkey industry, has to do with the pattern of things that has emerged in the States in terms of the relationship between those responsible for growing the birds and those processing the birds. It leans very strongly, it lends itself very strongly, to vertical integration big time, and in a short period of time. The choice of turkey producers in this country is to not follow that model. The choice is to maintain their independence and sustain themselves from the marketplace and the prices that are generated.

So those are only two answers that come to my mind.

Mr. Brian Ellsworth: I'd like to comment on that, because as egg producers we also have producers of these other commodities as members of our association.

I think you have to go back in history to talk about why the poultry people have supply management. Go back to the sixties. When the prices were up one year and down the next year, you made a few dollars and then things went down. And that was when we were only supplying a domestic market. We asked ourselves whether or not we could get a system that would fill that domestic market while giving a reasonable price to the consumer and the producer as well. So that's what our system has done.

For the other commodities that you talk about—I've been in the hog business for a while—I understand that they are into this cyclical thing. It looks good when the prices are high. They all go in, but then they all go out. They then think next year will be better, but a lot of that depends on their market. What is their market? Their market is outside Canada for a certain amount of product.

We in supply management said we're happy to supply the Canadian market. If there's extra for export, we'll then do that. But the Canadian market is mainly what we're trying to supply, and that's why there's a difference between us and the other commodities; they're going to produce for the world no matter how much it costs.

Mr. Garry Breitkreuz: Well, there's really a glaring conflict between your sector and the other agricultural sectors, and a lot of it's politically based. The point has already been made that a lot of it is due to the parliamentary system that we have here. If the people in your riding are involved in supply-managed products and you can bend the ear of government, you can have your way. But if you're in the west, you're out of luck because you're not part of the power structure. You're just hung out to dry in this whole system. And when it comes to the World Trade Organization and the negotiations that we have to enter into here, this is where your conflict really shows up.

You've made a strong case that Canada needs to bargain much more strongly at the international trade negotiating table. Your position, though, is to keep the status quo with the marketing boards. The other sectors want to level the playing field, so you have this really serious conflict. And the politics comes in here as to who can bend the ear of government to maintain whatever that position is.

The observation was made that we have a serious problem in democracy in our parliamentary system, and that's an interesting intercept. If we don't—

Mr. Larry McCormick: I have a point of order, Mr. Chair.

I'm not going to speak on the question of democracy. I just want to point out that, in my riding in eastern Ontario, I have wheat growers who belong to the wheat marketing board, and I have hog producers who are suffering just as much and are getting the same price. So for this idea of pointing out that we're going to bend just for the people in our ridings, take it easy there, colleague.

The Chairman: Okay, that's a point of order.

Mr. Larry McCormick: You're darn right it's a point of order. I got it on the record.

Some hon. members: Oh, oh!

The Chairman: Go ahead, Mr. Breitkreuz.

Mr. Garry Breitkreuz: I'll just make the observation that you allowed him to interrupt, Mr. Chairman.

If we don't change the system, we aren't going to change much else. You made the observation that we have these omnibus bills and that if there is a problem with them, it's very difficult to amend them and so on. When we go into trade negotiations, we have the same thing. There's this package deal, and you can't isolate your sectors from everything else that happens in the country.

So I come back to my initial question: why we have supply management in only a few industries, while we don't have the doors being beaten down in all the others. Unless you can answer that adequately, we have a problem here. And since I'm only limited to five minutes, I can't elaborate on that any more.

• 1230

The question I would like to see all of you and everybody who comes to this committee answer is, what can we do to have a bigger stick in these negotiations? We can talk and convince ourselves about what a wonderful situation we have here, but when it comes to international trade negotiations, we have to decide amongst ourselves how we are going to have a bigger stick at those negotiations so it's not a lot of hot air here and a lot of hot air there.

What would you suggest? I'm looking for a good non-political, impartial answer as to what we can do. I was interrupted here. There's too much politics here. What would you suggest we do to have a much bigger stick when we get to those negotiating tables? I think that's what has to happen at this committee, and unless that happens, we're just wasting our time.

The Chairman: You're taking up your time for the question, but I'll allow a minute or so for an answer.

Mr. Brian Ellsworth: I'd like to answer you. The reality is that we don't have a big stick. We're a small country, and we have to look after the people in that country. Don't you think every other country in negotiations looks after their own people?

You talk about having free, open borders in commodities like hogs and beef. Look what happened with the Americans in the western states. When a few loads of beef went in, or an extra load of grain, the Americans already were trying to stop it.

So you don't any kind of a foot up in these negotiations because you have taken all your barriers down. All they say is thank you very much; now we can walk right in.

Mr. Garry Breitkreuz: In other words, you're telling me we can't have a bigger stick. Are we wasting our time at the negotiations?

Mr. Brian Ellsworth: No. You can say we're a small country with a very small protected industry. It doesn't affect the whole big world, so why throw it away?

Mr. Garry Breitkreuz: I'm from western Canada, sir, and we need—

The Chairman: To continue debate here, Mr. Stolp, I'll give you a few seconds, and then we'll go to Mrs. Ur. Did you want to say anything?

Mr. John Stolp: Yes, please.

The CFA has worked on a balanced position, a balanced position of all of agriculture. That in itself can be a big stick. If all of agriculture works on a balanced position, we have our big stick, as big as we can get it within this country.

The Chairman: So everybody in the industry has to have a little of the sunshine, right?

Mrs. Ur.

Mrs. Rose-Marie Ur: Thank you, but some of my questions have been answered along the way.

This was brought up a little bit earlier in the discussion. When we're going into the negotiations this session, are we perhaps putting the cart before the horse? Should we have a period where we evaluate where we have come from since 1993 to 1998, have it down on paper and see exactly who has done what, who has met their targets, and where we start from there?

It's much the same equation as passing more laws but not putting into action the laws that have already been passed. I think all parties would be served well if there was a meeting set out where we take a look at who's met what criteria, and then go from there and discuss, okay, if this country hasn't done what they were supposed to do, how do we reach an agreement, rather than just compounding frustration, which will happen if this isn't rectified, as I hear today.

Mr. Paul Jelley: There is a process in Geneva called the information exchange committee or something, where officials from all countries do get together and review undertakings and commitments and that kind of thing. It may be helpful to this committee to have the AAFC staff person responsible for that appear before you to let you know where things are as to who has committed and what they've done and what they haven't done.

The Chairman: Okay, is that it?

Mr. Hilstrom.

Mr. Howard Hilstrom: Thanks very much. To put the political side to rest here, I don't know whether in the last round of trade negotiations it was the Right Honourable Brian Mulroney Conservatives or the Jean Chrétien Liberals who brought us to where we are today, but you may be dealing with the same devil today as you were then. We'll see where that goes, but there is a continuity in these negotiations over the years. Obviously, no matter, political parties come and go, and there is a continuity that's in place and is moving along.

On the whole income issue, I hope you guys will be back presenting. Some of you will be representing back on our upcoming income hearings, and I certainly look forward to that, for constructive suggestions there.

• 1235

One of the areas we'd like you to address when you come back on that is the concept of having rural Canada as more than just an agricultural producer, where the different industry sectors are going to fit into that, and how they can be treated in an equitable fashion. Certainly the people producing grains would like to be able to make a constant living. They're Canadians, the same as everybody else. So we'll be discussing that.

You may have some comments now on how that relates to trade. Certainly the trade negotiations should be looking at trying to enhance the ability of the non-supply sectors to enhance their incomes. That should be part of the negotiations. Do you have any comments on that?

Mr. John Stolp: We recognize that the turkey industry is only one part of the rural economy. We don't have turkey barns throughout the prairies in all the different grain fields to contribute to that. It is absolutely important, if we're talking about a strong rural Canadian economy, that all the parts that contribute to it are also strong and can do so. So we're very much in favour of being part of and discussing what can be done to enhance all of those sectors.

Mr. Howard Hilstrom: Thank you.

In my riding, which is Winnipeg North up through the Interlake area, Mr. Charison's company is probably one of the biggest turkey producers in Canada. They export all through the west and even into the U.S., I think. But we are also finding that people from the chicken sector are investing in land in our Interlake country and are not going into chicken production. They're using their profits out of the supply management area to buy land and buy into other sectors of agriculture, which seems a little unfair, I suppose, to producers that aren't in that sector. Do you have any comment on that?

It is on an individual basis. I don't know how you could apply that across it. It's kind of like somebody who makes income elsewhere and is able to apply it in competition with somebody who isn't able to do that.

Mr. Paul Jelley: I guess it's the same as off-farm income. What can you do about a school teacher who decides to compete for the acre of land? I don't know how you can answer the question. That's society.

Mr. Murray Calder: We've had beef farmers who've bought chicken quota.

Mr. Howard Hilstrom: Trying to arrive at a decent living for all sectors of the agriculture economy is tough.

Mr. Brian Ellsworth: I'd like to respond to your general question about supply-managed commodities and other farm sectors.

My understanding was that the safety net the government has put forward for farmers is the NISA program. Now, maybe that is not good enough. I've heard some concerns that the western people don't like it, but—

Mr. Rick Borotsik: I have a point of order, Mr. Chairman. It's not that they don't like it. I'd like that on the record. There have to be some adjustments to it, but I haven't heard any of the producers say they don't like it.

The Chairman: One at a time, please.

Mr. Brian Ellsworth: I'm just trying to say the NISA program is the safety net for grain farmers and other commodities that are non-supply.

I would just remind the members that supply management commodities do not fall into the NISA category. So we have a dual system there for Canadian farmers, and that is the way different commodities handle it. I don't think that has to be a hindrance to our negotiations at the international table.

The Chairman: Thank you. Those are good comments.

We're out of time. Mr. McCormick.

Mr. Larry McCormick: I have one short question here on one topic, Mr. Chair. Thank you.

Nothing's more important than safety when it comes to the food we're eating. The Ontario Egg Producers mentioned how they do testing for salmonella, and that no such system exists in the U.S. I'm sure—hopefully—that our food inspection people do testing. You made a comment that any product that does not meet our high standards should not be allowed into Canada. Do you believe there is food coming into this country that's not safe? Are we not testing it or catching it at the border? I'm just trying to give you an opportunity to explain this further.

• 1240

Mr. Brian Ellsworth: I'd rather talk about what we are doing and what we can assure the consumer and the public we are doing, rather than cast aspersions on anybody else.

If you want to hear more on that I'd be willing to do that, but I think I covered some of it—our farm testing and the fact that because we have supply management we have control over our producers. We can go on their farms and make sure they are adhering to our stringent regulations, particularly as they concern health standards.

The Chairman: Thank you very much.

I think Mr. Boyd wants to add a quick comment to that.

Mr. Phil Boyd: As our chairman mentioned in his paper, our concern isn't that the food coming in isn't safe. Our concern is that the costs associated with the food safety programs in this country, whether it's through inspection, the development of accreditation, HACCP programs, or HACCP-based principal programs on the farm, taken through their evolution to the final stage will increase costs in this country.

Can we trace imported whole-carcass turkeys back to the farm of origin to make sure they were treated, raised and handled equivalent to the Canadian bird? That's our issue.

Mr. Larry McCormick: Thank you.

The Chairman: Thanks to all of you. I think you did an outstanding job.

Members, our meetings on WTO will resume on Tuesday, and on Wednesday we'll begin our hearings on farm income.

This meeting is adjourned.