FAIT Committee Meeting

STANDING COMMITTEE ON FOREIGN AFFAIRS AND INTERNATIONAL TRADE

COMITÉ PERMANENT DES AFFAIRES ÉTRANGÈRES ET DU COMMERCE INTERNATIONAL

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, March 23, 1999

• 0902

[Translation]

The Chairman (Mr. Bill Graham (Toronto Centre—Rosedale, Lib.)): Everybody's here. We can start.

I guess Mr. Loubier is here today to see how a real committee of the House actually works as compared to his finance committee.

Mr. Loubier, welcome to this committee. As usual, the shorter your presentation, the more time the members of the committee will have for questions.

Mr. Yvan Loubier (Saint-Hyacinthe—Bagot, BQ): Mr. Chairman, welcome to Saint-Hyacinthe, the agri-food research park, in passing. This title of technopolis is not just some pompous title. It has been designated as such by an international organization. It's one of the rare regions bearing this title of agri-food research park and there's a reason for it.

In the Greater Emaska area you have about 30% of Quebec's tilled and tillable land. You also have the same proportion of animal production, especially in dairy and pork products. You also have no less than 10 research and development institutions in this area, two technological transfer centres in the agri-food area, four agri-food education training institutions, including the Veterinary Medicine School and the Agricultural Technology Institute, four government departments and agencies dealing more or less directly with the agri-food sector and no less than 10 professional associations and organizations in the agri-food business.

So you are in the ideal region to examine the matter of the World Trade Organization and the ninth round of negotiations that will commence with the November and December ministerial meeting this year as well as the links to be drawn between those things and agricultural concerns.

Before getting into the meat of the subject, Mr. Chairman, I'd like to remind us all of the major conclusions stemming from the eighth round of negotiations of what used to be called the GATT. To deal with this, I'll take off my MP's hat. I'm not going to play politics with this. I'll simply put my old economist's hat back on my head, the one I had when I was working for the UPA. At that point in time, I was in charge of international trade relations.

At that time, for some eight years, by then, on international markets, we'd been witnessing an extraordinarily chaotic situation.

• 0905

For the last 30 or 40 years we'd never witnessed such disorder brought about by government actions from countries all over the world, especially Europe and the USA, that were subsidizing all out all areas of agriculture and agri-food activity. Many of those subsidies were directly tied into exports but also to production. They were so tied in with production, especially in Europe, that, especially from 1984 to 1986, we had a situation of chronic surplus worldwide, especially for grains. We had twice the inventories we normally would have kept because of so much production.

That was the background when, in 1986, the eighth GATT round of negotiations got underway. Order had to be brought back in the world agri business and there also had to be order and discipline instilled in the actions of governments. At that point, there were 90 or 92 member countries of GATT which has now become the World Trade Organization.

In the agreement there were four conclusions concerning the agricultural sector.

First, all border control measures had to be replaced, in other words the quotas and the indirect control measures used for the entry of agri-food products on national territories had to be replaced by a single measure that was called tarification. In all 92 countries, what was to be found as measures controlling the imports had to be transformed into a single tariff which, with a view to liberalizing trade and putting order back into trade- exchange terms, had to be decreased by 36% over six years. In other words, everything that existed as controls over imports was to be replaced with customs tariffs and those customs tariffs had to offer the same protection as the other measures.

In Canada's case, this led to the elimination of Article XI of the GATT Agreement. Article XI of the old GATT agreement was an exception that allowed Canada to control the entry of agri-food products in the dairy sector and in the agricultural sector by means of strict controls over import volumes. We were able to control the entry of butter and milk. It was really the import volumes that were being controlled. These were replaced with customs tariffs, very high customs tariffs. The levels had been set on the basis of the 1986-1988 period. What we had then, and what we still have, is a customs tariff of 283% on milk, 351% on butter and 280% on chicken. These were the customs tariffs that we undertook to reduce by 36% over six years.

As far as tariff levels are concerned, Canada delivered on its promise and achieved a reduction of 36% in the tariffs that had been brought in by the Eighth Agreement to replace all border measures.

The second main conclusion of the GATT Agreement was that there should be, for agri-food products, a minimum level of access to the markets of the 92 countries that were GATT contracting parties. This level was set at 3%, for countries that had not already reached it for agri-food products overall, but the intention was to increase this minimum level of access for the entry of imported products to 5%. Here, too, Canada delivered on its promise, and went even further. If we look at the access levels for a range of foreign agri-food products on the Canadian market, we realize that they exceed the 5% level. Of all the world's industrialized countries, Canada has the market that is the most open to foreign products.

The third main conclusion of the Eighth GATT round was that the element of unfairness should be removed from subsidy wars, from the subsidies that were offered by national governments. Two major commitments were made in this regard. In the first place, agreement was reached on the definition of an export subsidy, and the parties committed themselves to reducing direct export subsidies by 36% over six years. Once again, as far as direct export subsidies are concerned, Canada more than lived up to its promise because, currently, there are practically no direct export subsidies going to agri-food products in Canada. They are a really tiny part of all the public policies regarding agricultural subsidies. However, we cannot say as much for Europe which, since that time, not only has not reduced its subsidies, but has actually increased them to a record level of $6.7 billion for direct export subsidies alone. Therefore, as far as export subsidies are concerned, Canada has not only achieved its objectives, but has gone beyond the call of duty, we might say.

• 0910

The fourth type of commitment had to do with overall domestic support for agriculture. At that time, the parties had concluded that, even though such subsidies were not directly linked to exports, they could have an effect on production and on the competitive advantage that the producers of one country might have over the producers of other GATT member countries. These various subsidies were brought together in an aggregate measure of support, and we undertook to reduce the level of this domestic support by 20% in six years. Here again, Mr. Chairman, Canada performed well. By the end of the year, which is the deadline it adopted to fulfil its commitments, Canada not only will have met, but will have surpassed the subsidy-reduction targets that were contained in the Eighth GATT Agreement.

Must we do more? That's the number-one question facing us as we prepare for the ninth round of WTO negotiations, in which 138 nations now participate. The Americans would like us to do more, but they are behaving so hypocritically and showing so little credibility in this matter that I hope, one day, when these 138 countries are sitting around the table, the other countries will tell the Americans to go take a walk and not to come back until they have met their commitments and are prepared to negotiate in a civilized manner. Even as the Americans denounce the supply management systems that we have here and our income stabilization policies, they are subsidizing their producers full out. Instead of following an intelligent, serious, systematic and disciplined policy, the Americans prefer to wait until the very last minute, just before their agricultural producers go under, before taking emergency measures.

Recently, about two weeks ago, the Secretary of State for Agriculture announced a special program for agricultural producers who were suffering hugely from the effects of the Asian crisis and from the collapse of Russia's economy. Approximately $10 billion in new funding was injected two weeks ago. That's almost two and a half times more than the regular budgets of the American Agriculture Department. The Americans can protest all they want. They can sing the praises of free trade and the agri-food sector as loudly as they wish. In the end, they are not only the most protectionist of the protectionist nations—along with the Europeans whom I will discuss again in a few minutes—but they are also the ones who subsidize their agricultural sector the most heavily, with the result that, at the present time, even though Canada has fulfilled its obligations admirably, we find ourselves with a situation in the United States, and even in Europe to a certain extent, that strangely resembles the origins of the crisis and confusion that could be observed in 1984. Subsidy wars are still being waged, as well as marketing wars. You have all heard the story about bananas and exports from countries that are party to the Lomé Convention, the former african colonies. Anything can be used as an excuse for a dispute between the two large trading blocks, the Americans and the Europeans.

In Europe, they have taken clear measures. Even though they increased direct export subsidies astronomically, as I mentioned earlier, they did decide to make some changes to the agricultural policies applying to the 12 European countries. In the document called Agenda 2000, which describes the reform of the Common Agricultural Policy, the CAP, you will find the approach that the European countries intend to adopt in the ninth round of WTO negotiations. Agenda 2000 states that European agriculture must be made capable of exporting without export subsidies—they have a long way to go with $6.7 billion—while maintaining producers' income and ensuring that they continue to contribute to the survival of rural regions.

• 0915

How extraordinary. If we were to apply this to the agricultural policy of Quebec and Canada, it would be extraordinary because this is how things already work here.

We have already done away with export subsidies in Quebec and Canada; furthermore, we already have policies that allow us to stabilize incomes and to ensure that the agricultural sector can support a multitude of functions, such as landscape maintenance, land use and so on. This allows us to maintain a certain level in all the regions of Quebec and Canada.

As far as Europe is concerned, the situation is somewhat divorced from reality. I hope that those countries, who say they want a more orderly and more disciplined situation, will move on this, but I also hope that Canada will stay put, because Canada has already done more than its share to reestablish some international order and discipline in this sector.

If Canada decided to give up more ground, for example by making further cuts in customs tariffs in supply-managed sectors such as milk, poultry and eggs, this would mean the beginning of the end for the supply management sector. Why? You cannot strictly control milk and poultry production within Canada and Quebec, and at the same time allow uncontrolled entry of imports from the United States and Europe.

If you don't have a production control system, you might as well give up, because the fact of having a system that restricts the amount that producers can produce will do more harm than good. Without import controls, a dairy and poultry supply management system would lead to a greater tariff reduction than the one already agreed to in the 1994 Marrakesh Agreement. That would not work. That would destroy what we know as the fundamental pillar of supply management in Quebec and Canada.

Cutting subsidies even further would not work either. Some of the agricultural producers here would go under. Why? Because we already receive, in cash, approximately half what OECD countries receive in the form of subsidies. If the subsidies—

The Chairman: One third, you say?

Mr. Yvan Loubier: One half, in cash. I'm referring to cash payments. Look at what has just been decided in the United States. A lump sum payment of $10 billion has been given to agricultural producers. We are no longer competitive with regard to government intervention. We have competitors who benefit excessively from their government's subsidies, while we Canadians—because we have been good international citizens, because we have respected and even surpassed our commitments, we have weakened our agricultural producers and our ability to compete. How can we be competitive when products are subsidized massively in Europe and the United States? It won't work.

Consequently, we should not continue reducing our subsidies. If, by opening our markets further, we allow products that receive substantial government subsidies to come into Canada and compete with ours, there's something wrong. It's not fair. We are being hit with unfair competition.

I would recommend that the Canadian government—without seeming to be arrogant, because being arrogant never pays off at forums for international negotiation like the GATT or the WTO—put Canada's achievements on the table, as well as those of Quebec's and Canada's agricultural producers, its achievements since 1994, since the Marrakesh Agreement, in order to demonstrate that it has fulfilled its obligations and that now it is up to the other parties to fulfil theirs.

I followed the entire eighth round of negotiations, from 1986 to 1993, and I found the negotiating process to be remarkably flawed. I hope it will be corrected this time.

First, I would like the federal government, if possible, to commits itself to defending unconditionally what I referred to as the three pillars of Quebec and Canadian agricultural policy, namely: dairy and poultry supply management, with sensible import controls; income stabilization programs providing income stability and a minimum income based on production costs for Quebec and Canadian producers; and agricultural credit.

Research and development, together with labour development, are certainly very important programs, but they are not being threatened. They were not threatened during the eighth round of the GATT and they will not be threatened during the ninth round of the WTO. The federal government must clearly commit itself to defending these three pillars of agriculture, preferably in writing, if that will reassure people.

• 0920

From 1986 to 1993, under the Conservatives, things were done with not too much transparency. I have nothing against the Conservatives, but since they were the ones who were there, I'll talk about them. Yes, there were sectoral advisory groups such as we now have, and here I refer to the infamous SAGITs. These SAGITs were around when the Mulroney government was in power, however, the information didn't get out and the people, particularly the targeted groups such as the farmers, had to pick up pieces of information here and there and, they even had to go to Geneva to get accurate information because the federal government kept everything back. This has an impact on our lives, not only from an economic point of view but also from a social and now cultural point of view., The WTO is going to be talking about cultural differences. It is important that people know about this, that the information get out, and that the federal government make some solid commitments.

The federal government must make a second commitment to its agricultural sector and to the citizens of both Quebec and Canada. It must make a clear commitment not to give away more markets to our trading partners than it has already done, particularly in cases where our partners have brazenly subsidized exports and domestic production and then compete with us, not because they are able to offer low-priced high quality goods on the Canadian market but because of the subsidies provided by their governments. It would make absolutely no sense to go back to the way things were in 1984.

Many people are expecting a third commitment from the federal government. If comprehensive negotiations are discussed at the ministerial meeting to be held in November and December in the United States, the federal government should make a firm commitment, in writing if necessary, that it will not yield on agri-food policy or markets under the pretext that concessions were made elsewhere. This occurs often. During comprehensive negotiations, shoes can be bartered for potatoes. We have seen this in the past. That is what comprehensive negotiations are all about. You try to get concessions in sector X and so you're prepared to make concessions in sector Y. The federal government has to make a commitment that this will not be the case during this negotiating process. We already have a specific agreement on the agricultural sector and special commitments pertaining to all agricultural policies were made. As we continue the process, I don't see why the agricultural sector would have to be considered in the comprehensive negotiations and I don't see why we should have to continue bartering, not within but outside a sector, in order to obtain agri-food concessions. This does not make any sense in terms of the process begun in 1986.

Fourthly, it is crucial that the federal government publicly disclose what it will tabling in December, during the GATT ministerial meeting. These things must be disclosed. In past years, the government said that it was confidential, that these were things that were yet to be negotiated and that we would lose are ability to negotiate if we showed all our cards. We are not asking the government to show us its negotiating cards. Negotiating cards are, in fact, the strategy that underlies the basic position you're tabling. We are asking that the government tell us what it will be presenting to the 137 other member countries of the World Trade Organization in Geneva.

I'll explain why this is so important. In 1988, government representatives told farmers in Quebec and in Canada not to be worried because they were defending Article XI of the GATT, which provided for effective monitoring of imports into the dairy and agricultural sectors, two sectors that were subject to supply management. After checking this out in Geneva—because we were travelling back and forth we set up a network—, we discovered that it was not until the fall of 1991 that the Canadian negotiators had in fact tabled a document requesting exemption for the supply management system and Article XI protection. After their initial statement that they were defending Article XI in Geneva, it took them three years to do anything about it. Had we been informed about the negotiating positions that were tabled, we would not have had this discrepancy between the political will here and what the Canadian negotiators were advocating there. I'm sure that this was not because the minister at the time was acting in bad faith, but a dichotomy was created between the political power here and what the negotiating teams were defending there, probably because of the dynamics involved in the negotiating process. Three years elapsed between the time when the political message was sent and the time when the negotiators did something about it. This must not happen again.

• 0925

We recently experienced some rather brutal MAI negotiations that were held behind closed doors. People were really fed up with this situation. Negotiating took place behind closed doors for two years. Had it worked, we would have, the following morning, lost nearly all of our rights to the big multinationals. This type of situation must never occur.

There are also the sixth and seventh commitments. First of all, the federal government must get a commitment from its trading partners that have not abided by the minimum access rules. These countries must make a commitment to open their borders. We must realize that we have gone much further than they have. Canada must demand greater access to foreign markets for Quebec and Canadian products.

As for the seventh commitment, Canada must also request that there be a real reduction in export subsidies and in the mew domestic support programs announced since the Marrakesh Agreement in 1994. We would not be heading in the right direction if we were to accept the fact that these countries, these large trading blocks that account for 60% of world trade, such as the United States and Europe, continue providing massive subsidies for their farmers and, in particular, their exporters. We are experiencing unfair competition that has had a very negative impact on the development of our sector, on economic growth and on job creation. And we say nothing about this, we continue to act as good citizens of the world.

Mr. Chairman, this concludes my remarks and I am prepared to answer your questions. I am pleased to be here this morning to talk about such interesting subjects. I would ask for your indulgence if I should by chance take up too much time with my answers. You know me, Mr. Graham.

The Chairman: Nobly born must nobly do, Mr. Loubier.

Mr. Yvan Loubier: As I've already told you, you are the best standing committee chairman of the House.

Some hon. members: Oh, oh!

The Chairman: You can't look for noblemen in the House of Commons. Is that what you mean?

Some hon. members: Ah, ah!

The Chairman: I should point out to committee members that we must finish with Mr. Loubier by ten o'clock because we have a very heavy schedule today. We will therefore keep to five minutes each.

Mr. Obhrai.

[English]

Mr. Deepak Obhrai (Calgary East, Ref.): Thank you.

Thank you for coming and for giving us an overview picture here. I am appreciative of that.

From what you've been saying, I understand two aspects. You are recommending that Canada hold back while the EU and Americans give more. You want Canada to hold back while the others give. In your view, as you have said, we have given quite a lot.

I have two questions here, sir. One, would you not think that while we maintain that and open our markets at the same time, it puts pressure on the other countries to reduce their export subsidies and play by the rules that we're going to negotiate?

While we are saying open up, my question to you is that while you have given a very good analysis of the crisis the farmers could face out of this, hasn't the consumer benefited, in your view, from Canada going that extra mile? Isn't the consumer, in the end, the beneficiary over there?

What's your view on that? Has the Canadian consumer benefited?

[Translation]

Mr. Yvan Loubier: When you negotiate any contract, be this a work contract between a union and an employer, a contract for buying land or a contract such as the one signed by 92 countries, namely the Eighth GATT Agreement, you make a commitment that you will abide by the terms and conditions negotiated in the agreement.

How are you supposed to come up with a new basis for another agreement if, out of the 90 countries, or out of the 138 that are now members of the World Trade Organization, most of the large countries don't meet their commitments? By acting in this manner, the credibility of an organization such as the WTO is damaged.

It also takes away from the credibility of the negotiating process itself because you have just given the message to the 138 member countries of the WTO that, regardless of any commitments they may agree to, they won't be required to abide by them.

• 0930

They will not be required to abide by these commitments because big trading blocks such the United States and Europe, which account for 60% of international exports, have decided not to comply with the terms and conditions set forth in the Eighth GATT Agreement.

There were some very stringent conditions that the countries were to enforce without fail. There was to be a 36% reduction in export subsidies and a 21% reduction in subsidized exports. I did not allude to this earlier because I didn't want to make things unnecessarily complicated, but when countries do not abide by these commitments and Canada does, we are not lacking in self-restraint but are just being objective and honest when we say: "I have abided by all of these conditions and you have not; now it's time for you to put on the table what should have been there from 1994 to 1999, something that you did not do for various reasons."

I think that Canada would be well equipped to have that kind of initial negotiating position. We have to avoid playing with words or being more catholic than the pope. We already went farther than what was required under the Eighth Agreement. We should not do more than what the others are prepared to concede in the ninth, because we would look crazy. Behaving that way in society won't gain you any respect.

[English]

Mr. Deepak Obhrai: Thank you.

What about the question I asked in reference to Canada going this extra mile, and whether or not the Canadian consumer has gained? You've been defending the producers. I agree, they play a vital role in agriculture, a very vital role, in the overall economy, especially in your area. But what about the Canadian consumer? Have they gained from the last round?

[Translation]

Mr. Yvan Loubier: I do not have the exact data, but I should have brought it. I regret not having done so.

Several organizations have conducted analyses on the cost of a basket of goods in Quebec, Canada, the United States, Australia, France, and Belgium, just to name a few countries. Comparative analyses were conducted on a typical basket of goods and it was determined that contrary to what we might think, even in areas that are subjected to supply management, the same conclusion was reached.

It is often said that consumers pay more because of supply management in the dairy sector, in poultry and in eggs, since supply management enables producers to negotiate prices for their primary products. That is false.

Our basket of goods is among the most competitive in the world, even for supply managed commodities. Do you know why? It is because we have the best products in the world in these two specific sectors in Quebec and in Canada. I am dead serious. That occurs because the prices producers receive are determined on the basis of a cost of production formula. If they are among the best producers in the world, that means that their production costs are among the lowest in the world; that also means that the price that flows from the cost of production is among the lowest in the world.

Since I have been involved in this field, I have heard a lot of comments. Representatives from the Consumers' Association of Canada made statements that were completely inaccurate and that insulted people's intelligence. For example, some people say that the fact that dairy quotas cost producers a lot of money results in consumers paying high prices for their dairy products, but that is false.

In the cost of production formula, the value of quotas is set aside. It is not part of the cost of production formula, and as a result the formula is based on a sampling of the most efficient dairy producers in Canada. They are already efficient generally speaking, but the sample that is retained to establish the cost of production formula that determines the prices is based on the best producers in Canada, so the prices are based on the cost of production without quotas being included. Saying that dairy prices in Canada are very high because the price of quotas is high is completely ludicrous. That does not stand up to analysis.

• 0935

In Canada today, consumers are benefiting from one of the best price-quality ratios fro agri-food products. What is important, and consumers are always very impressed by that, is the quality of the products. They want the quality to continue to be controlled strictly. They know that if they consume local products, they will be sure that the products are of a very high quality, subject to rules and to sanitary and phytosanitary standards that are unparalleled in the world.

The Chairman: Thank you.

Mr. Sauvageau.

Mr. Benoît Sauvageau (Repentigny, BQ): Mr. Loubier, it is nice to meet you. No, I am joking.

Yvan, my friend, it was a pleasure listening to you. I knew that you had a good handle on this matter, but the fact that you are going back to your first love—and you speak so passionately about it—is a pleasure for both of us, it's reciprocal. That is what came out of your presentation.

Mr. Yvan Loubier: First love is always the best.

Mr. Benoît Sauvageau: I was not talking about him and me. I am talking about what he loved at school. Don't take it personally, Ms. Folco.

Voices: Oh, oh!

Mr. Benoît Sauvageau: All right, I declare a truce on jokes.

You clearly addressed the speed at which Canada met its obligations at the last round of GATT negotiations. I know, for example, that Odina Desrochers and Hélène Alarie are using that somewhat as their pet subject when addressing the issue of new negotiations.

Your presentation and a document from the library lead me to a number of questions. Yes, I agree with you in saying that we need to go to the negotiating table with this reality in mind, knowing that Canada quickly met its objectives, but what are the chances of success with a negotiating strategy like that?

Are the others going to listen to us? Can the others respect us? Can the other countries say that they will not ask anything more from Canada, because it has complied with its obligations, but that they are going to make a commitment to complying with theirs? What are the chances of succeeding at that level?

What should we do if the other countries are not open to that negotiating strategy? Should we move away from the table? What should we negotiate? I know you mentioned not trading off agriculture for something else, but in the event that a deaf ear is turned to that negotiating strategy, what stand should we take?

You also mentioned some studies on the basket of goods. Many people have said that it is difficult to negotiate new agricultural agreements if there are no cost-benefit analyses. Have these rounds of negotiations, these treaties, and these agreements been beneficial for agricultural producers? Some people have told us that prior to negotiating, we should have cost-benefit analyses of what has already been negotiated, of what we have given up and what we have obtained. What do you think about that?

My last question concerns our American friends. They often invoke national security to override some international conventions. We've seen the American army transporting wheat, etc. What do you think about that? How do you think we should deal with the issue of national security in the next round of negotiations?

Mr. Yvan Loubier: Thank you, Benoît.

It is clear that we must not withdraw from the World Trade Organization. Regardless of what happens, we must not withdraw from it. The very fact of being a member of the World Trade Organization confers upon us what is called the most favoured nation status.

It ensures that with respect to international trade, Canada's 137 partners treat us in the best way possible and the same way they treat other trade partners. In other words, there is no discrimination. Normally, the GATT or WTO rule should be applied. The very fact of participating in this forum is an advantage in itself. Being excluded from it starts to be a disadvantage. That is so true that at present, there are 138 member countries and 30 or 32 other countries that are waiting to become members of the World Trade Organization.

There are two ways of addressing the problem in Geneva, or in the United States during the next ministerial meeting. We can say: This is what Canada has achieved; you must now do the same before we will accept other concessions. Or the issues can be presented differently. We can say that we will continue to comply with the commitments made in the Marrakesh Agreement in 1994. They were based on the situation that prevailed with respect to subsidies, and border controls during the period from 1986 to 1988.

• 0940

This looks more technical and perhaps less arrogant, but if we were to continue with the commitments made in the Eighth GATT Agreement on the 1996-1998 basis, that would tell the United States and Europe that they must comply with the reduction targets of 36% for export subsidies, 20% for domestic support and 36% for the custom tariffs, which replaced any type of import control.

There would be no shame if Canada were to say that we must continue what we began with the Uruguay Round, that unless and until the others comply with the commitments made under the Marrakesh Agreement, we will wait before assuming others regarding the reduction of subsidies and minimum market access.

As to the cost-benefit analysis—I probably said this before at some point—we may say that we require analyses of this type, but in actual fact, this is not possible. One can certainly study a given industry, such as poultry or yogurt with raisins and grains, and conclude that we in no way benefited from the Eighth GATT Agreement and that there was in fact greater competition. However, the negotiating process involves concessions and interdependencies. We make concessions left and right.

Overall, did Canada lose under the Eighth GATT Agreement? I don't think so. Did Quebec lose? Absolutely not, because between 1993 and 1998, there was significant growth in international trade.

The Asian flu threw a monkey wrench into the situation. Was the growth of trade linked to the Eight GATT Agreement? Perhaps there are new, clear, more modern rules, but it is not possible to do a genuine cost-benefit analysis. There have certainly been benefits to consumers. In fact, Mr. O'Brien was mentioning some of them. How do we take these into account? How do we measure them?

This may not be the correct approach. However, as I mentioned earlier, we can measure the effort made by the GATT member countries and their compliance with the commitments they made. I think there is more future in that than in doing cost-benefit analyses before we get into the negotiations. If it were up to me, we would be in GATT's negotiations every day, because what we have built in the last 50 years is extraordinary.

Despite all the weaknesses I mentioned earlier, such as the lack of discipline, we have to look at what was happening in 1947. The Second World War had just ended and the First World War ended a few years earlier. Yesterday's enemies have become today's partners and even friends.

Look at what happened in Europe. The first GATT treaty and the Treaty of Rome, in 1957, marked the beginning of the economic interdependence that guarantees some order, and especially peace. Any cost-benefit analysis will show that there have been some very significant net benefits.

The Chairman: Mr. Bachand.

Mr. André Bachand (Richmond—Arthabaska, PC): I apologize for disturbing you earlier, Mr. Loubier.

Mr. Yvan Loubier: No problem.

Mr. André Bachand: I would like to start by making a comment.

We hear a lot about the WTO decision on export subsidies, which affects 5% of Canada's production. There have been many meetings on the subject. Today, the Quebec's minister of Agriculture is meeting with people affected by this decision. I would like to hear your comments on this.

Mr. Yvan Loubier: Export subsidies in which sector?

Mr. André Bachand: Milk.

Mr. Yvan Loubier: Oh yes, the WTO issue.

Mr. André Bachand: Yes. I would like to know what you think about this. Should we appeal the decision? Should we take the next 15 to 18 months to find solutions regarding the implementation of the decision?

You talked a great deal about agriculture and agri-food. As Benoît said, you've gone back to your first love.

Mr. Yvan Loubier: That was this morning's topic.

Mr. André Bachand: Your first love?

Some hon. members: Oh, oh!

Mr. André Bachand: I don't know if your wife will be very happy about that.

Mr. Yvan Loubier: It's the same one. I met her when I was 16 and she's been the only one.

Mr. André Bachand: Well, so much for your youth. I don't remember what I wanted to say anymore.

• 0945

Some hon. members: Oh, oh!

Mr. André Bachand: We talked a great deal about agriculture and the WTO decision. If I understand you correctly, you're stating that Canada intends to maintain its position. What will be important this fall, when the ministers meet, will be to look at what provisions of the agreement have been respected, by whom and how, before we take part in the next round of negotiations. I believe it would be useful to be in a position to say that we took this or that measure in the area of agriculture. In your opinion, has Canada lived up to most expectations and respected all the provisions of the agreement signed during the eighth round of negotiations? Although I've referred to agriculture, negotiations did involve several other sectors.

Mr. Yvan Loubier: Yes.

Mr. André Bachand: I'd like to hear your views on that.

If we have time, I would like us to discuss the MAI and the whole investment issue which will also be a subject of negotiations, as we know. Will we be negotiating the MAI by the back door since it failed through the front door?

Mr. Yvan Loubier: That's a lot of topics.

Mr. André Bachand: Yes.

Mr. Yvan Loubier: With regard to subsidies for dairy exports, I was surprised that the Americans reacted badly to these Canadian subsidies because they don't come from the federal or provincial governments but rather from the producers themselves. They pay premiums and accumulate a fund that is similar to the equalization fund and which allows them to ship milk powder in particular, as well as butter, in international markets. These exports are quite minimal and as I said, producers are not using taxpayers' money but their own funds that they use to market their products internationally. They are not engaging in unfair competition because when they set up this fund, they sacrifice part of their profits and competitive ability. If they did not invest this money in marketing, they could invest it in measures to increase their productivity, for example. That money belongs to them. In fact, the American challenge can be challenged in turn. I wouldn't really say that this kind of subsidy is objectionable since these are not even public funds, but rather funds that belong to the producers.

The Chairman: Excuse me for interrupting. I'm not an economist, but you will agree that even though these are individuals, what you have just described does look a lot like dumping.

Mr. Yvan Loubier: No, it's not dumping.

The Chairman: Why not?

Mr. Yvan Loubier: Why are you saying that this is dumping?

The Chairman: No?

Mr. André Bachand: This may be because as you know, the Americans automatically hold the view that with domestic supply management, the tariff chart for products aimed at exports lists a different price.

Mr. Yvan Loubier: Yes.

Mr. André Bachand: The Americans call it an export subsidy because of our domestic supply management and they invoke several other arguments. The marketing fund you're referring to is one thing, but here we're talking about a marketing fund that has an impact on prices, and not on the level of marketing exposure. Since it affects prices, that's why all these crises can occur. But the starting point is domestic supply management.

Mr. Yvan Loubier: Yes, yes.

Mr. André Bachand: In any event, the reason hardly matters.

Mr. Yvan Loubier: Clearly, the Americans are trying to find all kinds of excuses to demolish supply management. However, when they accuse us of doing that, they don't gaze at their own navel and they don't look at what's going on in their own backyard. The tariff structure includes approximately seven different prices for American dairy products, about five of which are set for export markets. They engage in real dumping because they use government funds and they are giving money for all kinds of reasons. We also hear about fallow land. Producers are compensated, and curiously enough, dairy farmers and grain producers benefit most and their products are the ones Americans export the most.

That's the result of the supply management system. There is no doubt the price is negotiated and that if this supply management system did not exist, the prices paid to producers might be somewhat lower and less money would be accumulated to be used subsequently for export. But that's the debate that surrounds supply management as such; it's not the fact the funds that belong to the producers are used to export that is in question here.

• 0950

For as long as I have known them, the Americans have been contesting the supply management system and here they found another avenue. The problem with international regulations is that as long as there is no complaint about a measure like this, there is no investigation. If we started investigating all the practices of all governments worldwide for A to Z, the American government would be pilloried almost every week, especially in the dairy and grain sectors, where it gives out subsidies right and left to reduce prices and export these products on international markets.

You referred to whether Canada respected commitments in other areas. I see that our Chair is somewhat impatient here.

The Chairman: No.

Mr. Yvan Loubier: In my opinion, yes. There are indications that Canada has respected virtually all the terms of international agreements. When you look at the number of complaints filed against Canada, you see that it has often won. Whether it's the WTO or the NAFTA tribunal, Canada wins far more often than it loses. That indicates that on the whole we respect the rules of the GATT, the WTO and the free-trade agreement.

However, there is one sector where Canada does not apply the basic principles of the GATT and with reason; we will support it 100% on this. I'm referring here to national treatment, most favoured nation status and the cultural sector. We support the bill tabled by Ms. Copps as well as anything concerning a better defined and more explicit cultural exception or exemption. Even if Canada does not respect the basic principles in this regard, it has its reasons. Right now, cultural diversity is the subject of a major debate because as we built economic interdependence, we realized that this tends to lead to uniformity. The reflex of sovereign countries was to build some kind of a shield against that uniformity. The best rampart is really the discrimination that we can exercise through measures that are aimed at promoting the fulfilment and expansion of culture.

Mr. André Bachand: I had also raised the issue of investment.

Mr. Yvan Loubier: The AMI is a rotten agreement because for the first time, we were removing the significance of the process that had begun in 1947 when GATT was created. Since that time, countries had pooled resources, had participated in discussions and had arrived at a consensus in various areas. A secretariat in Geneva had also been established and certain powers had gradually been delegated to supranational organizations. But in exchange for the benefits we received, we had to assume certain obligations.

However, when we analyzed the MIA as such, we realized that the result was neither the globalization nor the creation of interdependence that we had witnessed over the past 50 years, since the creation of the GATT. What we were seeing was the multinationalization of trade. Moreover, I think that it was the Lisbon Group that came up with this name. There is a difference between multinationalization and globalization. All the advantages were to be given to the corporations with international addresses, corporations which we used to refer to as multinationals and are now known as transnationals, however, they were not required to take on any obligations. The governments were the ones who were to shoulder these obligations. These were not concessions accompanied by obligations for corporations and governments; the corporations were to be given all the rights whereas the governments were to shoulder all the constraints and obligations. That was the first aspect of it.

Secondly, for over two years this agreement was negotiated behind closed doors. It was an Internet accident that enabled people to find out about the clauses in this draft agreement. France intervened and so did Canada, which came out and said that it would not sign this agreement because there were no cultural exemptions. It's thanks to a chance accident that we were able to find out about these things.

The negotiation for a multilateral investment agreement that are taking place in Geneva, within the WTO, is more transparent and more general. There is nothing wrong about wanting to negotiate an investment agreement, however, the WTO makes it possible to hold more public and more general discussions, as I was saying earlier, because this organization has 138 member countries and another 30 waiting to join. It is not a group of 29 OCED countries, the billionaires' club.

• 0955

We know where we're going with the negotiating process. I am convinced that if we stick to the principles used since negotiating the GATT in 1947, which led to the establishment of economic interdependence, this investment agreement will not bear any resemblance to the one negotiated at the OCED, which was denounced by the citizens and subsequently died. As for the citizens who denounced the MIA and who hampered the Montreal Conference, they should be given a medal and not punished in any shape way or form.

The Chairman: Thank you, we have only seven minutes left and Mr. Patry and Ms. Folco would like to ask questions.

Mr. Bernard Patry (Pierrefonds—Dollard, Lib.): I will share my time with Ms. Folco. I'm only going to ask you one question.

Mr. Loubier, thank you for your presentation. I appreciate you more at the Standing Committee on Foreign Affairs than I do on the finance committee.

Mr. Yvan Loubier: I see. Do you like me less because I do a bad job in finance?

Mr. Bernard Patry: No, no, I said that I appreciated you more. I was being very positive, not negative.

Mr. Yvan Loubier: Because we don't treat roughly our old loves. We must always put a smile on.

Mr. Bernard Patry: That's right.

You told us that before Canada sits down at the negotiating table, it should insist that its trading partners first of all respect their commitments. We all know that the Uruguay Round ended with a confrontation between the United States and the European Union.

We now see what's happening with the banana conflict. Before negotiations are even under way, we may be heading towards another confrontation between the United States and the European Union.

My question is where will Canada be, should this occur? Some analysts have told us that they can foresee taking a North American approach to counter the European Union, despite all of the problems we experience almost daily with the United States. In your opinion, is this a possibility? Would we be better off doing this or we would be shooting ourselves in the foot? My question is as follows: who are Canada's allies? In agriculture, there are only two superpowers: the United States and the European Union.

Mr. Yvan Loubier: As for your first question or comment, the Uruguay Round did end in hostility, nevertheless, the Eighth Agreement was signed. The Uruguay Round began in hostility and this hostility never abated.

I can recall that, back in 1986, Europe and the United States had daggers at each other's throats. There was no reason for that. During the four previous years, the subsidies had been top loaded. All of the parties were guilty of this. The United States would top load, and then Europe would follow suit.

Canada and the 13 other countries, referred to as the countries from the Group of 13, which were all significant exporters despite their smaller size, suffered tremendously. I remember that there were some special programs in Canada. The federal government used these programs to assist and support Western farmers because the price of grain was falling from day to day. The government poured billions of dollars into this program for years, but it was never able to compete with American and European government money. When we consider the amounts of money involved at that time in the common agricultural policy, you can understand that we were really too small to be able to react.

From 1986 to 1993, negotiations nearby failed completely on two occasions. But at the GATT, as is the case with all international bodies, diplomacy intervenes. Negotiators talked about postponing negotiations. However, in reality, those who were there to witness what was going on observed that negotiations had failed. People didn't want to negotiate anymore. The representative from the European Commission and the representative from the United States were literally squabbling with each other.

The negotiation process has been like that since 1947. The Americans were the cause for the failure in 1947. In 1947, we weren't supposed to wind up with the GATT. This agreement was not supposed to be a trade agreement between 23 countries. It was supposed to be an international agreement to set up an international organization which would have truly policed trade. The Americans refused. They did not want to lose their prerogatives and their sovereignty by doing that. This is how we go about the building process.

At the House of Commons, we're not always in agreement. I'm not saying that we can always arrive at a consensus, but this has happened. If we were responsible for the fate of international trade and millions of jobs around the world, I think that we would do everything we could to come up with a trade agreement. Consequently, even if things start in hostility, they will continue in hostility.

• 1000

It is important to understand that it is in no one's interest, it is not in the interest of either the United States or of Europe, to see the multilateral system weaken when in fact it has grown stronger from one round to the next since 1947.

In my opinion, the WTO is the international organization that has been the most successful and it does have rules of law, which is not the case with the others. I think that everyone is going to rally.

I like the idea of free trade between the three Americas because trading blocks are forming everywhere. This would be a good counterpart to Europe, and also to Asia, because Asia is also getting organized. The countries that we refer to as the Tigers, which includes Thailand that I so adore because my daughter comes from there, and country such as Korea, Vietnam and Laos are getting organized and will probably join with Japan. They're forming a block and, a few years down the road, perhaps in 10 or 15 years, the Asian countries will unite. So we have to think about that.

The debate that we initiated on currency was all about that. We wanted to talk about the need for forming a solid trading block comprised of the three Americas. To make this trading block even more solid, we should perhaps, if we look at European history, begin discussing the issue of a common currency, which would not necessarily be the American dollar.

The Chairman: Thank you. I think that we'll have to conclude because we have many more witnesses to hear today.

Could I ask you only three questions which you may answer by saying yes or no? Is the Saint-Hyacinthe research park unique in Canada?

Mr. Yvan Loubier: The agrifood research park called—?

Ms. Raymonde Folco (Laval West, Lib.): No, there is Laval as well.

Mr. Yvan Loubier: No, no, no.

Ms. Raymonde Folco: In agriculture, yes.

Mr. Yvan Loubier: One moment. No, no, no. Listen.

The Chairman: I simply wanted to describe—

Mr. Yvan Loubier: Mr. Chairman, let's clarify that. There are lot of candidates but few elected.

Saint-Hyacinthe is the only agri-food research park that has been designated as such by an international organization. Laval makes such claims but doesn't have the title. It bestows the title on itself.

The Chairman: You're suggesting that we consider this model in our government report. This would be a type of centre where we could look at issues pertaining to the export of our agricultural products.

Mr. Yvan Loubier: I have suggested the research park not as a theoretical model but as a model that actually exists. A research park is characterized by its ability to bring together all aspects, whether they be direct or indirect, of a particular sector.

Here you have university research, education, training for people in the agri-food sector, production, processing and federal and provincial research centres for marketing and food quality. This is what defines a research park: the integration of all aspects of one sector in particular. I do not think that Laval is able to provide all of these features.

The Chairman: You talked about the fact that the approach taken in agriculture in the East is different than it is in the West. Representatives from the Canadian Federation of Agriculture, who appeared before the committee a few weeks ago, told us that divisions were not nearly so great as they had been in the past in Canada. Do you agree with this opinion?

Mr. Yvan Loubier: Mr. Chairman, since 1982 I have experienced every possible and unthinkable division in the agricultural sector. I worked on the Crow's Nest file in 1982, at a time when I was working for Mr. Whelan. I saw how torn people were during the eighth negotiating round. This time, in my opinion, there will be unity because all of the sectors, be they significant net exporters or industries governed by supply management, will come to the same conclusion. Canada gave more than what was called for under the Eighth Agreement. It is pretty clear that we will be asked to take it easy.

The Chairman: Thirdly, should Canada disclose its position as it did in Geneva? Are the other countries going to want to make their position known?

Mr. Yvan Loubier: As soon as you table your initial negotiating position with 137 countries, it becomes public knowledge. It is the strategy surrounding our position that we have to keep under wraps. Canadian negotiators did come to this realization, but not until 1991. It took them five years to get the message! After that, we were entitled to the negotiating positions and to the developments within these positions during the course of the Geneva negotiating process. We're not asking them to show us their negotiating cards, but if we're asked to defend supply management, they had better prove why.

The Chairman: Thank you, Mr. Loubier. You have made a very good contribution to our committee.

• 1005

Mr. Yvan Loubier: Thank you very much.

The Chairman: No doubt we will see each other in other places.

Mr. Yvan Loubier: No doubt, because this committee will always be interesting.

The Chairman: You may now leave if you'd like.

Mr. Yvan Loubier: I'm not at all bored at this committee.

The Chairman: I will now ask the Syndicat des employé(e)s de magasins et de bureaux de la SAQ to join us.

Witness the marvels of modern technology: we have gone from the Arctic to Florida in 40 minutes. It's great!

I would like to thank our witnesses. We had planned only one hour for you, but since there are four of you, I suggest that we add 15 minutes and finish around 11:15. If you could limit your presentation to 15 to 20 minutes, that would give us more time for questions.

Mr. Jean Jr. LaPerrière (President, Syndicat des employé(e)s de magasins et bureaux de la SAQ): We'll try.

The Chairman: Thank you.

Mr. Jean LaPerrière: First of all, I would like to thank members of the committee for giving us this hearing as part of your objectives to represent as faithfully as possible the interests of the Canadian and Quebec public in anticipation of the ministerial meeting of the World Trade Organization that will take place in Seattle from November 30 to December 3, 1999.

Allow me to introduce the persons accompanying me: Ms. Jacynthe Fortin, a sociologist currently employed by the Collectif pour une loi sur l'élimination de la pauvreté; Mr. François Patenaude, a researcher with the Chaire d'études socio-économiques of the Université du Québec à Montréal; and Mr. Ronald Guévremont, communications officer with our union.

I'm the president of the Syndicat des employé(e)s de magasins et de bureaux de la Société des alcools du Québec, which represents 2,800 of the 5,000 employees of the Société des alcools throughout its 337 branches in Quebec.

The Société des alcools du Québec is what the WTO calls a state-trading enterprise. These enterprises will be the subject of intense debates during the upcoming WTO negotiations.

The first question we asked ourselves is: What is the WTO? We really like the metaphor you used, Mr. Chairman, during a previous hearing, when you compared the WTO to a chess game set up on 130 floors and played simultaneously. We also agree with Mr. Jonathan Fried, the Assistant Deputy Minister for Trade, when he says that Canada must guarantee that it maintains a regulatory right in the interest of the Canadian public and in the interest of public health and safety. Lastly, what guided our thoughts on the subject, before we met with you, was the statement made by the Minister of International Trade, Sergio Marchi, to the effect that you have to talk about the economic dividend as well as the social dividend.

When Canada wonders how it can reconcile, in the mind of the WTO, its role as a commercial engine and that of a country based on social standards, that looks after the welfare of the public with which it is dealing, our answer is that if it adopts as its position that it will defend the SAQ and all other provincial liquor control boards before the WTO, it will have achieved that goal.

Let's take a quick look at the history of the trade in alcohol in Quebec. In 1878, Alexander Mackenzie proclaimed the Scott Act, a response to the Dunkin Act, which, since Confederation, was only applied in Quebec and in Ontario and which stated that 25% of the voters in a county or a city could demand a referendum on prohibition.

In 1919, the government of Quebec gave the public a choice between total and partial prohibition. The latter option won in a referendum. On July 8, 1920, Taschereau took power and the selling of alcohol was the first problem he attacked.

All the players on the Quebec political scene at the time got involved as well as newspapers such as L'Autorité, Le Pays, Le Canada, Le Devoir, Anglican and Catholic religious authorities, the disciples of temperance, academics, tavern owners, etc..

After a year of debate and a few studies on the subject, the law came into effect on May 1, 1921. Citizens of the City of Quebec voted against the Scott Law, on September 12, 1921, by a majority of 11,872 votes, which meant that Quebec City would be governed by the new legislation.

• 1010

In Quebec, everywhere the Scott Act prevails and where a referendum is held, the public comes out in favour of the new Taschereau Act. In his biography of Taschereau, Antonin Dupont even concludes that the profits on liquor sales allowed for an improvement in the social conditions of the Quebec people. It is therefore obvious that the SAQ was created for social reasons. Since 1921, several surveys have indicated that the people of Quebec support and are attached to this crown corporation.

Wines and spirits are not food products like any other. According to experts, alcohol is a drug which is just as dangerous as cocaine or heroine. That's one of the conclusions of a report on the "problems arising out of the dangerousness of drugs" drafted by a group of French and foreign experts presided by professor Bernard-Pierre Roques, director of the molecular pharmacology unit of Inserm, and which was tabled with the Secretary of State for Health of the French government, Bernard Kouchner. All the studies, both medical or sociological, clearly prove this fact: alcohol is not a food product like any other and, as a result, cannot be sold like any other.

The sale of liquor may not be one of the essential functions of the state in the same way as education, health care or social services, even though the SAQ does help fund these functions that are essential to the survival of the French fact in North America, but it is certainly a barometer that indicates what kind of society we live in. As we know, liquor has a social impact on health care and crime. But none of this exists for the private sector.

Ms. Fortin will have an opportunity to give us more information about the social role of the SAQ.

Before we broach the subject of the social dividend, let's look at the economic dividend and the role of state-trading enterprises as dominant players in a given market, more specifically the SAQ and the liquor trade in Quebec. I will give the floor to Mr. François Patenaude, of the Chaire d'études socio- économiques of the Université du Québec à Montréal, who has looked at this issue for us.

The Chairman: Mr. François Patenaude.

Mr. François Patenaude (Researcher, Chaire d'études socio- économiques of the Université du Québec à Montréal): Good morning, everyone.

In the brief we are tabling before you today, we've analyzed two of the main subjects that will be dealt with in the next round of WTO negotiations, namely, market access and the role of state- trading enterprises. This brief deals with these subjects exclusively in relation to the SAQ.

With regard to market access, we examined primarily the access provided to the wine market in Quebec. First of all, we must point out that because of its climate, Quebec produces very little wine. Home-based production of wine in Quebec is about 475,000 litres; by comparison, the SAQ and grocery stores sold 76.3 million litres of wine in Quebec in 1998. That is to say that the production of wine in Quebec only represents a microscopic part of the entire Quebec wine market.

Therefore, if market access is generally defined as access to a country's domestic market by exporting countries, these conditions not being hindered by the protectionist imperatives of domestic production in the case before us, we try to determine who offers the best market access to foreign products, be it a state- trading enterprise like the SAQ or food retailers.

This was done in order to prove whether a state-trading enterprise like the SAQ is more open to international trade than the private sector, contrary to the statements put forward by the Americans and certain WTO member countries.

Wine sales in Quebec are conducted by three networks. The two major networks are the Société des alcools du Québec, which has a 63% market share, and a network of authorized distributors, that is grocery stores and convenience stores, which have 36% of the market. There is also a network of producer craftsmen, of which there are 66 in the case of Quebec, and who represent less than 1% of total wine sales in Quebec.

In order to study the market access provided by the two main networks, we looked at a certain number of criteria. Among these were the number of products offered by each network, the origin of the wines and the volume of sales. We found that for each criterion, the SAQ provided greater market access. It offers 3,479 different wine products, compared to 217 in the private network.

With respect to the origin of the wines, the SAQ offers products from 31 different countries compared with nine in the grocery store network. The sales volume for wines from outside Canada accounted for 80% of still or non-sparkling wines, which were the regular wines sold through the SAQ in 1997 and 1998.

• 1015

We can conclude, therefore, that the SAQ provides better market access for foreign products. That access enables both Canadian and foreign producers to sell their products in Quebec. It also gives consumers the benefit of a wider variety of products. The gap results in part from restrictions under the Quebec Liquor Board Act but mainly from three factors that make it difficult for grocers and the private sector to offer a comparable product line to the SAQ's.

The first of these factors is their mission. Grocers do not have as their main mission to sell alcohol; it is one of their side activities. Because of their mission, grocers and corner store owners will always be limited in their choice of middle and high- end wines, and the problems involved in storing and keeping wine will be very significant in the network of private grocers.

There is also the economic aspect. Grocers, and to an even greater extent corner store owners, will not be able to keep a large inventory of wines in stock because of the high price of these products. Transportation costs will also be higher to bring the products to the 11,000 sales points in the grocers' network rather than to the 337 SAQ stores.

Finally, the grocers and corner store owners will never be able to be as efficient at importing wine as the SAQ is. Customers who go into an SAQ branch and want to buy wines that are not available there can use the SAQ's services to import wine privately on their account.

Moreover, grocers and corner store owners across Quebec will never be able to get products for their customers that are not on their shelves. That is another service that is unique to the SAQ. If you go to your local SAQ store and the product you are looking for is not available, it can always be ordered from another branch so that you can then buy it locally.

Regarding the role of State-trading enterprises, the SAQ has above all a social role to play. It is a commercial enterprise that was originally set up for social reasons, since alcohol consumption has a social impact and a social cost. Ms. Fortin will talk to you in greater detail about that, but it is an essential point to keep in mind in respect to the SAQ.

The SAQ also has an impact on public finances. Its contribution to the Quebec and Canadian public purse helps to offset part of the social costs of alcohol consumption. The SAQ's contribution is far from negligible, since it has been directly responsible for providing $6.7 billion in taxes to the two governments over the past ten years. No other alcohol marketing system can rival the present one in terms of its direct contribution to the public treasury.

The SAQ is also a well managed state-trading enterprise, and that is worth emphasizing. The reason often given for privatizing state-owned enterprises is that they are poorly run and costly. In fact, contrary to certain claims by the private sector, a state enterprise can be well run and can strictly control its operating expenditures to generate good profits. The SAQ is a case in point.

One of the advantages of the SAQ's public monopoly is that it provides better market access. For consumers, the SAQ provides more choice. It also ensures better quality control. It is important to realize that quality control is much easier if it is all done by one organization, which is what the SAQ does. Moreover, SAQ managers are not set on increasing profits at any price, which considerably reduces the risk of poor quality control. Finally, the SAQ offers excellent customer service, which the private network cannot do because of its mission.

For the government, the SAQ represents a source of funds. As we have seen, the SAQ contributes substantially to the Quebec and Canada governments through dividends, taxes and duties. For 1998, the amount was $753 million.

There is no conflict between the government and the SAQ's commercial activities. When the government wants to change tax laws or legislation affecting the private sector, people in the private sector always resists by lobbying or through employer or industry associations. But since the SAQ is an extension of government, it is on side, whereas the private sector is sometimes on the other side.

• 1020

Here are a few things worth noting. During the next WTO negotiations, certain member countries, especially the Americans, will want to discuss the role of state-trading enterprises. They feel that these enterprises create market distortions and exercise substantial market power because they are buying and selling monopolies. Our position is that this is true not only of state- trading enterprises, which is what some countries claim. We agree with New Zealand and Australia that the issue of market distortion and monopolies must be looked at in both the public and private sectors.

In closing, I would like to point out some disadvantages to eliminating the SAQ's public monopoly. First, there would be less market accessibility and a smaller variety of products available. Why do we say that? There are some precedents for privatizing state liquor boards, including in Alberta and Iowa. In Alberta, privatization led to a significant drop in the number of products available in the stores. The average number of products declined from 860 before privatization to only 425 afterwards, a drop of 51%. Before privatization, there were up to 2,000 products in the liquor stores, compared with at most 1,000 after privatization. Wine selection was particularly affected by the decrease in the number of different products. Six months after privatization, the choice of wines available to consumer was down by 75%. In Iowa, the same thing happened: the number of products offered decreased. Products with small profit margins and low sales volumes disappeared from the shelves and were replaced by more profitable products. Of the 700 different wines available before privatization, only 300 were left after privatization, a reduction of 57%. Rural regions were especially hard hit by privatization, since two-thirds of the liquor stores closed and those that remained generally had only about a dozen different products.

The second risk associated with the disappearance of the SAQ's public monopoly is that it could lead to a takeover of the market. The SAQ's public monopoly allows all players to have access to the market, be they large exporters or small businesses that offer good products but perhaps do not have the same means as the multinationals to become established on the market. The SAQ therefore encourages competition, by allowing new players to joint the game. It also prevents the creation of an oligopoly, that might control the market. The SAQ, because of its size, is able to resist pressure from local, national and multinational companies that would like to obtain a form of exclusive rights for their products. If the SAQ were to be privatized, we could have reason to fear that some companies would attempt to control the market.

Thirdly, there are fears that the disappearance of the SAQ could lead to higher costs for the citizens of Quebec, because the private sector wants nothing to do with social policies that focus on the responsibilities associated with alcohol consumption. Its goals are purely commercial. Therefore, we might have to worry about an increase in alcohol consumption and the associated social costs, were the SAQ to be privatized.

Furthermore, based on the results of privatization in Alberta and Iowa, the disappearance of the SAQ could lead to higher product prices. If the SAQ were to be privatized, the Quebec government would have to forego its dividend, which amounted to over $300 million in 1998, and would also have to resist pressure from the private sector, which would lobby for lower taxes. I would like to point out that, in the case of Alberta's privatization, which was carried out in 1993, taxes on alcohol were lowered three times. This foregone revenue for State coffers represents that much less money available to absorb a portion of the social costs of alcohol consumption.

As for the importance of the social role played by the SAQ, I now turn the floor over to Ms. Jacynthe Fortin, sociologist.

The Chairman: Ms. Fortin.

Ms. Jacynthe Fortin (Sociologist, Author of the Study "Enjeux sociaux de la privatisation de la SAQ: de la facture économique à la fracture sociale"): Good morning. My comments really have very little to do with accounting concerns, although we use some of the same language when we talk about social cost effectiveness.

It is my intent to look carefully at what is at stake in privatizing the SAQ, in other words, to look beyond the figures. To this end, I would like to start by giving you some background. We could set aside the more technical issues until question period.

• 1025

The Chairman: May I interrupt? The reason for you presentation this morning on the problem of privatization is that you are afraid that the WTO will inevitably lead us to privatization one day. Is that right? I simply seek to explain how your presentation fits in with our study of the WTO.

Mr. François Patenaude: One of the subjects raised in the upcoming WTO negotiations will be the rule of State-run businesses, which is what the SAQ is. The Americans and other countries claim that such enterprises cause distortions in the market and exercise significant market power because of their monopoly status. They wish to discuss the appropriateness of such enterprises in trade.

The Chairman: I had realized that. But, in my mind, when the Americans refer to State-run enterprises, they are thinking of the Canadian Wheat Board, rather than to all our businesses involved in alcohol sales, because all the provinces are also concerned.

Mr. François Patenaude: Yes.

The Chairman: I apologize for interrupting you. I think that everyone has understood the relevance of what we are examining. Thank you.

Ms. Jacynthe Fortin: May I continue?

The Chairman: Excuse me, Ms. Fortin. You may continue.

Ms. Jacynthe Fortin: The purpose of my remarks is in fact to demonstrate the social mission that is served by controlling a market. There are more opportunities for protecting citizens when the State is managing alcohol sales.

I would like to give you some historical background to help you understand a little more clearly the special way in which Quebec has dealt with alcohol, on the initial premise that alcohol is not a food product like any other, but a hazardous product.

You will recall that, generally speaking, alcohol monopolies were first created in the mid-19th century with the avowed goal of halting the excess consumption that was found in particular in the working class. Thus the motive was not altruistic; the purpose was to ensure that workers remained docile and showed up for work. It was a time of major social changes arising from industrialization and urbanization. On the entire North American continent and in the United States especially, the anti-alcohol movement was so strong that it led to a prohibitionist law after the Second World War.

Quebec, as Mr. LaPerrière pointed out—although I'm not considering the question from the same angle as he—distinguished itself at this time from the rest of North America by adopting a forward-looking position of tolerance regarding alcohol. This could be considered a distinct characteristic of Quebec on the North American continent as a whole, in contrast to the prevailing prohibitionist attitude.

Instead of following the continent-wide tendency of constraint, Quebec instituted, in 1921, a State monopoly over the consumption of alcoholic beverages, with the creation of what was then called the Liquor Board. This specific, innovative strategy proved to be effective in limiting excessive consumption, while in the prohibitionist countries, excessive alcohol consumption continued to be a problem and the anticipated results were not achieved. On balance, then, prohibition was a negative experience.

We can talk about the Quebec model, which, moreover, was quickly copied in the early years following the period after Prohibition. At least 15 American States set up a State-run monopoly similar to Quebec's between 1933 and 1935, once Prohibition had ended. The soundness of the way things worked in Quebec was recognized.

It will be recalled that the initial mandate of the Liquor Board was to promote moderate consumption of alcoholic beverages whose quality had been duly verified and that were sold at a reasonable price, all of this within a framework of controlled operations.

I would like to diverge for a minute. These years, in the 1930s, represent a turning point in the changing cycles of alcohol consumption in Quebec. These years were marked by the Depression, and hence difficult living conditions and a real change in drinking habits. This was reflected in a sharp upswing in liquor consumption. This new tendency lasted approximately 40 years, peaking during the War years, so that in 1950, liquor was still outselling wine by a ratio of two to one.

• 1030

One might put forward the hypothesis that, when life is hard, people tend to turn to hard liquor. There is a need for drunkenness. So much for the historical background.

On a cultural level, Quebec's monopoly over alcohol exercised control not only by means of physical mechanisms such as laws, sanctions and supply control, but also symbolically, that is, by means of speeches, beliefs, values and attitudes. The control mechanisms in this second group are part of what we call the sociocultural code that is present in all societies and is unique to each of them.

As for the cultural standards that prevail in the case of Quebec, we can speak of a specific pattern of consumption that differs from that of North America as a whole. Currently, we consume more wine and much less liquor than Canada and North America as a whole.

Now let's look at the evolutionary cycles. Since the eighties, there has been a gradual decrease in total alcohol consumption in Quebec. This phenomenon, which characterizes all Western countries, is attributable to the age of the population but also to the educational influence of an organization like Éduc'alcool. Set up in 1989, this organization serves to educate the population to promote a culture of moderation.

Finally, the cyclical variations in consumption show that this Quebec model is a bit fragile because it's not just a matter of the cultural variable but also the social context. I actually mentioned that for the 1930s.

Now I'll look at the social aspect. We have to put ourselves in the setting of the new neoliberal order which presently prevails in Quebec just as everywhere else and which might seriously influence collective practices in the matter of alcohol. Taking into account the general impoverishment that follows and increasing inequalities, will we now find conditions favourable to the reappearance of the gin era as we witnessed in England during its industrial revolution?

The wine culture is what we now have. It is part of our model. However, it's not necessarily an unchangeable model. These are hypotheses which can certainly be set out in a context of profound change or an imbalance between means and needs.

As the problems are as many factors which might have weight in the problem concerning alcohol abuse, mightn't we talk, within the present context of structural unemployment, about social disaffiliation and an increase in psychological distress, of a society at risk and thus of increasing vulnerability in the social fabric?

Studies are actually confirming that the problems having to do with over consumption of psychotropes—as alcohol is defined as being a psychotrope—are more prevalent in those societies which are faced with difficulties in adjusting to social change. Such conditions bring about a weakening of standards and an identity confusion that affects the use of psychotropes. This will be found in the volume titled L'usage des drogues et la toxicomanie.

If, for the time being, in what is becoming more and more a Quebec fractured in two, there are not more social damages stemming from abusive consumption—according to Statistics Canada, Quebeckers are those who, in Canada, have the fewest problems with alcohol—couldn't we attribute this fact, in part, to the role of social safety net implicitly played by the SAQ monopoly? So I'll put this question back into a public health perspective.

Protecting public health by decreasing the importance of damages stemming from alcohol consumption is certainly not a very obvious objective nor is it explicitly set forth by today's monopolies. However, this does remain a real social role that a monopoly institution like the SAQ is called upon to play.

In his analysis of the Ontarian monopoly, Single, a teacher of preventive medicine and research director for the Canadian Centre on Substance Abuse, does confirm that monopoly over alcohol also plays a role in public health. One would be naive to say that it's the main justification for the monopoly's existence, but it is nevertheless an important reason in favour of its existence even though it is sometimes neglected.

• 1035

Because it allows one to exclude the search for personal profit from the operations in question and that it imposes certain limits in terms of access to the product, limits in terms of sites, number of hours and times of day the sales points are open, in terms of price setting, in terms of compliance with legislation concerning the sale to minors and so on, only a government monopoly over retail sales can guarantee a balance between health imperatives and public safety and those imperatives having to do with client satisfaction. In other words, in the global perspective, you have the consumer, but you also have the vision of the citizen.

In the context of partial or total privatization of the SAQ, the worst of all scenarios would be the one affecting the retail sales network. It would be like destroying the ultimate protective dyke that Quebeckers have built for themselves collectively on the way to neutralize the social risk potential represented by alcohol which, let's be honest about this, is not a food product just like any other.

As for alcohol seen as a risk product, Mr. LaPerrière mentioned before that the latest French study talks in terms of a danger equivalent to that of cocaine or heroine. Personally, I go by the usual definition which says that it is a psychotrope. It's a risk product for the consumer and for others. Consuming alcohol is not on par with eating little green peas or spaghetti. Far from it, as indicated by the official stance of the Department of Health and Social Services and the scientific community. There's really a consensus when it comes to talking about a risk product and social costs.

As for the impact on the physical health, let's just say, as an indication, according to the Department of Health and Social Services's statistics, that about 4,000 deaths per year can be blamed on abusive consumption of alcohol. On the psychological health side, research has shown that it's the heavy drinkers who show the highest rates of psychological distress, suicidal tendencies or ideas.

Socially speaking, we know how important are those problems caused by drunk driving. Heavy drinkers, in other words 30% of those involved in driving incidents, show up way ahead of the herd. In 1994, it was indicated that 94% of Criminal Code offences had to do with driving a vehicle while impaired.

Alcohol would also be involved in 30% of those cases involving violence against women while 50% of the victims of incest apparently come from families having problems with alcoholism.

So there is a strong correlation between violence and psychoactive drugs. For example, in 1991, 92.52% of people accused of murder had consumed some kind of drug at the time of the crime. Amongst those, 66% had ingested alcohol. So it is a risk product.

It should also be mentioned that there are groups at risk. We should not however forget to place these groups in a social environment and context. The most general socio-historical data is that alcohol was mainly and still is today something men consume. Excessive consumption is two to three times more frequent than for women and that is valid for each one of the age groups considered. The heavy drinkers are, essentially, men. They are two to three times more susceptible to present a risk profile. On the other hand, you find the heavy drinkers in the least economically favoured levels of society or in socio-professional categories characterized by the lack of decisional independence.

In conclusion, I'd like to point out that it's also a youth thing. The use of alcohol is becoming a more and more premature phenomenon. It's a behaviour that develops very early during adolescence. In that age category, a new trend is being observed that is heavy drinking by girls and that means a trend towards the homogenization of sexes in that category of the population.

• 1040

With that in mind, I would like to point to an article that appeared at the end of 1997 and alerted the Quebec population to the fact that drug use in the ranks of youth was not only increasing, but was becoming more serious. It said that the average age of teenagers using drugs and alcohol had gone from 16 to 14 over the last five preceding years. That indicator is mentioned as being a major cry from a society in distress.

We could elaborate even more on that, but I would simply like to point out that this is a problem that is appearing in the horizon and that should be dealt with at another level if we want to talk about social protection involving a monopoly over the alcohol being offered on the market.

This information or these sociological and epidemiological distinctions are really the essential elements of any discussion of the social issues surrounding the privatization of the SAQ.

During the question and answer period, we could provide more information to show that the greater the accessibility, the more consumption is likely to increase.

The social aspects of the privatization of the SAQ already suggest that this issue goes well beyond budgetary considerations and is among the choices made by a society.

I would say in closing that government cannot do everything, but that there are some things that only government can do.

The Chairman: Thank you, Mr. Fortin.

Mr. Jean LaPerrière: We have four recommendations, Mr. Chairman.

First, we recommend that the Canadian government adopt a clear, categorical position about the fundamental right of government to be involved in the domestic trade of alcoholic products, with no restrictions. The SAQ was established for social reasons and plays a fundamental social role, while complying with existing commercial practices. It also accounts for significant tax revenues for both governments.

Second, we recommend that the government of Canada put the American demands into their proper context. If the Americans and the WTO really want to reduce market distortions, then all the factors that can produce distortions, both private and public, must be analyzed in the upcoming WTO negotiations. Any debate about state-trading enterprises must focus essentially on those measures that really do distort trade, rather than on the very existence of STEs. We would point out that the market distortion effects do not apply to the SAQ, because it is exempt from them.

Third, we recommend that the Canadian government not restrict the issue of monopolies to public monopolies alone. If the issue of monopolies is part of the WTO negotiations, then the debate must include all monopolies and oligopolies. Private monopolies and oligopolies have just as much, if not more, of an impact on the market. This impact or power must also be discussed.

Finally, we recommend that the Canadian government ensures that the social role of the SAQ is not only maintained, but also strengthened. The federal department and the provincial ministries will be holding a federal-provincial industry conference in Ottawa from April 18 to 20, 1999. Since you plan to take advantage of this conference to bring together the representatives of the various industries affected by the upcoming WTO negotiations, we would ask you, in the spirit of transparency, to invite us to take part in the conference, so that we can put forward the interests of our members and of civil society.

The Chairman: Thank you very much, Mr. LaPerrière. We have about 35 minutes for questions.

[English]

Mr. Obhrai—and resist the temptation to get into an Alberta-Quebec debate. I can see you sitting there, going like this.

Voices: Oh, oh.

[Translation]

The Chairman: Some of our members come from Alberta. You have been given fair warning. You started this.

[English]

Mr. Deepak Obhrai: That's right.

Before I start, I listened to Madam here in reference to the impact of alcohol as an abuse substance, which she was talking about. I don't think anybody will disagree with the fact that alcohol can be an abuse substance.

• 1045

There is a need, from my point of view, for education, to get out the message that overuse of alcohol has social consequences, as you have mentioned. I don't think I'll disagree with you except for the fact that I view education as key. Governments have a role, through education, to send that message out. You are telling us it should be through the state enterprise, restriction of the availability of the product. But I would prefer to have the state use educational tools to send that message out, and I think they are doing that.

In reference to the fact that you have touched my province, Alberta, I was there at the time when alcohol was a state-controlled retail outlet, and today it is a private enterprise. I will tell you this: Albertans are pretty happy it has been privatized, for a couple of reasons.

One, its accessibility to the market has dramatically increased, huge time. Two, the prices have gone down because of the severe competition. That alludes back to your point that you curtail the sale of product for social reasons. Well, I disagree, going back to the educational aspect.

The gentleman over there alluded to non-availability of product because it has been privatized. I would venture to say that the reduction in availability of product was based upon consumer demand, not because it was privatized. As a matter of fact, we have seen a marked increase in Calgary, Alberta, of specialty stores selling vintage wines. You can go there and get it. The availability of product is there.

So as a person who has seen it, I would venture to say—and I don't want to get into a debate about privatization versus non-privatization; it's for Quebeckers to decide if they want to privatize you or not—we are happy with the privatization, from our point of view. So we have some fundamental disagreement over here.

You are asking for WTO...because of the American demand. I think I just read over here that in America only 13 states have privatized. Am I right? So they have a lot of states over there that still control. If they are asking us, then they will also be putting theirs on the table.

Basically, I don't know what to ask you. Just suffice it to say that from our perspective, the route Alberta has taken was good. But I do not wish to get into the debate in Quebec. I'll leave it up to the people of Quebec to decide whether or not they wish to privatize.

Do you have a comment you want to make, Mr. Guévremont??

Mr. Ronald Guévremont (Communications Officer, Syndicat des employé(e)s et magasins et de bureaux de la S.A.Q.): Yes, I have a comment.

On your three points about the privatization in Alberta—and I don't want to comment on the debate either—if you're talking about accessibility, we have told you that more accessibility is more consumption. Maybe some groups among the population are happy about that, but we know some chiefs of police down in your province are not too happy about it.

About the price, as my colleague said, it's the population who suffers. The taxes went down, so at the end the population lost money.

About the availability, well, there may be more availability of the products in Alberta, but they are not in the stores; they're in the warehouse, and that's where they stay.

I don't want to get into a debate, but I just want to tell you that about the situation. That's all.

Thank you.

• 1050

Mr. Deepak Obhrai: I would tend to disagree on all three points you've just mentioned. On the product end, I tend to disagree with exactly what you've said. I think it's on the other side as well. Taxes have increased because it's become privatized. The stores out there are all paying property taxes and all kinds of taxes.

So on the tax issue, I don't think it's a problem at all. No, we're making more money. As a matter of fact, Alberta has eliminated the deficit.

But let's not get into this argument. I'll just tell you this: Albertans are pretty happy.

Mr. Ronald Guévremont: I'm sure, but we have a lot of discussions about that.

Mr. Deepak Obhrai: Yes, I'm sure you do.

The Chairman: Mr. Sauvageau.

[Translation]

Mr. Benoît Sauvageau: I will be brief, but I must take this opportunity to greet my union, the union of SAQ workers, because I am an SAQ employee on leave without pay for public office. I worked ten years at store 89, and my father worked 35 years at stores 89 and 127 in Repentigny. So I am pleased to see you here today. We dealt with Mr. Guévremont on a few occasions. Since I did not have any grievances, I think we can get along.

The Chairman: [Editor's note: Inaudible]

Mr. Benoît Sauvageau: Yes, yes. I am on leave for public office, and I don't feel secure. I am still at store 89, at the Galeries Rive-Nord. I worked there first as a student, from age eighteen to twenty-something, and I liked it a lot. So I stayed on, even after I went into teaching. So I really must extend a special greeting to you today.

I will keep my comment simple, because Ms. Debien is urging me to leave some time for her. I would like to ask a question about your fourth recommendation. What representations have you made to the organizers of the April 18-20 conference? Do you think you will be invited to it? Are there any representatives from civil society who are invited to it? If not, it is not because of any bad faith on anyone's part. However, if there are a number of civil society representatives and you have not been invited, then we might wonder what is going on. I don't know how these things work.

Ms. Maud Debien (Laval East, BQ): May I ask my question right away?

Mr. Benoît Sauvageau: Yes, go ahead.

Ms. Maud Debien: Good morning, ladies and gentlemen. Welcome to our committee. My question is about recommendation number 2. You say that you are calling on the Americans to put their demands into the proper context. Obviously, we have not had time to look at the material you gave us this morning. If I understand the recommendation correctly, the Americans claim that government monopolies may have some distorting effects on trade. I would like you to explain how the Americans can say that State monopolies may have distorting effects on the market. That is my question.

Mr. Ronald Guévremont: Fine.

Mr. Benoît Sauvageau: I would like to make a final comment. I think I have been hearing about privatization for a very long time. As I was saying to Maud, I think Rodrigue Biron, of the Parti Québécois, was the Minister of Industry when the debate began.

Mr. Jean LaPerrière: It began well before that.

Mr. Benoît Sauvageau: Or perhaps before.

Mr. Ronald Guévremont: I will answer your first question about the meeting to be held in Ottawa. We heard about this meeting very recently, about two weeks ago, and we asked to be part of it. Actually, our request was made somewhat in conjunction with that of Ms. Barlow, of the Council of Canadians. I think her position is quite right. From my understanding, one of your committee's concerns is to be as transparent as possible with Canadians, so that they understand the importance of the WTO.

For us, as the union representing workers in the alcohol industry, the WTO is tremendously important. It is a powerful force that could be compared to prohibition in 1921, which also happened in the United States. We know what that was like. The strong force of prohibition meant that the market had to be totally closed. Today we are dealing with another powerful force whose origin is the same, but which is actually calling for the opposite: a completely open market.

• 1055

In 1921, our ancestors did not lose their heads and found the most intelligent way of dealing with the problem. We are asking you not to lose your heads and not to throw out the baby with the bath water, so to speak.

We are talking about the meeting in Ottawa, but we could also talk about all the other meetings that will be held and at which we would like to be present and have a say. Ms. Barlow's request is part of an effort to achieve greater transparency. I think the committee has everything to gain from this, because the more people know about what is going on, the more they will be able to support, or not support, the policies to be put forward by the Canadian government. This is the context of our fourth recommendation.

I will let my colleague answer your question about the second recommendation.

Mr. Benoît Sauvageau: Do you know whether any representatives from civil society have been invited so far?

Mr. Ronald Guévremont: No, we do not know that.

Mr. Benoît Sauvageau: That's fine. Thank you. We will find out for you.

Mr. Ronald Guévremont: Very good. Thank you.

And on the second question?

Mr. François Patenaude: Your question was how the Americans could claim that State trading enterprises were causing market distortions. Their main accusation is that State trading enterprises are traditionally used to control imports and to encourage exports for commercial reasons, such as obtaining foreign currency or eliminating production surpluses.

As we saw, in the case of the SAQ, that does not apply at all, because the wine produced accounts for less than 1% of sales.

One of the documents we used in drafting our brief was published by the Quebec Department of Agriculture, Fisheries and Food. Like you, they are holding hearings throughout the province in order to make some recommendations to the Canadian government. This document asked what position could be recommended to the Canadian and Quebec governments regarding the Americans' complaints about State trading enterprises. The question was whether only the market distortions created by State trading enterprises should be analyzed, or whether the market distortions created by all players should be analyzed.

Ms. Maud Debien: If I understand correctly, we're actually neither producers nor exporters. Consequently, the SAQ does not fall at all into the category into which the United States is trying to place us.

Mr. François Patenaude: That is likely so, but we are a little surprised to be here today. We found out about a month ago, quite by chance, about the WTO negotiations and their impact on the SAQ. We read this in an article in Le Devoir.

We phoned the Department of Industry and Commerce, because the SAQ comes under it, but no one was able to give us any information about the negotiations on agriculture. We phoned the Quebec Department of Agriculture, Fisheries and Food, and asked whether the SAQ was affected by the issue regarding State trading enterprises. They first said no, but when we called later, they confirmed that the SAQ was directly affected by the negotiations on agriculture, which were to begin in May 1999.

Mr. Michel Desbiens: Thank you.

Mr. Ronald Guévremont: Was there a question about privatization?

An hon. member: No.

Mr. Ronald Guévremont: Fine.

The Chairman: No, it was a comment. People should not always react to the comments they hear here, otherwise, meetings would never end.

Mr. Bachand.

Mr. André Bachand: Unlike my colleague Benoît Sauvageau, I am not a former unionized employee of the SAQ, but I am one of its good customers.

I must start by thanking you. I checked with our research assistant, Mr. Dupras, who prepared the documentation we have. We have had a great deal of material to read in recent weeks, but I had never heard about this matter before. Not once. So your presence here this morning has made me aware that the choice a province makes regarding the sale of alcohol may be called into question. If Alberta decides to privatize, that is its choice, but if it wants a state monopoly over alcohol in five years, it could do that as well under the current rules.

You say that ultimately the choice should be left up to the people. We will not get into a debate about the privatization of the SAQ this morning. You have flagged the issue for us today by telling us to be careful, because State trading enterprises such as the SAQ could be affected by the negotiations that will be starting as the year 2000 begins. At the moment, we have no information to tell you that this will happen, but it could happen through the back door, under the discussions on agriculture, for example. I very much appreciate your informing us of this.

• 1100

I think your position is most commendable. People are going to have to be made aware of this. I don't really have any questions for you. I would like to thank you for flagging the issue for us this morning. Rest assured that the report the committee is to submit to the government in June will mention State trading enterprises, particularly those involving alcohol. What will we say exactly? That, we don't know, but your being here today will ensure that the Canadian government will be made aware of the issue.

Personally, I think government should be able to do this. If they decide not to, fine, but they must at least have the option.

There is no doubt that State monopolies run counter to a number of rules of international trade, but people must be reasonable in cases such as this. If the House of Commons continues along its current path, someday there could be a State monopoly over marijuana.

Mr. Ronald Guévremont: It would need the SAQ.

Mr. André Bachand: It would create the SAM, or who knows what, but who cares. If it brings taxes and can save lives, why not?

So I just wanted to make that comment. I would like to thank the people from the SAQ for telling us about this issue which we had not considered before.

The Chairman: Thank you, Mr. Bachand.

Ms. Folco.

Ms. Raymonde Folco: I have nothing to add to what Mr. Bachand just said, Mr. Chairman. He stated my position exactly. So I will keep quiet.

The Chairman: I would like to add that I totally support Mr. Bachand's comments. However I must tell you, friends, that I too was once quite a faithful customer of the SAQ, but that was at a time when your prices were better than those of your Ontario competitor, the LCBO. Since you have increased your prices, no doubt at the urging of your sociologists, I am no longer buying your products, because they are too expensive. I have gone back home and I am now buying in Ontario.

I come now to my question. Is it correct to say that all the other provinces, except Alberta, must take the position you have taken? Is it up to the alcohol boards of Canada to pursue this matter with the federal government, or is it rather the provinces that should be doing this, so that they can highlight the issue in the discussions?

Mr. Ronald Guévremont: That is a good question, Mr. Chairman. The boards come under the jurisdiction of each province.

Now that you are talking about the other alcohol boards of Canada, with the exception of Alberta, I would say that all the provinces have a liquor board or a monopoly, but that these boards are not all the same. Each province has adapted the monopoly to the needs of the people in the province.

You asked us whether it should be up to the boards or the provinces to defend the interests of the population. I think both should be doing this. Both should be involved. As members of Parliament, you have to satisfy a number of people, and try to keep everyone happy, while the interests of unions and provincial alcohol boards—and this is the beauty of it—are the same, to all intents and purposes, as those of the population.

I think that unions such as ours have a right to intervene when their enterprises and their interests are at stake.

The Chairman: In the past, the objections of our trading partners, particularly the Europeans, about alcohol boards, had less to do with the existence of the boards as monopolies, and more to do with their practices.

• 1105

The Americans said that the practices of the LCBO favoured the production of local Ontario wine, for example. The Europeans said that their products were difficult to get in some stores, and so on. Today, with the exception of the Americans, have the complaints made by the Europeans in the 1950s and 1960s disappeared? The complaints were about the practices of the alcohol boards, which, they claimed, made it more difficult for their products to get market access.

Mr. Jean LaPerrière: I cannot speak for the other provinces in Canada, although I did visit the largest liquor store in Canada, which is in Toronto, in your neck of the woods. It is a huge store.

The Chairman: It is in my riding, I believe.

Mr. Jean LaPerrière: It is the largest and the nicest that I have seen. It had every variety.

The Chairman: A host of products.

Mr. Jean LaPerrière: I imagine that all liquor stores in Ontario are not that big. With respect to Quebec, I can tell you, and François mentioned it, that access to foreign wine is virtually unlimited, in that we have wine from roughly 30 countries in our stores. I have spoken to the Europeans, to the French, among others. In France, obviously, they produce a lot of wine. The French visited our liquor stores and said that they could not find as many varieties of wine in their own country, even in France. When you're in Bordeaux, you have Bordeaux; when you're in the Rhone valley, you have Rhone wines. Here we have all of that. We have wines from Spain, Italy, Australia and Chile. We are open to the world. That leads me to believe that there is no problem at that level in Quebec.

The Chairman: May I ask you if you also have Ontario wines?

Mr. Jean LaPerrière: Yes, we also have wines from Canada, from Ontario—

The Chairman: From British Columbia as well.

Mr. Jean LaPerrière: British Columbia.

Mr. Ronald Guévremont: Ice wine?

The Chairman: Yes, ice wine. Thank you very much. I think we have inspired Ms. Debien.

Ms. Maud Debien: Yes. I would like to go back to a comment made by Ms. Fortin, who presented her remarks from an historic, cultural, social and public health perspective. You are well aware that everything that has been negotiated at the WTO to date has been negotiated from strictly a commercial perspective and that trade and social issues do not generally mix well at the WTO. All of those issues may be completely excluded during the WTO negotiations, even though a large number of witnesses have told the committee that, on the contrary, issues such as social clauses, human rights and the environment must be addressed as part of the WTO negotiations. We know that several countries currently have reservations with respect to the inclusion of those discussions in the debate.

To go back to the issue of the WTO, I think that strategically speaking your comments must be looked at in the context of recommendation 2. Quebec is not responsible for the distortions the Americans are accusing us of and for which they want to punish us. From a strategic point of view, I think that's what needs to be addressed. The other issue is public health. That is important. That is another aspect that will have to be addressed in our discussions on the WTO. Both of those issues have to be addressed. If you start by raising cultural and historic issues, there might well be some reservations. Instead, you should talk about public health and the absence of a distortion effect in Quebec.

• 1110

I do not know what you think about that. Do you want to comment on the comments, as the chairman said?

Mr. Ronald Guévremont: We have taken note of your comment and we thank you. We agree with you of course.

The Chairman: We are mutually sharing our expertise.

Thank you for coming.

Mr. Benoît Sauvageau: Since we have time, even if this is not directly—

The Chairman: We just have a few minutes because we want to take a break.

Mr. Benoît Sauvageau: I know that you are not from the SAQ head office, but from the union, but you might be able to answer my question. Do Quebec wines have the same market access as wines from Ontario, France or Spain, or do they benefit from advantages on your shelves?

Mr. Jean LaPerrière: There are regional products.

Mr. Benoît Sauvageau: Yes, I know.

Mr. Jean LaPerrière: Those wines can be sold where they are produced as well as in public liquor stores. They can also be sold at public markets. It is a kind of licence extension.

Mr. Benoît Sauvageau: It is quite difficult to put them into stores, isn't it?

Mr. Jean LaPerrière: Well, I think that is the producers' choice.

Mr. Benoît Sauvageau: Thank you.

The Chairman: Thank you very much.

Yes, Mr. Patenaude.

Mr. François Patenaude: You mentioned the Europeans earlier on. There were complaints about the percentage of sales volume. The French placed first at the SAQ last year, with 45% of the sales volume; Italy was in third place, with 15%; and Spain was in sixth, with 2.1%. So three European countries placed among the top six. I do not think that is a problem for the Europeans.

The Chairman: I did not see figures for Australia and New Zealand.

Mr. François Patenaude: They are in the appendix. The appendix contains figures for 31 countries.

The Chairman: Thank you very much.

Mr. Benoît Sauvageau: Thank you.

The Chairman: Colleagues, we are going to take a short five- minute break.

• 1113

• 1123

The Chairman: I would like to welcome Mr. Lafleur and Mr. Brodeur from the Coopérative fédérée de Québec. You may make your presentation and then we will move on to questions.

Mr. Claude Lafleur (Secretary General, Coopérative fédérée de Québec): Thank you, Mr. Chairman, honourable members. I will make a rather brief ten-minute presentation on the position of the Coopérative fédérée with respect to the WTO.

The Coopérative fédérée is a federation of 97 cooperatives and belongs to 33,600 members. We are involved in supply at the farm gate, in local pork markets and also in the poultry sector. We have revenues of more than $1.8 billion per year and we have 7,500 employees, or 2,500 more than in 1993. This increase is mainly due to our export activities. The issue surrounding the WTO is therefore important to us.

We are involved in international trade, as I mentioned earlier. We primarily export pork. We also export dairy products and maple products. Our exports represent more than a half-billion dollars per year. We are the largest agri-food business in Quebec.

As part of our presentation this morning, I would like to share with you our experience over the past five years, since the conclusion or the implementation of the agricultural agreements reached in 1994 and 1995.

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Because we are involved in international markets, we have had interesting experiences and also some frustrating experiences. What we have learned about the WTO is that since 1994 agriculture is an integral part of international agreements. Before that, agriculture was not part of these agreements. We can say that it has been added with some degree of success. One of the success factors was undoubtedly the presence of a tribunal to deal with disputes among the parties.

Over the past five years, we have also learned that despite the agreements on agriculture, countries throughout the world have continued to invest massively in this sector. That was especially the case last year. The Americans, for example, invested and will invest this year more than $16 billion U.S. in agriculture. That is the second largest budget ever devoted to agriculture in the history of the United States. So State intervention is ongoing.

Over the past five or six years we have also learned that supply management—we know that this is a highly sensitive issue in Quebec—has, despite the openness, easily made it through tarification. Since we lost article XI, tarification has existed. Supply management has easily made it through this tarification.

As for market access, we have had some rather unfortunate experiences. In 1994, countries agreed to open up markets to a percentage somewhere between 3 and 5% of consumption between 1986 and 1988. Unfortunately, markets did not open up the way we thought they would, and our pork exports to Europe were hindered by European protectionism. The market access that the Europeans agreed to in 1994 allowed 600,000 tons of pork exports. These exports are now approximately 75,000 tons. So we have very little access to the European market.

The same thing holds true for butter. The Americans played all kinds of dirty tricks on us and kept us from getting the 3% access to the butter market that they had agreed to 1994.

On top of that, we have to deal with the administrative arrangements for the tariff rate quotas, which provide some access to markets, and which vary between 3% and 5%. Furthermore, it is very difficult to get import documentation and this problem is currently hindering trade.

As for export subsidies, our company cannot sell pork in Europe even though production costs in Canada are much lower. In Europe, it costs twice as much to produce pork as it does here. And yet, they manage to compete with us on European markets. We are unable to sell pork bellies or hams—even though these are profitable products for us—because the Commission offers expert assistance and storage assistance programs. It is impossible for us to compete with the Europeans.

To summarize our experience over the past six years, we are pleased that the adjustment has been phased in gradually. That was one of our objectives. As for the WTO agreements, we think it is extremely important that changes be implemented gradually so that people have some time to adjust. We have the same objectives for 1999. The Canadian government will be going to Geneva to negotiate in 1999, in the year 2000, 2001 and 2002, for we think that the negotiations will last for three to five years. We are asking the government to negotiate agreements that we allow the Quebec and Canadian Agriculture Industry to adjust gradually, without any brutal changes.

During the next round of negotiations, we would also like the Canadian government to take note of the special nature of farming, as nearly all countries currently do, and play an active role in the agri-food industry, as the Europeans and the Americans currently do.

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In closing, I would like to say that we will be monitoring these negotiations closely. We think that the next round of negotiations will be long because the Europeans are currently extremely reticent to open up their markets. We can sense it. Recently there were huge demonstrations in Brussels. As you know, Mr. Chairman, president Clinton is powerless. Everyone knows it. He does not have a fast track. Since Congress has not given him this authority, it will be very difficult for him to go off to Geneva to negotiate over the next two or three years. As a result, it is important for Canada to present its position, but we must not commit ourselves before the Americans or the Europeans do within the next two or three years.

That's basically everything that I had to tell you. Our objectives are clear. We approve of export markets opening up gradually. We also like the idea of the sensitive sector that we have here in Quebec being opened up, as has been the case for six years, but on a gradual basis, without any brutal changes.

Thank you, Mr. Chairman.

The Chairman: Would Mr. Brodeur like to add something?

Mr. Jean Brodeur (Director of Public Affairs, Coopérative fédérée de Québec): No, that's fine.

The Chairman: We'll now go to questions.

Mr. Obhrai.

[English]

Mr. Deepak Obhrai: Thank you very much for your presentation.

I guess your objective is the gradual opening up of the market, as you've stated, but you have not told us exactly what position your federation has aside from opening the markets.

As you know, you have alluded to the fact that the European market is still tightly controlled. The Americans are still heavily subsidizing. We have heard from a lot of witnesses here, as our colleague said, that at this given time Canada should hold its position while making sure the other countries comply as well. He feels Canada has gone as far as it can go before it starts having an impact on the agriculture industry.

Can you tell us exactly what is the federation's view in terms of what should be Canada's position? What would you want to do?

[Translation]

Mr. Claude Lafleur: That is a very good question. Thank you.

Our position is quite clear. The 1994 position, which had been accepted, recommended opening up the markets from 3 to 5% for all countries. What we now know is that the markets did not allow openness of this magnitude. For the next five or six years, if we were to obtain the concession agreed to in 1994, our business would be able to insure its growth.

The concession that was made in 1994, but that we have not yet obtained, would enable our business to easily double its exports, from 500 million to $1 billion.

Our position is as follows: let's digest what was accomplished in 1994 and has not yet been implemented. We have enough leeway for the next few years with respect to agriculture. There's no point in increasing the concessions to 10, 20 or 30% of the market if we can't obtain 3% of the market.

Our second position, which is as clear as the previous one, is that since 1967 or 1970, in Canada, we have had an effective supply management system. This system has stood the test of time, be it with respect to producers' incomes or prices for consumers. In comparison with the United States, for the past three years, retail prices for dairy products have remained the same or are higher in Canada, despite the fact that producers' prices have gone up 30%.

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Producers' negotiating strength is such that they have obtained a larger piece of the pie. The government's objective is to ensure that all citizens have access to a decent income and not to favour foreign companies or multinationals. That is the position we have been defending since 1994, in other words to allow supply management to continue. If the market were to be opened up, it should be done gradually and progressively.

[English]

Mr. Deepak Obhrai: I presume in the next negotiations that will come around the other countries will be knocking at our doors as well as opening up the market more. The supply management system, of course, is quite under attack. If I read you correctly, you are in agreement that the supply management system would gradually be phased out, giving you the time to adapt to the changes, because you yourselves want to take advantage of the opening markets overseas. I presume that would be your position, from what you've told me.

I have a last question. We have heard about genetically altered products. What's the position of your federation on that, if you have one?

[Translation]

Mr. Claude Lafleur: I will repeat our position on supply management: we want it to be gradual and progressive. We would prefer keeping supply management in place. We know, however, that the WTO is traditionally moving towards opening markets. Change is already moving in that direction. We do not know how fast this openness can be adapted to or implemented. We mentioned earlier on that we must ask Canada to negotiate and make sure that it obtains a commitment from Geneva that that step will be taken gradually. I am not talking about two or three years here. I am talking about 15, 20 or 25 years to adapt gradually. That is our position.

With respect to genetically modified organisms, you know that the Europeans are currently extremely reluctant, namely because of mad cow disease and the issue of tainted blood. They have lost a bit of confidence in the ability of public authorities to control organisms that are not "natural". More and more, the Europeans are asking people in Quebec and Canada to retrace the product origin. They want to know more than what is in the water, if it contains residue or not, they also want to know where it comes from, how it was taken from the source. What mechanical means were used or what the working conditions were.

Our organization is firmly committed to the HACCP system and to control measures designed to trace the origin of products in the medium term. By 2003 or 2004, we will be able to export products, the origin of which we will be able to trace from the farm gate, through the abattoir to the consumers' plate.

Our position is that trade and genetically modified products should be allowed. The main reason is because the world population is growing by 90 million people per year, that is three times as many people as there are in Canada. Agricultural productivity must increase by 2 or 3% per year. With current technology, it is virtually impossible to achieve that while conserving the land without genetically modified organisms. Arable land worldwide is currently on the decline.

Canadian farmers will be asked to double and even triple their production within the next 20 years. As you know, that cannot be done by spreading more fertilizer or putting more phosphorus on the land. That is impossible. We need seed that will produce higher yields than what we currently have. That can be obtained through genetic engineering. We are involved in canola and all kinds of other commodities that can be genetically engineered. We are well aware that Europe is fundamentally opposed to this. But Europe is only 300 million people, whereas there are 6 billion people in the rest of the world. We will be able to find niche markets for our exports. The European market is not our main export market, our main markets are Asia and the United States. The Americans have no problem whatsoever with genetically modified organisms.

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The Chairman: That is interesting. Farmers will be asked to double or triple their production within 20 years because of the increase in the world's population.

Mr. Claude Lafleur: Quebec only has 35,000 farms, and we are currently losing three or four producers every day. Within the next five to ten years, there will only be 20,000 farms that we will be able to ask to double their production over the next 20 years so that they can maintain the same influence in the international market place. Canada currently has 3% of world production. To meet its objective, which is to increase production to 4%, our producers will have to double their production, and do so with fewer farms. The same phenomenon is occurring in western Canada. Production will have to be more concentrated, and production on the farm will have to go up as well.

The Chairman: Thank you.

Mr. Sauvageau.

Mr. Benoît Sauvageau: Mr. Lafleur, I am happy to see you again. I do not know if the chairman remembers, but if I remember correctly, Mr. Lafleur, we met at the first ministerial meeting.

The Chairman: In Singapore?

Mr. Benoît Sauvageau: Yes. Mr. Lafleur, I have only had time to take a quick look at the document you gave us this morning. So apologize if it contains the answers to my questions.

I would like to know if you have adopted the same position as the Canadian Federation of Agriculture and the UPA.

Mr. Claude Lafleur: I forgot to mention during my presentation that an extremely rare event occurred in the history of the national Canadian Federation of Agriculture. For the first time, we reached an agreement and adopted a common trade policy, which brought together people from the West, cooperatives from the West, pork producers, supply managed producers and members of the Canadian Federation of Agriculture, to which we belong. In 1994, there was no such agreement, but this time, all agricultural organizations in Quebec, including the UPA and the Coopérative fédérée de Québec, decided to support the Canadian Federation of Agriculture's position. The position that we are presenting to the Canadian government represents the views of 75 to 80% of all Canadian producers.

Mr. Benoît Sauvageau: Thank you. I have no further questions.

The Chairman: Ms. Debien.

Ms. Maud Debien: Good morning gentlemen.

Some witnesses this morning have told us that the main problem with the agriculture agreement was not market access, but to a large extent the limited way in which Canada has interpreted the agreement. It has often been mentioned that when the agreement was signed, the plan was to increase market access to 5% of domestic consumption for all agricultural commodities, whereas some countries upped the percentage to 10% for their competitive products, thus reducing it to 0% percent for sensitive markets. In Canada however we interpreted the agreement in a very limited way and maintained the percentage at 5% for all commodities, which has in fact distorted market access. You said that the next round of negotiations would go even farther with respect to reducing that 5%.

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If we are already at a disadvantage because of our restrictive interpretation, I wonder what Canada's position should be if they go even further during the next round of negotiations. If this should occur, shouldn't Canada use all of the latitude allowed in enforcing international trade rules? Shouldn't we give ourselves all of this latitude because, after all, we have come to the realization that, up until now, this restrictive enforcement has put us at a disadvantage?

Mr. Claude Lafleur: Good comment. As far as meeting one's commitments is concerned, Canada has an excellent international reputation and it is one of the rare countries that did in fact comply somewhat with the spirit of the agreement.

Ms. Maud Debien: The spirit and the letter.

Mr. Claude Lafleur: Yes, and the letter as well. In 1994, we had understood that we were to gradually concede market shares from 3% to 5%. We had agreed to that and that is what we did. We also maintained that we had to reduce domestic support by approximately 20%. In 1988, Canada spent $5.1 billion on domestic support and we wanted to reduce this amount by 20%. Today this amount has decreased by $777 million. Over the past five years, our country has done more than any other country to reduce its domestic agricultural support.

Accordingly, Canada will be going to Geneva with an almost perfect record as far as its commitments are concerned. Other countries have not made this type of effort. As I said earlier, if we were to obtain, for the next five years, the concessions obtained in 1994, we would have enough flexibility to pursue our trade activities. Right now, we're restricted by the fact that Europe, for instance, has not decreased its pork production subsidies by 5% because it is now including pork production with beef production, which is less sensitive. When Europe does its arithmetic, it comes up with an average. This is not even accounted for.

Ms. Maud Debien: Europe protected its sensitive markets.

Mr. Claude Lafleur: If we manage to clarify that aspect, we will not have to have any openings or request major concessions over the next few years because we will have made enough gains to allow our businesses to continue their commercial activities.

We are telling Canada to proceed with caution and to use its negotiating cards, because it has some. Canada respected the spirit and the letter of the agreement, as you said. Now, it must obtain the same concessions from other countries before looking for any others.

Ms. Maud Debien: I have another question that pertains to transgenic products or genetically altered products. Perhaps I should ask Ms. Folco to ask this question on my behalf because, yesterday, she gave a concrete example and asked an excellent question about sterile wheat. Since Raymonde perhaps intended to ask a similar question, I can turn the floor over to her.

Ms. Raymonde Folco: Mr. Chairman, do you want me to ask this question right now on behalf of Ms. Debien? I could also wait for my turn.

The Chairman: Go ahead, Ms. Folco.

Ms. Raymonde Folco: Thank you, Mr. Chairman, and I would also like to thank my colleague. You and I always worked very well together. Moreover, we both come from Laval.

Aside from the issue of protectionism coming from the Canadian or any other State government, or from a trade monopoly, there is, of course, an ethical and control problem.

Yesterday, in Quebec City, I gave a witness the example of sterile wheat. As you know probably better than I do, sterile wheat poses two problems. On the one hand, when sterile wheat is grown in a field, we do not have 100% control over what happens around this field. The seeds may very well spread and make other types of wheat, which are not part of the experiment, sterile.

On the other hand, there are direct repercussions when you produce sterile wheat. Yesterday, I mentioned the example of Egypt, which is a big wheat producer. In countries such as Egypt, which have been producing their own seeds for thousands of years, peasants could cultivate wheat each year without having to buy new seeds. But these producers may find themselves in a situation where, each year, they will have to buy new seeds from a multinational company, such as Monsanto, because their wheat would become sterile at the end of the season.

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Therefore, the second problem lies with the multinationals, which may relatively easily gain a monopoly over wheat, for instance, and so the problem would not necessarily lie with the country.

There is a third problem in terms of security. In the case of an international conflict, it's not hard to imagine that a country which depends on another one for its major food production, be it rice or wheat, for instance, may find itself without the means to produce those foodstuffs.

Lastly, if this type of sterile wheat became diseased, we may find ourselves in a situation which would not be very different from the AIDS situation throughout the world, for instance.

I wanted to raise these examples to show you that it may be hard for a country to protect its agricultural or farm production without at the same time being accused of protectionism, on the one hand, but also of having a monopoly, on the other. That's the issue Ms. Debien wanted to raise.

Mr. Claude Lafleur: I'd like to add something to what you said—since it was a commentary rather than a question. In 1960, governments throughout the world funded research. In those days, research was a public undertaking. But in the last 10 to 15 years, it is mostly private enterprises which do research because governments, for the most part, don't do it anymore.

We have asked our government to invest in research. Americans and more specifically Europeans continue to invest in agricultural research, which is a green program under the GATT, that is, it does not distort trade. In our brief, that is precisely what we have asked of the Canadian government: to pursue its research activities and to make the results of that research public, and not to let private companies who own the trademarks to do the research.

Could you be a little more specific?

Ms. Raymonde Folco: There has to be a balance between protectionism, on the one hand.... Let me go back a little bit.

The Chairman: I would like to know what you mean by sterile wheat. Why would anyone buy sterile wheat which does not reproduce from one year to the next? Surely it must yield a bigger harvest.

Mr. André Bachand: It's like a eunuch, Mr. Chairman, who has lost his testicles and whose energy is concentrated in his muscle mass. It's about the same for wheat.

Some hon. members: Ah, ah!

Mr. Claude Lafleur: Well, that's not quite right.

The Chairman: Mr. Bachand, you never ceased to amaze us with your truly extraordinary expertise.

Mr. Lafleur, you may speak at your own peril.

Mr. Claude Lafleur: An organism like that one, which has been castrated, possesses special characteristics which render it very productive in certain conditions. The company which developed that type of wheat owns the inventor's patent and genetic codes accessible only to itself. The company introduced another code rendering the wheat sterile.

The Chairman: I see.

Mr. Claude Lafleur: Farmers like this wheat because of its high quality and productivity, even if they have to buy it again every year. But companies like Monsanto don't only sell wheat seeds. They also sell a completely integrated program which includes fertilizers and herbicides. That's why, in the medium term, co-ops with 35,000 members are threatened.

The Chairman: The companies that produce this sterile wheat—not necessarily for the reasons mentioned by Mr. Bachand—are trying to protect their market. Can you get as good a wheat yield without using this sterile wheat?

Mr. Claude Lafleur: Genetically modified organisms are currently being produced by agricultural companies, and particularly by drug companies, which hold the patents.

The Chairman: Right, I see.

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Ms. Raymonde Folco: The answer to your question, Mr. Chairman, all depends on which side of the table you are on. If you are on the side of Monsanto, for example, to mention just this company as an example, it would say that it wants to protect its code. Obviously, farmers are on the other side of the table, particularly those who live in countries that depend totally or almost totally on wheat production. They must say that the code was added to enable a single company to have a monopoly over wheat production throughout the world. This could very easily be seen as another example of interference and control on the part of the United States. There are significant political consequences involved here. I think you see that yourself.

The Chairman: I apologize for interrupting you. Have you completed your comments on this?

Mr. Claude Lafleur: I would add that as a cooperative with certain objectives, specific ideology and certain values, we think that it is important to show some respect for family farms, farms on a human scale. We are not trying to get concentration tools in the WTO negotiations, but rather tools that will enable many farmers to be located throughout the land.

What happens when we prevent supply management and equalization between people? You know that the people of the Gaspé region are living in a very remote part of Quebec and that they get the same price as producers located right next to the Montreal market. The producers themselves pay for this extraordinary regional development. A multinational would never do that. It locates just beside the market and says: "The hell with the regions."

The reference to gradual adjustment in the context of our objectives at the WTO is to tools that will allow us to open markets up, but which also allow human-size farms to continue to prosper. That is why we will be constantly defending the principle of supply management.

The Chairman: So in the issue regarding bananas, you support the Europeans, not the Americans, if I understand you correctly.

Mr. Claude Lafleur: Absolutely. We are talking about multinationals that are requesting, through contributions to election funds—

The Chairman: Exactly.

Mr. Claude Lafleur: We could talk about bananas for quite a while.

The Chairman: May I ask you a question about the European market?

As you point out in your brief—and I would like to congratulate you on it, because it is very relevant—and as a number of witnesses have told us in recent days, Canada has already given in the area of agriculture. We have delivered the goods, as our first witnesses this morning said.

An hon. member: That was Mr. Loubier.

The Chairman: We have delivered the goods, so we don't have to give up anything.

Now we find ourselves in a situation in Europe in which the barriers are not tariff barriers. As you point out quite rightly here, they have to do with sovereignty, because the issue involves people's health, which is a very emotional and difficult area to manage in political terms.

How do you view our chances of forcing the Europeans to carry out hog inspections, here in Quebec and in Ontario, as the Americans do? How will we reach a compromise on this matter, which seems much more difficult than the tariff issue, particularly since we don't have a lot of cards to play, because we have already played them all?

Mr. Claude Lafleur: That depends on one's point of view. If I put myself in the position of a negotiator going to Geneva with the concessions I have introduced in my country, I would feel in a good position to require that the others make the same type of concession. We have delivered the goods; in fact, we have delivered far more than the others. As far as the negotiations go and the cards we have available, I don't think we are in a weak position.

In Canada, exactly as throughout the world, some people favour protectionism, while others, like New Zealand and Australia, are in favour of opening up world markets. Japan, Europe, and our country are calling for protectionism.

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The fact that Canada succeeds despite everything, through the Canadian position on farmers, to achieve some type of compromise, may serve as an example for the world, because we have certain exports that bring in wealth and also some sensitive sectors that we want to keep. This is not ideal, because we are opening up on one hand and closing in on the other. But that is what must be done at the moment; everyone is doing it, but no one admits it.

The Americans say they want open markets, but at the same time, they have much stronger protection for sugar and peanuts than we have for milk and poultry. They are doing it too, but a little bit more hypocritically than we are. Our position really reflects the world position, and we should not be ashamed of it.

The Chairman: Thank you, Mr. Lafleur. I'm starting to understand a little just how complex these agricultural problems are. Of course, Mr. Bachand understands everything.

Some hon. members: Oh, oh!

Mr. André Bachand: If you want to talk about sexuality, I can tell you a thing or two.

Ms. Raymonde Folco: That's symbolic.

Mr. André Bachand: With my reference to eunuchs, I think I've just lost some of my credibility on agriculture.

Mr. Claude Lafleur: No, not necessarily. I think that was good. We noted it.

Mr. André Bachand: I would remind you that in the case of piglets, castration occurs very quickly. I am not—

Mr. Claude Lafleur: Hogs have nothing to do with this. It is really the fact that an extra gene is added to sterilize the wheat.

Mr. André Bachand: Yes, yes.

The Chairman: Are there any other questions? Dr. Patry. We can talk about sexuality some more, if you wish.

Mr. Bernard Patry: No, thank you. I'm learning a great deal with my colleagues.

Could you tell us about Canada's position on domestic support and the move toward green boxes? I think that's becoming a greener area, with the green moving toward blue. I would like to know what you think about all that for the upcoming negotiations.

Mr. Claude Lafleur: Just so that everyone understands, I would explain that a green box is a program that has no direct impact on trade or production, while a red box does have an impact—it is direct assistance to production.

En 1994, we wanted to have support programs similar to those of all other countries, but we wanted to try to ensure that they would be as green as possible and cause as few trade distortions as possible. We wanted to put all our programs into the green box rather than into the red box.

The Americans currently have many programs, and they put them all into the green box. However, when the green box is small, it does not have much impact on production and trade. When the box is as big as the room, it does have an impact on trade. The Canadian Treasury will never have enough money to compete with the European and American treasuries.

That is why even the Coopérative fédérée, with its position on supply management, says that we absolutely must find an international way of reducing subsidies, because we cannot compete in this game. We can compete when it's moderate, or to support farmers during difficult periods. But we cannot do it for subsidies, and so on.

We are looking at green boxes, but in a moderate way, at a level substantially the same as that of everyone else. That is not what we are saying at the moment; we are saying the Europeans and the Americans are taking advantage of this definition to expand the box, so that their farmers can compete with us, not because of subsidies, but because they get different types of assistance programs worth huge amounts of money.

Our position is that Canada should negotiate to get a similar level of competition throughout the world. There should not be unduly large green boxes throughout the world, when we would only have a very small box, because we have no money.

Mr. Bernard Patry: Thank you.

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The Chairman: When you said that the Americans had invested more than $16 billion in agriculture, were you referring to subsidies in addition to the other investments?

Mr. Claude Lafleur: They invested $6 billion in direct subsidies and the rest they put into the green box.

The Chairman: Into the green box.

Mr. Claude Lafleur: Yes, for agriculture only. There's also $37 billion for food stamps, a type of farm welfare, but programs of this type cannot be considered agricultural assistance programs. They have invested $16 billion in agriculture, 6 billion of which is in red subsidies, and this is possible under GATT.

This is a terribly complex issue. So they're not being reluctant to support agriculture, while we very much are at the moment.

The Chairman: I've noticed that the support often occurs very close to election time.

Mr. Claude Lafleur: You are right. Some people in the United States thanked Monica Lewinski for the pre-election timing. Many American analysts said that the president's personal problems caused him to invest in agriculture; many ministers say that quite seriously.

The Chairman: I was in Washington during the Lewinski crisis, and people were saying that it was impossible to say no to anything a senator wanted a few days before the vote. You can be absolutely sure that the senators who asked for subsidies at certain times all had their request granted.

Mr. Brodeur.

Mr. Jean Brodeur: I would like to complete the answer about the history of the American position compared to the Canadian position regarding support for agriculture. In order to make Canada's agricultural policy compatible with our international commitments, beginning in 1994, we simply included agriculture in a significant rationalization effort that included the elimination of the Crow's Nest in the West, a 560 million dollar annual program, and the elimination of the dairy subsidy in the East. The Americans and the Europeans changed the agricultural funding into green box programs. So there were two different agricultural policies: in one, programs were changed into green box programs and the funding remained available; while in Canada, there's a move toward a rationalization to make our programs and policies compatible with our international commitments.

The Chairman: There are no further questions. We thank you for coming this morning, Mr. Lafleur and Mr. Brodeur. You clarified the issue through your brief and your comments.

Mr. Claude Lafleur: I would like to thank the chairman and the members of the committee for their patience and their understanding.

The Chairman: We will adjourn until 1:30 p.m., that is, one hour and 20 minutes from now.

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The Chairman: We are continuing our hearings. We apologize, Mr. Côté, there are some people arriving. I will start by giving you the floor to present your views, and then we will have a question and answer period.

I would like to welcome you and your colleague, Mr. Manga, to the committee. I believe you are here to talk about agriculture, in your capacity as experts in international law. The floor is yours.

Mr. René Côté (Professor, Centre de recherche en droit, sciences et sociétés, University of Quebec at Montreal; Individual Presentation): I would like, first of all, to thank you for inviting us to present a brief to your committee this afternoon.

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I would like to congratulate the committee for taking the initiative to hold these hearings, so as to allow Canadians to express their views on the negotiations soon to begin under the auspices of the World Trade Organization. Your consultations, which take place prior to the start of the negotiations, should have an influence on the Canadian Government's actions in this process which is critical for the future of international trade and for the future of Canadian society as well.

On three occasions in 12 years, Canada has accepted, through bilateral, regional and multilateral negotiations, what amounts to the equivalent of a "New Deal," given the scope of the legislative changes that they have brought about in the way our domestic affairs are managed.

Contrary to the way we imagine talks would take place when they are to be followed by such far-reaching transformations, the new social contract that Canada was to adopt by means of these three agreements was drafted during inter-State negotiations conducted behind closed doors. Furthermore, these inter-State negotiations took place with trading partners in a power relationship that is hardly in Canada's favour.

Nevertheless, it is in these international forums that the future of Canadians is forged. The information provided to, and the consultations held with provincial governments are clearly inadequate to ensure that a democratic debate takes place on the many issues raised by these upcoming negotiations. It is therefore essential to ensure that citizens have a role in these negotiations. Your consultations will compensate partly, but only partly, for the lack of democratic process that was the legacy of the last negotiations.

Last year, the negative reaction on the part of numerous citizens to the negotiations for the Multilateral Agreement on Investment, conducted under the auspices of the OECD, perfectly illustrated the possible consequences of a lack of transparency in a process for international negotiations. In a free and democratic society, it is increasingly unacceptable for citizens to be excluded from developing a new legal framework whose impact will by far surpass that of all the proposals for constitutional reform of the Canadian federation in the last 15 years put together.

Our first recommendation is thus as follows. In a free and democratic society, it is up to parliamentarians like yourselves to ensure that the WTO negotiating process is transparent, so as to compensate for this lack of democratic process. You have an obligation to build a bridge between the government and the Canadian people so that citizens can be involved in the changes arising from these negotiations.

Among the questions to be dealt with in the upcoming WTO negotiations, the future of agriculture is undoubtedly one of the most important, if not the most important. As we know, until the WTO agreements came into effect, the GATT was in a relatively poor position to regulate international trade in agricultural products. Import restrictions on agricultural products—quotas—and export subsidies flourished under the umbrella of the former GATT.

Then two agreements were adopted as part of the Uruguay Round to regulate agricultural trade in a very specific manner: the Agriculture Agreement and the Sanitary and Phytosanitary Measures Agreement.

These agreements, however, did not take into account an increasingly significant consideration in the Canadian agricultural sector, namely the growing use of genetically modified organisms, a product of modern biotechnology, in agriculture.

The use of biotechnology by the agricultural industry is one of the most controversial developments that society has known in the last years of this century. Recent events have shown us just how controversial this question is. I will give you three examples.

First, on January 15, 1999, Health Canada announced its decision not to approve recombinant bovine somatotropin, a bovine growth hormone manufactured by Monsanto using genetic engineering techniques. Although it refused to issue a notice of compliance for this growth hormone, thereby prohibiting the sale of this product in Canada or its importation to Canada, Health Canada did not require the special labelling of dairy products containing recombinant somatotropin.

• 1345

A report issued by the Office of Biotechnology of the Canadian Food Inspection Agency even stated that:

There is no way to identify products unless they are positively identified as coming from milk produced by cows treated with rbST. [...] However, dairy products are identified by country of origin, so consumers have the option of purchasing or not purchasing products from countries which have approved rbST.

Here's another example: in the February 3, 1999 issue of the Washington Post it was reported that Monsanto was suing or threatening to sue hundreds of Canadian and American farmers who allegedly reserved part of their harvest from one year to the next because they planned to use genetically modified soya and canola seed as crop seed for the next year, thereby contravening the user licences they had signed.

At the First Extraordinary Meeting of the Conference of the Parties of the Convention on Biological Diversity, it was reported, on February 23, 1999, that the negotiations aimed at adopting a Protocol on Biosafety had reached a deadlock. This protocol is intended to ensure that concerns regarding environmental protection and human health are addressed in the international trading of genetically modified organisms. One of the reasons for the breakdown of these negotiations could be that the implications of the provisions of the draft protocol would have been too significant for international trade.

These examples clearly show that there are basic social issues associated with the use of genetically modified organisms in agriculture. It would be irresponsible for the Canadian government to claim that these social debates are the work of a few environmental activists from European Union member countries or some developing countries.

Here is our second recommendation. The Government of Canada does not have the right to deprive Canadians, as agricultural producers, consumers or citizens, of their democratic right to participate in decisions concerning the future of agriculture and the protection of human health and the environment, by claiming that these issues fall within the purview of international trade negotiations.

Mr. Sylvestre Manga (Assistant Researcher, Commerce international des produits agricoles génétiquement modifiés, University of Québec at Montreal; Individual Presentation): The member States of the WTO, in Article 1 of Annex A of the Sanitary and Phytosanitary Measures Agreement (SPS Agreement) which contains definitions, expressed their desire to protect human, plant or animal life or health within their territories from risks arising from additives, contaminants, parasites, diseases, toxins or disease-causing organisms in foods, beverages or feedstuffs.

They are no where near understanding biotechnology as a pathogenic agent or vector for agricultural products. That is why the SPS Agreement cannot properly regulate international trade in GMO-based agricultural products whose pathogenic potential—which is primarily linked to the lack of DNA integrity—is at the centre of the negotiations aimed at developing biosafety standards. And so genetically modified agricultural products are making their way into international trade within a conventional commercial framework that gives little or no consideration to the fact that recombinant DNA has the same potential for causing disease as the other sanitary and phytosanitary agents in normal agricultural products.

That is why we are recommending, thirdly, that Canada propose the inclusion of biotechnology as a potential pathogenic agent in the SPS Agreement.

Some may think that the inclusion of biotechnology in the WTO's SPS Agreement as a potential pathogenic agent would undermine international trade liberalization efforts regarding agricultural products using modern biotechnology. This is a groundless fear, because such an inclusion would far from rule out biotechnology as an activity that can improve people's quality of life. On the contrary, it would be an innovative move in the current biosecurity standardization process. It would aim to set a standard, which to date has not existed, so that the harmfulness of recombinant DNA could be taken into account under the SPS Agreement.

• 1350

For example, we know that pathogens are identified as potentially pathogenic agents for agricultural products in the SPS Agreement. However, people are in contact every day with micro- organisms that can cause disease. In fact, these micro-organisms are only identified as pathogenic agents when evidence has established their link to disease, or to negative impacts on the environment or biological diversity.

Similarly, biotechnology could conceivably be listed as a potentially pathogenic agent without this impairing the applications of biotechnology in agriculture and food. As in the case of pathogenic micro-organisms, biotechnology would be declared a pathogenic agent only when it caused disease or harmed the environment or biological diversity. Listing biotechnology as a pathological agent in the SPS Agreement raises the general question of technology as a source of disease in agriculture and food.

The trade incident involving the United States and Canada, on one side, and the European Union, on the other side, with respect to growth hormone-treated meat that is banned in the European Union, highlighted the inability of the SPS Agreement to regulate the pathogenic potential of growth hormone. The European Union became aware that the Agreement had an incomplete pathological standard and announced that it would take steps to condemn this gap and propose measures at the WTO to remedy the situation. In reality, since technology is not listed as a potentially pathogenic agent in the SPS Agreement, the ban on meat containing growth hormone was considered a discriminatory measure and a covert restriction on international trade. The scientific evidence that had been provided linking growth hormone to disease, specifically, cancer, had not been accepted, even if it might have been appropriate in other circumstances. The decision specified that the European communities maintained sanitary measures that were not based on existing international standards.

This is why we recommend, fourthly, that Canada propose that the technology for developing and administering growth hormone be listed as a potentially pathogenic agent in the SPS Agreement.

Agricultural products are increasingly based on technological intervention. Genetically engineered food and meats with growth hormone, recombinant or not, which we mentioned earlier, are not the only things that should be covered by international legislation.

To establish a generalized designation of technology as a potentially pathogenic agent in the international trade of agricultural products, the WTO member countries should develop provisions to protect health against any technology or technological procedure that could potentially cause disease and is used in agriculture and food. The general standard should cover both the present technologies as well as future technologies. This prospective dimension is essential because scientific innovation is developing rapidly in this field. For example, genetically modified organisms had barely been developed when other parallel technologies were developed to destroy the live element in GMO-based foods and purify it.

Technologies or technological procedures such as transgenetic or ordinary processing, purification, improvement, and radiation should also be considered potentially pathological agents.

This is why we recommend, fifthly, that Canada propose that technology be listed as a potentially pathogenic agent in the SPS Agreement.

Our sixth recommendation is that Canada, though remaining sensitive to the interests of the United States, its major trading partner, could continue to maintain its image as an ideal international trade partner by focussing on transparency and credibility with respect to the developing countries. The proposal to designate modern technologies as potentially pathogenic agents would make it possible to highlight this point, which is beneficial to our international trade.

• 1355

In conclusion, we would say that listing the modern technologies used in agriculture and food as potentially pathogenic agents should be perceived as a way of improving and adapting the existing conventional standard. This initiative is innovative and prospective. It would make it possible to advance freer international trade in agricultural products while at the same time protecting the health of people, plants and animals. It would be appropriate for our country to bring this into the conventional WTO provision on the basis of the precautionary principle.

Such an initiative would not only be advantageous to Canada internationally. Domestically, it would encourage the stakeholders to develop risk assessment in order to produce and market non- pathogenic products and to protect our people, in spite of freer trade, against the health risks linked to distributing GMO-based foods, particularly imported foods, and other agricultural products derived from biotechnology.

I apologize for having spoken so loudly.

The Chairman: Thank you, Mr. Manga.

Mr. Sylvestre Manga: You're welcome.

The Chairman: Are there any questions for the witnesses?

Mr. Obhrai.

[English]

Mr. Deepak Obhrai: Thank you for your presentation.

Before I came onto this committee I did not recognize the impact of this new technology that's coming into the world. I thank you very much for flagging it for us.

I'm going to leave to Madam Folco the other question that was asked about the multinationals, since she brought it up.

Yesterday I asked one of our witnesses questions in reference to what organization will do the safeguards. Obviously, the WTO is all for liberalization of the agricultural sector, and I see from your brief that you also agree with that, but you are just flagging a caution.

Would you perhaps say that globally the World Health Organization should take this responsibility of ensuring that the GMOs that are now coming up all over the world are regulated, and certified as safe, or do you think it should be left to each country's health department to do that?

Prof. René Côté: You have to understand that in the agreement, l'accord sur les mesures sanitaires et phytosanitaires, it's already taking into account the work of the World Health Organization through the Codex Alimentarius and two other organizations that are dealing with particular norms or standards in order to maintain the health of plants, animals, and of course the human population. But these three agreements that are brought to the WTO have to be integrated by each country of the WTO.

That means the rules that have been made, which are normally not mandatory, are being kept by each country in terms of their own legislation, their own rhythm. It is put as an obligation under WTO rules. That's the way it works, and that's how the European Union has been defeated on this question of growth hormones for beef exports from Canada and the United States.

So for the moment, it's not the forum, because this organization is not dealing with that at present. It was supposed to be dealt with under another protocol that was undergoing drafting with regard to the biodiversity convention.

• 1400

The negotiation was halted in Cartagena in the month of February, partly due to the action of Canada, which felt it was more a question of trade than a question of protection of the environment. For the moment, there's a vacuum; there's no place where we can deal with those issues. That's what we are saying.

The WTO will be looking at the issues around genetically modified organisms, but they have to integrate it in a way that allows some standards to be set on this question. I doubt they'll do it by themselves. I think they'll give it to an outside body to deal with these issues. But it has to be dealt with somehow in the next negotiation.

Mr. Deepak Obhrai: Perhaps you would like to elaborate on Canada's position when it says this is a trade issue and not an environmental issue. Why did Canada put that position forward?

Prof. René Côté: First of all, the United States is not a party to the Convention on Biological Diversity, and Canada seems to have had the role of being one of the countries to stop the agreement from being implemented. That's what we read in The Globe and Mail. I can give you the article that says exactly that—Canada was not interested because it was a trade question it wanted the WTO to take care of.

Mr. Deepak Obhrai: Merci.

[Translation]

Mr. Sylvestre Manga: May I add something? I'm sorry. If necessary, I could perhaps come back later.

Canada's position is, generally, very similar to that of the United States: only live genetically modified organisms that are capable of reproducing in the environment should be considered in the application of the Protocol on Biological Diversity.

Basically, the idea of the Protocol was to see the effects of the GMOs on the environment. In my opinion, this is quite clear and, generally, makes good sense.

There was, nevertheless, a health component in the mandate to develop a standard for biosecurity that was given, in Jakarta, to the parties to the Convention on Biological Diversity; the main concern was the environment, but health was also featured. The health aspect can be very broad and raises the issue of GMO-based products.

Canada's position in this regard is, again, quite similar to that of the United States, namely, that derived products, generally, since they cannot reproduce because they are not living—they are usually processed or their DNA structure has been destroyed or purified—should fall under the auspices of the WTO. In fact, we are saying it is a trade problem. Since the health aspect is less important, it is a trade rather than an environmental issue.

Technically and scientifically, we are saying at the negotiations, that, even dead, DNA fragments or the genetic products of DNA structures, to speak in scientific terms, might be reproduced by the bacteria of intestinal flora, for example, or by other living organisms in the earth. The DNA fragment might even be dead but other living organisms might consume the genetic product, namely enzymes or proteins in general.

This, therefore, poses a health problem because even if the genetically modified product is dead and has been purified, it still constitutes a danger to health and even to the environment because it is a derived product.

• 1405

If the scientific issue is acknowledged, Canada might eventually agree that derived products be the responsibility of the agencies that are responsible for the trade aspects. The issue is to find out whether, in view of the potential danger of derived products to health, the WTO will subsequently adopt a related standard, namely, a biosecurity standard, to regulate these products. This is probably the question that we have to ask ourselves. I think that, at the present time, we do not have an answer and that even the WTO is waiting for the biosecurity standard to be set within the Protocol, in order to determine what category of genetically modified organisms and their derived products might fall under the auspices of the WTO.

The Chairman: Ms. Debien.

Ms. Maud Debien: Thank you, Mr. Chairman. It's a very technical discussion, thank goodness!

I will attempt to make a comment or ask a question that, I hope, will be in keeping with what we are discussing.

This morning, one of our witnesses who spoke to us about sanitary and phytosanitary measures told us that, because of overpopulation, environmental phenomena such as drought in certain countries, and decreasing numbers of farmers, who may be asked to produce twice as much with fewer resources, we would in any event, one day, be forced to use genetically modified crop seeds. He said that it is very likely an issue that we will have to face very soon.

I would like to know whether you agree with this hypothesis and I would then like you to give us some concrete examples of sanitary and phytosanitary measures used by certain countries as non-tariff barriers.

Mr. Sylvestre Manga: I may not be able to answer your second question, but I will answer the first.

Is it true, generally speaking, that a drop in agricultural output should lead to the production of genetically modified organisms, and in particular more productive agricultural products? I think that this should be the case, technically speaking. If you compile statistics, taking into account diversification, environmental problems, the use of pesticides in organic farming and everything else, it is true, as we heard this morning, that the reduction in the number of farmers could encourage us to adopt a bias and set things up so that we produce much more with fewer resources. When I talk about resources, it's really in terms of all those parameters.

But the problem is that we adopt a scientific approach. Since I am also an aqua-ecologist, I'm somewhat familiar with the agricultural field. I think that it's a question of logic and that the problem to be dealt with is the potential risk that genetically modified organisms may have adverse effects on the environment or on human health.

I cannot go any further as a scientist. Population growth and production capacity in particular seem to indicate that it will be necessary to find some way of allowing us to produce much from little.

The Chairman: Mr. Côté.

Mr. René Côté: As for the problems that non-tariff barriers may cause, the most flagrant example is that of hormones in beef. It is important to realize that the SPS Agreement provided for the application of the scientific standards that had been adopted by the major international organizations, including the Codex Alimentarius, one of the international bodies that draws up new plant protection standards. If a country wishes to impose additional standards, that go beyond the standards devised by international organizations, it is required to justify them and to present scientific evidence. It must therefore claim that these growth hormones are a danger to human health and support its claims with scientific evidence.

• 1410

This morning, I read in the Globe and Mail that, for two years, the British government had maintained that eating beef affected by mad cow disease had no effect on human health. And suddenly, a link was observed between this mad cow disease and human health. There is certainly a principle of prudence that could be applied to ensure that these standards based on protecting human health and the environment are not considered as non-tariff barriers.

When the Europeans refuse to accept beef treated with hormones, they are not rejecting it solely as an import product, but also for use by their own producers. Is this a discriminatory or arbitrary standard? I do not think so.

The Chairman: Thank you.

Mr. Bachand.

Mr. André Bachand: I got completely lost when listening to the presentation because I don't have as extensive an education as the witnesses do. I would like you to explain clearly to me what a genetically modified organism is, so that I will be able to explain it to others in turn. I'm not interested in HIX and SH2. The other members of this committee are also trying to express in layman's terms what exactly is a GMO. I'd like to be able to explain it to my children when they reach the age of reason, that is 37 years old, which is my age. In all seriousness, please explain a GMO to me. I hear the term and I want to understand what it is.

The Chairman: You gave the example of a eunuch this morning.

Some hon. members: Oh, oh!

Mr. André Bachand: Well, if I have a child, it means I'm not a eunuch.

Mr. Sylvestre Manga: A genetically modified organism is an organism whose DNA has been recombined. The language of DNA is a universal language. It is the codification of everything that is characteristic and hereditary, in other words, genetics in general. For example, if an insect causes problems in tomatoes that I am growing in Canada, I could—since the language of DNA is universal—identify a gene in another living being that expresses a vector that could work against the effect of this insect and I could use it. This gene could come from China or Africa, could be identified in a cow or even in a human being, or could be collected from a micro-organism, a parasite of some kind or a virus.

Mr. André Bachand: I'm clear on that. Genetic modifications have been made, and are still being made regularly, to tomatoes grown in Quebec. The clementines that we see in Morocco did not exist before; they were genetically modified. We have been living with genetically modified organisms for a long time, for all kinds of reasons, including improved production and resistance to cold, heat, humidity and bugs.

Ms. Raymonde Folco: Since Mendel's time, in fact.

Mr. André Bachand: I don't know. I didn't know him personally. My riding is a big tomato producer. Clearly, the tomatoes grown there have been genetically modified, just as the clementines imported from Morocco are clearly GMOs. If what I'm saying is wrong, please correct me. I'd like to know how we could develop a protocol applying to that.

Mr. René Côté: I would like to clarify a few things regarding genetic modification and natural selection. As Ms. Folco remarked, since Mendel's time, we have discovered the rules of genetics and we therefore are able to breed plants to obtain more resistant varieties.

• 1415

New varieties were produced by crossbreeding. International protection of new plant varieties dates from an international agreement that was reached in the 1930s. So it's nothing new. But what is essentially new, which came out of Watson's work in the 1950s on the discovery of DNA, is the way in which this works and the fact that, rather than crossbreeding between species, scientists are extracting DNA fragments to yield a certain gene, for example the Bt gene that allows potatoes or another product to generate their own insecticide.

Mr. André Bachand: That was done before.

Ms. Maud Debien: No, the DNA was not modified.

Mr. André Bachand: Yes, the DNA was modified, but it was done using crossbreeding. Crossbreeding was done at an exponential rate, so that there was never an end to it. Well, you know what I mean. The gene became isolated. Scientists did not exactly understand the chemical and biological formula that we know today, but the crossbreeding produced the same results. Finally, in the end, the DNA was modified.

Mr. Sylvestre Manga: I don't agree when you say that DNA was ultimately modified. As far as applications go, genetic engineering did not really get going until the 1970s. That is when we were able to get into the DNA and do some crossing by transferring genes. You may be referring to something else or simply to these crossings.

Mr. André Bachand: I think that DNA crossings and gene crossings have been going on since the beginning of time, whether we wanted them or not. Here, at this table, we are the result of gene crosses. As far as agricultural products go, the situation is extremely complicated, and some refinements have been made. We can now get the DNA directly. We are no longer limited to crosses that seek to produce a product with certain specific features. We can do this in using the DNA alone, and that allows us to avoid a number of procedures. These crosses ultimately result in a different DNA, don't they?

Mr. Sylvestre Manga: As far as definitions go, the situation is actually somewhat different. We can talk about crossings or recombination, as you are. But in this case, we are talking about recombinant DNA, fragments of DNA taken from various places and collected somewhere, which gives us an organism that is genetically modified, and that could not have been created by nature. It is a very, very specific process.

It is true that generally speaking biotechnology, or what you call DNA crossings has been going on for a very long time. However, we have only been modifying organisms through genetic engineering since the 1970s. That involves taking a gene, transferring it elsewhere and creating a different organism, one that is not natural.

I think that the problem is the World Trade Organization's ability to take the specific nature of these organisms into account, because they do not exist under international trade. That is the challenge today. We hope Canada will be able to anticipate the environmental and health problems that technology and the processes used in developing GMO's can cause. The international community has done this at a number of forums since the conference in Rio. Nothing in the SPS Agreement will enable the WTO to deal with an issue involving recombinant DNA.

Mr. André Bachand: This morning, Mr. Lafleur and other witness spoke about traceability, labelling, place of origin and the efforts made by Great Britain to require the labelling of genetically modified products.

Mr. Sylvestre Manga: I would like to answer this specific, interesting question. I think there are two different levels here. We would like Canada to start by suggesting legislation, before thinking about identification, a procedure that is carried out for storage and sending purposes, and which enables people to make a choice. We are talking about something different here.

• 1420

The pathogenic organism may make the agricultural product harmful, and this organism is the result of recombinant DNA technology. Since the international community has acknowledged that technology had a potential to create disease and since this standard does not exist for trade purposes at the moment, Canada must suggest that it be included in the WTO Agreement. It is quite in Canada's interest to suggest this, because it will happen in any case.

I was an observer at the negotiations for the Protocol on Biosecurity. The WTO is waiting to see what happens with the protocol to determine which categories of agricultural products will be assigned to it. That is an important point.

Should the WTO be redesigning another biosecurity standard for the derivative products that will be assigned to it? That is where the problem lies. That must be done. There is really no other solution, because even trade of living products will come under the auspices of the WTO, even though they're dealt with under the Protocol on Biosecurity.

In both cases, the World Trade Organization will be handling the marketing. Consequently, the SPS Agreement of the WTO must include a provision regarding the potential for disease caused by technology. That is very much in the interest of international trade. In this way, we would have standards for eradiation, modern biotechnology, genetic engineering and any other purification technique or procedure. We should at least have a standard.

For example, Senegal could import genetically modified rice from Taiwan that would cause problems for the people of Senegal. I am almost certain that in evaluating the dangers of this product, Senegal will not merely check whether there are any pathogenic organisms, additives or any other standard pathogenic agent used in ordinary agricultural products. When Senegal is informed that the rice was genetically modified at the outset, it would certainly proceed with its risk evaluation based on the fact that although the flour was purified, it was the product of recombinant DNA technology, which is recognized as having a pathogenic potential. That is the issue.

So if we include in the SPS Agreement—

Mr. André Bachand: That agreement will provide a living not only for lawyers, but also for scientists. Good for them! It is extremely complicated. Thank you.

Mr. Sylvestre Manga: Yes, it is complicated.

The Chairman: We have a real scheduling problem, colleagues, because time is passing quickly, and I still have Ms. Folco, Mr. Patry and Mr. Sauvageau who would like to ask questions. Please proceed quickly.

Mr. Patry.

Mr. Bernard Patry: It is true that this is getting more and more complicated.

Thank you for your presentation, Mr. Côté and Mr. Manga. You said at the beginning of your remarks that you were in favour of consolidation and you were commenting on the achievements of Canada's biotechnological food industry. You said that Canada should be defending trade liberalization for GMO agricultural products that have been proven safe.

You also say:

It would be desirable for Canada to recommend that the international community adopt, within the SPS Agreement, a provision that would signal that technology generally, and recombinant DNA in particular, has potential pathogenic agents.

You spoke about recombinant DNA, Mr. Manga. I want to make sure I understood all the subtleties. When you use the term "recombination", are you referring to the modification of the DNA? Did I understand you correctly?

In recommendations 3 and 5, you say that Canada should recommend that technology and biotechnology be identified as potential pathogenic agents in the SPS Agreement. How do you intend to interpret or define the word "potential"? I don't know how that can be done in legal terms, but the WTO will tell us that. How can we legislate before we know what the situation is?

Mr. Sylvestre Manga: The term "DNA recombination" is another way of saying "genetic engineering" or "modern biotechnology". They all mean the same thing.

Mr. Bernard Patry: It is the modification of the DNA.

Mr. Sylvestre Manga: That's correct.

• 1425

Mr. Bernard Patry: In very down-to-earth terms it is the modification of the DNA.

Mr. Sylvestre Manga: Yes.

Mr. Bernard Patry: Fine.

Mr. Sylvestre Manga: And the creation of organisms that could not exist—

Mr. Bernard Patry: My second question is to Mr. Côté or to Mr. Manga and involves the word "potential".

Mr. René Côté: In the criteria set out in Schedule A of the SPS Agreement, the agents mentioned as having the ability to cause disease are contaminants, additives, toxins and pathogenic organisms. There is a list, but there is no list of the dangers that could be caused by some technologies. There seems to be a vacuum that the members of the Convention on Biological Diversity tried to fill, but since they were getting into the WTO's area of jurisdiction, they were told to back off and that such a protocol would not be accepted.

It is time the WTO assumed its responsibilities and dealt with the issue of biotechnology, because, for the time being, we don't know what would happen in the case of an international trade problem involving genetically modified organisms.

Mr. Bernard Patry: Thank you, Mr. Côté.

The Chairman: Is that it?

Mr. Bernard Patry: That's it. Thank you, Mr. Chairman.

The Chairman: The agricultural issues were complicated enough but when you get chemists and lawyers involved as well, things get much more complicated than I could have ever imagined.

Ms. Folco. We must finish in the next five minutes, because we have other witnesses waiting.

Ms. Raymonde Folco: I have a futuristic question, Mr. Chairman.

The Chairman: Futuristic?

Ms. Raymonde Folco: Yes, futuristic. I would like to broaden the debate. You may not have time to answer, but I have been eager to ask this question for the last two days.

People say that thanks to biotechnology, we can produce more and concentrate our production sites at the same time. You would agree with me on that. What is the future of agriculture throughout the world or even within Canada? Can we imagine a time, not so far off, when some countries will decide to stop producing agri-food products, and go into telecommunications instead, for example?

Let me take the example of Israel, which used to produce large quantities of oranges, tomatoes and all sorts of fruit, and at some point decided to refocus its economy on electronic products, and so on. Could we imagine a country like Canada deciding to do that? And if so, could we imagine a time in the not-too-distant future when developed countries, like Canada, would head in this direction, while developing countries, as we call them today, would become the food-producing countries that would feed us? Does this division, this huge gap, exist between developing countries and developed countries?

I apologize for my question, Mr. Chairman.

Mr. René Côté: I might suggest a brief answer. Obviously, we will not be asking Saudi Arabia to start producing tomatoes any time soon. The current trend seems more economic in nature to me than geographic. This morning you yourself spoke about terminator genes, those that prevent reproduction.

• 1430

At the moment, agricultural producers are not buying seeds. They enter into licencing agreements, because there are patents, similar to the licencing agreements for software in the 1980s, which prohibited the reproduction of software. Both the American and Canadian governments had to intervene to force software producers to allow them to be reproduced.

In the same way, the government again has a role to play with respect to the trade practices we are to establish. You heard the representatives from the Coopérative fédérée who said they were prepared to deal with biotechnology, but that that also meant getting their seed from Monsanto, as well as their chemicals and everything else. This would ultimately result in the death of groups like the Coopérative fédérée. We would therefore have to give this to big multinationals, which, as far as geography goes, have no problem producing wheat or anything else in Canada. So what is happening in agriculture has more to do with an economic than a geographic concentration.

The Chairman: Mr. Sauvageau, please.

Mr. Benoît Sauvageau: We talked a little bit about this—

Ms. Raymonde Folco: [Editor's Note: Inaudible]... at lunch time.

Mr. Benoît Sauvageau: Without realizing it, we planned our questions before the meeting. I would like to make two brief comments. If the negotiators say that the World Health Organization, not the WTO, should look after that, what should our defence be?

To follow-up on Ms. Folco's comments, is the chapter in Jeremy Rifkin's book on the end of agriculture science fiction, or could such a thing happen?

Mr. René Côté: I read several of Rifkin's books, but not that one.

Mr. Sylvestre Manga: I'm familiar with it. It is called The End of Work.

Mr. Benoît Sauvageau: Yes, The End of Work; I was referring to a chapter in that book.

Mr. Sylvestre Manga: There's a chapter on molecular agriculture.

Mr. Benoît Sauvageau: Is it science fiction?

Mr. Sylvestre Manga: No. As an agro-ecologist, I don't think it is science fiction. There are different approaches, and some of them may have worked very well a few years ago, before we had applications of recombinant DNA. Personally, I find it quite extreme, but now that genetically modified organisms have already been produced, the question is quite different. They are a reality.

So in that sense, it's not science fiction. These are things that could happen, but there is definitively some extremism in the language used.

Mr. René Côté: To answer your question on WTO and the WHO, I have been to WTO before, which at the time was called GATT. There is no doubt that they will not start establishing sanitary and phytosanitary standards, no more than they are currently doing so, because they are delegated to three outside bodies: the Codex Alimentarius, the International Office of Epizooties—

Mr. Benoît Sauvageau: We're familiar with those bodies. André and I have learned them by heart. No, that's a joke.

Mr. René Côté: That is how it will be managed. It will not be managed by WTO bureaucrats, but rather by people outside the organization. However, the issue must be taken into account by the WTO with respect to international trade.

The Chairman: Thank you very much. Unfortunately, we have other witnesses waiting. I am sure your students at UQAM are not bored. If they understand all that, I wonder whether their brains might have been genetically modified. Thank you very much.

Could we ask Mr. Bouvier to come back, please?

• 1435

• 1440

The Chairman: We would now like to welcome the representatives of the Lanaudière dairy producers' union. We thank you and your colleagues for coming to meet us, Mr. Bouvier. You have the floor. I hope you haven't been too terrified by the view of the future presented by the previous witnesses.

Mr. Jean-Guy Bouvier 1(President, Syndicat des producteurs de lait de Lanaudière): Thank you, Mr. Chairman. My name is Jean-Guy Bouvier; thank you very much for inviting us to take part in your hearings.

I'm a dairy producer, and an Administrator and First Vice President of the Lanaudière dairy producers' union. Since we are producers, the WTO negotiations have a very direct impact on us, and we will explain our view of the WTO.

Have you received a copy of our paper?

The Chairman: Yes, we did received a brief.

Mr. Jean-Guy Bouvier: The title of our document is: "Presentation to the consultation held in preparation of the World Trade Organization negotiations".

I will start by giving you a brief outline of the short- medium- and long-term situation of the dairy industry. There are 511 dairy farms in our region, with gross revenues totalling 66.5 million dollars, or 19 per cent of the reported regional revenue, which is about 350.8 million dollars.

The total area of the region is 1,347,977 hectares, and the agricultural area totals 204,831 hectares, or 15 per cent of the total.

Our dairy industry accounts for 27 per cent of the agricultural revenue of Quebec, and 5 per cent of that of Canada, and for over 56,000 direct and indirect jobs located throughout Quebec.

The collective marketing of dairy products ensures that Canadian and Quebec consumers enjoy prices for dairy products that increase less quickly than those of other goods in general and production input. The table in our brief compares the various price indexes. From 1985 to 1998, the price for milk paid to the producer went from 100% to 126.2%, the price of milk to the consumer to 124.4, the consumer price index to 143.3, while inputs went to 139.3 and food to 135.1.

In addition to guaranteeing stable, low prices for dairy products compared to the unstable prices that American consumers have to pay, the Canadian marketing system costs Canadian consumers nothing.

In addition, supply management allows us to move toward a balance of supply and demand. In this way, Canadian producers get farm-gate prices close to the most efficient production costs. Governments do not have to intervene to stabilize prices, as in the case of the hog industry. Our industry costs governments nothing, because the federal dairy subsidy will be completely abolished by the year 2001.

In addition, the stability of the price paid for milk to producers has made possible a spectacular increase in production on individual farms and improvements in efficiency.

These investments mean that the Quebec and Canadian dairy production use the land well and generate economic activity in each of these communities, particularly in Quebec, which are significant for our development and that of our governments. No one denies that this economic development results in the creation or maintenance of jobs.

In addition, these investments and improvements in efficiency have always been carried out in an extremely environmentally friendly way. Breeding dairy cows allows producers to rotate crops and to reduce the use of pesticides through integrated manure management.

• 1445

Another important characteristic of this regulated industry is that it provides a regular, high-quality supply to dairy processing plants, thereby enabling them to do business in Quebec and Canada.

The economic performance of this sector definitely has an excellent potential. We need only think of the multinational Parmalat, which purchased Ault.

This brief overview of the dairy industry has probably highlighted for you that the maintenance and particularly the expansion of this economic sector must be encouraged. That is why the dairy producers of the Lanaudière and of Quebec are asking you to do everything in your power to keep the rules governing their supply management systems in the upcoming rounds of WTO negotiations. It is easy to justify this system, for example, using the various arguments put forward in our brief paper and in parts II and III of the report of the Quebec dairy producers federation presented to the Quebec Department of Agriculture, Fisheries and Food (MAPAQ), which will be defending this position to the federal government.

We have also appended to our paper a copy of a resolution passed by the Lanaudière dairy producers that supports our demands.

On the last page of our brief you will find an excerpt of the minutes of the annual general meeting of the Lanaudière dairy producers' union, which was held in the L'Ambrosienne room in Saint-Ambroise on Tuesday, March 16, 1999 at 10 a.m.:

Subject: Reopening of the World Trade Organization agreements:

Whereas the WTO agreement was signed in December 1994 after several years of negotiations;

Whereas these agreements will be reopened for negotiation in the fall of 1999;

Whereas, as a result of the supply management systems, the products they regulate have complied to the rules laid down in the WTO agreements to a large extent;

Further to a duly moved and seconded motion, be it unanimously resolved that the Lanaudière dairy producers at their annual general meeting:

demand that the UPA and the Canadian Government maintain supply managed products, because these systems in no way harm the trade of other WTO member countries; and

that they ensure that the achievements made for one product not be negotiated away for another.

Certified true copy this 18th day of March 1999.

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

Do you have any questions for Mr. Bouvier?

Mr. Obhrai.

[English]

Mr. Deepak Obhrai: You gave a brief overview of this report, which is in French. I'll let my other colleagues ask questions, but for myself—

The Chairman: You may want me to come back to you at the end.

Mr. Deepak Obhrai: Yes. I'll listen to your presentation, and then I may have a question.

The Chairman: Thank you.

[Translation]

Mr. Sauvageau.

Mr. Benoît Sauvageau: Welcome to Saint-Hyacinthe, Mr. Bouvier, Mr. Lorrain and Mr. Lépine, and thank you for your presentation to the committee.

I am the Member of Parliament for the Lanaudière region, and Ms. Maud Debien is almost my neighbour, because she represents the riding of Laval East. So we are not too far away.

Ms. Raymonde Folco: I'm from the area too.

Mr. Benoît Sauvageau: Ms. Folco's from the area as well.

Ms. Raymonde Folco: We represent the regions of Laval, Laurentides and Lanaudière, Mr. Sauvageau.

Mr. Benoît Sauvageau: That's right, the three Ls.

Ms. Raymonde Folco: Absolutely.

Mr. Benoît Sauvageau: Before it was Louvain, Lautrec and I forget the other one. But now it is Laval, Laurentides and Lanaudière.

I would like to know whether all the regions will be presenting a recommendation similar to the one you signed on March 18, 1999, and that you read at the end of your remarks.

Mr. Jean-Guy Bouvier: Yes.

Mr. Benoît Sauvageau: Is there agreement among all the producers in the Quebec dairy federation?

Mr. Jean-Guy Bouvier: The Quebec federation.

Mr. Benoît Sauvageau: And there's a Canadian federation, is there not?

Mr. Jean-Guy Bouvier: Yes, the Dairy Farmers of Canada.

Mr. Benoît Sauvageau: You're all working together.

Mr. Jean-Guy Bouvier: Yes.

Mr. Benoît Sauvageau: You have adopted a joint position.

Mr. Jean-Guy Bouvier: Yes.

Mr. Benoît Sauvageau: Are you familiar with the position on agriculture adopted by the UPA and the Canadian Federation of Agriculture?

Mr. Jean-Guy Bouvier: Yes, we have some information on this.

Mr. Benoît Sauvageau: If I understand correctly, all dairy producers who belong to the Dairy Farmers of Canada, whether they're from the Lanaudière region or any other part of Quebec or Canada, have adopted a joint position.

Mr. Jean-Guy Bouvier: I know that all Quebec producers agree on this matter.

• 1450

Mr. Benoît Sauvageau: I see. I've heard there are some dairy producers in Laval. Are there some in Richmond as well?

Mr. Jean-Guy Bouvier: Yes.

Mr. Benoît Sauvageau: Has the consultation process you conducted taken place in all the regions? At the end of the process, could some dairy producers, whether they are located in Richmond or somewhere else, say that they have not been consulted?

Mr. Jean-Guy Bouvier: No.

Mr. Benoît Sauvageau: Very well.

Mr. Jean-Guy Bouvier: I am fairly sure of that.

Mr. Benoît Sauvageau: The position is supported across the board?

Mr. Jean-Guy Bouvier: Yes, we discussed it at our meetings and we will be discussing it again at our meeting to be held here in Saint-Hyacinthe at the Auberge des Seigneurs on April 13, if I recall correctly.

We talked about it last fall at our semi-annual meeting. All dairy producers from Quebec and elsewhere in Canada have adopted virtually the same position. We have signed some national agreements, including agreement P6, which provides for the pooling of all the milk in Canada. I think we all pretty much agree on this.

Mr. Benoît Sauvageau: Fine. I will change topics and ask you whether the decision handed down by the WTO last week on milk exports has any impact on the dairy producers in Lanaudière and in Quebec generally. If so, what impact does it have?

Mr. Jean-Guy Bouvier: The WTO holds that our Class-5 milk is counter to its rules.

Mr. Benoît Sauvageau: What is Class-5 milk?

Mr. Jean-Guy Bouvier: It comprises dairy products other than fluid milk.

Ms. Maud Debien: Processed products.

Mr. Jean-Guy Bouvier: Yes, processed products.

Mr. Benoît Sauvageau: Excuse me for having interrupted. Could you tell us about the consequences of the WTO decision?

Mr. Jean-Guy Bouvier: It is stated that this class is contrary to WTO and GATT agreements. When we signed agreements P5 and P6, we had to restructure our list to comply with these agreements. We amended a class of milk, that they call the export quota, to comply with the system. This is what the Americans are challenging. Such challenges are not new; the Americans are constantly challenging us whether it be in milk, poultry or lumber. There is always a problem. It is quite likely that they will appeal this case.

Mr. Benoît Sauvageau: Yes, they have officially announced it.

The Chairman: Yes, they are appealing the decision.

Mr. Jean-Guy Bouvier: That suits me fine. They are challenging Class 5 which includes the lowest line of processed products.

Mr. Benoît Sauvageau: That's fine, thank you.

The Chairman: Ms. Folco.

Ms. Raymonde Folco: May I have some information? There was nothing in the newspapers on this subject this morning, but I heard on television—correct me, if this is incorrect, Mr. Bouvier—that this affected only 5% of dairy production.

Mr. Benoît Sauvageau: Does this impact on their daily activities?

Ms. Raymonde Folco: Yes, 5%.

Mr. Jean-Guy Bouvier: Yes, we were talking about 5% of dairy production. Canada has a long border with the United States; it goes from British Columbia to Maine. The surveys that we carried out at Canadian and American customs showed that Canadians who went to the United States for their grocery shopping brought back at least the value of 5% of dairy products to Quebec. We thought that our markets were already covered for 5% by this. This is what the Americans are currently disputing.

We studied this subject and assessed the shopping that was done every week at 5%. Many Canadians went to the United States to do their grocery shopping, but there may be fewer of them at the present time.

Ms. Raymonde Folco: Mr. Bouvier, the people from Châteauguay go to New York all the time.

Mr. Jean-Guy Bouvier: Yes.

Ms. Raymonde Folco: I would imagine that this is the same thing for you.

Mr. Jean-Guy Bouvier: That's correct. It is certain that Canadians would still do their grocery shopping in Quebec, even if we lost these 5%. We fear that if the gap in our exchange rate were to decrease, Canadians would do even more shopping in the United States. If we lost our 5% in this negotiation and we were obliged to open our market by 5%, we would lose 10%. As you said a while ago, the present situation does affect us, and it would be worse if we lost.

• 1455

The Chairman: Does 5% represent most of your markets in the United States? Isn't this the only market that we have in United States?

Mr. Jean-Guy Bouvier: You are referring to exports to the United States?

The Chairman: Yes.

Mr. Jean-Guy Bouvier: We also export products to the United States, mainly specialty cheeses.

The Chairman: That's true, specialty cheeses.

Mr. Jean-Guy Bouvier: We do not export milk because they are self-sufficient in that regard. We are entering new markets for speciality cheeses, but that is minimal because they are conservative. It is hard to find the markets.

The Chairman: The Americans have not objected to specialty cheeses as being a subsidized product, have they?

Mr. Jean-Guy Bouvier: No.

The Chairman: You said that the supply management system absolutely had to be protected. This morning, the Coopérative fédérée de Québec presented us with a very fine brief full of good information. It said that for skim milk, at least, the tariff must be reduced from 237% to 200% by the year 2001.

Mr. Jean-Guy Bouvier: The tariff reduction.

The Chairman: Yes, that's correct. Will this 200% tariff suffice to protect your market here, in Canada?

Mr. Jean-Guy Bouvier: I would say so.

The Chairman: How low will it have to go? Obviously, we will be negotiating decreases again because this tariff applies for five years. If it is reduced by another 36% in the next five years, how far could we go without your becoming increasingly worried?

Mr. Jean-Guy Bouvier: The tariff isn't our only worry. The 236% tariff which, according to what you have said, will be reduced, is not the only factor. A little while ago, we talked about people who shop in the United States. The value of our currency is another factor. At the present time, it is not dangerous because you won't do your grocery shopping in the United States; it is more expensive or as expensive as it is here and, furthermore, you lose because of the low value of the dollar. In this case, there is no problem at 200%, but if it were to drop, to 100% and the value of our dollar increased, that would have an impact on us.

The Chairman: I understand that.

Mr. Jean-Guy Bouvier: When it was negotiated at 200%, that was fine and it was a good way to protect us.

The Chairman: But the problem is that we cannot control the exchange rate.

Mr. Jean-Guy Bouvier: That's our worry.

Ms. Raymonde Folco: [Editor's note: Inaudible]

The Chairman: Many of our exports are well protected in this regard, at least at the moment. Years ago, my professor in Toronto said that with the exchange rate at 65%, we didn't need free trade with the United States, and with the dollar close to parity, even free trade would be useless, because the market would be impenetrable.

Mr. Jean-Guy Bouvier: That is not relevant.

The Chairman: In any case, that is out of our control. We have enough issues to deal with. Are there any other questions?

Mr. Obhrai.

[English]

Mr. Deepak Obhrai: This morning the witness from the co-operatives was here. He said that the co-operatives in general know that there is pressure on the supply management system of marketing and that they were in agreement. They know that it will phase out in due time. Yet you are asking us to ensure that the supply management system of marketing is maintained. So there is a little contradiction there. What would you say, now that the other group is saying they feel it will gradually disappear?

[Translation]

Mr. Jean-Guy Bouvier: That is the point of view of the dairy cooperatives or of a cooperative federation; it is the point of view of the food and processing industries, but it is not exactly the same as our point of view, because there are two differences between being a processor and a producer.

• 1500

If you are a producer and have the same profit margin for exports as for domestic sales, there is no problem. But when you are a producer, and you want to be competitive and the industry encourages you to be productive to be able to export and be competitive, that's another matter. Being competitive in the market cannot always be done at the expense of the base producer. It is easier for processors: they process the product, keep their profit margin, and then find buyers. As a producer, you have to maintain a profit margin to be able to continue on the farm to get ahead and to have a decent living. This is our point of view as producers, and this is why we don't have the same point of view as the cooperatives. On the other hand, we live with the cooperatives and normally get along with them quite well. Sometimes, we have to refocus our activity.

The Chairman: Ms. Debien.

Ms. Maud Debien: I would like to get back to the statement that Mr. Lafleur of the Coopérative fédérée made this morning following Mr. Obhrai's intervention. If I understood him correctly, Mr. Lafleur never said that supply management should be eliminated. He said that supply management might be eliminated some day, but to the extent that all countries would have equal market access, and this is not presently the case. As all of our witnesses told us this morning, Canada has made great efforts to comply with the latest agreements on agriculture, while the European Union and the United States failed to do so by finding all sorts of measures to thwart the Agreement on Agriculture.

I don't think that Mr. Lafleur said that he was opposed to supply management; I think he said, rather, that if the rules of the Agreement on Agriculture were clear and applied by all countries one day, then Canada might be as competitive as the other countries, and supply management would no longer be necessary, but not in the present context. Therefore, Mr. Lafleur said that the supply management system had to be maintained until the new rules were applied by everyone. This is my understanding of the discussion this morning with Mr. Lafleur. If my colleagues have a different understanding—

Mr. Jean-Guy Bouvier: Might I—

The Chairman: He said that we could never predict the future, but that we could be certain that there would be adjustments to make and that we would have to adapt to new conditions. The important thing is that the adjustments are not too abrupt so that people can adapt. It takes time to prepare for changes in life. I fully understand that.

[English]

Mr. Deepak Obhrai: It's a phased-out process of 10 to 15 years.

[Translation]

The Chairman: Ten years, fifteen years.

Ms. Maud Debien: [Editor's Note: Inaudible]

Mr. Jean-Guy Bouvier: As Ms. Debien said a little while ago, Canada has done its part to comply with the WTO standards: the subsidies have been practically removed as well as other supports that were not relevant to the WTO. We even got ahead of the other countries, who did nothing; they nearly worked around the rules to continue doing what they were doing before. In Quebec and in Canada, we did our duty. I did not hear Mr. Lafleur's statement this morning, but I think that he is on the same wavelength as us, because he worked for us a little while ago.

• 1505

We, the agricultural producers, are the base, and we should be able to live decently from agriculture and ensure continuity on our farms. A little while ago we heard a futuristic vision of agriculture. I do not think that a country such as ours can get out of agriculture and do something else. Be it in Canada or Quebec, there will always be agriculture as long as we provide farmers with decent prices for their products so that they can live decently like any other member of society. This is my opinion. My children will take over my farm, and I hope they share my vision. But regardless of the field that we pursue, it has to be profitable and we have to be able to live decently and be able to get ahead. I believe that the Quebec producers share this point of view.

The Chairman: Last year, I met with dairy producers from Northern Ireland who are members of my wife's family, and they think exactly as I do. This vision doesn't change from country to country.

Thank you very much Mr. Bouvier, Mr. Lorrain and Mr. Lépine for coming to meet with us this afternoon. Through our report, we will express your concerns to the government.

Mr. Jean-Guy Bouvier: Thank you very much.

The Chairman: We will now hear from the representatives of the Chambre de commerce des Mascoutains. I have learned that this word refers to people from Saint-Hyacinthe.

Mr. Cloutier and Mr. De Tilly, welcome to our committee. We thank you for coming to share your opinions with us today. I would invite you to start your statement.

Mr. Denis Cloutier (Director General, Chambre de commerce de la Municipalité régionale du comté des Maskoutains): First of all, in view of our region's particular nature, the main subject that our Chamber of Commerce wishes to address this morning in these hearings is obviously, agriculture. I believe that Canadian statistics very clearly point out the importance of agriculture in our economy. I'm sure you are more familiar with these figures than I am. This proportion is even more important here, in our region.

If we look at the eighth round of the GATT negotiations, we can see that the general plan was that all of the measures and goals were to promote competition based not on subsidies, but, rather, on the quality-price ratio.

The Chamber of Commerce greatly appreciates your invitation to participate in this broad consultation. However, you'll understand that because of the short timeframe—we had barely two days to prepare—and the concerns of the Chamber of Commerce, which supports economic development in general and does not operate directly at the level of businesses, our presentation will be not nearly as detailed as some of the other participants.

However, on the basis of the discussions and consultations that I was able to carry out in the last few hours, I can speak for a certain number of stakeholders and present you with the following information.

First, it is clear that apart from the claims and positive or negative elements, the trade agreements and issues before us here are of critical importance. This is clearly evident from the fact that there are 30 or 40 countries on the waiting list.

• 1510

Having said that, the stakes are very high. We have already taken steps to deal with the issues of subsidies and customs, which, in my opinion, are the two main teams. Like the person whose presentation I heard a bit of a little while ago, we are saying generally, that Canada, particularly in the field of agriculture, has done its homework and even moved ahead in a number of cases.

In this respect, Canada has a considerable headstart over the other member countries. We have complied with the rules that were adopted. How should we respond to the $10 billion subsidy that American farmers received a few months ago? As a member of the WTO, how can Canada tolerate such measures? How can it show openness and the willingness to proceed with applying the rules and even go further? This is hard to envisage at the present time.

The same thing is happening in Europe. They seem to have provided $6.7 billion in export subsidies. In view of this, how could we position ourselves with respect to these agreements, since we had agreed to achieve a 20% subsidy reduction? According to the figures that I have received, Canada has reduced its subsidies by 25%, exceeding the targets.

Quebec accounts for 75% of all Canadian dairy production, and the subsidies based on production volumes, which were a little over $6 per hectolitre a few years ago, will completely disappear starting next year.

When we look at the list of all the rules and the amendments to be made, we can see that Canada has done very well. The issue is not to see how Canada will be able to respect those rules, but how to position ourselves when these rules are flouted by the other signatories to these agreements. I think that this is the main issue.

Beyond that, there is of course the desire of farmers to live decently, which is perfectly normal. I believe that Canada will have to state its position and ask the other members to respect the rules that were established by all present.

Lastly, until there is a proper standardization, it will be difficult for the Canadian industry to go any further in applying the rules that were previously established, or to reduce subsidies to farmers.

That is essentially the position that the Chamber of Commerce wanted to present to you here this afternoon.

The Chairman: Thank you, Mr. Cloutier.

Mr. De Tilly, do you have anything to add?

Mr. Mario De Tilly (Industrial Commissioner, Saint-Hyacinthe Region): Without reiterating the four main commitments of the GATT Eighth Round, I would like to point out that the organization I represent is a local development centre that is unique in Quebec. It brings together organizations that are dedicated mainly to the economic development of the communities in which they are located.

In light of these four commitments, we also have certain questions that arise because in most cases, Canada has succeeded in meeting the obligations the 138 countries had pledged to fulfil at the outset.

• 1515

With regard to monitoring customs tariffs at the borders, the 36% reductions provided for in the commitments have apparently been complied with by Canada. The same is true with regard to minimum market access, customs tariff exemptions for 3% of volumes, the reduction in export subsidies and domestic support for agriculture, which were to be reduced by 20%. It would seem that Canada has met all these objectives.

Other than the fact that many of our partners, and not the least of them, notably Europe, did not manage to meet these commitments, there are other factors that we find perplexing. As Mr. Cloutier explained, Saint-Hyacinthe is an internationally recognized research park. It's important to point out that it was the first research park in Canada to be designated as such by the International Association of Science Parks. It is also important to mention that it is the only one worldwide which is specialized in a single sector, namely agri-food. In addition, of the 42 agri-food production processing companies located in our territory, 15 are net exporters and by themselves generate $527 million in exports. Needless to say, 65% of pork processing is done by one of our companies called Olymel, which is strongly dependent on export markets.

All the companies in the MRC des Maskoutains, which number about 320, export $900 million worth of goods annually. That gives you some idea of the importance of agreements such as those of the WTO. In many cases, our companies compete with corporations located in other continents, especially in developing countries of Africa and Asia.

One of our concerns is as follows. In many of these countries, human rights are not necessarily respected, especially labour rights. When one of our companies is competing with a corporation operating in Africa or Asia which violates human rights and environmental rights, it is very difficult for it to compete in those markets as well as in markets shared by these corporations. Some countries still practice certain forms of slavery and exploit child labour, and these same corporations are often in competition with our own companies. We therefore believe that the WTO, which is a recognized organization, should be in a position to closely scrutinize what goes on in those areas.

Why the WTO? Why not the ILO or even an organization such as the UN or UNESCO? Simply because of all the international organizations, only the WTO has a large number of member countries. We know that 30 more countries are waiting to join this club, this organization that is the WTO.

With regard to ensuring compliance with labour conventions, it's important to note that this can't be done in the short term. I believe we must respond at the federal level. Canada, which is a role model in this area, should take action so that the right to unionization, environmental rights, labour law and especially individual human rights are respected. Like it or not, this does have an impact on the competitiveness of our companies on international markets.

That is essentially what we wanted to tell you today.

The Chairman: Thank you, Mr. De Tilly.

Mr. Obhrai.

[English]

Mr. Deepak Obhrai: Thank you for the presentation. It's quite obvious, from all the presentations we have heard, that the bottom line is Canada has met its obligations and the other countries are using other means in not meeting their obligations.

I was just wondering out loud why Canada is not more aggressive in putting complaints. We have had two complaints put against us, which we lost. So why is Canada not really aggressive in putting out the complaints if they feel there have been violations of WTO rules? That's what it is there for, right? That's a question I have.

• 1520

On the other hand, I think we should be very proud of the fact that we have met WTO obligations, because after all, we are also an exporting nation and a member of the chamber of commerce. We need the markets out there as well. I think we should look at having achieved the objectives as a good thing for Canada. We should maintain that and ask for more, but at the same time not say that because the other guys have not done it, we should hold it back or something. Why not use the mechanism of dispute resolutions in WTO to become more aggressive and say “You are using the green box tricks and all those things to get away from your obligations”?

Would you say that's a fair assumption? Are you unhappy with Canada not taking a more aggressive stand in complaining?

The Chairman: I'll ask the witnesses first if they know how many complaints we've actually launched. Most of us don't know. I had to ask our researcher myself. We've actually launched thirteen, and six have been launched against us since the beginning of this.

[Translation]

Ms. Maud Debien: Since when?

An hon. member: Since 1995.

Ms. Maud Debien: Thirteen since 1995.

[English]

The Chairman: So on balance we're ahead of the others, in terms of doing more bleating and squeaking than being complained against.

Mr. Deepak Obhrai: Would not your approach be to say “Yes, we should go to the next round of negotiations to see more opening up of the market” and not just say “We have achieved this target and that's it for us until somebody else does it”?

Shouldn't our position be to become more aggressive in the WTO and open up more markets, but at the same time become far more aggressive in launching complaints against the U.S. and the Europeans, just to name two? You have a very challenging issue about human rights and international labour organizations. As globalization takes place, they are becoming more and more apparent and interesting. Is child labour to a degree an export subsidization, direct or indirect?

I think it's definitely worth looking at that issue as a whole, so I'm glad you brought it up.

[Translation]

The Chairman: If I understand correctly, you accept the comment.

Mr. Mario De Tilly: Yes, absolutely.

The Chairman: Ms. Debien.

Ms. Maud Debien: Good afternoon, Mr. Cloutier, Mr. De Tilly.

Mr. Mario De Tilly: Good afternoon.

Ms. Maud Debien: My colleague Mr. Obhrai asked you essentially the same question I intended to ask. You said that the issue was not to ask other countries to comply with WTO rules, but to see how Canada should position itself when rules are not respected. That brings us back to Mr. Obhrai's question. It means that Canada has not been sufficiently aggressive, if I understand you correctly, with regard to complaints by the European Union in particular and the United States.

Unfortunately, we have very little statistical data. You say that there have been 13 complaints since 1995.

Mr. Mario De Tilly: Since 1995, yes.

Ms. Maud Debien: By how many countries? What are the countries in question? For instance, how many complaints were filed by the United States? The main countries that have filed complaints against Canada to date are countries in the European Union and—

Mr. Mario De Tilly: The United States.

Ms. Maud Debien: —the United States in particular. It's difficult to verify whether these complaints are a significant proportion of the overall number of complaints filed before the WTO by all countries. Is the ration of complaints filed against us quite significant or not? It would be important to have that data, Mr. Chairman.

The Chairman: I don't know if we can find that here—

Ms. Maud Debien: In the research document.

The Chairman: In the research document, there is a chapter on dispute settlement and I believe that there are some statistics on the processes in which Canada participates, as defendant or plaintiff.

• 1525

However, I do know that in the five years since the inception of the WTO, there have been more complaints than in the entire 50 years of the GATT, because we now have a legal system that is much more sustainable and secure. Therefore, the system has become more legalistic.

Mr. André Bachand: I can tell you that I put this question to Daniel and he told me that on the Internet, there were complementary documents about all complaints filed with the WTO. It's very interesting. It's quite a complete document, but on the committee's Internet site, concerning the WTO, we can see all the complaints that were filed with the WTO. It's enormous.

Ms. Maud Debien: It's difficult to measure to what extent Canada is aggressive or not with regard to complaints when we don't have a complete picture of the situation.

My second question, which is really a comment, is for Mr. De Tilly. I was very pleased to hear you say that the WTO should deal with all the issues respecting human rights, labour law and environmental issues. As I said previously, there are currently major international instruments which, in principle, deal with all these issues. These are the major international instruments of the UN. We know that many countries have signed these major agreements, but in many cases, they are not respected. The WTO is becoming the most powerful institutional body on the planet, and issues of trade, labour standards, human rights and environmental considerations are closely linked. Given that the WTO is the only organization that has regulatory and coercive powers, that is where the major issues should be discussed. The other major international instruments don't have that kind of clout. Therefore, I was pleased to hear you say that these should be discussed. That's a comment rather than a question.

Mr. Mario De Tilly: Thank you. To come back to what Mr. Obhrai was saying, I will say that that was a comment that I was making. It was not intended as a criticism or as a speculation on whether Canada was aggressive enough regarding enforcement of the agreements. It was an observation of someone who follows these things from a distance as well as close-up, since we regularly work with exporting firms. In our experience, Canada is usually a leader in meeting its commitments, whereas its partners are not necessarily up to speed. We feel that that can create difficulties for Canadian companies, especially those in the St. Hyacinthe region.

The Chairman: Mr. Bachand.

Mr. André Bachand: Given that we are in the region of the agri-food research park, we have been hearing some good arguments with respect to the WTO and the agri-food industry. I would like to come back to something that we were saying earlier about human rights.

You missed a fairly technical presentation on sanitary and phytosanitary standards, genetically modified organisms, etc. Those issues are important, but I know that you, Mario, have been working for a number of years to help companies and promote regional development. You have been involved for a long time, haven't you? You were talking about the whole issue of human rights and labour law. That is very difficult to put in place. What are the criteria for reasonable wages in a given country? What are the criteria for reasonable working conditions in a given country? These are extremely difficult issues. Some things are easy, such as child labour under the age of 12 or 16. These judgments are very difficult to make, and I do not believe that we can expect any short-term solutions. These things will have to be worked on, but I doubt that the companies you are working with will see increases in wages or improvements in working conditions overnight in certain countries.

• 1530

Certain environmental standards will perhaps be applied more vigorously. I do not know if you saw the CBC program a few weeks ago on the American companies that crossed the Rio Grande and set up their manufacturing facilities in Mexico; they were producing horrible pollution. It is awful. Mexico is a partner in the North American Free Trade Agreement. It is one of Canada's major partners, and yet we are unable to ensure compliance with certain agreements.

Even those countries could tell you that Quebec does not fulfil its agreements and does not protect the environment in the hog production industry. When you start to argue at the international level, there can be some low blows.

All things considered, is the region benefiting from the world market? You were saying, I believe, that exports from the region amounted to nearly a billion dollars.

Mr. Mario De Tilly: One billion dollars, but nearly $600 millions of that involves exports of processed or pre-processed agri-food products.

In developing countries, environmental standards do not exist or they are too lax, but their products are easy to find on the shelves in western countries, maybe even in Canada. To feed some western countries, we consent to pollute and destroy the environment in certain other countries. That will have permanent repercussions. In the meantime, it also creates economic distortions. Since the environment does not have to be taken into account, production is less costly. That raises questions.

Since there is no respect either for workers' rights, labour is abundant and cheap. In some cases, slave labour is said to be resurfacing. That idea does not come from me: there have been a number of reports of this phenomenon. The organizations exploiting that labour force are competing with Olymel and Flamingo from this side of the world and all the other food processors, whether we like it or not.

I'm aware of one thing. It is true that it is completely impossible to find a short-term solution. However, we need to begin to deal with it, to try to find interim solutions. Canada has every reason to spearhead this effort. Our country can act as a role model for certain other countries and this to Canada's advantage, especially since there is this vehicle called the WTO, which is probably the most credible international organization at present. Its credibility is increasing year by year, simply because, as Ms. Debien said, it is the only international organization with teeth. And God knows it has very considerable coercive powers. So why not take advantage of a forum like that to raise some important issues?

Listening to our prime minister, we can feel that he has a strong attachment for human rights. I think that we have a unique opportunity to work with all our politicians who talk that way. The WTO is perhaps the ideal platform in which to advance certain rights.

The Chairman: Before giving the floor to Ms. Folco, I would like to ask you a question in the same vein as the one by Mr. Bachand.

Since we started this study, we have been aware that agriculture is one of the most difficult areas to place under international rules. The difficulties have been around since the beginning of the GATT. You live in the middle of an agricultural region, if I understand correctly, and you have told us that Canada is meeting its commitments. The people here must have the impression that they have complied with their commitments under the international system, probably with some adjustment problems. It is your impression that we are in a good position at the WTO?

• 1535

Do you think that we should stay in the system and try to improve it or do you feel that the disadvantages have outweighed the advantages? I am asking that question because some witnesses have told us we should not take part in the upcoming round of negotiations that will start in Seattle. They have told us that we should stay out and that we have done enough for the time being. What is your view on that?

Mr. Mario De Tilly: The question kind of answers itself. Canada has shown leadership, as the country that is probably done the best in meeting its commitments, Canada is in a position where it can do power dealing. We have done what we were supposed to and made the necessary changes, and now it is up to the others to do the same. So on some level, Canada can play a leadership role with respect to the other partners.

I would not dare to give a personal opinion on whether Canada should withdraw from the WTO or not. My strictly personal view is that we clearly cannot withdraw from an organization as important as the WTO. I think that that would be radical and that there would be many obstacles. We would be going against the tide.

I think, however, that Canada should increase its representations to ensure that our partners keep up with their commitments that they made under the Eighth Round.

We were talking about a 36% decrease in tariff controls. That is a quantitative measure. How is it that Canada was able to fulfil that obligation and the European States were not? I think that is a question we should ask ourselves. Everything is open to question. How is it that we were able to open our markets by 3% for tariff- exempt products? How is it that Canada even exceeded this 3%? We are at around 5%, if I am not mistaken, how have we been able to open our markets by 5%, whereas the European countries and the United States have not managed even 3%?

The same goes for the reduction in export subsidies. We have reduced them, if not nearly abolish them, I believe. They no longer exist, do they?

Ms. Maud Debien: They will be abolished in 2001.

Mr. Mario De Tilly: All right, 2001. How is it that other countries still have them? Domestic support subsidies were to be lowered by 20%. If I remember rightly, Canada is at around 25%.

Given all these statistics, one has to wonder why a relatively minor player on the international stage, which Canada is in terms of agri-food, is able to meet its obligations and its partners are not.

My comments may be a bit simplistic, since I am not offering any solutions. Of course, I cannot claim that I have found a solution or that anyone else has. All I am saying is that we are concerned about this situation.

The Chairman: This is a bit of an unfair question, but you probably know American producers. Do they consider that we have fulfilled our obligations and that they have not? If they were appearing before the committee, would they tell us exactly the same thing, that is, that they are meeting their obligations and that it is the Canadians who are not, for example, regarding milk exports? We know the decision that was handed down this morning by the tribunal. There are many perceptions and many versions of the truth. We are trying to find out about both. Obviously, since politics is made up of both.

Mr. Mario De Tilly: Let us take the example of the pork industry, which is important for the Saint-Hyacinthe region. I talked to you about the 65% of pork processing. If we look at that sector of the Quebec agri-food industry and the competition that exists with the United States, we see that the Americans have made a rapid transition from being importers barely 20 years ago to being exporters of pork. They developed their industry extremely quickly, with environmental standards that are very flexible compared with those applied to hog producers in Quebec.

One just has to visit hog farms in the Golden Triangle States of North Carolina, South Carolina, Georgia, etc.. It is amazing to see their facilities and what they do with the liquid manure.

The Chairman: Thank you.

Ms. Folco.

Ms. Raymonde Folco: My comment is no longer quite relevant, but I would like to add it anyway.

• 1540

You were talking about the economic relations between Canada and developing countries as regards child labour, women's rights, etc.. I have always considered that as a kind of economic neo- colonialism. The first type of colonialism, in the 18th and 19th centuries, was the source of Great Britain's prosperity, and this new colonialism is making us rich today.

There is a chain of interdependence, since we depend on what they produce at low costs, but they also depend on it. The families themselves often support child labour and labour by women because it is the only way they can make ends meet. In those countries, if a child is not working, it often means that the family does not eat. There is this element of interdependence, this vicious circle that has to be broken. We depend on them and they depend on us. When we say that women should have decent working conditions and that children should go to school, we are using western preconceptions. I endorse those ideas, of course, but there is also an economic system that has to be changed downstream first, so that women can in fact have decent working conditions and children can go to school rather than to work. For that to happen, there need to be economic changes in these developing countries. That won't happen overnight.

Mr. Mario De Tilly: In this region, we often say that the day that we would be able to offer the same labour rights in developing countries, we will have to be willing to pay $8 for a cup of coffee.

Ms. Raymonde Folco: Absolutely.

Mr. Mario De Tilly: If we want to continue to pay $1 for a cup of coffee, we need to—

Ms. Maud Debien: It does not cost less than fair trade coffee.

A voice: Do you really believe that that coffee is fairer?

Ms. Maud Debien: That it is fairer coffee? Yes.

Mr. Benoît Sauvageau: It is produced according to environmental standards and rights—

Ms. Raymonde Folco: It isn't the guy who walks around and individually picks each coffee bean?

Mr. Benoît Sauvageau: No, that is not an advertising gimmick.

Mr. Bernard Patry: We are not supposed to talk among ourselves.

Mr. Benoît Sauvageau: No, but do you know what I am talking about, sir?

Mr. Mario De Tilly: No, not at all.

Mr. Benoît Sauvageau: May I, Mr. Chairman?

The Chairman: Do you want to ask a question?

Mr. Bernard Patry: If he would like to ask a question, we will listen to him. We are used to listening to the opposition.

The Chairman: It is the end of the day and things are coming apart. It is your fault, Mr. De Tilly. Up to now, the meeting has been very orderly.

Mr. Benoît Sauvageau: I listened to a radio program on Radio- Canada about fair-trade coffee. There was a multinational production where working conditions and everything else were really terrible. They were talking about coffee production. An organization—I think it was OXFAM or something like it—buys coffee at a fair price and the coffee has been produced under decent working conditions, in accordance with environmental standards, etc.. This coffee costs about the same as traditional coffee and it is more and more widely available. I don't sell it, but it is available in OXFAM stores. They want to sell it in supermarkets as well, but there is a problem with that. People want to increase this type of production. It is called fair trade coffee.

When you talked about your $8 cup of coffee, it made me think of that program. That's it for my commercial. Thank you.

The Chairman: Don't you think that the name Sauvageau has an Italian ring to it? It would be a good name for a brand of coffee, don't you agree?

Mr. Patry.

Mr. Bernard Patry: Thank you, Mr. De Tilly and Mr. Cloutier.

I was very happy to hear you talk about human rights. I will not say that that is not a concern for people involved in trade, but it is still very refreshing to hear you mention it. We will be meeting tomorrow with representatives of the International Centre for Human Rights and Democratic Development. You have given us a little foretaste today.

Here is my first question. Everyone tells us that the WTO has been very good for Canada, but I would like to hear you tell what it has done for the Saint-Hyacinthe region. This is a great research park. You talked about 42 industries and $900 million in exports. Since 1995, since the inception of the WTO, has there been a boom? Has the greater Saint-Hyacinthe region really benefited? We also know that the unemployment rate in the region is among the lowest in Quebec and Canada.

Mr. Mario De Tilly: Saint-Hyacinthe has a very good ambassador.

Mr. Bernard Patry: We love him.

Mr. Mario De Tilly: I am rather pleased to.... Is this discussion being recorded?

A voice: Yes, it is being recorded.

Mr. Mario De Tilly: I would like to have a copy.

Some voices: Oh, oh!

Mr. Mario De Tilly: You are asking an extremely complex question. To begin with, yes, exports from the region since 1995 have increased by between 5 and 6% yearly.

However, this must be put in context. The dollar has had some problems during the same period, and we have also enjoyed a certain momentum at the international level. The Asian foot and mouth disease among hogs led to a significant market. Hogs in certain Asian and Scandinavian countries had to be put down. During that period, Quebec pork was able to make a massive entry into international markets. That had a decisive impact on the overall volume internationally.

Companies also started to develop a few years ago what is called over-processing, which is really the keystone to economic development. We jumped with both feet into what could be called a new economy. We used to sell beef hocks and pork chops. Now we sell processed beef hocks and pork chops. We sell processed products. That has also had an impact. The more a product is processed, the higher its added value. So the export value automatically increases.

Has the WTO had an effect? I would have to say that it has, but I could not tell you how much.

The Chairman: Has NAFTA been more significant?

Mr. Mario De Tilly: Of the $900 million in exports we do every year, between 45 and 50% goes to the United States. But of the $500 million in food products exported, 52% goes to the United States. The American market is a dominant market in the food sector.

Mr. Bernard Patry: Mr. Cloutier, I would like to ask you one last question. Are there currently any particularly non-tariff barriers, like import licensing systems or customs valuations for markets outside the region that affect your efforts to export products?

Mr. Denis Cloutier: I will be very frank with you. I think that Mr. De Tilly would be much better able to answer that question than I would, if you really want an intelligent answer.

Mr. Bernard Patry: I wanted to share the questions.

Go ahead, Mr. De Tilly.

Mr. Mario De Tilly: I must admit I was not listening carefully.

Mr. Bernard Patry: I wanted to know if there were any particular non-tariff barriers, such as import licensing systems or customs valuations that made it difficult to export products from the region.

Mr. Mario De Tilly: I am not really an expert on non-tariff barriers. I can say, however, that in the food processing industry, with respect to dairy products in particular, there are still significant constraints. There are disputes between certain processors here and the American market. They have substantial barriers.

That has also been the case for some pharmaceutical firms that have links to the food industry. A problem arose regarding the processing of heart valves taken from hogs. At one point, there was a dispute about that. It was smoothed over, but the situation got quite complex at one point.

Once again, I am not an expert in non-tariff barriers.

Mr. Bernard Patry: Thank you.

The Chairman: I am going to clarify the list of non-tariff barriers that Mr. Patry gave. He did not mentioned sanitary and phytosanitary barriers, and I believe that the things you talked about were in connection with the sanitary and phytosanitary barriers.

Mr. Mario De Tilly: That isn't what you were talking about?

Mr. Bernard Patry: That is an example, yes.

The Chairman: All right.

On behalf of the committee, I would like to thank you for coming to share your opinions with us. We will pass them along in Ottawa in our report. Thank you very much.

• 1550

Mr. Mario De Tilly: What you are doing is very important, and I wanted to say that. It is essential. This work is extremely important for the future of international trade. I congratulate you on this.

The Chairman: Thank you, Sir.

Mr. De Tilly, I taught international trade law for 15 years, but I think I have learned more in a few weeks by talking to people like you as we do this study than I learned during my years at university. That is very important.

Mr. Mario De Tilly: Thank you.

The Chairman: Thank you very much.

The meeting is adjourned.