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]

Thursday, April 29, 1999

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[English]

The Acting Chairman (Ms. Sarmite Bulte (Parkdale—High Park, Lib.)): Good morning, ladies and gentlemen. I would like to call the meeting of the Standing Committee on Foreign Affairs and International Trade to order. Pursuant to Standing Order 108(2), the main committee is conducting an examination of Canada's trade objectives and the forthcoming agenda of the World Trade Organization.

In addition, its subcommittee on international trade is also conducting an examination of Canada's priority interests in the free trade area of the Americas. Public hearings that our committee is holding across the country on key aspects of Canada's future international trade policy come at a time when countries are facing some crucial choices and decisions in the complex negotiating process that's being conducted both multilaterally at the WTO and in developing regional forums such as the proposed free trade area of the Americas. In undertaking these wide-ranging public consultations on Canadian interests in both the WTO and FTAA negotiations, the committee and its trade subcommittee strongly agree with the Minister for International Trade, Sergio Marchi, on the necessity to provide Canadians with more opportunities to have input into positions the Government of Canada takes going into these negotiations.

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In March the committee travelled to Quebec and to the Atlantic provinces. This week, while one-half of the committee is holding hearings in three western provinces, the other half of our committee is in Manitoba and Ontario. We hope to benefit from as broad a cross-section of Canadian opinion as possible, and to reflect that in a report that we hope to table in the House of Commons before the summer, well in advance of the major trade meetings that will be taking place later this year.

While leading up to this phase of our cross-country consultations, the committee heard first from the minister and his officials in February. Following that, a number of successful round tables were convened in Ottawa. Prior to the start of our cross-country hearings, by mid-April more than 100 witnesses had made substantive presentations to the committee, addressing a broad range of critical issues and concerns. Since Monday, I might add, while the committee was in Vancouver for two days and also in Edmonton, we have seen an additional 100 witnesses.

As Minister Marchi stated in his opening presentation to us, international trade has become a local issue. What happens as far away at the negotiating table has consequences that reach right to the kitchen table and into other domains of our daily lives. As this trend deepens as a result of globalization, the making of trade policy cannot be left to the officials in back rooms, but needs to engage the whole of society and governments at all levels.

Members of the committee therefore welcome these hearings as one step in a continuing process. We have been impressed by the quality of the testimony and the written submissions we have received. But the process of consultation must be ongoing. In that regard we have just added to our committee's website a series of discussion notes, with questions for public consideration, and we are planning to include in our report a citizens' guide to the WTO. We encourage citizens in all parts of Canada to continue to participate and to follow the process of our parliamentary study in the coming weeks and months.

With that, I would like to welcome our witnesses this morning. Welcome, gentlemen, to the committee. Before we hear our presentations, I would like to have my colleagues quickly introduce themselves.

Mr. Charlie Penson (Peace River, Ref.): Charlie Penson. I'm the trade critic for the Reform Party. I am the member of Parliament for Peace River.

[Translation]

Mr. Benoît Sauvageau (Repentigny, BQ): Good morning. My name is Benoît Sauvageau. I am a member of the Bloc Québécois and I represent a riding near Montreal. I am also critic of the party for International trade.

[English]

Mr. Murray Calder (Dufferin—Peel—Wellington—Grey, Lib.): My name is Murray Calder. I'm from central Ontario. My riding is Dufferin—Peel—Wellington—Grey. Also, in my other life I'm an active chicken farmer.

The Acting Chairman (Ms. Sarmite Bulte): And also the vice-chairman of the Standing Committee on Agriculture and Agri-food.

Mr. Murray Calder: That's right.

Mr. Bob Speller (Haldimand—Norfolk—Brant, Lib.): Bob Speller. I'm the member of Parliament for Haldimand—Norfolk—Brant. I'm the parliamentary secretary to the Minister of International Trade.

The Acting Chairman (Ms. Sarmite Bulte): My name is Sarmite Bulte. I have the honour and the privilege of chairing these western consultations. In addition, I am the chair of the Subcommittee on International Trade, Trade Disputes and Investments. I am a member of Parliament from Toronto, from the riding of Parkdale—High Park. Welcome.

Who will begin? Mr. Randall, please.

Mr. Stephen Randall (Dean of Social Studies, University of Calgary): Good morning. Bonjour, Madam Chair, and members of the subcommittee. Thank you very much for including us in your deliberations.

The perspectives that I wish to provide on the free trade area of the Americas prospects and challenges is not what you might describe in your opening remarks as a local vision, or local perspective, but I hope a national one. I would like to run through a number of issues. I have provided copies of this very brief presentation for members of the committee.

We know, of course, that the Miami summit in December 1994 produced a plan of action containing 23 provisions, one of which committed the signatories to seek to establish a free trade area of the Americas by 2005 in a manner that would be consistent with the GATT and the WTO. Subsections of the integration initiative involved capital market development and liberalization, improvement of infrastructure, energy cooperation, development of the region's telecommunications and information infrastructure, cooperation in science and technology, and increased tourism.

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The same declaration, however, committed the signatories to preserve and strengthen the community of democracies, to eradicate poverty and discrimination, and to guarantee sustainable development and conserve our natural environment for future generations. They also confirmed the need to ensure equality of access to education and to advance the cause of human rights.

These broad objectives, I would suggest, are entirely consistent with the best traditions in Canadian foreign policy and the Canadian approach to international development. Indeed, Canada, along with Brazil, agreed to assume the leading role in the implementation of both the democracy and the human rights agendas within the Miami summit declaration. Canada, of course, had already been instrumental in the establishment of the Unit for the Promotion of Democracy in the Organization of American States. Since joining the OAS in 1989, it has made I think very positive contributions to the gradual establishment of more democratic political processes and culture in the western hemisphere, and particularly in the Caribbean and Latin America.

There are I think several questions that need to be addressed in connection with the quest for an FTAA. I would hope that the joint committee would consider these as it continues its inquiry. These are complex matters that require considerably more deliberation than obviously can be presented at this session in such a short time. Those questions include: What progress has been made on the Miami and then later the Santiago summit commitments toward the attainment of an FTAA? What have been the impediments? Should this be a Canadian foreign policy objective? What is the Canadian economic and political interest in Caribbean and Latin America? Do we have national security interests in the area? What are the current levels of Canadian trade with the region? What are the prospects for increasing those levels? What, if any, is the link between trade and investment liberalization and economic development and democratization on the other side? Finally, though there are many other questions one could pose, are there casualties that we could anticipate in the process of achieving trade and investment liberalization along the lines of an FTAA?

Let me touch very briefly on the progress since the Miami summit in 1994. North America has made considerable progress in the development of existing regional trading blocs, in reducing tariff and non-tariff barriers to intra-regional trade, modernizing their legislation on trade and investment, privatizing state-owned ventures, and improving legal protection for intellectual property. The countries of the hemisphere have altered their development strategies over the past two decades from an emphasis on national markets and the protection of national industries to promoting exports and opening their economies.

Political and economic changes have been the basis to rethink old integration efforts and the promotion of integrationism. The older integration efforts, such as the Central American Common Market, the Caribbean Community and Common Market, or CARICOM, and the Andean Pact, for example, have been revitalized and combined with more recent developments such as MERCOSUR, established in 1991, and of course the North American Free Trade Agreement in 1994. The result, I think, has been a significant increase in intra-regional trade. The Central American Common Market's internal trade, for instance, increased from $450 million in value in 1986 to $1.5 billion in 1997. MERCOSUR's trade rose from $3 billion in 1991 to over $4.7 billion in 1997. The improvements, I would suggest, of these regional trading groups—and I would add NAFTA, of course—provide a strong foundation on which to build something as ambitious—and it is indeed ambitious—as a free trade area of the Americas.

The failure of the Clinton administration to achieve fast-track authority for the negotiation of trade agreements has been a serious impediment to movement on this broader front, but it has not prevented—and I think this is very important to note—Canada from moving forward in significant ways on its own. I site the example of the Canada-Chile bilateral trade agreement. There were also four important ministerial trade meetings between the Miami and Santiago summits: 1995 at Denver, 1996 at Cartagena, 1997 in Belo Horizonte, and 1998 at San José, Costa Rica.

The Belo Horizonte meeting especially took the significant step of involving the business community in the discussions. The topics ranged from market access to standards and non-tariff barriers to trade, customs procedures and rules of origin, subsidies, competition policy, government procurement, technology, and intellectual property rights and investments.

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The San José meetings resulted in the establishment of the trade negotiations committee, a device at ministerial level, with nine negotiating groups. The TNC will take over all responsibility to ensure the full participation of all the countries in the FTAA process. Canada, of course, is serving as the first chair of the TNC, a role it holds until October of this year, with the United States and Brazil serving as co-chairs in what will likely not in fact be the final and crucial period, as I don't think the 2005 deadline is in fact a realistic one. Nonetheless, they will serve as chairs in the period from November 2002 until the end of 2004.

The ministerial meeting at San José also took the important step of establishing a consultative group on smaller economies to address the ongoing fears of the smaller economies of the Caribbean and Central America that they will be seriously harmed by the integrationist agenda and further marginalized in the process. Countries in the eastern Caribbean, for instance, have been concerned about hemispheric integration for a long time. This was especially acute with the conclusion of the North American Free Trade Agreement. Hence, it's not surprising that it's Jamaica and Guatemala that will chair the group on smaller economies, although what can be accomplished of a substantial nature to buffer the impact of broader hemispheric integration and free trade on those smaller economies I think remains very much to be seen.

The San José ministerial meeting also reaffirmed the commitment to the principle of transparency at the negotiation process and to facilitate the constructive participation of the different sectors of society, something which your committee is engaged in, obviously, as well: business and other sectors of production, labour, environmental and academic groups, and I would add women and indigenous groups. It is extremely important that this commitment be honoured by more than lip service, and that issues such as environmental protection, which my colleague Dixon Thompson will be addressing in a moment, and improvement of labour standards be considered an integral part of any hemispheric trade agreement, in the same way that for the first time they were associated in the conclusion of the North American Free Trade Agreement, at least a side agreement.

This commitment is contained in the San José ministerial declaration, which states as its general objectives, and I quote from the San José declaration:

To promote democracy through increased economic integration and free trade, which are key factors for raising standards of living, improving the working conditions of people in the Americas, and better protecting the environment.

To further secure the observance and promotion of worker rights, renewing our commitment to the observance of internationally recognized core labour standards, and acknowledging that the international labour organization is a competent body

—that's open to question, I think—

to set and deal with those core labour standards.

Governments and civil society will need to be vigilant to ensure that such phrases are not mere rhetoric, especially in dealing with an historical pattern in Latin America in which labour rights and standards as well as environmental protection have received more rhetorical than real attention, and in many instances have frankly been savagely violated.

On Canadian foreign policy interests in the region, Canada has strong historical ties to the region, particularly in the Caribbean and in those countries in which industries such as mining, oil and gas development, forest industries, and banking have been important. It has also had long-established cultural links, especially through Quebec and the maritime provinces, which were very active in missionary work in the region from the 19th century on.

As well—and I think this is terribly important—the definition of what constitutes national security has, in the past decade, certainly since the end of the Cold War, changed, I think rather dramatically. With the end of the Cold War and the decline of east-west tensions, we have come to recognize that a wider range of issues threaten our national security. They include environmental degradation, poverty, the lack of education, political problems that arise in undemocratic political situations, narcotics trafficking, human migration, and the violence associated with those problems. These are major national security issues, what we have come to think of and the Department of Foreign Affairs and International Trade has strongly emphasized in the last two years as human security issues, which are just as real a threat as the threat of open war.

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Canada also has a substantial economic interest in the region through commodity trade and investment, although the United States of course remains the major player in our economy as well as in the economies of Latin America. Canadian domestic exports, for example, to South America in the top 25 industries in 1998-99 increased over 100%. Some exports showed significant percentage increases. Exports from the newsprint industry, for instance, increased almost 80%, telecommunications equipment by 50%, pulp products by over 670%, paper consumer products industry by over 12,000%, just to mention a few. Canadian exports to Mexico in that period increased by 230% and imports by more than 23%.

Canadian imports from South America as a whole, again just the top 25 industries, in the same period, on the other hand declined by 14%. This decline in imports from the region is reflected throughout much of the region, the countries of the Caribbean and Latin America.

What about the relationship between democratization, political liberalization, if you wish, and free trade? Whether there is a direct causal link between political democratization, free trade, and economic development is still very much open to debate, certainly in academic circles. We need to remember that the 1980s were a period of economic crisis in Latin America. Indeed, it was dubbed the lost decade by the United Nations economic commission for Latin America. It was during the same period that Central America gradually threw off the yoke of military and civilian dictatorships. In the same period, there was considerable movement toward democratization or return to democracy in countries such as Chile and Argentina.

Those areas also moved toward trade and investment liberalization in the course of the 1980s and the 1990s, with Mexico's opening to the north under President Salinas likely the most striking example. Yet we know that Mexico, in the period in which it was moving toward the achievement of that economic liberalization agenda, remained highly corrupt, treated its indigenous population ruthlessly, often suppressed the rights of workers to free association, and did little to promote a more pluralistic political structure, although I do believe that is now changing in a rather dramatic way with the decline of the total political dominance of one party, the Institutional Revolutionary Party in Mexico.

The point is that economic liberalization is in itself no absolute guarantee of more open and democratic political systems. Nonetheless, at the same time, the broader involvement of civil society, which has accompanied the debates and implementation of free trade—and I think this committee's activities are a reflection of that—is an extremely positive development, which in the long term will certainly contribute to democratization. Indeed, I would suggest it is an essential feature of a democratic society.

Will there be casualties? Have there been casualties? There's general agreement among economists and others that free trade and investment liberalization does leave its casualties, notably those workers who are in sectors that are less competitive internationally, at least in the short term. Frequently those most marginalized, especially in the Latin American environment, are women and indigenous people. Here there does seem to be a tension between the basic orientation, for example, of Canadian international development policy—for instance, the improvement of small handicraft industries, frequently among indigenous women—and our larger foreign economic policy objectives, which will, when realized, make precisely those industries non-competitive, indeed obsolete.

The history of economic expansion since the industrial revolution in the early 19th century I think leaves no other possible conclusion. Small handicraft-based industries such as personalized boot and shoe manufacturing in the 19th century in Latin America simply couldn't withstand the arrival of machine-made mass-produced goods. What is true in the industrial sector is true in agriculture, as it's mechanized in those areas that can be mechanized. Workers in the short-term will be displaced by more efficient large-scale market production. At the same time, new employment opportunities will open. So we're looking certainly at short-term dislocation.

Anyone familiar with the maquiladora industries in Mexico has to recognize that workers have migrated away from low-paying, unskilled jobs to higher-paying and more skilled employment in the maquiladora. This is not to discount the problems associated with the maquiladora, including environmental degradation, the need to protect workers' rights to free association, and so on. And yet, if you were to ask workers in that sector whether they would rather eke out a barely subsistence existence by growing corn on rented or occupied land, or make a living wage in the maquiladoras, the answer would usually be strongly in favour of the latter, problems and all.

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In conclusion, then, Canada has a longstanding commitment to the region that was symbolized, I think in a very concrete way, by joining the Organization of American States in 1989 and by concluding the North American Free Trade Agreement in 1994. It has important and growing economic interests in the region, and its foreign policy goals in the area of human security necessitate a close working relationship with the nations of the western hemisphere.

Canadian policies should continue to emphasize the region and support the conclusion of a free trade agreement or area of the Americas, with the important caveat that there will need to be vigilance in protecting labour standards, the environment, and those people and economies that may be disadvantaged and marginalized in the process of achieving a free trade area of the Americas. Thank you.

The Acting Chairman (Ms. Sarmite Bulte): Thank you very much, Mr. Randall.

Mr. Beaulieu.

Mr. Eugene Beaulieu (Department of Economics, University of Calgary): Good morning. Thank you, Chair and standing committee. I also wanted to thank you for your efforts in including civil society and getting views from Canadians across the country.

My comments will also have to do with looking at our negotiations from a national perspective. I will begin my comments with a premise. As we know, when the GATT created the World Trade Organization, this became a membership organization, and my premise is that membership has its privileges and also its responsibilities. I will argue that Canada has a leadership role to play, and that as this World Trade Organization grows and expands, that role will become more and more important. Then I'll go through what I see as a couple of stumbling blocks and concerns I have with regard to Canada's leadership role in this World Trade Organization negotiation process.

What I would argue is that it's important for us as a leader in the World Trade Organization to play by the rules. If we look ahead to the next couple of years, we know that the trade in merchandise, goods, and services will expand to over $8 trillion. The World Trade Organization will soon have more than 160 member countries, and that accounts for 95% of the world trade. This includes a number of countries that possibly do not have the resources to bargain effectively at the world trade table and that are severely stretched in carrying out their obligations as members. In that sense Canada needs to play a leadership role and make sure that it follows its obligations in the World Trade Organization.

Just as it did as an original member of the first round of GATT tariff reductions, Canada must continue its leadership role. This becomes more important as WTO grows and expands. According to Curtis and Wolf—and I got this from your briefing notes, which I found very useful and interesting to read:

Canadian leadership is most important in the realm of ideas about the rules and principles of the trading system.

It's these rules and principles that are important, and we have to make sure that as leaders we set a good example.

Moving on to some issues, concerns, and possible stumbling blocks, the first one is what I would call the pitfalls of new protectionism. It's a return to a beggar-thy-neighbour trade policy, and in some cases it's a matter of Canada being the pot that's calling the kettle black.

Minister Marchi has made it clear that he sees curbing the abuse of anti-dumping, countervailing duties, and safeguard actions as a priority in future WTO negotiations. One of the reasons he wants to do that is because of the proliferation of these types of actions. It's widely seen that these actions are merely a new form of protectionism. They've replaced the old system of tariffs and are actually very costly to the world trading system.

For the last 15 or 20 years, the anti-dumping, countervailing duties, and safeguard measures have largely been undertaken by countries such as the United States and Canada and other industrialized countries, but only by a few of them. Now other countries are starting to adopt these measures. That's why Canada is concerned about it.

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Anti-dumping restrictions are extremely costly to Canada. In a recent case, the International Trade Tribunal ruled in favour of a Heinz case against Gerber, and that actually created a monopoly in Canada. The cost of this protectionism is seen by another arm of the Canadian government, the Competition Bureau, taking the International Trade Tribunal to the next level of panel review.

So I think it's very clear that this is a costly type of protectionism, and it's the kind of protectionism Canada should try to eliminate in future rounds of negotiations. In order to take that high principle stand, Canada needs to practise what it preaches and start backing off on some of these forms of protectionism.

Another area where Canada needs to focus its attention is in following WTO rulings and regulations. Canada is proud of its record as a leading member of early GATT negotiations on tariff reductions and in complying with GATT mandates, etc. However, a recent example indicates that Canada doesn't always practise what it preaches, and that's Bill C-55. Canada is ignoring a World Trade Organization panel that has already found components of Canada's magazine policy to be illegal under GATT. The original ruling found three violations of GATT, and when Canada appealed that decision, they found a fourth violation. Having a policy of protecting culture is one issue, but disregarding WTO rules in this regard sets a bad example. If our goal is to support Canadian culture and Canadian magazine producers, there are other ways of doing it than by setting a bad example in the World Trade Organization.

One issue that has been raised by Professor Randall and will be raised by Professor Thompson is, what should trade negotiators negotiate about and what should be on the table in the World Trade Organization? I will just briefly comment that I think labour standards and environmental standards are important and that we need to figure out ways to address these issues. I also believe they are part of a country's rights and obligations in their own civil society and that they have to make their own decisions in this regard. I also feel that the World Trade Organization may not be the best place to address them and that possibly other institutions, such as the International Labour Organization, would be the proper place for those kinds of discussions.

A final issue is, with whom should trade negotiators negotiate? That addresses whether or not we should be seeking further regional agreements or focusing primarily on the World Trade Organization and multilateral negotiations.

A big debate in economics is whether regionalism is a step toward multilateralism or a hindrance toward that goal. The nay side is that regional agreements are a form of protectionism. That's from a purely economic perspective. Regional agreements are protecting because they are keeping out a group of countries. They're also counter to the most-favoured-nation principle, which is one of the founding principles of the GATT. That's a fundamental principle of the GATT and the World Trade Organization that regional agreements violate.

On the other hand, in terms of Canada's own case, Canada has traditionally taken what has been characterized as a more pragmatic role, especially in the mid-1980s when it undertook negotiations with the United States. It decided that the costs and the length of time needed to negotiate multilateral agreements meant that it should look elsewhere and try to push its agenda in a bilateral forum rather than on a multilateral stage.

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Another argument made by proponents of the Canada-U.S. FTA was this idea that if we make it here, we can make it anywhere, and that if we open up our trade to the Americans, Canadian companies will become competitive and be able to compete on the world stage. That type of argument was made as we entered the Canada-U.S. trade agreement.

There may be something to it that this type of agreement is a step toward multilateral negotiations, but I would caution that furthering the free trade agreement of the Americas doesn't quite fit that model. It also becomes a cumbersome negotiation process with a large number of countries involved and with as many, or more, issues as countries. Each country has its own issues.

So that becomes a mini-WTO, and it's not clear that the gains of having shorter, more effective negotiations with one or two partners translates into the free trade agreement of the Americas.

On the other hand, it may make good strategic sense for Canada to pursue and push for the free trade agreement of the Americas, as that is, and is becoming, a very important region of the world. Canada has an opportunity, with the lame-duck nature of the American process toward the free trade agreement of the Americas, to play a leadership role there. I think I would conclude that Canada could push its agenda at both the FTAA and the WTO, and that those aren't inconsistent objectives.

There is one other caution with regard to pursuing a large number of preferential trade agreements. One of the reasons we undertake these types of negotiations is that they are seen as less costly and more effective than the multilateral negotiations. I have a graduate student, Annette Hester, who's studying whether or not the proliferation of bilateral and trilateral trade and investment agreements actually does enhance and encourage business and trade and investment opportunities or acts as a hindrance to them.

These negotiations are what Sylvia Ostry calls a “bowl of spaghetti” in trade and investment. Relations between countries have become so costly and so cumbersome, it may not achieve the goals we think it could achieve.

I would like to make some concluding remarks. I argue that Canada should continue with its multi-track approach to trade and investment, and that it should push the multilateral agenda. I think that's key. If it views other negotiations with such countries as Chile, Mexico, the United States, and other countries in Latin America as a step toward the multilateral trade agreement, and a further pushing of the WTO, then I strongly recommend it pursue that.

Canada should follow the recommendations of the WTO review. Every two or three years Canada is reviewed. In the most recent one, Canada was asked to reduce protection in agriculture, textiles and clothing, motor vehicles and services. If Canada's going to play a leadership role in the WTO, it has to do everything it can to follow these recommendations, although I realize having protection there is part of the bargaining process.

Canada should lead by example and it should follow World Trade Organization rules. It should work toward eliminating new protectionism.

Thank you.

The Acting Chairman (Ms. Sarmite Bulte): Thank you very much.

Professor Thompson.

Professor Dixon Thompson (Faculty of Environment Design, Ekos 707, University of Calgary): Good morning, and thank you for the opportunity to present these ideas.

I've been working on this problem since the early eighties, when there was the Macdonald commission, and for the last four months I've been working with a group of graduate students, many of whom are here this morning.

We have already presented a brief on the FTAA, and we'll submit to you a written brief with supporting documents in the next few days.

You have some notes in point form on our presentation today.

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I want to respond to two parts of the invitation you extended. The first aspect is the invitation to civil society to comment on the protection of the environment and the efficient use of resources. The second aspect is the export of environmental goods and services. The Export Development Corporation says Canadian exports may total $1 billion by 2002.

The focus of our brief is that governments must include the encouragement and facilitation of environmental management systems and environmental management tools in trade negotiations. Now, this is a focus on what can be done and what has been done in the NAFTA parallel accord. So Canada has already done this in one international trade agreement.

There are six points we want to cover: why environmental factors should be included; some economic aspects; the role of the market; how we believe these environmental systems and environmental management tools can be included; some of the benefits we expect Canada to obtain from these tools and management systems; and some comments on the need for being consistent with other Canadian initiatives.

To turn to the first point—namely, why we should include the environment in these negotiations—I'd say that, first of all, it must not compromise or hinder the efforts to meet international and domestic environmental obligations. Canada has many of these. We'll touch upon a few of them in a moment.

The trade negotiating position should be consistent with the principles established under NAFTA, the North American Agreement on Environmental Co-operation, and the Commission on Environmental Co-operation, and the principles used in the negotiations with Chile.

Third, we should have improved environmental management tools. They make good economic sense for both the public sector and the private sector.

Fourth, this is not introducing any new policies. If we examine the participants' other environmental obligations, the participants in both the FTAA negotiations and the World Trade Organization, we'll find that virtually all of them have some international obligations under the environmental concerns, and many of them have quite a few. A number of them have voluntary systems incorporated in their industry sectors—“Responsible Care” is a good example—and we've already incorporated these in other trade agreements.

Under the international obligations, table 1 is an overhead I might have presented to you. Let me just summarize what's on there.

If we look at international agreements on biodiversity, climate change, hazardous waste, the Montreal protocol on ozone-damaging substances, agreements on pesticides and chemicals, voluntary initiatives such as Responsible Care, and the ISO's TC 207—that's the negotiating group on environmental management—of the 34 countries involved in the FTAA, almost all of them have commitments under the five or six international agreements. Of those who have a chemical industry, their industry is already voluntarily complying with Responsible Care, and 14 of those countries were involved in the ISO negotiations on environmental management.

So they've already made those commitments. They're already active in those areas.

What kinds of environmental management tools are we talking about? There's a list at the top of page 2 of my outline.

We're talking about environmental impact assessment; environmental audits; life cycle assessment; risk management; education and training; environmental accounting, including, in particular, an adjusted GDP; and economic instruments, etc.

Most of these economic instruments are mentioned in the parallel accord to NAFTA, and all of them are used regularly—except, I should mention, the adjusted GDP—by the private sector, and in some cases by governments.

I'll turn now to the economic aspects. I think it's been shown repeatedly that improved environmental management enhances the benefits and controls the negative aspects of trade. Trade is promoted as something that will provide benefit. That's true, and these environmental management tools and environmental management systems will make sure we get the best of those benefits. At the same time, it's agreed that they introduce problems. These environmental tools and management systems allow us to control the difficulties encountered when we enhance trade.

Second, numerous government, private sector and academic studies show economic benefits of environmental management systems and the use of environmental management tools. I won't go into a long academic paper and cite numerous references, but there are a lot of sound studies that show those benefits can be obtained.

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Third, encouragement of environmental management systems and environmental management tools will encourage the export of Canadian environmental goods and services.

Fourth, the costs for cleanup, restoration, and rehabilitation exceed the short-term benefits of ignoring environmental management systems in the first place, incurring the damages and then trying to go in and fix them up later. I think the environmental management tools help us show that. We should also note that some of that damage is irreversible. Once we have allowed it to occur, there is no going back.

Finally, the mal-distribution of benefits and costs of allowing pollution and inefficient exploitation of resources means we're basically allowing a transfer of money from the pollutee to the polluter. The principle of polluter pays does not apply.

Next are some comments on the market, because the market is supposed to control all of these factors. The market provides benefits if there are fewer constraints and fewer subsidies. Therefore the principle of no subsidy should apply, but allowing pollution is allowing a form of indirect subsidy. The polluter is not paying for the subsidy they get by being allowed to pollute or exploit resources in a way that's inefficient. So we have to internalize what are now external costs. The environmental management systems and the environmental management tools we're talking about allow us to internalize those external costs.

How should we include these environmental factors? The negotiations should encourage and facilitate the use of environmental management systems, such as ISO 14001, which is a voluntary market-driven system in place and actively being used by advanced corporations around the world. We should encourage and facilitate the use of the environmental management tools I've listed, and more. We should learn particularly from the experience of the North American Commission on Environmental Co-operation, which is housed in Montreal, and from the experience in our negotiations with Chile.

We should add a tenth negotiating group on environmental issues to the FTAA. In the working groups that were initially established in the early negotiations on the FTAA, there was a working group on environment. When the negotiating groups were established, environment was dropped as one of the issues to be included. I think that principle, which was established in Miami in 1994, should be re-established in the negotiating groups under FTAA.

Most importantly when we examine this, the biggest constraint on developing capacity in Latin America is the lack of education and training. Canada can play a big role in assisting Latin America to build capabilities in these areas, in terms of partnerships, etc.

What are the benefits? We can enhance the benefits and reduce the damage of increased trade. We can meet other domestic and international obligations. We can export environmental goods and services. We can enhance access to markets. For example, Japan has made it clear that registration in ISO 14000 will make access to the markets in Japan much easier. This will become a more and more common aspect. Purchasing guidelines from major industrial companies such as IBM and Ford are encouraging, if not requiring, ISO 14001 registration from their suppliers.

Finally, the environmental management tools we're talking about allow us to quantify the benefits we're deriving from protecting the environment and using more efficient trade.

The last point I want to make has to do with consistency with Canadian initiatives. Canada has done a lot in this field, and nothing we should do in these trade negotiations should compromise those other initiatives. We have a lot of private sector initiatives, with industry organizations and individual corporations playing leading roles internationally. I think it would be a travesty for Canada to enter into trade negotiations that would then make those initiatives more difficult.

The Canadian Standards Association is the secretariat for the ISO 14000 negotiations and standardizations, centred in Toronto.

• 0920

The North American Commission for Environmental Co-operation under NAFTA is centred in Montreal. Although they're very short of staff, they have done excellent work. I would recommend it to this group, if they want to study environmental issues under trade further.

The International Institute for Sustainable Development, located in Winnipeg, is the result of Canada's negotiations in Brazil in 1992 under the UN conference.

Finally, Canada will be the host in 2000 for the OAS, and I think we ought to play a leadership role there. Thank you very much.

The Acting Chairman (Ms. Sarmite Bulte): Thank you very much. We'll open it up to questions.

Mr. Penson.

Mr. Charlie Penson: Thank you, Madam Chair. Welcome to you gentlemen this morning for coming to help us work through the fairly tough technical area of trade negotiations, and further to that, where we should be going with the free trade for the Americas. I appreciate your comments.

I have one question for each member of the panel. I hope we have time, Madam Chair.

The first is for Mr. Randall. In terms of the Latin American countries, there seems to be quite a debate about what role civil society should play in these negotiations. Here in Canada it's pretty much taken for granted that we do this. But I was at a conference in Miami in December. A number of the countries were suggesting...they are the elected representatives. I think it was mentioned here earlier that several of those countries have fairly fragile democracies that have just emerged in the last few years.

How much emphasis should we be putting on trying to force other countries to have to go through that process? Should we be looking at this and saying, “This is something we're going to do; this is our standard, but we'll leave it up to you as to how you handle your own affairs”?

Prof. Stephen Randall: It's a very good question, and I think I would allude to a point Eugene Beaulieu made in his comments on labour standards, for example, and perhaps environmental protection.

There is no question that issues of national sovereignty are critical to the larger process. There's also no question that we have very differing political cultures, and Latin America is not homogeneous. There is a wide range of civil society participation in different countries. Without being too specific, and I don't want to identify those on the opposite ends of the political spectrum in the Latin American context, there's no doubt the role of civil society generally has been less in the Latin American environment. But one could also argue that it has been more.

The role of civil society in a number of countries that are not terribly democratic is still very high, because the absence of democracy has necessitated the mobilization of many civil sector groups. Student organizations are far more radical in Latin America, and have been for well over 100 years. Labour organizations are far more radical and far more mobilized.

I think we will see, by leaving each country to its own political traditions, as you suggest in your question, that each of those civil societies will work out their own dynamic within their own context. I agree with the implication of your question that we cannot force the Canadian political and civil society standard on other nations, and ours may not be the best model in any case.

It's a very important issue. Clearly one wants to have as wide, diverse, and inclusive a debate as possible in this process. Thank you.

Mr. Charlie Penson: Thank you very much. I'd like to ask other questions of you, Professor Randall, but time doesn't really permit.

Professor Beaulieu, you talked about the need for clear rules for all countries, in terms of honouring the rulings that are made as well. You suggested that Canada should take a leadership role here, because we have been one of the leaders in developing these rules, going way back to the original GATT in 1947. I certainly appreciate your comments in terms of accepting panel rulings. Either you're part of the process or you're not.

But I've had a bit of a problem with the dispute compliance aspect of the World Trade Organization, for example. We know the only method, in terms of a win at the WTO, is to either accept the ruling, or the penalty is to pay the price, with extra duties being applied in equivalent effect.

• 0925

But is that a good enough process? Can we go beyond that?

I cite the case of the softwood lumber agreement with the United States as an example. My understanding is that one of the reasons we accept managed trade in that area is the industry's concern that if they took this to the World Trade Organization, even if they win, it may take a year and a half, during which there may be duties applied that may not be recoverable. Is there any way we can advance this? Do you think there's any international agreement to help this dispute settlement process to better reflect a win, if you like?

Prof. Eugene Beaulieu: First of all, I'm not an expert on these settlement mechanisms, although I think there are some valuable lessons that you can learn and that have been learned. I think the WTO is trying to move towards a more open and more effective review process by having time limits and things like that.

I think the Canada-U.S. trade agreement and NAFTA really set a standard for multilateral or bilateral dispute settlement mechanisms. An important element of that is having a clear review process where there is a panel, and that's changed from the former GATT. You also have time limits on rulings. So I think those help. I think that is one area where improvement needs to be made. I take your point on that.

Mr. Charlie Penson: Okay. That's a big area that I think needs some further work.

Prof. Eugene Beaulieu: Yes.

Mr. Charlie Penson: But you did talk specifically about Canadian trade law or the use of trade law in general dumping.

I sat on the special import measures review group, along with a few colleagues, about three years ago. The discussion was whether this use of dumping in so-called free trade areas was acceptable or even desirable any more. The difficulty is, though, that even if we believe it's not, when you have a major trading partner like the United States that won't give it up, how do you move past the need to have sort of defensive trade laws?

Prof. Eugene Beaulieu: I think that's important. We should have a strong position against these and try to convince the Americans that this is the way to go. If we can convince other countries that this is the way to go, then that will help. The problem I see is that now that other countries have access to these kinds of tools, it's going to proliferate and it's going to be harder to get rid of this kind of protectionism in five or ten years.

Right now it's still manageable. There's still only a handful of countries that are adopting these practices. Obviously the Americans won't want to give them up, but the cases that Canada has brought have increased a lot. Canada has become a much bigger user of these kinds of tools. So if we're going to try to negotiate or convince the Americans not to use these kinds of tools, I think we need to take a hard stand on that.

Mr. Charlie Penson: Would you advocate Canada moving away from trade law ourselves to try to set the example? Is that what you're suggesting?

Prof. Eugene Beaulieu: I'm suggesting that we come out with a strong argument against these kinds of rules.

Within the context of NAFTA, I guess we should continue to operate within those rules, but we could still take a high road. We have negotiated these rules with the Americans. I guess in some sense you're saying, should we give up what we have and not use them? Yes, maybe we should.

Mr. Charlie Penson: I'm sorry, I haven't much time. Professor Thompson, I may have to get you to give a written answer if we don't have time.

My question really has to do with the issue of environmental degradation and what's the best way to stop that from happening. The International Institute for Sustainable Development made a presentation to us in Winnipeg suggesting that agriculture subsidies are very detrimental to the environment in general. Given that agriculture is a pretty big industry in the countries we're negotiating with in the FTAA, what would you make of their suggestion that we should move away from subsidies as much as possible to a more liberalized environment in order to help protect the environment?

• 0930

Prof. Eugene Beaulieu: I can't comment in detail without having seen the details of their presentation, but a very short response would be that it depends on what you're subsidizing. I can think of a number of subsidies to agriculture to allow people to develop more environmentally sensitive and sustainable practices that would be very important—subsidies for training and education, subsidies for new equipment, subsidies to develop systems that reduce soil erosion, that reduce the need for pesticides, that sort of thing.

Mr. Charlie Penson: I think you're talking about the production subsidies. What I'm getting at is the European Union, the Netherlands, for instance, with their hog industry, where there is very big production there, largely built on subsidies, and therefore they have environmental problems with high nitrate levels, and so on.

Prof. Dixon Thompson: I'd shift the subsidies to find ways and means of using the high nitrate effluent as fertilizer, rather than chemically produced fertilizer.

The Acting Chairman (Ms. Sarmite Bulte): Thank you, Mr. Penson.

Mr. Sauvageau.

[Translation]

Mr. Benoît Sauvageau: Good morning. Welcome to all our witnesses and to the students as well. I am always pleased to see people with interest in the matter, either at the table or in the audience.

I have rather general questions for the three panelists.

You spoke about the role of civil society and consultations. Mr. Penson also touched on the subject. We heard comments on the role of civil society in Vancouver, Edmonton and Ottawa. I will speak of Canada first, then we will move on to the other countries.

In Canada, how should we go about consulting civil society groups? We can write it in documents and propose it during round tables, but how should we do it? For example, in Vancouver, we heard 70 witnesses supposedly representing some 250,000 people. Did we meet the civil society? What does that mean and how can we meet the civil society?

Mr. Penson spoke indirectly about the role of parliamentarians. In Canada, unless proven otherwise, we are elected to represent the population. What is the role of parliamentarians in such international agreements?

My third comment will deal with regionalism as opposed to multilateralism. I think Mr. Beaulieu is the one who spoke the most about it. I wonder about that. Several witnesses told us that Canada was pulling on all sides regarding free trade agreements and was doing a lot of marketing in Latin American countries. We know that we have a small team of trade representatives. They are very good by the way but their number is limited. Are we not trying to be in too many places at the same time and are we diminishing our strength by so dissipating our efforts?

My last comment is for Mr. Thompson. In your document, you talk about voluntary measures on the environment side. Do you find it sufficient to promote voluntary measures regarding the environment? Thank you.

Mr. Stephen Randall: I will answer you in English.

[English]

On the two issues you raised, relating to the civil society process, one on the role of parliamentarians and the other more broadly, how to ensure there is a broad civil society participation, it's somewhat similar to the answer I provided to Mr. Penson. This will differ from country to country.

In the Canadian context, as to how one can promote civil society involvement, I think you're doing that. It seems to me that what you're doing here in Vancouver, Calgary, and Winnipeg, and so on, and the other half of the committee—

Mr. Benoît Sauvageau: Is it enough?

Prof. Stephen Randall: —is the culmination of parliamentary participation at the same time as you're encouraging civil society participation in that process as well.

• 0935

Since the free trade agreement with the United States, at the end of the 1980s, the level of civil society participation in trade debates has, in the Canadian context, and perhaps in the United States, been unparalleled. The level of open discussion, the need, if you wish, to consult, very broadly, private interest groups, from business through to indigenous peoples, women's labour organizations, and so on down the line, is I think really without equal in the history of the western hemisphere. There's no prior example where the level of consultation has been as broadly based in civil society as it has been since the 1980s.

I think my response to your question is that the right things are being done now. What's the role of Parliament? I think the role of Parliament is obviously to help shape Canadian foreign policy in a broad range of issues and to be a filter, one of the many filters, shall I say, but perhaps the key filter as elected representatives, for the movement of ideas from the private sector and civil society into the foreign-policy making process.

The Acting Chairman (Ms. Sarmite Bulte): Mr. Beaulieu, would you like to add to that?

Prof. Eugene Beaulieu: Not on that question. I can answer the second question.

The Acting Chairman (Ms. Sarmite Bulte): Please do.

Prof. Eugene Beaulieu: In regard to regionalism versus multilateralism, I think we are spreading ourselves too thin, not only ourselves, but other countries as well. I mentioned a graduate student of mine who's working on this issue. She hasn't finished the analysis, but she's looking at whether or not this proliferation of investment and trade negotiations among many different countries and many different groups.... You have negotiations between Brazil and Canada, and Canada and MERCOSUR, so it's just a massive number of bilateral negotiations.

I have major problems with that, and I don't think that's the right way to go. The FTAA at least brings everyone all together, and the World Trade Organization is a multilateral format. I believe the reason countries have gone this route is because of the sense that the GATT negotiations take five or six years to complete and aren't always that effective, so countries have gone the regional route. I think for Canada, in its negotiations with Canada and Mexico, that was clearly the right thing to do, because of the importance of those countries in terms of building the region.

So I think that was a step for Canada toward multilateral participation, but I don't think negotiating with every country separately is the right thing to do.

Mr. Benoît Sauvageau: Merci.

Prof. Dixon Thompson: Thanks for the questions. I have a very brief comment. I think the consultation with civil society is very important, because economics is not the only important thing we're dealing with here, and that's one of the ways it has to be included.

Secondly, with respect to the negotiations and consultation, there's one level at this kind of committee—broad, national negotiations—but many of the environmental management tools we discussed in our brief include a requirement for consultation with the proponents of specific projects at the detailed level with those people who are affected. So there are a couple of different levels at which consultation is important. It's not just at this level, but at the more specific level. By including these environmental management tools, which require or should include consultation, you can get more of it at that level. And that is improving in Latin America, slowly.

Finally, with respect to voluntary measures, these are not meant in any way to displace regulation or the use of economic instruments to encourage the behaviour we want and discourage the behaviour we don't want. They can be an important compliment when they're credible, and that credibility, again, requires these kinds of environmental management tools, particularly environmental audits. So you'd have a third party audit the behaviour of the particular corporation to show that they are in fact doing consultation and meeting the voluntary measures they said they would meet.

The Acting Chairman (Ms. Sarmite Bulte): Thank you.

Mr. Calder and Mr. Speller, we have about five minutes left.

Mr. Calder.

Mr. Murray Calder: Okay, thanks. Gentlemen, one of the things I see with these negotiations, as we move toward trying to create a global community...and currently, the WTO has 134 nations involved in it, and another 30 want to come in. This comes down to a situation of what we refer to back on the farm as the golden rule: he who has the gold makes the rules. I see that countries like the United States and Canada that have high GDPs can have specialists go in, negotiators who negotiate each individual sector, whether it's agriculture, industry, social services, education, or whatever—it's all incorporated within this—whereas the poorer countries have one individual who will go in and do that. Quite frankly, I find that a warning light, because I don't see a fairness in that. I'm wondering if you have any idea how we would address that issue. That's one question.

• 0940

The other one, Eugene, is that you made the statement that Canada should take the high road and we should lead by example. Well, from a tariff and subsidy reduction position, Canada already is in the lead. In fact, people who work with Angus Reid have already said that Canada is as many as 10 years in the lead. Now what do we do in that situation? Do we keep leading by example and basically trade away any bargaining chips that we have right now? Or do we stand back and tread water and let the rest of the countries catch up to us?

I can give you an example. I'm the vice-chair of the Standing Committee on Agriculture, and last month we were down in Washington and we appeared in front of the International Trade Commission. When I asked the trade commission down there what they wanted on the table, the commissioner said everything. I asked where he wanted tariffs and subsidies to go. He said “I want them at zero.” I said “In Canada right now we have zero tariffs on sugar and peanuts. Are you going to take your tariffs down to zero right now?” We got into a “yes, but” situation really quickly.

I would like your comments on both those situations.

Prof. Stephen Randall: I'll comment on the first.

I think one must not underestimate the capacity of other western hemisphere countries' peoples to negotiate effectively on their own behalf. If you followed the NAFTA negotiations carefully, you will know that the Mexicans were far better prepared than the Americans, right across the board. The Americans were very badly prepared. It's probably one of the reasons Mexico emerged as the main winner from the North American Free Trade Agreement. So don't underestimate the capacity of the highly trained, elite, and very sophisticated Latin American population to—

Mr. Murray Calder: What about a country like Uganda?

Prof. Stephen Randall: We're not dealing with Uganda. We're dealing with Chile, Argentina, Mexico, Columbia, etc.

Please don't underestimate the capacity of our neighbours to the south to out-negotiate us on a lot of things. They're very sophisticated negotiators.

The second area to which you alluded is the role of the United States in the western hemisphere. You're perfectly right. We are in a situation where the United States has been a lame duck for a few years. It's not going to be the case permanently. It's going to come back to the table, I think, with a much more vigorous trade agenda and the capacity of the White House to play a more significant role than it has over the last five or six years. Without getting into the details of that, I think the balance of power in the western hemisphere is highly unlikely to shift in the next two decades. We are going to be dealing with one superpower within the hemisphere and a second first nation, in terms of relevant level, and that's Canada. I don't think that's going to change. So you're right about the golden rule, I think, in that regard. Still, don't underestimate the capacity of Latin Americans to negotiate effectively on their own behalf.

To allude quickly to the point Eugene made before, I think the regional trading blocks that have been strengthened or have been created in the last decade in Latin America are a reflection of the fact that the United States hasn't been able to play the dominant role it traditionally has. They have broken down very significant political as well as economic barriers among countries. The traditional tensions between Argentina and Brazil, for example, are still there, but they are now trading in a much more effective way than they were previously, in breaking down tariff and non-tariff barriers between them.

• 0945

So on the one hand, yes, multilateralism may be preferred, but the breaking down of bilateral barriers is a very effective first step in moving towards that multilateral agenda, it seems to me.

The Acting Chairman (Ms. Sarmite Bulte): Thank you very much. Unfortunately, we're out of time. One of the problems with having only an hour or so is that when we get into discussions there's so much we want to say. I do encourage you to please continue this dialogue that we've started here today. This is not the end of the consultation process but the beginning. If there are any other additional concerns you have or issues that you feel this committee should address, please tell us by getting them to the clerk or just by direct contact with any member of the committee. We encourage that.

Professor Beaulieu, I noticed that for the sake of time you went over the Canadian experience with the Canada-U.S. trade agreement in terms of the benefits, the analysis, but if you have any detailed analysis we'd appreciate it if you could provide us with it. Certainly this issue has arisen throughout our consultations—the benefits, the detriments, the lost wages. We'd really appreciate it if you could do that.

Prof. Eugene Beaulieu: Yes. I have at least one academic paper that I could send to you.

The Acting Chairman (Ms. Sarmite Bulte): Okay.

Last but not least, with respect to your statement in item number two that Canada is known to disregard WTO recommendations and rulings, citing Bill C-55 as an example, I think that's still debatable.

Some hon. members: Oh, oh!

The Acting Chairman (Ms. Sarmite Bulte): With that, I thank you all very much for being here.

• 0946

• 0948

The Acting Chairman (Ms. Sarmite Bulte): Colleagues, I'd like start the next section of our consultations. We have with us Brian Gromoff, who is president of ACTRA. With him is Gary Neil, whose name, of course, is known to us from the wonderful analysis of the MAI last year for the Canadian Conference of the Arts.

Welcome.

Mr. Gromoff, are you going to begin?

Mr. Brian Gromoff (National President, Alliance of Canadian Cinema, Television and Radio Artists): Good morning, Madam Chairman and members of the committee, and welcome to Calgary.

I'm the national president of ACTRA, which represents more than 13,000 professional performers—actors, singers, dancers, stunt performers, hosts, and others—who work in Canada's films, television, radio programs, sound recordings, and new media products so vital to our cultural life.

With me today is Gary Neil, ACTRA's policy adviser, who is also an expert on the relationship between cultural policy and the international trade agreements. Mr. Neil is widely consulted on this topic, has written extensively on it, and is a frequent media commentator.

• 0950

I'm particularly delighted to be appearing before you here in my hometown, where almost 300 ACTRA members live and work. Canada's culture is so alive and dynamic in part because of its strong regional base. Here in Calgary, we create television programs, movies, new media products, and commercials, not only for local and national audiences but for global markets. Calgary's pool of professional talent and crews is used by producers from around the world. You may even have seen some of us on television in the series North of 60 and Honey, I Shrunk the Kids, or on the big screen in The Edge, Cool Runnings, Legends of the Fall, and Unforgiven.

The existence of a strong infrastructure here in Calgary and throughout Canada is based on a combination of public policies and programs, which try to level the playing field for Canadian cultural producers, and the entrepreneurial spirit of all of us in the industry.

As Canadians now know, these policies and programs, which are the foundation of our successes, are increasingly at risk from the series of international trade agreements Canada has entered into over the past decade. ACTRA has been sounding the alarm bells since the original Canada-U.S. free trade agreement was being negotiated. Our predictions about the consequences have been, unfortunately for Canada, only too accurate.

In 1994, the Government of Canada released a document entitled Canada and the Uruguay Round—Information Kit, a report to Canadians on the results of these multilateral negotiations and why Canada was signing on. In discussing the implications for Canadian cultural policy of the agreement and the creation of the World Trade Organization, the WTO, the kit states:

Canada's ability to foster the continuing vitality of its national identity and the cultural industries is undiminished.

We were told that Canada “achieved the equivalent of the cultural exemptions” of the NAFTA and the FTA, and that the General Agreement on Trade in Services, GATS,

has no effect on government subsidy programs or other support measures in the cultural sectors (e.g. publishing, broadcasting, film and sound recording).

So what happened? Why do we continue to see challenges to Canadian cultural measures? Why did the challenge against our magazine support measures succeed at the WTO? Because the existing mechanisms and language Canada tries to use in the trade agreements to protect our rights to support our culture do not work. They are inadequate.

Over the past decade, we have witnessed a significant development in Canada. Most Canadians, including all but one of our national political parties, have come to share the concerns of ACTRA and the broader cultural community. The issue is no longer whether we should exempt culture from roles designed to liberalize trade in traditional goods and services. The only question is, how can we achieve that goal effectively? ACTRA believes that the only way to fully protect the cultural sovereignty of all nations and to ensure there is cultural diversity worldwide is to develop and implement a global charter of cultural rights.

ACTRA urges your committee to recommend to the government that Canada take the lead in working to achieve such a charter. I know your committee has heard from others in the cultural sector on the needs for the charter and that members of your committee are interested in technical aspects such as what the relationship should be in regard to the charter, the trade agreements, and the WTO.

I would like Gary Neil to briefly address those issues before inviting your questions, but I will finish by saying that we may never be the leading country in space travel or film production, but many countries in the rest of the world look to us to be the leading country in the protection of cultural life. If I may misquote a wartime leader whom some of you may be old enough to remember, “We will fight for our writers. We will fight for our artists. We will fight for our performers. We will never surrender our cultural policy and heritage.”

Thank you.

The Acting Chairman (Ms. Sarmite Bulte): Thank you very much, Mr. Gromoff.

Mr. Neil.

Mr. Gary Neil (Policy Adviser, Alliance of Canadian Cinema, Television and Radio Artists): Thank you, Madam Chair. I have just a couple of quick comments about how I would see the charter developing.

• 0955

While the efforts of Minister Copps to bring together her culture minister colleagues are to be applauded, the only way, in my view, to assure that a cultural agreement is not subservient or secondary or potentially undercut entirely by the trade agreements is for the charter to have equivalent status to GATS, TRIMs, TRIPS, and the rest. Despite the challenges this might create, it means, in my view, that Canada should put the issue of a charter on the agenda of the upcoming WTO ministerial meeting.

In fact, as we all know, I think, others will be tabling concerns about certain aspects of culture, including audiovisual policy. So it seems to me that the best approach is a proactive approach that says we want a distinct agreement with respect to trade in cultural goods and products and services, an agreement that should be of equivalent status to the others administered by the WTO.

Second, it must nonetheless be a separate instrument quite distinct from the others, because part of our challenge in the past decade has been that rules written for more traditional goods and services and products simply cannot be made to fit for cultural matters.

Third, the charter needs to be self-defining. What constitutes a culturally significant matter in one country may be very different for another.

Fourth, the definition needs to be permitted to develop over time. After all, in 1930, who could have predicted the cultural importance of television? In 1980—or perhaps I could say in 1990—who could have predicted the significance of the Internet?

The charter would acknowledge the importance of cultural diversity and the fact that cultural goods and services are much different from wheat, cars, engineering services, and so on. There is scope in a charter to develop rules about what domestic measures could be adopted in support of cultural diversity. For example, rules on expropriation of property and fair compensation would seem appropriate. Obligations of foreign companies to contribute to domestic expression might also be appropriate. Transparency and certainty for investors are obviously essential.

In my view, there's also room for some creativity. Perhaps the charter could identify threshold levels of foreign control of the domestic marketplace, beyond which nations would be free to take action to preserve the remaining market for domestic products. How could anyone object if such a threshold of foreign control of one's domestic marketplace were set at 60%, for example? Yet this would still provide broad scope for Canada to maintain existing measures and to develop new ones, since foreign material generally dominates our market far beyond the 60% level.

Finally, disputes and challenges under the charter would need to be judged by cultural experts, not trade experts. This was a significant problem for Canada in the WTO magazine case, as the panel members could not comprehend the cultural significance of magazines and in fact ruled that Canadian and American magazines were like products, despite the fundamentally different editorial content.

Thank you, Madam Chair.

The Acting Chairman (Ms. Sarmite Bulte): Thank you very much, Mr. Neil.

Mr. Sauvageau.

[Translation]

Mr. Benoît Sauvageau: Mr. Penson was nice enough to give me his 10 minutes. Therefore, I have 20. It's not true.

Good morning gentlemen and thank you for being here. I have questions for Mr. Gromoff and Mr. Neil.

Mr. Gromoff, on page 4 of your document, you say that the exemptions presently in existence to protect Canadian culture are inefficient and you prove it by saying that they are often challenged. You used the Canadian magazines as an example.

I agree with you except as far as magazines are concerned. We were not talking about the content of magazines, but about the advertising sold, unless I'm wrong. Which other cultural sectors have been under attack, either in NAFTA or at WTO, besides Canadian magazines? I don't think Smirnoff or American cigarettes' advertising greatly affect Canadian culture.

I would rather have your comments about the 90% American films on our screens, the 75% books or the 70% radio programs. At first sight, those things seem more directly related to culture than advertising pages in magazines. So, which other sectors have been under attack?

• 1000

My next question is directed to Mr. Neil. The negotiation of a cultural rights charter is one way to go but I wonder about its feasibility. You said that it should be the subject of negotiations at the ministerial meeting in Seattle. I am not an expert in those processes but is it realistic to envision such a thing? Can Canada decide that the 130 or so other ministers will discuss a cultural charter? Otherwise, what other process should be used to bring the issue to the negotiation table? Which countries are our allies regarding this international culture charter? Despite all the respect I have for Canada, it is not one of the major players in WTO. Do we have enough allies to defend this cause? Given the fact that it might take at least a few years to get such a charter, what would plan B be and what do we do in the meantime?

[English]

Mr. Gary Neil: Thank you very much.

Other challenges that have already taken place were the New Country Network and Country Music Television problem. When the CRTC licensed New Country Network, at the same time it delisted an American service, Country Music Television, and the office of the U.S. trade representative took an action, as did Country Music Television itself. That action stopped when there was a merger between Country Music Television and New Country Network, and so we didn't see it go to the level of a formal application under the NAFTA.

However, I would note that subsequent to that decision, the CRTC announced it would no longer delist a foreign service if it subsequently licensed a competitive Canadian service. So the policy under which that decision was made, which is quite a legitimate policy in my view, is now no longer in existence.

Our copyright legislation, which provides certain rights to performers and producers of sound recordings, which matter is now before the Copyright Board for decision, has been introduced in a way that it basically is material reciprocity. We will grant rights to foreign nationals only when they grant equivalent rights to Canadians.

When the decision of the Copyright Board is issued, and that could be as early as June, the U.S. could well challenge that action under the NAFTA. There have been preliminary discussions between Canada and the U.S. about the Copyright Act. They have made it known that they are quite unhappy with the basis on which we've introduced these rights. They have suggested that this may be a course of action for them to take.

Finally, we have the case of Polygram. Under Canada's foreign ownership policy in the feature film area, Polygram Films Entertainment, a Dutch-based, European company, was prevented from expanding its film distribution business in Canada for other than the distribution of its proprietary product. The European Economic Community was set to launch an action against that decision under the WTO. That's still pending, and the reason it's pending, of course, is because Polygram has been purchased by Seagram's and so in fact it may be a Canadian company in the end.

With respect to advertising, I would like to make three points. First, advertising revenues are fundamental to the production of commercial cultural products; advertising revenues are fundamental to the magazine industry; and advertising revenues are fundamental to the broadcasting industry. That's why we've adopted measures to attempt to protect advertising revenues from unfair competition. Those, in my view, remain vital elements of our overall cultural support mechanisms.

Secondly, with respect to advertising itself and the production of commercials, I would note that commercials are very powerful cultural tools. We get an awful lot of our cultural mores and our traditions and approaches to the world delivered to us through commercials. So I wouldn't underestimate the cultural importance of commercials themselves.

• 1005

A third point with respect to advertising is what I fear will happen should we not find a resolution with the U.S. on Bill C-55—the Americans will not in fact take an action under the WTO.

I understand why our government wants to go back to the WTO, because under the WTO I suspect Bill C-55 is fine. There may be cause of action under NAFTA, because NAFTA, which is an extension of the FTA, specifically includes the advertising industry within the disciplines of the agreement. I'm not sure we have examined this yet, and I may be the only one in the cultural sector to have this fear, but I think there's much more susceptibility to a challenge under NAFTA against Bill C-55.

Yet it would be a difficult process to attempt to create this charter. Other nations are in a sense much further behind us, because they have not had the proximity to the largest producer of cultural products in the world, the Americans, and/or they've historically been protected by language from the free flow of those products. That, of course, is now all changing. When you travel in Europe now you get the American products directly in English, with no subtitles or dubbing, or anything. You just watch them in English.

We certainly know who some of our natural allies are. They are the French, who understand us very well, the Australians, and a number of other countries in Europe. The Irish, for example, have equivalent measures to our own; the Spanish and the Portuguese have some equivalent measures to our own. We know where we can find our allies in the short term.

I don't know the technical details of how one puts items on the agenda of the WTO. I certainly know that we could in fact propose that it be done. There's no guarantee that it would be accepted, that it would be done through the WTO, but we certainly have every right to propose that it be done.

My plan B, as it were, is in fact to continue as much as we can to use those instruments we have been using. So if we are to enter any new trade agreements, there must be an exemption for culture. If it's impossible to get an exemption for culture, we must take unbound, country-specific reservations against any measures that may impact on our cultural program. And obviously, we must not make any commitments whatsoever that would touch on cultural programs and policies.

Mr. Brian Gromoff: Perhaps I might just add that the United States does continue to challenge the copyright provisions under NAFTA and the Copyright Board, with regard to the decisions on paying the royalties to performers and record producers when the work is used commercially.

The Acting Chairman (Ms. Sarmite Bulte): Mr. Calder.

Mr. Murray Calder: Thank you very much, Madam Chair.

I want to go back to Bill C-55. The previous presenters said Canada was getting a reputation for disregarding WTO recommendations and rulings, and they used Bill C-55 as an example. They said Canada was ignoring a WTO panel that already found in February 1997 that three components of the Canadian magazine policy were illegal under GATT. One was the ban on imports of magazines with Canadian-directed advertising, and they cited tariff item 9958.00.00. The second was a special excise tax of 80% on the value of advertising in split-run magazines. And the third was the discriminatory postal rates on imported magazines. When Canada appealed it they found a fourth violation, which was the discriminatory postal subsidy for Canadian-produced magazines.

I understand why we had Bill C-55. It was basically a matter of showing the Americans in the upcoming negotiations...we're not going to take them back down.

On the same side, if these gentlemen are in fact right in what they're saying, and I haven't had a chance to go back and research this, and you'd probably have more information on this than I do, it leaves us in a very precarious position. I'd like your comment on this and how we'd go about correcting that.

Mr. Gary Neil: That's exactly the problem, Mr. Calder, because the WTO panel decision...first of all, that was a remark Mr. Gromoff made in the opening. We were assured when we entered the WTO, when we agreed to the GATS and the TRIMs and the TRIPS, that they would have no impact on our cultural industries. Here we see within a matter of 18 months that it has a very profound impact on an important cultural industry, the magazine industry, notwithstanding those assurances. There are reasons for that.

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The original tariff item itself was probably susceptible to a challenge under the original 1947 GATT, and the fact that we continued it for so long perhaps was an incorrect strategical decision on our part. But the panel decision does not give much comfort to those of us in the cultural sector, because it found that magazines were a good, and it found that as a good they were like product to the American magazines. The implications of that, to me, are profound and they're enormous. They are saying to us that there is no difference between a Canadian television program and a U.S. television program; they are all television programs. That's the implication of that decision.

They used precedents from tobacco and alcohol to rule against our policy measures. That was one of the profound aspects of that decision. They said a magazine, no matter what the editorial content of that magazine is, is no different from any other magazine. They found a Canadian magazine is no different in trade law from a U.S. magazine, and as a Canadian, I find that kind of attitude offensive and objectionable. That's exactly the problem when you have trade agreements and trade lawyers who are looking at these things; you get decisions of that kind.

I must say it's very clear that Bill C-55 is running in the face of a clear decision by the WTO trade panel. On the other hand, I fully support the efforts of the government to introduce C-55. We have to do that because we have to continue to provide a level playing field for our magazine producers. If we don't do that, our magazine industry will disappear. We will be left with nothing but the so-called Canadian edition of Time and Newsweek and Harper's and every other magazine. So I think that's why Bill C-55 has to be supported. But it's very clear that the decision of the trade panel was a very, very negative precedent for us.

Mr. Murray Calder: Basically what you're saying to me is that one of the things we're going to have to discuss within these negotiations then is...description parameters, I guess would be the best way of doing it, whereby it is made obvious that a Canadian magazine is a Canadian magazine, a U.S. magazine is a U.S. magazine, a Mexican one is Mexican, and so on; they're not all the same. I guess my question would be, then, how do we work in our negotiations to set up parameters so that if there is a dispute, the panels can give a decision within those parameters?

Mr. Gary Neil: That's exactly the reason the cultural sector is coming forward with the idea that what we need is a separate global instrument that will address these matters, the cultural area, that we have called a global charter of rights, a charter of cultural rights. It's for precisely that reason, because when you try to shoehorn protection of culture into trade agreements whose basic objective is to liberalize trade and whose basic approach is to eliminate so-called barriers, it simply does not work. We will forever be confronted with this erosion of our ability to support our own domestic cultural producers and products and artists unless we're able to achieve a new instrument that would talk about the importance of cultural diversity, the importance of cultural sovereignty, and would maintain that sovereignty for all nations.

Thank you.

The Acting Chairman (Ms. Sarmite Bulte): Thank you.

We're just about out of time. Unless you are very quick, Mr. Penson, we are out of time.

Mr. Charlie Penson: I just have three short questions arising out of the testimony by Mr. Beaulieu this morning, that when we enter into trade negotiations and trade agreements, we undertake certain commitments. I assume we go there with our eyes open when we find these things, and therefore there should be a clear understanding of what we find. Governments entered into these agreements. So we have the original free trade agreement, we have NAFTA, and we have the WTO. Somebody said that in WTO, after that, there were assurances given that culture would not be subject to these kinds of actions. First of all, I guess I'd ask who gave that assurance.

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My second question is, if we move into this charter aspect you're talking about, don't you appreciate that we still have the original free trade agreement, we have NAFTA, that sets out the parameters? My understanding is that most of the pressure to cultural industries you're talking about comes from the United States, which has a very different view of it. That will stay in place. Canada can't just walk away from that. How would the charter work when we still have the original free trade agreement that says culture is exempt but the United States has the right to retaliate in equivalent effect for any action taken?

The third thing is more or less a comment, and that is regarding advertising. I often wonder what would happen if countries like the United States said to their companies that they couldn't advertise in Canadian magazines. When I look through Maclean's magazine, the one that probably benefits the most from this cultural policy, I often see that 60% to 70% of the advertising is done by foreign companies, foreign firms. If they were to lose that revenue, what would happen to a magazine like Maclean's?

I've heard the argument that, yes, it's General Motors Canada, but let's be realistic. Their parent company is in the United States, so that's where the direction comes from.

Those are the questions I have, Madam Chair.

The Acting Chairman (Ms. Sarmite Bulte): I don't think he can answer all those questions in a minute, but maybe he could address the highlights. Actually, what we have been encouraging all our witnesses to do is provide additional material and submissions.

Mr. Charlie Penson: Madam Chair, on a point of order, I would ask then, if it's not possible to do it now, would these gentlemen answer them in written form so we have the benefit of those answers for the committee?

Mr. Brian Gromoff: Very briefly, to answer the very first one, perhaps the government doesn't use the experts it should when it first negotiates its trade agreements.

Mr. Charlie Penson: You were not consulted properly, you would suggest, in the WTO negotiations.

Mr. Gary Neil: The grey hair is earned from years of involvement. I used to work at ACTRA, in fact. I used to be a full-time employee. I no longer am one; I just consult with them. And I was involved right back in 1977 with the FTA. Subsequent to that I was appointed to the Sectoral Advisory Group for International Trade from the cultural industries, where I served for seven or eight years during the development of the NAFTA and the WTO.

Indeed, I echo Brian's comment that in the end game of the negotiations—I mean, I'm an old labour negotiator and I know how these things work. The words “during the process” are all very comforting to us about how we're being defended and protected, but in the end game of negotiations it's the negotiators who are sitting in that room and their political masters back in their capitals who are making the final decisions. And that's where the serious erosion is occurring.

I remember having a debate in 1977 with the people who were bringing us back the FTA, and I pointed out the dilemma of putting the advertising industry within the disciplines of the agreement. I said “We're going to run into trouble; I tell you, we will run into trouble”.

Mr. Charlie Penson: They ignored your advice in that case, in the original—

Mr. Gary Neil: And then we were told in the SAGIT that the excise tax for the magazine sector was being designed specifically to withstand a challenge under the WTO. This was the advice from the senior government lawyers and the senior bureaucrats who were at the SAGIT, who said “That's why we've designed it in this way, because it's immune from a challenge under the WTO”.

Mr. Charlie Penson: Given your experience and that they ignored your advice under the original free trade agreement, they ignored your advice when they had a chance to correct it when NAFTA was introduced and continued that process, they ignored your advice on the Uruguay Round in the WTO, what confidence have you that the government is going to take your charter and sell it?

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Mr. Gary Neil: I'm ever the optimistic and believe that we have turned a fundamental corner. In 1977, I remember very well, when we were first raising the alarm bells about the FTA, we didn't even have the whole cultural community on our side. There were some in the cultural community who were thinking that this might present some real opportunities. Clearly, that transition occurred many years ago. The cultural community is by and large united.

I'm convinced that we have turned a corner with the Canadian public, that there is a sensitivity and an awareness of the issues that we're now raising that has not existed before. I'm convinced that in the final analysis, that's what will prevail, regardless of the political leadership that happens to be there at the day.

I have just a final comment on advertising. The basic mechanism we use in the advertising field is subsection 19(1) of the Income Tax Act, which says if you're a Canadian company and you're advertising on a U.S. border station or in a U.S. magazine, that expense is not deductible from your income in the calculation of your tax. The U.S. has equivalent legislation in place. So there's nothing to stop an advertiser from advertising here. It just may mean that on their U.S. tax return they may not be able to deduct it, although it's likely being done through a subsidiary. Similarly, there's nothing to stop a Canadian firm from advertising in the U.S.

Mr. Charlie Penson: That was not quite my question. My question was to the extent that this is sort of extraterritorial legislation, Bill C-55, what's to stop the United States from using the same type of approach to say to their companies that if they advertise in Canadian magazines they're going to be subject to a $250,000 penalty? If Maclean's were to lose that advertising revenue, what would happen to them?

Mr. Gary Neil: That would be a serious problem. I presume the policy people who have been developing Bill C-55 have analysed that and have determined that it isn't a risk. On the other hand, I perhaps personally would share your observation that if I were in the office of the U.S. trade representative, that is certainly something I would immediately look at doing.

Mr. Brian Gromoff: I have one final comment.

Picking up on the last point about Ford Canada and the head office really being in the United States, what we have to be careful of is that the head office of Canada doesn't become Washington.

The Acting Chairman (Ms. Sarmite Bulte): Again, we encourage you to continue dialogue with us. If there are additional issues that you want to bring to the committee's attention, please feel free to follow up with the clerk or contact individual committee members.

Thank you very much for coming.

Next I'd like to call our panellists from the Agri-Industry Trade Group, the Alberta Barley Commission, the National Farmers Union, and the Western Canadian Wheat Growers Association. Please take your places at the front of the table. Perhaps you would put your name tags out for us too, please.

Gentlemen, welcome to the Standing Committee on Foreign Affairs and International Trade. According to my agenda, Mr. Riddell, you're the co-chair of the Agri-Industry Trade Group and you will be starting.

Mr. Dale A. Riddell (Co-Chair, Agri-Industry Trade Group): Thank you very much for the opportunity to make this presentation on behalf of the Agri-Industry Trade Group.

The AITG is a coalition of about 90 food businesses, farm groups, and processors that have an interest in trade. Participants in our group are based mostly in western Canada. Our current efforts are aimed at developing industry positions for the next round of WTO negotiations that reflect the best long-term interests of those organizations comprising the AITG and, hopefully, the interests of all agriculture in Canada. We intend to convey these positions in detail to the federal and provincial governments by June 1999.

AITG has already come a long way in putting together its position statement, but there's still work to do in order to achieve the best level of consensus possible. AITG sees the upcoming round as probably the best opportunity ever to advance the reform and liberalization of agrifood markets envisioned by the outcome of the Uruguay Round of the GATT negotiations.

The Uruguay Round set the framework for reform. We now need to capitalize this time in a substantive way on the new rules and disciplines that have been established for agriculture. So very much is at stake.

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Significant opportunities await Canada's agrifood sector, from continued and accelerated reductions in barriers to market access and in production and trade-distorting subsidies. Research co-sponsored by AITG shows that the elimination of tariffs within 10 years would result in a net benefit to Canada's agrifood sector of some $2.5 billion per year. This value of benefits does not include potential returns to higher value-added activity and to the special crop sector.

There is also a very real threat to our industries if negotiations do not advance the reform agenda. A backslide toward protectionism could result in an entrenchment of current high barriers to access and unleash the large capacity of our competitors' treasuries to subsidize their industries. Needless to say, this would be a very uncomfortable scenario for Canada's agrifood sector. On an equal footing, Canada's industries are hopefully capable of competing and prospering; against the treasuries of our competitors, we cannot.

Along this line, one of the main themes of the AITG position for the next round is that Canada should be a leader in demanding that other countries bring their subsidy levels in line with those of Canada and other exporters, such as those in the Cairns Group of countries.

Our major competitors, the U.S. and the European Union, still have significant capacity to export subsidize. In the meantime, Canada has all but dismantled its ability to provide export subsidies. On wheat, for example, the EU has the ability to use up to $1.4 billion to subsidize exports; the U.S., $444 million; and Canada, zero dollars. On oilseeds, the EU has the ability to use up to $25 million; the U.S., $22 million; and Canada, zero dollars. On beef, the EU has the ability to use up to $1.5 billion; the U.S., $25 million; and Canada, zero dollars. On skim milk powder, the European Union has the ability to use up to $283 million; the U.S., $90 million; and Canada, $22 million.

These are but a few examples of the export subsidy capacity that overhangs world markets. Export subsidies have a particularly damaging effect on world markets, and for this reason AITG will be calling for their full elimination in the next round.

There are also large disparities among WTO signatories in terms of domestic support. Canada again has gone far beyond its commitments and beyond what others have done. In the category of domestic subsidies that are subject to reduction under the WTO, spending in the EU in 1998 was $61.5 billion; in the U.S., $6.2 billion; and in Canada, $566 million. These levels represent 60%, 27%, and 15% respectively of the WTO commitment levels. This summary does not even reflect the so-called blue box subsidies provided by the European Union, which are significant.

These numbers show the extent to which Canada has reduced its trade-distorting supports ahead of others. They also show the magnitude of the treasuries against which Canadian agrifood industries have to compete. In the next round Canada must not only pursue the accelerated reduction of production and trade-distorting forms of support, but also see that other countries commit to immediately bring their subsidy levels in line with those subsidizing at lower levels.

At the same time as Canadian industries face the harmful effects of inordinate levels of transfers from governments, we also continue to battle high barriers to access in key markets. Especially for value-added products, where the largest future opportunities exist for Canada's agrifood sector, tariffs and the administration of import regimes continue to curtail our industry's ability to compete. In Japan, tariffs still exist for beef at 40%; cheese, 25% to 47%; and for canola, $183 per metric tonne.

The case of canola represents a particularly onerous type of restriction called tariff escalation. This is when the value-added product, in this case the oil, is levied at a much higher tariff than the raw product, canola seed. This kind of tariff structure works at the expense of manufacturing jobs for competitive exporters such as Canada. Add to these examples a plethora of other tariff barriers and the cumbersome and restrictive import regimes of the EU and others and you have the flip side of the research results I alluded to earlier. The cost to the Canadian industry is at least $2.5 billion per year.

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There is a serious need in the next round to bring down tariffs and related administrative barriers to trade and to eliminate tariff escalations. The combined effect of subsidies and border measures on Canada's ability to compete are reflected in measures calculated by the Organisation for Economic Co-operation and Development, called producer subsidy equivalents, or PSEs. These basically reflect the amount of government support to agricultural products in specific jurisdictions. On a full-time farmer basis in 1997, support in the European Union was $18,000; in the U.S., $13,000; and in Japan, $24,000. In Canada it was $8,000. On a commodity basis in 1997, the European Union supported wheat at 36% of its market value, barley at 45%, oilseeds at 48%, and beef at 60%. For the U.S. these values were 32%, 28%, 8%, and 4% respectively. For Canada they were 10%, 7%, 10%, and 14%.

As tariff barriers and market distortions to international trade have fallen in recent years, we have seen a rising tide of so-called technical barriers to trade. These have often been implemented under the guise of measures to protect human or plant and animal life. The trade term for this is sanitary and phytosanitary measures.

Most recently, border measures have been put in place restricting trade in the growing area of genetically modified organisms, or GMOs. In the future we might expect to see increasing pressure to reflect societal concerns, such as animal—

Mr. Charlie Penson: I have a point of order, Mr. Chairman. I'm just wondering, Mr. Riddell, if you have copies of what you're reading so that we could follow along.

Mr. Dale Riddell: Yes. Your front desk had copies.

Mr. Charlie Penson: This is the item we have. It's not part of what you're reading.

Okay, I have it. Thank you.

Mr. Dale Riddell: I'm on page 8. It's the AITG's view that Canada will have to be diligent in the next round to ensure that trade measures related to these issues are based on sound science and that they not be used as disguised barriers to trade.

Ladies and gentlemen, I've summarized some of the key concerns, themes, and negotiating elements that participants in the AITG feel should be taken up by Canada in the next round of the WTO agriculture negotiations. I have by no means exhausted the list, and I hope the committee will be receptive to a more detailed position in due course, which we intend to submit.

In summary, the next round of WTO negotiations is pivotal for the future growth and prosperity of Canada's agriculture and food sector. In setting and pursuing its negotiating positions, Canada must not lose the opportunity. It needs to have a position that is credible and effective. It is clear to the AITG that to be credible and effective means being unambiguous in knowing what we want and going out and getting it. As Minister Vanclief said in his closing address at the national WTO conference last week, Canada is most effective in international negotiations when it embarks on its agenda early.

But if we are to be effective early this time, we cannot sit back on our heels as we did the last time with a so-called balanced approach that left Canada taking what it was given out of the negotiations. Instead, we must aggressively pursue what we want, indeed what the agrifood sector needs, which is to maximize our leverage toward reducing barriers to trade and removing the distortions and disparities in government support that so limit Canada's potential. Respectfully submitted by the Agri-Industry Trade Group.

The Acting Chairman (Ms. Sarmite Bulte): Thank you very much, Mr. Riddell. I should add that we've actually been encouraging organizations and individuals to provide us with additional detailed briefs, if they so wish. We're looking forward to receiving that.

Next we have the Alberta Barley Commission, which is represented by Mr. Logan, the chairman; Mr. Foster, the general manager; and I understand, Mr. Kriz, that you're also with the Alberta Barley Commission. Who will be presenting?

Mr. Glenn Logan (Chairman, Alberta Barley Commission): I will.

The Acting Chairman (Ms. Sarmite Bulte): Thank you. Please begin, Mr. Logan.

Mr. Glenn Logan: I believe you've been presented with copies of our presentation. It's not my intention to read that to you. You can do that at a later time. I'd prefer to leave some time at the end for discussion. I will pull a couple of comments from the document.

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While this committee's jurisdiction extends beyond agriculture to include cultural and institutional issues surrounding trade, we welcome the opportunity to express our views about the Canadian barley industry.

The Alberta Barley Commission is a producer-funded, -directed, and -controlled organization that coordinates research and undertakes market and policy development on behalf of some 36,000 barley producers in this province. The board of directors consists of nine elected farmers who represent the various regions of the province and develop the positions advocated by our organization.

Alberta produces better than half of Canada's 12 million to 14 million tonnes of barley annually. In the next round of trade talks, the objective should be to complete liberalized trade in barley and barley products. A liberalized trade environment is critical to the barley industry in this country.

The complete liberalization of trade for a particular commodity has been coined a zero-for-zero agreement, and this is the type of agreement the Canadian barley industry supports. The committee should recognize that the Canadian barley industry has joined with other members of the international barley and malt industry to support a zero-for-zero trade agreement on barley and barley products.

The International Barley and Malt Coalition for Free Trade is a collection of barley growers and malting organizations drawn from the major exporting nations. The coalition has come together to support the conclusion of a zero-for-zero agreement on barley and barley products. The coalition members are barley producers and malting organizations from both Canada and the United States. We are currently discussing these issues with our counterparts in Australia, and we feel confident they will become a part of this coalition.

In my mind, the most important part of this document is on page 4, the zero-for-zero objectives as stated in the box. In numerous studies that have been done in the past year or so, it's been demonstrated that there would be considerable economic advantage to barley producers in adopting these trade positions.

In concluding, the elimination of export subsidies, market access barriers, and particular powers of state trading enterprises will make substantial contributions to the realization of free and fair trading. It is critical for the committee to advance the zero-for-zero objective for the benefit of the Canadian barley industry and in particular the barley growers of this province.

Therefore we ask you to recommend that Canada's negotiating mandate for WTO and FTAA negotiations include the following points: the pursuit of a zero-for-zero agreement on barley and barley products; the pursuit of an agreement to measure domestic support transfers on a commodity-specific basis; and the pursuit of an agreement to implement accelerated reduction in commodity support levels, with the goal being to eliminate the disparity between countries with high support levels and those with low support levels.

A zero-for-zero trade agreement on barley and barley products will allow trade in these products to take place on a level playing field, governed by true market signals and competitive disciplines, which will be to the benefit of the Canadian barley industry.

Thank you.

The Acting Chairman (Mr. Murray Calder): Thank you very much, Glenn.

Next is Ted Menzies from the Western Canadian Wheat Growers Association.

Mr. Ted Menzies (Vice-President, Western Canadian Wheat Growers Association): Thank you, Mr. Chairman.

I have a point of clarification. I believe in your notes I'm classified as the president. I'm not actually the president, so I can't be blamed for everything. I'm vice-president at this point.

The Acting Chairman (Mr. Murray Calder): You've been demoted now.

Mr. Ted Menzies: Well, we won't tell the president; maybe he won't know.

The Acting Chairman (Mr. Murray Calder): Okay.

Mr. Ted Menzies: I'll give a little bit of background on me for those who are here this morning. I farm about an hour south of Calgary. I'm a grain, oilseed, and pulse producer, and probably one of the few people in this room who's glad it snowed last night. We'll take moisture in any form we can get it. We are shut down right now, so I don't feel too bad about being up here.

We have provided our position paper, and I believe you all have copies of that. I have a summary that I would like to read some points from, but it's basically all in the paper you have in front of you.

First of all, we'd like to thank you for the opportunity to speak to the standing committee. This document we're presenting represents the association's views on a national position on trade issues for the 1999 negotiations.

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The western grain sector is export-based, both for primary and processed grain and for grain products, and will continue to be export-based and export-dependent in the foreseeable future.

Grain farmers have adjusted to the termination of transportation subsidies by diversifying their cropping patterns and by investing in processing facilities to add value to their crops. We have also accepted the fact that ad hoc government support for that sector, which was common in the past, is no longer possible given fiscal restraints, nor is it desirable from a competitiveness perspective.

The Wheat Growers maintain that the sector can thrive without interference or handouts from government, given a level playing field in the world trading environment and in the domestic policy arena. We need and expect the level playing field to come out of the agricultural negotiations.

Our concerns centre on three main areas: export subsidies, market access, and domestic supports. I will direct my comments to these areas.

Our first priority is the complete elimination of export subsidies. The European Union's export support provisions within the common agricultural policy, formerly known as CAP, and the U.S. export enhancement program are the two most damaging programs for the western grain industry. While both are slated for reduction, allowable levels under the previous agricultural agreement remain high enough to cause significant harm to international grain prices. It is urgent that the subsidy levels be reduced and eliminated on a priority basis. We cannot prosper with the uncertainty caused by the use of export subsidies in other nations.

While tariffication has made the reduction of import tariffs more straightforward and transparent, some of these tariffs remain significant barriers to trade. Countries were granted much leeway during the Uruguay Round in the tariffication of their market access barriers. Many imposed high tariff rate quotas, or TRQs, as they're known, on the products they most wanted to protect, and managed to maintain high levels of protection from imports.

Tariff escalation is also a serious problem for western Canada. Many countries are using tariff escalation to impose increasing import tariffs as products are further processed. For example, Japan imposes a significantly higher import tariff on canola oil than on canola seed, which restricts our access to the Japanese market for oil. This practice is particularly damaging to the western grain sector. Such tariffs have contributed to western Canada's high dependence on the export of raw grain rather than higher, value-added, processed products.

The elimination of transportation subsidies in western Canada is encouraging value-added processing by exposing the real costs of shipping low-value commodities. We must have access to world markets for our higher-value products.

Domestic supports were subject to some discipline in the last trade round. However, because of the aggregate measure of support mechanism, in which domestic support was measured on an aggregate level, WTO members managed to maintain high levels of protection and subsidization for select products while continuing to meet their aggregate measure of support reduction commitments. These levels of support continue to encourage production above market-clearing levels, and they continue to restrict trade. Therefore consideration should be given to negotiating future commitments for domestic support reductions on a product-specific basis rather than on an aggregate basis.

Excessive trade-distorting and production-enhancing domestic supports must be altered to ensure they conform to green box criteria. Export trade-dependent industries, such as the western grain sector, suffer when excess domestic supplies of grain are sold on world markets, depressing world prices. Further clarification and tightening of green box criteria is critical to limit the ability of WTO members to continue high levels of support, even with their current WTO agreements.

We support the elimination of the blue box category for domestic supports, because it allows continued high levels of domestic supports that are not subject to reductions.

Non-tariff barriers are likely to be used more frequently as tariff and export subsidies are reduced and eliminated. We have urged the Canadian government to uphold the use of non-tariff barriers to limit trade. Specifically, the trade of genetically modified organisms or GMOs must not be allowed to be hindered by excessive rules and labelling requirements based on unsound science. We oppose special labelling requirements for GMOs that could force them to be handled separately and that could make them vulnerable to negative propaganda by special interest groups.

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Similarly, Canada must stand firmly behind the agreement signed on sanitary and phytosanitary measures to ensure that the WTO members are not given leeway to use these SPS measures to restrict access to their domestic markets.

As trading blocs become a more common way of doing business in the world, Canada should seek a more comprehensive free trade agreement with the U.S. Canada is not large enough to stand alone in the face of these large trading blocs, and we will have a stronger negotiating position in the 1999 talks if we go into them in an alliance with the U.S. rather than as an opponent on important issues.

I might throw in a little side note at this point. Thursday next week there's a meeting in Washington with the Food Quality Protection Agency of the United States and the Pest Management Regulatory Agency in Canada. I believe this is groundbreaking work for both these people. We're working on chemical harmonization. I've been invited to go and speak to that conference next week. This, I think, is a tremendous step towards eliminating some of the trade barriers that we've seen thrown up in these border blockades in the northern tier states. That's a little aside. It's happening next week, and we hope to see more out of that.

The world competitiveness of the western Canadian grain sector is linked closely to domestic policies in grain marketing and transportation. To compete on world markets, farmers in western Canada must have the ability to control their cost of doing business. Significant reforms in both transportation and grain marketing are critical for the continued development of the value-added sector and for the long-term viability of western farms. We continue to urge the federal government to accept the recommendations on grain transportation reform made by Justice Willard Estey and to begin the implementation process with the involvement of all stakeholder groups. We also need marketing reforms that will allow farmers the freedom to make their own choices about how and when to market their crops. Import and export state trading enterprises, STEs as they're known, continue to restrict trade on a global basis, particularly in markets in which Canada has primary trading interests.

The Canadian Wheat Board will continue to face pressure from the U.S. in particular, despite their claims that they do not contravene trade law. The Western Canadian Wheat Growers Association encourages Canada and the other WTO countries to demand the establishment of rules for import and export STEs to operate at the risk of the market and only on a voluntary basis; that is, removal of the monopoly powers from the Wheat Board.

In the Uruguay Round, Canada tried both to protect the supply-managed sectors while asking for concessions on export subsidies and market access. The western grain sector has accepted that protecting our industry from outside competition is neither possible nor is it desirable. Grain farmers have adapted to a global trading environment, and for this we must demand that the barriers to fair trade on the products we sell on world markets be reduced and eliminated. The highly protected supply-managed industries are going to have to mature as the grain industry already has to allow access to the Canadian market for their sensitive products and to take advantage of export opportunities.

The wheat growers have been involved in a number of initiatives leading up to the WTO negotiations. We were one of the host organizations of the Canada-U.S. grain summit held in Banff in September, which brought together representatives of over 50 Canadian and American farm organizations to discuss trade issues. We are active participants in the agri-industry trade group, which you've already heard from here today, a coalition of 100 stakeholders working on a joint trade position. We're also involved in a planning process for the Alberta/Montana Agricultural Opportunities Conference to be held in Great Falls, Montana, on June 1 and 2 of this year. We actively participated in the recent federal-provincial conference, “Toward an Agricultural Trade Position: A Dialogue with Canadian Industry”, at which we promoted our position on trade and gained new understanding of the trade positions of other sectors.

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I would like to conclude by saying that we welcome the challenges of the global marketplace, but must be able to count on clear and enforceable rules of trade. We must seek a trade agreement that is in the interests of the nation as a whole. We must take a very strong stand on the issues outlined here or risk further damage to the grain sector at a time when profitability remains a serious issue for farmers.

Thank you once again for the opportunity to address this committee.

The Acting Chairman (Ms. Sarmite Bulte): Thank you very much, Mr. Menzies.

We have with us Michelle Melnyk, youth president of the National Farmers Union. Welcome. I understand that your organization has already filed two briefs and that you don't have one today.

Ms. Michelle Melnyk (Youth President, National Farmers Union): Yes. They filed in Vancouver and Winnipeg as well, so I am going to do a short note, a little presentation, if that's all right.

I'd like to apologize for being late. I had a run-in with my tire this morning that I didn't factor time for.

I'm speaking to you as a young farmer who farms with my parents and my two brothers about an hour northeast of Edmonton, in a small community called Waskatenau. In our farming community we have heard over and over again, through various forms of media and industry and government sources, that we should be very excited in our community that the agrifood exports have doubled in Canada over the last five years to $20 billion. When numbers are tossed around in the media like that, I think we have a certain difficulty in really digesting what that means to the economy. I can tell you that the farmers I meet with in the coffee shops, in the gas stations, and in the grain elevators in my community aren't very excited about hearing that the exports have increased $20 billion when they look at net farm income that has decreased by 19% over the course of those five years.

One of the most tangible ways that I judge how a community is thriving and surviving is paying attention to the spring auction sales that are held every year. This spring in our local paper—and if I had remembered, I would have brought one—I can tell you that the number of auctions advertised in this paper has increased by at least 25%. I can also tell you that those auctions that are being held are not as prosperous as they have been in the past, and that is a clear indication of how people are hurting in the countryside. Money is not being spent because it is not in the farmers' pockets.

I think the effects of this have come despite the fact that farmers have been doing everything the government and the industry have been encouraging them to do. We have doubled our exports. We're producing more grain. We're diversifying. We have buffalo growers, we have llama, we have elk, we have caraway and canary seed, and all of these other things, cash crops that are supposed to subsidize the low wheat and barley. I don't even know what the canola price is in our area any more.

So this is indicative to me that perhaps what we are being encouraged to do is not working, and in fact when you factor in the potential long-term effects of this, they are far more serious than just this immediate short-term cash crisis. I will qualify that by saying that it really is amounting, in my mind, to systemic depopulation and de-development. I can drive 25 miles in all four directions from my farm and count on both of my hands the number of people who are farming who are under the age of 40. You can tell all those people to increase their exports as much as you want, but if there are not people farming, then it seems to me to be a moot point.

I have little faith in the industry export managers, or whatever you might call them. I'm of the opinion that it matters little to the large corporations of the world if there are 1,000 people producing grain in western Canada or if there are 10,000. Once you commodify food, it becomes an abstract object, completely removed from the communities you live in. And I live in my community, I am part of it, and I need to have people around me helping to support that community.

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It's a cause and effect system. Our elevator in Waskatenau is already only accepting grain three days a week. It's on a short branch-line. In a couple of months there are going to be 100 car terminal elevators opened up about a half hour away from us. So in a very short time our elevator in Waskatenau is not going to be open at all. I'm going to be chucking grain an extra half an hour away. The implement dealer, who has to deal with the ramifications of that fact, is going to slowly see his business diminish. The schools, the banks.... That kind of de-development has a very obvious trickle-down effect. I think as a young person trying to find a place for myself in rural Canada, it's very frightening to me.

One of the most telling conversations I had was with a woman some months ago. She and her husband had been farming for about 35 years and they were in the process of beginning to think about retirement and such. We were chatting about their options, and she said they were fairly sure this was what they were going to do. Then she said to me “And then our son broke the news to us that he wanted to farm.” She didn't say that to me because she disliked farming, or in her heart she didn't want him to do that. She said that because it is not only a physical struggle—and certainly I'm not expecting that this should be easy—but it is also a struggle....

I suppose if you want to talk about risk management and where your support is going to come from...I can't imagine a field or a trade that could possibly be more risky, because we take the risk of growing the grain, financing that, and then dealing with the weather. And increasingly we are becoming closed in a marketplace that I'm not sure has the farmers' best interests in mind. I'm quite sure it has the processors' and the industry's interests in mind, but I'm not sure it really thinks about the people on the farm who are producing that grain.

Where the government is in the process of assessing its position...I attended part of a session in Ottawa last week, the government-industry get together, to discuss what the WTO position would be. I listened to an American economist tell us that our prime goal in this new round of negotiations should be increasing market access. Again, the government, by 2005, wants to double exports to $40 billion. The farm gate income is not there now. I am very leery of jumping into the river without a life jacket. It's one thing to access markets, but if we look at the markets we're accessing...we're giving away Canadian access to our markets, which are very fairly high priced and stable markets, and we're looking for access to markets that are not necessarily as stable; they are mostly Asian, if not developing country markets. We only have to look at the pig crisis to see how that did.

I would suggest to the committee that we proceed very slowly and cautiously. I think the mechanisms that are used to judge the prosperity and the effectiveness of the trade system purely deal with those $20 billion and $40 billion numbers, and those are way too large. Those numbers don't allow us to get a really concise analysis of what is happening in the countryside. I think first we need to step back and see, and analyse a little bit more, what the effects of this increased trade have already been before we too eagerly proceed to increase it again.

I'm afraid I have to disagree with my colleague over here. I think we also need to be very wary of signing away our supply management and orderly marketing systems in favour of accessing markets that aren't nearly as concrete as the domestic support systems we have here.

I think that's about all I have to say.

The Acting Chairman (Ms. Sarmite Bulte): Thank you very much, Ms. Melnyk, and thank you, panellists. I'll turn it over for questions.

Mr. Penson.

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Mr. Charlie Penson: Thank you, Madam Chair. I'd like to welcome the group here today. I think we're going to have a good discussion. I appreciate your input. The only thing I can sort of agree with Ms. Melnyk about is that we have a problem. I guess the basic question is, what do we do about it?

I've heard the NFU's submission two or three times now, and they point to the net farm income being stagnant for the last 20 years. That is certainly true. But they also point to the fact that the trade rules that brought agriculture under the WTO in the Uruguay Round haven't been effective, and to a large extent I can agree with that.

I just want to give a little historical backdrop as to why that might be and put it out to the panel. We didn't have any trade rules in agriculture, even though we've had trade rules in industrial products and many other products since the end of the Second World War. Agriculture has always been this maverick that's been tough to handle. It was only brought under in the Uruguay Round after seven years of negotiations.

The participants recognized they couldn't go all the way in what they desired, in terms of a phase-down of tariffs and subsidies, but decided to get started, make some modest gains, get border quotas switched over to tariffs, and gradually start to make some progress. As a result of that, there was about a 15% reduction in subsidies and tariffs built into those first six years.

They also recognized that there needed to be a second round—the one we're embarking on in 2000. The expectation was that we could make some significant gains for the sectors that needed trade liberalization. I would cite the grain, oilseeds, and beef sectors as good examples of that. Those expectations have been created, and certainly western farmers, for example, are very much looking forward to achieving that goal, because, as Ms. Melnyk has said, farm income is not good. We all know there are people hurting very badly.

So the question as I see it, and I think Mr. Riddell put it fairly well, is how do we advance our objectives? My concern is much the same as Mr. Riddell's. How can Canada, which has largely been a leader in trade rules and trade negotiations in the past, be a leader when we have two very distinct groups? There's the supply management sector, which essentially doesn't want any change, and the grains, oilseeds, beef, and other sectors, which want substantial change in market access.

This balanced approach that seems to be out there a lot, essentially by government, is about as effective as a steer in a cattle operation. I don't think you're going to get the gains you want unless you speak out very loud and clear that the balanced approach is not a credible one for Canada. I know some panel members will disagree with me, but I just wonder what your thoughts are.

I have one other question on working with the United States, as Mr. Menzies said, in order to try to advance those objectives as well. Perhaps others would like to comment on that.

Mr. Brian Kriz (Ex-Officio Member, Alberta Barley Commission): Thank you. I'll just introduce myself. I'm the past chairman of the Alberta Barley Commission, and I farm with my brothers at Rimbley, about an hour and half north of here.

I just want to make some comments about some of the things Michelle said and then address Charlie's question directly on what position we think we should take.

One of the things I want to make clear to the panel is there's a success story out on the prairies that is often missed. I come from a third-generation family farm that started out in the late thirties. My grandparents emigrated from Czechoslovakia just before the Second World War. I grew up on the family farm with five siblings in the fifties, and times weren't very good then. I don't know if we've forgotten that.

If you look around the countryside at the scale of agricultural operations and a lot of the things that have happened, improvements have been made because we've been willing to make some changes. The status quo—some of the rules and regulations we're faced with as farmers are the things that have kept us from getting there in a hurry. We've spent countless hours as individual farmers doing things that are foreign to us, like coming to talk before panels like this and making presentations to governments to ask for some simple deregulation.

If you look at successes out there, they're in the private initiative enterprises, not in the ones that are entirely controlled. The supply-managed sector does not have a very good record of expansion, especially in exporting or competing with their products. The sectors that have been left unfettered, for example, Canadian beef, are doing very well, thank you. They have ups and downs.

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That's the nature of commodity markets. But there's a success story out there, and we'd like government to look at that, and not just at the down-and-out stories.

It is a tough business and it requires a lot of skill and equity. A beginning farmer can't expect to move into a million-dollar operation and pay his bills with the kind of competition that's out there. Most farms are not leveraged very heavily. Standard farms have a lot of equity—they're our neighbours out there. If you're going to enter that industry, you have to realize that.

The position of the Alberta Barley Commission, through a coalition of Canadian barley interests, is that we need to move quicker towards trade liberalization. The nature of trade is moving in that direction. We had no trade agreements not that long ago. Agriculture is just a new part of these trade agreements, and for the barley industry it's pretty vital.

To give you an example, this year the Canadian Wheat Board will export about 2% of the Canadian feed barley grown. With that kind of record, you can see what the state-trading monopoly has done for me, as far as the international export market for barley goes. There are a lot of reasons why they've had trouble sourcing barley this year, but a lot of it has to do with how they access and price, and their monopoly power doesn't enhance that. Malt accounts for 20% of the export total volume of Canadian barley, and they have a monopoly on that. A lot of that is handled domestically through the border or exported directly south by truck into the U.S.

Our position from the malt coalition and the barley coalition is that we move to a zero-for-zero position. I'd like to just take a minute and explain what Glen referred to in our reference paper. Zero-for-zero means we move immediately to zero import restrictions and zero export subsidies. That's a trade rule we'd like to see for barley. That has come about through a coalition of American and Canadian barley interests.

There are four major barley players in the world: the EU, Australia, Canada, and the United States. At this point, the EU is a major problem because their subsidy program is about equivalent to our high-priced barley market in Lethbridge. In other words, the total price for barley in Lethbridge just south of here is around $120 a tonne. The EU subsidy program is $135 a tonne in equivalence.

That is what we're up against in the barley industry. The world trade for barley is completely distorted by what Europe's doing. If we can't move as barley producers in Canada to ask our federal government to go to the next round and change these rules, we won't think we've been served very well.

We are a competitive industry and the Canadian barley producer has a comparative advantage. Our climate and a lot of the things we do as farmers make it that way, but we need these trade liberalizations because we can't allow Europe to do what they're doing, and continue to grow barley as we are.

Mr. Charlie Penson: Mr. Riddell, you've identified how Canada might benefit from the reduction of tariffs outside of Canada so we can access more markets. There's also the business of both domestic subsidies and export subsidies that play a big part in that. I see $2.5 billion is your estimate on the tariff side. Has any work been done to see what kind of potential gain Canadian farmers would make if subsidies were reduced and went to more or less world market conditions rather than subsidy?

Mr. Dale Riddell: That was one of the key assumptions in some of the work we commissioned through the George Morris Centre but have not yet made public. It is therefore the source of my figure of looking at the industry in aggregate of $2.5 billion in gain by liberalizing trade. I realize there are a number of assumptions in that, but it's basically taking a look at what opportunities exist to move products from Canada and into Canada, and what would happen with the flow of those commodities if the barriers were taken down.

Mr. Charlie Penson: The Canola Crushers Association in Winnipeg made a presentation much to the same effect. With the tariffs we're facing into Japan on our oil—and into Korea as well, I believe—they estimated there would be a significant increase in net farm income in western Canada, if that were able to be negotiated on a zero-for-zero basis.

Mr. Dale Riddell: Yes, and zero-for-zero in canola is something the agri-industry trade group has looked at and supports as well.

Mr. Charlie Penson: Okay.

The Acting Chairman (Ms. Sarmite Bulte): Thank you. We'll come back to you in the second round.

Mr. Calder.

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Mr. Murray Calder: Thank you very much, Madam Chair. I've been finding these hearings very interesting. I'm also the vice-chair of the Standing Committee on Agriculture and Agri-Food, and in my other life I am a poultry farmer. So I'm underneath the supply-managed groups.

I find some of the comments I hear about supply management very interesting, because a lot of what I hear at the present time is either a lack of knowledge or misinformation.

For your point of interest, Brian, the supply-managed group, after the last negotiations, switched from article 11 to tariffication, which was something the United States was proposing, and basically we beat them at their own game. Since then, we have been reducing our protection at the border, and we actually have greater access to our markets here in Canada through import quotas than what the United States allows us into the United States. So when you say you want zero tariffs, the United States has a long way to go to catch up to us.

The other thing is, with supply management being underneath the cost production formula, as your commodities have decreased in price, so have ours. Last year I was making about $1.20 a kilogram on the chicken I was shipping off my farm. I'm now down to $1.13. It's reflective of the input costs, and that's how we work.

The other aspect of it, the efficiency of the SM-5, of which I'm the co-chair—and we've already put together our trade negotiating position, which has been adopted by the CFA—is that we are one of if not the cheapest meat commodities on the retail shelf today, which goes to show you the efficiency of the system too.

I noticed in your presentation, Dale, on the EU and the United States, what they have built up in subsidized exports.... Basically I think you're alluding to the carry-forward clause that the Europeans negotiated in 1993. In your estimation, do you think they're going to try to use up those carry-forward subsidies in 1999 and the year 2000?

That is a concern I raised last month with Congress and the Senate in the United States, because at that point it could trigger the United States reorganizing EEP and using that again. That would be one thing I would like you to comment on.

Mr. Dale Riddell: I think it's a real threat that they could do the carry-forward aspect of that business, and we do know they have funds in their export enhancement program, or EEP. It's sort of a veiled threat hanging there that makes us very nervous. We have talked to them at length, both at the American Farm Bureau and with people in the Government of the U.S., and have encouraged them not to, because in our minds that would take us very backward in the whole effort to liberalize trade, which I think by and large most American farmers do support.

Mr. Murray Calder: I would agree with that. In fact, one of the things I've seen with Canada right now is that we have played by the rules while the other ones have debated the rules, from what I could see in the last round. Given the point that when we were down there we appeared in front of the International Trade Commission, the ITC, I asked the commissioner at that point “What's on the table?” He said “Everything.” I asked “Where do you want tariffs and subsidies?” He said “I want them at zero.” Then I said “Okay, Canada currently has a zero tariff on sugar and a zero tariff on peanuts. Does that mean to say you're immediately going to go to a zero tariff to match what we've already done?” We very quickly got into a “yes, but” scenario.

Given that, and given that some of the pollsters from Angus Reid have said—and they've said this basically off the record, but it has been said nonetheless—that Canada is 10 years ahead of the United States in subsidy reduction, when we go into this round right now, do we keep going ahead or do we tread water until they catch up to us? How do we deal with this discrepancy?

Mr. Dale Riddell: I'll take a crack at it, and I'm sure some of my colleagues will want to comment on it as well. Obviously you don't want to be Boy Scouts and do all the right stuff but end up in a bad or a worse situation than we do with those people we compete with in world markets. To continue our escalation down, if others don't follow or try to equalize in some manner, then we're probably not very smart. I think it has already been referred to in some of the other briefs at the table this morning that we need an equalization and an agreement bringing the levels together as we wind these subsidies down, both in the domestic area and in the export area. I think that's clearly the logic we need to follow.

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Mr. Murray Calder: Does anybody else want to comment on that?

Mr. Clifton Foster (General Manager, Alberta Barley Commission): Yes. We've dealt quite a bit with the Americans as well on the barley trade issues. Sometimes I get a little discouraged because they seem to, on one point, want to support subsidized farming within their own country and push for access to other countries. So nobody's pointing to the Americans and saying they're the example we need follow, because clearly they're not.

But as our paper points out, in Canada, in barley, we have $7 per metric tonne of producer subsidy equivalent, according to the OECD's method of calculating it. The Australians have about $8 per metric tonne of producer subsidy equivalent, the U.S. has $40 per metric tonne, and the EU has $135 per metric tonne. So clearly they're oversupporting their barley industry or barley producers compared to here.

That is one of the reasons we feel our government should be pushing for zero-for-zero on barley all across the board. We think barley is doable, because barley is not elite; it's not a major crop in the world. It's not corn, it's not wheat, it's not rice. It's not quite as problematic as some of those. They may be more difficult to achieve. We believe zero-for-zero in barley is achievable, and we think our government should be pushing for that, to set an example perhaps on how all other commodities should be traded as well.

Of course, our hands aren't clean either. In the zero-for-zero proposal, STEs become a problem because the rest of world sees STEs as a problem. Some would argue that they're not trade distorting, but if they're any good or if they do what they say they're supposed to be doing for the benefit of farmers, then they are trade distorting. If they're not, then why do we need them? So STEs are part of this proposal, and not only from the point of view of the exporting STE, but the importing STE as well.

The Japanese Food Agency, for instance, has a serious distortion on exports into Japan. We think that distortion has to be removed as well.

So we think if worldwide, through the WTO negotiation, we can achieve zero-for-zero in barley, we will be making a major leap forward. As an exporting commodity in this country, barley is very important to western economic success, and I would like to see our government get behind this initiative. Our counterparts in the U.S. are also pushing their government to get behind it, and I think we can accomplish this if we get together and push it. But you can believe that the biggest problem is going to be the European Union, and if we're not united in tackling that front, we'll never accomplish it.

Mr. Brian Kriz: I'd like to add that the zero-for-zero is not just a farmer initiative in barley; it is an industry initiative, which is quite unique, because it's not very often that farmers agree with the processing industry. This coalition represents the malt industry in Canada, which is very export oriented and is a growth industry, if we'd let it get there. They're signatories to this zero-for-zero, and that's where we think the push is coming from. There have been some real problems in acquisition, and they're having some real troubles in the export market right now because of this $130 per metric tonne out of Europe.

So we think it's vital and it's also workable, and we'd sure like to recommend to this panel again to use barley as an example. We'd like to ask you to get it done. We're very serious.

Mr. Murray Calder: It's one of the things I've seen from agricultural sectors. As I said, we've put forward a negotiating position for the SM-5. That incorporated also the food processors within that position.

When we were down in February, I attended the Agricultural Outlook Forum, and one of the things I heard when I talked to farmers down there is that there is a major concern now within the United States, from the grassroots level, about vertical integration. You can see Don Tyson, for instance, who has over 30% of the processing share in the States, which is massive. They are now starting to voice those same concerns to their politicians because they are now at the point where they're worried about the family farm.

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The Acting Chairman (Ms. Sarmite Bulte): Mr. Speller.

Mr. Bob Speller: Thank you, Madam Chair, and thank you, gentlemen, for presenting here this morning.

As a little background, I'm the parliamentary secretary to the Minister for International Trade. My responsibilities include dealing with agriculture and agricultural issues. In a former life I used to chair the Standing Committee on Agriculture, before going into the international trade area.

In terms of the solidarity of the different commodity groups, last time around when we were in Geneva, the one thing that impressed me was the fact that the different commodity groups around Canada came together in the end, albeit somewhat late. I know there's some criticism of what you call the balanced position, but it at least showed that the different groups in Canada were on side and they were moving in to get some changes to the trade-distorting practices of other countries.

This time around, though, I feel you seem to be rejecting that in your comments. You seem to be asking the Government of Canada to either choose supply-managed commodities, which are not totally eastern-based...but Charlie may not be aware that there are a number of supply-managed commodities in western Canada also, albeit when compared to you guys they are not very large in size.

One group that has tried to put together a position—and I'm not quite sure what they call it—is the Canadian Federation of Agriculture. They have tried to bring in different groups from across the country. I'm sure you've read their position paper. I'm wondering if you could just comment on their position, on where they're coming from in their trade position, and whether or not you think it's a viable alternative.

The Acting Chairman (Ms. Sarmite Bulte): Mr. Menzies.

Mr. Ted Menzies: I just received a copy of this in Ottawa last week when I should have been home seeding. I didn't get a whole lot of spare time to read it, so I must apologize; I haven't read it. I can probably paraphrase what's in it from their past positions.

Going back to your previous statement that we don't seem to be as amalgamated a group as we perhaps were last time, I would also question how amalgamated we actually were in the final negotiations. It came down to an 11th-hour decision, and I appreciate that those are tough decisions to make when you're trying to finalize negotiations.

Mr. Bob Speller: There's no doubt it came late in the process.

Mr. Ted Menzies: I think we all came late in the process. We must appreciate the fact that we've had the opportunity, the understanding, and the comprehension in the agricultural sector this time around to become prepared, and this AITG is a perfect example of this. We have between 90 and 100 organizations, all the way from producers, including supply-managed groups, grains, oilseeds to processors and exporters all under one umbrella group.

Dale and I and a lot of others have put a lot of volunteer hours into this, trying to come up with...and we knew we weren't going to come up with a consensus. We eliminated the word “consensus” before we ever started, because we knew we wouldn't reach a consensus. We knew there had to be a common position that all these different sectors could come to the table with to take to our negotiators. We had to say that as an agricultural group this is what we think we should be pushing for in this round.

To comment on your statement on our not agreeing with each other, the grains and oilseeds sector felt we were perhaps being pushed into the back corner and the supply management perhaps received a little more attention in the last round. That may be a perception on our part.

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We also want to make sure we are part of the negotiation process this time around. Dan Glickman gave a banquet speech in Ottawa last week and fairly well summed it up: supply management and state-trading enterprises are going to be on the negotiating table whether we like it or not.

We're not just trying to single out the Canadian Wheat Board here; I'm almost sure you're going to see China involved in this next round. It sounds like they will be part of it before it ever happens. COFCO is an import state-trading enterprise, which will be a very important issue on the table. With that, and with the Japanese Food Agency, there are over 200 state-trading enterprises around the world, so we're not just singling out the Canadian Wheat Board. Going back to what Clif said, if we let the marketplace dictate the prices, then we don't need the state-trading enterprises.

We can argue efficiencies between the supply management and the grains and oilseeds sectors, but I would like to suggest that perhaps grain producers are more efficient, because we're living on today's commodity prices, which are about the lowest they've ever been in history in real dollar values. We're not getting rich, but we are surviving. And we don't work on a cost-of-production basis; our prices aren't dictated by our cost of production.

We could argue that one all day, and probably, Mr. Calder, you and I would never agree on that one.

Mr. Murray Calder: I think you're right.

The Acting Chairman (Ms. Sarmite Bulte): Mr. Riddell, would you like to add something?

Mr. Dale Riddell: I would just like to add that we do have a variety of members, as Mr. Menzies has suggested, some having supply-managed interests and others having export interests and so on. The discussions thus far have been that most of the members feel there's a huge opportunity in gaining market access, and they want us to go aggressively after that with a lot of vigour this time.

At the same time, we've wrestled with the fact of how we can say we want access to somebody else's resident and not give them access to our resident when you develop trade, and that's really what it boils down to as the difficulty. Thus, we've tried to look at the total market and the economic benefits...and therefore the study I made reference to earlier.

I would just like to note that AITG is still wrestling with its position on the state-trading enterprise. I didn't want to have you confuse Mr. Menzies' statements with what AITG has actually agreed to.

I'm being fair to our members in saying that the members generally agree that there needs to be an establishment of some rules and disciplines in the wording of the next World Trade Organization...so that we know what state-trading enterprises, whether they're export or import, should be covering so that there is a fairness in how they operate. That's about as far as we went. As mentioned earlier, we intend to submit more material to you when we continue that refinement in the AITG group.

The Acting Chairman (Ms. Sarmite Bulte): Michelle Melnyk.

Ms. Michelle Melnyk: I found the discussion about the U.S. and the EU and Canada like playing a game of ball where you have the two big guys on the end. They're throwing the ball overhead, and little Canada keeps trying to jump up and catch it.

I'm not sure why we should go to a negotiating table with the position that we are going to give all of this away slowly if they give us a morsel every time. The United States imports/exports everything we want to import to them to access their own markets. I'm really curious about this notion about going after market access without ensuring that there's market power to back it up.

The Acting Chairman (Ms. Sarmite Bulte): Do you wish to comment, Mr. Kriz?

Mr. Brian Kriz: This zero-for-zero position gives you both because it is the elimination of export subsidies and import tariffs. That's a far cry from giving it away. We don't have that kind of access with the subsidies and with the tariffs. That's our position, and it does move to trade liberalization, which is what we think this next round is about.

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The Acting Chairman (Ms. Sarmite Bulte): Mr. Foster, you had a comment?

Mr. Clif Foster: Yes. I'm going to speak to Bob's comments on the balanced position, and I've always had a less flattering analogy for that. It's like sucking and blowing at the same time.

You can't take a position where you're trying to protect your markets, domestic markets, and try to get everybody else to open up theirs. It's just the opposite sides of a continuum. So what we're trying to say is we don't want to be sacrificed for the supply management end. We don't want to make even a comment on supply management, for that matter. You have your own problems.

I was in that business, and you're not laughing all the way to the bank either, and there's no question about that. But the system that's developed has I think generated a fairly introverted industry, whereas the grains industry and the pork industry and the beef industry are all export-oriented, so we're looking for markets.

We're also looking for fair markets that aren't distorted by the issue of subsidies. If we could accomplish that, to get these subsidies out of the way.... In fact, the whole question of the Canadian Wheat Board is dwarfed by the magnitude of the EU subsidies in the barley market right now—dwarfed.

If we could accomplish at least that, then we've made a major breakthrough in world trade, and I think it's doable for barley.

The Acting Chairman (Ms. Sarmite Bulte): Mr. Speller?

Mr. Bob Speller: No, that's fine.

The Acting Chairman (Ms. Sarmite Bulte): We have two more on the second round, Mr. Penson and Mr. Calder.

Mr. Charlie Penson: I just want to pick up on some of the comments Mr. Calder made and get your reaction from the panel. We've played by the rules under the WTO and other countries haven't, and I've heard Murray make these comments before.

I just want to challenge them in the fact that in the Uruguay Round all we were able to achieve, as I said earlier, was a modest start. So there was this formula that all countries had to agree with, and Canada has gone faster than we needed to in reduction of subsidies, the Crow benefit and the GRIP program. All of those were given up, but largely it was done for different reasons, budget reasons, whatever.

By the way, we still have some $300 million in dairy subsidies that don't often get mentioned, and they haven't got phased down very quickly like the GRIP program did.

Mr. Murray Calder: Not for chickens.

Mr. Charlie Penson: No, not for chickens—dairy. But in any case the point I'm making I guess is that the United States still uses the export enhancement program—we've seen some of that barley land right here in Alberta in the last little while—but they are within the framework of the first six years, as are the European Union.

I guess what I'm saying is it just points out, to me, the need to move far beyond that, because the original base year that was used to establish those original cuts was 1986, a very, very high year in terms of subsidies in the world, and therefore we just have this modest start. So we haven't seen much gain.

On the other side, Canada has got rid of subsidies in agriculture, which I don't disagree with. But let's put it where it is—we are all within that framework.

On the question of exempt industries like sugar and peanuts in the United States, it's sort of the equivalent of what Canada was able to keep in supply management. They have prohibitive tariffs on those products just as we do with our supply management industries. I'd also point out that the United States has significant subsidies—state-level subsidies, school lunch programs, dairy herd buyouts, and all of that in the dairy sector—that would restrict our access into that market in the event, and I'm concerned, in the event that we do get hit if these big tariff spikes are attacked this time around, which I think is a very distinct possibility. How can we prepare ourselves to look for other market access, because we haven't put on the table that we need to address these subsidies that are not necessarily at a federal level but at a state level?

The other point I would just ask about—I asked it a little bit earlier—is cooperation with the United States in order to try to get some resolution to these high domestic subsidies and tariffs. It seems to me the European Union has a social policy where they've maintained high levels for different reasons.

• 1135

The other countries, like the Cairns Group, and I would suggest even the United States, have largely responded because we don't want to get frozen out of those markets. I think we have a natural ally in working with them in order to achieve this.

I just came back from Montana last weekend, where we had discussions with three senators, and it seems to me we have that. I'm wondering if your organizations are willing to push and work with them to help resolve this issue where we have $60 billion, $70 billion of European Union subsidies—it's not just them; it's the United States as well—to try to resolve the whole question of subsidies that are largely hurting our farms.

The Acting Chairman (Ms. Sarmite Bulte): Mr. Riddell.

Mr. Dale Riddell: Yes, we have been looking for other markets, to answer your question directly. Also, on the issue of working with the people in the United States, we, at the encouragement of Mike Gifford, one of the key federal negotiators for Canada, have developed a strong relationship with the American Farm Bureau Federation—as I know the Barley Commission here has with farm groups down there as well. Quite frankly, I think that's a smart thing to do, and we need to keep it fostered and managed so that we do work together.

Just as a good example, when the recent border skirmish came up and some of the American farmers were stopping Canadian trucks from going in, we were able to talk with the American Farm Bureau, which is like-minded on the importance of market access between the two countries. They did us a lot of good, in my mind, by standing up within their own country and as a farm group in the United States, saying this is not right—the action that was being taken at the border, the action that was being taken in North and South Dakota, to put non-tariff barriers on Canadian products. We recognize that as positive, and in turn we've tried to take some action to get around some of the concerns the American farmers have about accessing Canadian markets.

For example, some of our members have designated delivery points in Canada, showing good faith about the movement of American grain into Canada. In fact, some of our members have moved grain and are moving grain from the U.S. into Canada to show that it indeed is a two-way traffic. And that's the way it has to be.

The Acting Chairman (Ms. Sarmite Bulte): Mr. Foster.

Mr. Clif Foster: I'd like to make a comment that we're working quite closely with our American counterparts, the barley producers, the industry. We had a meeting in Banff last September, while the border action was on, and we had over 50 organizations, mostly farm groups from Canada and the U.S., sitting down to discuss this very issue of the cross-border trade with the U.S. In fact, out of that discussion came the proposal for zero-for-zero, among other things.

Much of this has been shared with the government already in terms of trying to harmonize our pesticide and other issues, and there's been a lot of movement in that area. But the zero-for-zero idea came out of that grain summit, and we have since been moving it along.

I couldn't agree with you more that we need to work with our American counterparts to start to build a coalition that will grow throughout the world to actually be a grassroots type of structure rather than government-imposed disciplines.

But in the area of the European community, I think we have to be cognizant of a couple of things, and it applies in the U.S. too, where their subsidies have been much higher than they have been in Canada. Because we haven't had much subsidy in Canada, we've become very lean and very mean.

Mr. Charlie Penson: We're lean, I think.

Mr. Clif Foster: We're pretty darn good and pretty darn competitive in the world marketplace. But in those other countries they've been getting much fatter subsidies, and what's happened is they've capitalized those subsidies into the price of their land. As a result, they're locked in and now they're faced with the problem of how the hell do they get out of these subsidies? How do they make them less trade-distorting, less production-distorting and market-distorting and still maintain some semblance of a farm community? The more you subsidize farmers the more they're just going to turn around and plough it back into the land.

Mr. Charlie Penson: Mr. Foster, I'm sorry, I just want to make a suggestion. I agree with you, that is a big problem, and we know there are farmers in Europe who are hurting as well. But it seems to me we have a great opportunity now. The European Union is in the process of expansion, taking in some new member countries—five new member countries hopefully in the next five years, and then five more after that.

• 1140

The production that could be generated from such countries as Poland is immense. They know they have a problem if they're going to apply these big subsidies to all that agricultural production.

I'm suggesting that the timing is right for us to work together with Australia, the United States and other countries to put some pressure on. It gives the European Union a little bit of an out. They can say, well, we didn't like to do this, but this international agreement we signed forces us to do it. They know they have to, but politically, it's very tough to sell.

I'm wondering what you think of that.

Mr. Clif Foster: I couldn't agree with you more. That's why we're pretty excited that it's a zero-for-zero situation for barley. We think it's doable.

I think the Europeans might look to us to say, okay, maybe that's our way to get out of this box. If it can work for barley, then in time they may expand it to other commodities as well.

Now, there is a move to decouple farm subsidies from the commodities in Europe. To some degree that would also fit with more openness towards a concept like zero-for-zero, albeit the need to be careful that decoupled subsidies just keep farm production in production.

So it may be less distorting, but it's not entirely not distorting.

Mr. Charlie Penson: But if there was a subsidy essentially to farm that wasn't linked to production levels, wouldn't that lead to probably lower...? Right now our biggest problem is that they overproduce, and that surplus is dumped onto the market at depressed prices, which we have to compete with.

Not only do we not have the problem of not being able to access the European Union countries' market but we also have the bigger problem, I think, of what it does to the world market.

If that payment was made directly to them rather than based on so much per acre or so much a bushel, wouldn't it reduce the overproduction?

The Acting Chairman (Ms. Sarmite Bulte): I think Mr. Kriz would like to make a comment.

Mr. Brian Kriz: As a farmer, I want to answer that. If you give extra dollars in the spring, I'm going to buy more fertilizer. I'm going to use better technology and better-priced seed, and I'm going to grow more. That's the nature of the beast. Those dollars will translate into a few new pickups, but they do increase production.

The Acting Chairman (Ms. Sarmite Bulte): Mr. Foster and then Mr. Calder.

Mr. Clif Foster: I agree with Brian, but to some degree, I think, if you pay people to do nothing, they may just do nothing.

Mr. Charlie Penson: [Inaudible—Editor]

Mr. Clif Foster: Nothing against farmers; I think they may just try a little less to be more productive than.... I'm saying generally speaking. I'm not casting.... I agree; there's a lot of people like Brian, who try to do a better job, but I think there's a lot out there who might do less.

I think the point is, if you decouple the support payments to farmers from the commodity, it would be less distorting than having them directly related to the amount being produced by that farmer, which gives him an incentive to produce more. At the same time, though, don't lose sight of the fact that it's going to keep farm production in production that maybe should not be in production.

So we can't look at that as being the answer.

The Acting Chairman (Ms. Sarmite Bulte): Mr. Calder.

Mr. Murray Calder: Thank you very much, Madam Chair.

As you've probably picked up, Charlie and I agree to disagree on a regular basis here.

One of the things I have noticed...and I was involved when we came in, when I was first elected in October of 1993. Quite frankly, that was something I never want to go through again. That's why we're here, and that's why the Standing Committee on Agriculture and Agri-Food is travelling, and the international trade committee is travelling: We're ready to hit the line this time instead of this eleventh-hour business.

One of the things that was supposed to happen is that the principle of low prices will stop low prices. In other words, you can't produce something at a loss for a period of time until the bank owns you. That round of negotiations was supposed to stop low commodity prices. It was supposed to stop trade wars. It was supposed to do a whole bunch of different things.

We know right now, sitting where we're at, that has not happened. Obviously, subsidies are still there, at the same level they were at in the mid-eighties.

Just to reinforce that, I know last year the United States, through the FAIR Act, through Farm Aid, through the Farm Debt Review Act, put into their local farm economy about $15.2 billion for 1998. Europe must have put in the same amount of money to take and counteract that, or the United States was counteracting what Europe was doing.

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This is what we have to take and deal with.

Mr. Charlie Penson: We agree on that.

Mr. Murray Calder: Yes.

In that situation, then, it's a fact: We are the leaders on this. I come back to the point of what is the most effective way, when we get into these negotiations, of us turning around and bringing both the EU and the United States, putting their feet to the fire, and saying, look, guys, we've been playing by the rules, and we went down by what the rules dictated, while you, in turn, have been debating the rules.

The Acting Chairman (Ms. Sarmite Bulte): Comments?

Mr. Menzies.

Mr. Ted Menzies: I don't know if I can agree with you wholeheartedly, although I don't mean to say I disagree with every statement you've made here this morning.

I think those countries have cut back, but I guess when you look at it in perspective, their subsidy levels were up here, and everybody agreed to cut back by 6%. Well, if you cut back 6% of this high a pile, where we're cutting back 6% of this high a pile, ours looks like we cut back more. But when you talk percentages....

There are tribunals out there that have studied these. There are people who have requested studies on these. There have been dispute settlements.

I'm not trying to protect the European Union; don't get me wrong. I feel they're over-subsidizing enormously. But I think a lot of Canadians say, well, why should Canada cut back on their subsidies when these other guys aren't doing anything?

It's such a negligible amount that you see, but I think they actually have cut back.

Mr. Murray Calder: But don't you think, Ted, that what they've been doing is to pull from this pile right here, saying, “This is what we've cut back”, and then put it into another pile over here that's brand new? The same thing trickles down.

Mr. Ted Menzies: But are we not doing the same thing by protecting supply management—

Mr. Murray Calder: No.

Mr. Ted Menzies: —and saying that we want open exports to the other?

Mr. Murray Calder: No. If you want to take a look at our industry right now, we've already reduced tariffication over the schedule that was laid down.

Inside this country, in the poultry industry, for instance, the feather industry itself does not collect dollar one in subsidy from the federal government. If you take a look at the dairy industry, the subsidies that were paid to them have also been diminished. It's heading very quickly towards a zero situation.

If you take a look at our industry, all of the so-called SM-5 have now adopted an export policy where we're actively looking at exporting internationally. We've done that in conjunction with our processors.

Even within the poultry industry, for instance, in Ontario, although I can't cite the numbers here, I know within Ontario in the late eighties we had approximately 750 growers. We're now sitting at nearly 1,200.

So we're growing. There are new barns going up in Ontario all the time, and I would imagine there will be new barns going up here as well.

Mr. Ted Menzies: I guess the one comment I would make—and this is going back to some of Mr. Penson's comments about an alignment with the United States—is that it is imperative that we stop fighting back and forth across this 49th parallel. We are too small to have much clout in this international market. We need an ally, and we need a big ally. They can be an ally. Just because we have a border across the middle, it doesn't mean their marketing opportunities or their marketing problems are any different from ours.

I think the work done by the Reformers last weekend was a tremendous gain. I understand you're going to try to bring them up to visit the farm progress show in June. That's a great opportunity. Perhaps some of the producer organizations can be part of that.

Mr. Murray Calder: If you listened, Ted, to the Minister of Agriculture, you'd know we did that five months ago.

Mr. Ted Menzies: I think it has to be ongoing.

The Acting Chairman (Ms. Sarmite Bulte): Thank you.

On behalf of all the members of the committee, I would like to thank all of you for coming, for your presentations, for your briefs, and for engaging in a dialogue with us.

We also hope this is the beginning of a consultation, and that our consultation will be ongoing. If there are any additional concerns you wish to share with the committee, please feel free to do so by either sending them to the clerk or contacting individual members of the committee.

Thank you for coming. We appreciate your participation.

The meeting is adjourned until 1 p.m.

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• 1311

The Acting Chairman (Ms. Sarmite Bulte): Good afternoon, ladies and gentlemen, and welcome.

We're delighted that you're here to present to the Standing Committee on Foreign Affairs and International Trade as we examine Canada's priorities as we head into the WTO and FTAA negotiations.

Since you're our last panel for the day, I'm going to give my colleagues the opportunity to quickly introduce themselves to you.

Mr. Penson.

Mr. Charlie Penson: I'm Charlie Penson, member of Parliament for Peace River and trade critic for the Reform Party.

[Translation]

Mr. Benoît Sauvageau: Good afternoon. My name is Benoît Sauvageau and I am the MP for the riding of Repentigny.

[English]

Mr. Bob Speller: I'm Bob Speller, member of Parliament for Haldimand—Norfolk—Brant in southwestern Ontario. I'm also parliamentary secretary to the Minister of International Trade.

In a previous life, I chaired the agriculture committee of the House.

Ms. Colleen Beaumier: I'm Colleen Beaumier, member of Parliament from outside Toronto. I'm just trying to make the alienation connection here.

I'm also chair of the subcommittee on international human rights.

The Acting Chairman (Ms. Sarmite Bulte): I'm Sam Bulte. I happen to be an MP from Toronto; Colleen's been setting me up like this all week.

I have the privilege of chairing the western hearings. As well, I'm chair of the international trade, trade disputes and investment subcommittee.

Welcome, all. Who will begin? Is it Mr. Beattie? Great.

Thank you, Mr. Beattie, for the pen.

Mr. Benoît Sauvageau: Oh, yes, thank you for the pen.

Mr. Bruce Beattie (Milk Producers Spokesperson, Poultry and Dairy Industries of Alberta): You're very welcome.

On behalf of the group and our industries, I'd like to thank you very much for the opportunity to meet with you today and to present some of our positions relative to the upcoming round.

We recognize the importance of the round we're going to be involved in and also the importance of Canada developing a strong and unified position within agriculture. We want to be part of that unified position that we take forward into the talks.

To introduce myself, I'm Bruce Beattie, a dairy farmer from Sundre. I've been a dairy farmer for about 28 years. Sundre's about an hour and a half northwest of Calgary.

I'll have my compatriots just introduce themselves.

Mr. Don Sundgaard (Chicken Producers Vice-Chairman, Poultry and Dairy Industries of Alberta): Thanks, Bruce.

My name is Don Sundgaard, and I farm about 60 miles east of here. This morning about four inches of snow was on the lawn when I left, so I almost have to say “Merry Christmas” to you.

The Acting Chairman (Ms. Sarmite Bulte): Maybe it is Christmas; I know we've been travelling for a long time.

Voices: Oh, oh!

Mr. Don Sundgaard: Getting back into the season, I understand it will melt, and we'll get some seed in the ground.

I'm a third-generation chicken farmer as well as a small grain producer in the area.

Mr. Tony Wooldridge (Egg Producers Chair, Poultry and Dairy Industries of Alberta): My name is Tony Wooldridge, and I'm an egg producer. I farm west of Okotoks, which is southwest of here, with my family.

We're very pleased to have this opportunity to speak to you today. We hope we can accomplish something.

The Acting Chairman (Ms. Sarmite Bulte): We're delighted to have you with us.

Tina.

Ms. Tina Notenbomer (Hatching Egg Producers Board Director, Poultry and Dairy Industries of Alberta): My name is Tina Notembomer, and I am a producer and a hatching egg producer. We farm near Lethbridge, which is about an hour and a half south. We've been producing hatching eggs for about 20 years.

I also am very pleased to be here.

The Acting Chairman (Ms. Sarmite Bulte): Thank you.

Mr. Enarson.

Mr. Dale Enarson (Turkey Producers Chair, Poultry and Dairy Industries of Alberta): I'm Dale Enarson. I run a poultry operation raising primarily turkeys but occasionally flocks of chickens when there's quota available and when our barns happen to be free. We run a third-generation poultry operation.

When you think of turkey, gobble it up.

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The Acting Chairman (Ms. Sarmite Bulte): Oh, I love turkey.

I'm going to use this opportunity to introduce Mr. Calder—it seems appropriate that he's actually introduced. He is a member of the committee, but....

Murray, please introduce yourself.

Mr. Murray Calder: My name is Murray Calder. I'm the vice-chair of the Standing Committee on Agriculture. I'm from central Ontario, and in my other life I am an active chicken farmer. So you've got competition, Dale.

The Acting Chairman (Ms. Sarmite Bulte): Mr. Beattie.

Mr. Bruce Beattie: I hope we won't bore you. We have a short four-page presentation that I'd like to go through and read. After that, any of us would be very pleased to entertain any questions you might have, and perhaps we can shed some light on our feelings about the trade negotiations and where we stand on them.

Dairy, egg, chicken, turkey, and broiler hatching egg producers of Alberta welcome this opportunity to present our views on the agricultural negotiations of the World Trade Organization to the committee. The future of our farms depends on these negotiations. We will rely on our members of Parliament and government trade officials to represent our interests during the negotiations so a strong, healthy agriculture for Alberta and Canada can be assured. Poultry and dairy farm gate sales in Alberta total about $505 million a year. This represents about 14% of total livestock cash receipts for Alberta.

Besides being of economic importance to our rural communities, our industries are also important to the well-being of our major cities. For example, Lilydale, headquartered in Edmonton, ships out 147,000 dozen Canadian eggs and 2.6 million kilograms of Canadian turkey and chicken a week. In major centres across Alberta, Dairyworld Foods processes over 8 million litres of milk a week for the fresh table market, as well as a variety of cheeses and other dairy products.

Poultry and dairy industries directly employ many Albertans. For example, Lilydale and Alberta's milk producers alone employ 5,200 people. Our industries also indirectly employ many more thousands of Albertans. For example, it is estimated that the whole dairy industry provides employment for over 10,000 Albertans in the retail and food service sector, in feed and equipment manufacturing as well as a host of service industries.

The dairy and poultry trade position on the multilateral agriculture negotiations is fully consistent with that developed by the national supply management organizations representing us. We were consulted in the development of the national position, and endorsed the position during the recent national trade workshop attended by producers and directors from across Canada.

Our position can be summarized in six brief sentences: Export subsidies need to be eliminated. We need fair rules that apply to all countries. Over-quota tariffs must be maintained. We need clean in-quota access. Domestic support should have some limits. Sound science must be the basis of sanitary and phytosanitary rules.

In terms of export subsidies, government-financed subsidies used to export primary commodities and processed food are the most distorting to world trade. The United States and the European Union have become experts in using these subsidies. For example, they subsidize 99.4% of all the world's subsidized poultry exports. Canada, on the other hand, has eliminated its export subsidies. The end of the western grain transportation assistance is an example of Canada's commitment to eliminating these export subsidies. We need fair rules that apply to all countries. The next round of negotiations must achieve a true rules-based system. These rules must be binding and enforceable, not guidelines that allow countries to interpret them to their benefit.

This is particularly true in the case of market access. In the Uruguay Round, market access commitments were established according to a series of guidelines, and the end result is that market access opportunities offered by WTO countries are today very unequal. A good example of that is the specific tariff for ice cream to Jamaica that the United States offered, and clearly Jamaica is not a major producer of ice cream in the world market.

Over-quota tariffs must be maintained. Tariff equivalents must be maintained at their current level to ensure an equivalent effect for the border measures that have been provided under GATT article XI. Predictability in the levels of imports is essential to the maintenance of poultry and dairy industries in Canada. One of the key principles of the WTO is to create a stable and predictable trade environment. The reduction of over-quota tariffs is contrary to this principle.

Predictability can only be achieved through access offers under TRQs that are unimpeded and fully achievable. To this end, Canada's egg, dairy, and poultry farmers support reducing all in-quota tariffs to zero.

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Fluctuations in exchange rates, the use of export subsidies, and overly generous domestic support programs by our competitors require that Canada maintain its over-quota tariffs so that the level of access can be determined.

We need clean in-quota access. A good way to enhance market access worldwide is to reduce to zero the tariffs on the 5% quota access levels established under the Uruguay Round. Sadly, some countries still have restrictive tariffs on this access.

Specific rules on the administration of tariff rate quotas will also increase access. Right now, each country may choose its own methods to administer TRQs, which can and does impair access. They can jiggle the administration by assigning a TRQ to a country that does not supply the goods in question. They can impose limits on shipments. They can assign the import rights to organizations that have no incentive to import.

In terms of domestic support, we support the imposition of a cap on total domestic support, including amber, blue, and green programs. Both the European Union and the U.S. have been able to manipulate guidelines to shift subsidies from the amber box, which must be reduced into the green box or the blue box.

Sound science must be the basis of the sanitary and phytosanitary rules. If sanitary and phytosanitary measures are not based on science, countries can use them disguised as trade barriers. Indeed, this is already happening. The EU, for example, prohibits imports of poultry chilled in chlorinated water. As well, New Zealand and Australia do not permit the import of raw unprocessed poultry products.

In conclusion, Madam Chairman, our industries are offering a sound and credible position—an aggressive position—that Canada can take to the WTO negotiations. It is a pragmatic position that offers achievable measures to improve access and increase fairness.

We look to your support and welcome any questions or comments you might have. Attached to our brief is a copy of the SM5 position, which we have all endorsed within the province.

The Acting Chairman (Ms. Sarmite Bulte): Thank you.

Would anybody else like to say something before we open it up to questions? Please feel free to take this opportunity to do so.

Mr. Sundgaard, please.

Mr. Don Sundgaard: Thank you, Madam Chair.

Having been a third-generation chicken farmer, I go back before the days of supply management and I can relate to where we were at. Having seen those days, I can say that I doubt very much that we'd be here as a viable industry in chicken if we didn't have supply management. I can recall days when chicken was shipped off our farm and my father—like the other farmers—did not have enough money to pay a lot of the input costs, let alone make any money for himself.

Perhaps Murray can reflect on that. I'm not sure how far back he goes.

Mr. Murray Calder: [Inaudible—Editor].

Mr. Don Sundgaard: Okay. Well, you're on the same page I'm on.

Mr. Murray Calder: Yes.

Mr. Don Sundgaard: This is in support of the government. They've already stated their position. They support supply management. We in Alberta are no different from the rest of Canada.

The Acting Chairman (Ms. Sarmite Bulte): Are there any other comments? Mr. Enarson, please.

Mr. Dale Enarson: Thank you.

Along the same lines, I had a very interesting experience. I was vacationing in northern Canada up at Watson Lake and was set to fly into the territories, just north of Nahanni National Park. I was visiting with a bus tour that came through there and got chatting with some Americans who were on this bus tour. We started comparing notes. I said I was a poultry farmer and this fellow said that was interesting, that he was a turkey farmer too. I said that I raised turkeys and as we were comparing notes, he said that he “used” to be a turkey farmer.

When I asked what happened, he said that he had been running so many thousand birds a year but was a small producer compared to many, and one of the major multinationals who kind of dominated the area told the processor, “Next year, you will buy only our product or you will get none of our product.” This is reality.

Unless there is some kind of rules situation where the little guys like us can be involved in this industry, we will be toast. Without supply management...our poultry and dairy sectors will still exist, I agree. There will still be cows milked and there will still be eggs picked, but it won't be the individuals from the farming community who will be benefiting from it.

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Thank you.

The Acting Chairman (Ms. Sarmite Bulte): Anyone else? If not, I'll turn it over to questions, starting with Mr. Penson.

Mr. Charlie Penson: Thank you, Madam Chair.

I'd like to welcome the panel here today.

I just want to explore a couple of areas. In the upcoming round of trade talks, agriculture is mandated, of course, and so are services, but there is a movement afoot to try to expand that into a general round. I'm just wondering if, from your industry's perspective, you would consider that a good thing. Or would you like to keep the negotiations just to agriculture?

The second area has to do with whether the supply management industry is being realistic in this upcoming round. The Uruguay Round, as you know, established tariffs, and I think the general principle at the WTO, at the GATT at that time, was to establish tariffs and then try to phase them down. We do know that although we've had six years there are still some pretty high tariffs, especially in the dairy industry, where it is something like 300%. Other countries have essentially filed notice that they're going to be looking for tariff spikes in whatever area and trying to negotiate them down.

My concern is that.... I understand where your industry is coming from. You want to maintain what we have—no reduction in tariffs. But I just wonder if you're prepared for the eventuality that it may not be the case. We're one of 134 member countries at those negotiations, and even Canada.... Some of you probably were here earlier and heard the other concerns from the grain-oilseeds side about looking for market access. I'm just wondering what would happen to your industry if we came home with half the tariff protection that we have had. I understand that there would be a process and that time would be allowed to accomplish that.

My concern is that if we're looking for market access in general, why don't we take to those talks the fact that a country like United States has probably just as much restriction in market access as we do? Theirs is in a different form. Theirs is in subsidy, in school lunch programs and in state level subsidies and all of that. I don't think anybody has talked about the need to force them to the table to talk about those issues and give up market access, and I'm just concerned that if we come back from those negotiations and you don't have that tariff protection.... Where would that leave your industry?

The Acting Chairman (Ms. Sarmite Bulte): Who wants to answer it? Mr. Beattie? Mr. Sundgaard?

Mr. Bruce Beattie: Thank you.

I'll maybe touch on the second question first, the question relative to how realistic the position is. When I think about what Canada should be doing as far as approaching these next rounds, I think we have to keep in mind that (a) they are negotiations, so we should start with a position that is as strong as we can start with.

One of the points made in our little supply book is that it's first things first. When we look back at what happened during the Uruguay Round, where we talked about access, we've never achieved that level of access. Our concern is that there are these issues of access, of domestic support and those types of things, which have a much greater impact on trade and on world prices than do our import tariffs.

For example, there is the type of tariff that the oilseeds face, for example, in going into Japan. It is a tariff, as we know, that increases as the product becomes more processed.

Mr. Charlie Penson: Yes.

Mr. Bruce Beattie: We're absolutely in favour of eliminating those types of tariffs. We think that's inappropriate. We should be getting rid of them. We support that. In fact, we support the zero-for-zero concept as well. If oilseeds can come to an agreement, we think that's an excellent way to approach it.

The trade conference was interesting. I was sitting with a fellow by the name of Bob Weaver, who is with the Canadian Meat Council. He was talking about the tariff on beef, which is about 35%. That 35% tariff effectively keeps out some of the competitive beef that would normally come into Canada. So that's an effective tariff of 35%, and it's just as effective as a tariff of perhaps 300% on a dairy product, simply because of the kind of support there is, whether it's currency fluctuations, domestic support, or those types of things. So it's hard to say that a 300% tariff is any more protective than a 35% tariff when you have to take those different points into account.

• 1330

Mr. Charlie Penson: I agree. It would be the level that would stop the importation, whatever that would be.

Mr. Bruce Beattie: That's right, and the basis of supply management is that we can manage what we have coming in. We have 2,700 tonnes of butter coming into our country this year under our TRQ, at zero tariff. We accept that, because we know it's coming and we can deal with that. Our problem arises when we have a great influx one year, and then the next year perhaps none. Not only will that create problems for our producers, but it may well create a lot of problems for consumers, because all of a sudden either the product isn't on the shelf or the product has gone up by 20% or 30% in price.

So there are a lot of benefits to being able to understand what's going to be coming into the country, what the volumes are going to be, and then dealing with that, rather than taking a wild guess. That's really how we base our industry. Just as with our chicken producers, when the chickens are laying eggs, you don't tell them, “Sorry, we don't need an egg tomorrow”, I can't go to my cows and say, “Well, I'll just turn that cow down a bit, because I don't need that milk.”

I really relate well to what Don was talking about, because I started out without supply management as well, here in Sundre. I used to ship cans to the local creamery, and he'd say, “Well, I'll have 11 cans today, but tomorrow I only want eight.” So I'd have to go and explain to the girls that I'd only need eight cans of milk the next day.

Voices: Oh, oh!

Mr. Bruce Beattie: Unfortunately they wouldn't listen, so I'd have to separate it, give the cream away, and I used to give the skim milk to my neighbouring pig farmer.

So I saw that kind of thing, and I've seen the kind of stability that supply management and the system have brought to our industry. That's why I really support the idea of maintaining those tariffs. Let's get the other things in place before we go to the world body and say we're prepared to change our system. We should say, “Give us some honesty in the way you run your system, and then we'll talk.”

Mr. Charlie Penson: Mr. Beattie, I understand your position completely, and I understand not wanting to pre-negotiate anything away, but I'm concerned. Is anybody addressing the issue of market restrictions that we might have to look at?

The Canadian government may go to these negotiations and say, “We're supporting our supply management”, but there are 134 member countries, and there's pressure. So in the event that something happens and they're not able to hold that line, as they weren't able to on article XI, what are we doing to look at access into the border country where there may be some potential? Are you pushing the position that the U.S. subsidies should be reviewed? I've never seen this anyplace.

Mr. Bruce Beattie: Certainly both export subsidies and domestic subsidies are areas we want to see reduced. We want to eliminate export subsidies and have a definite cap on domestic subsidies.

When you go into the United States and start talking to their producers down there, you find they aren't doing particularly well. I thought it was interesting when Mr. Glickman made the comment that in spite of the tremendous increase in exports, they have big problems down on the farm in the United States, because the producers aren't getting the returns. That's because of their system, and they have to end up giving them money.

As for producers in our industry, it's been a long time since dairy producers or chicken producers have gone to governments and asked for money.

Mr. Charlie Penson: So the domestic subsidy you're referring to in this brief then would be that type of subsidy I'm talking about.

Mr. Bruce Beattie: Absolutely.

Mr. Charlie Penson: Okay.

The Acting Chairman (Ms. Sarmite Bulte): Mr. Sundgaard, if you want to add something, please go ahead.

Mr. Don Sundgaard: Sure. I'll just add something from our chicken perspective.

As you may or may not be aware, a considerable amount of U.S. chicken comes into Canada. They rank around the fourth- or fifth-largest quota-holder in Canada, which is equal to or a little bit greater than Alberta, for example. True, it doesn't come all into western Canada—central Canada has the greatest pressure from the U.S. production—but it does spill over to western Canada vis-à-vis other production, whether it's in Ontario or Quebec. It's more of the Canadian market than it used to be 10 or 20 years ago. Chicken goes from Alberta all the way down to Newfoundland, and Quebec chicken comes all the way to Alberta.

There is a predominance of U.S. chicken here. When I say U.S., I realize that's maybe defining it a little bit more narrowly when we're talking about the WTO, but being that they are our biggest and closest neighbour, when we're talking about chicken, that's where our greatest trade force and challenge is.

• 1335

Mr. Charlie Penson: Have we given more TRQ, more than 5%, in the chicken industry? My understanding is that under the quota or whatever it is—minimum access, anyway—we've raised the level in dairy from 3.5% to 4.5% or 5%. Is it higher in the chicken industry?

Mr. Don Sundgaard: I'm not positive of what the numbers are, but they used to be between 7% and 8%. Maybe Murray is more aware of what it is.

Mr. Dale Enarson: You've received these little booklets. If you turn to the second page, you can see in the bottom right corner it identifies the estimated market access for poultry as a percentage of domestic consumption for the year 2000. You'll find Canada's market is already 21% supplied by foreign product in hatching eggs, 5% in eggs, 7.5% in chicken, and 5% in turkey. If you compare that to the access available in the European market, they have significantly less than that.

Also, all kinds of games were played under these guidelines in the last GATT talks, and we can't allow that to happen in the new WTO round. Countries supposedly give access, at least on paper, but then they impose all kinds of funny rules. Maybe you've heard some of these statistics before. Reference is made in our brief to some of these SPS regulations that come in on things. For example, chicken going into Australia has to be cooked for two and a half hours at 70 degrees Celsius. I don't know what you like to chew, but I wouldn't be able to chew that.

So we have a situation where countries say they're giving 5%, but the fill rate on that 5% is negligible in many cases.

If you look at what Canada has said we are granting, we are granting it. We can't be the leader of the boy scouts at this next round of the WTO talks, saying, “Here we are. What do you want from us this time?” We did take a leadership role in the last round, we did open our markets, and we are allowing a true filling of what we did offer, whereas other countries.... They're doing what they said they would under the “guidelines”, but under the rules, in the future, there has to be true market access. If you want market access, let's make it clean, let's make it pure, let's make it something that is available and truly fillable by other countries.

Let's take pork, for example. If Europe would actually give a true 5% on pork, can you imagine what would happen to the Canadian pork industry, which currently is in terrible shape? It also happens to not be a supply-managed commodity, in case you didn't remember.

Voices: Oh, oh!

Mr. Dale Enarson: Can you imagine what true benefit there would be for that pork industry if the other countries would simply do what Canada has already done? We can't sit back and say, “Okay, what do you want this round?”, because we gave, truly, in the last round.

Thank you.

The Acting Chairman (Ms. Sarmite Bulte): Thank you.

Ms. Beaumier, you had a question.

Ms. Colleen Beaumier: I did, but I think probably the answers can be found in here.

We have two different groups. Certainly the group this morning wanted to reduce all tariffs, reduce all subsidies, and reduce all management boards. However, they're not dealing with a perishable item. Do you think it's possible that in dealing with the agricultural rounds in the WTO, we can logistically divide agriculture into the different groups with different needs and deal with them individually?

We have a lot of pressure from groups like this morning's, with barley and such pushing for the ultimate, total open trade. So how are we going to address this?

Mr. Don Sundgaard: You bring up an excellent point in regard to particularly our commodities in the SM5. We have discussed it. It's not in our paper as such, but it is an excellent point.

• 1340

In Canada, if we are a little short of chicken and the U.S. happens to be a little bit over, it flows very easily between Canada and the U.S. If it has to come from France, it's a whole different story, regarding chicken, turkeys, or whatever.

With the amount of production Canada has in regard to the U.S., 10% would take over our market. That has a great impact on us. The U.S. exchange rate has a great impact on us. I'm sure you've heard that before many times.

That may be a strategy to work on. I think that's what you're alluding to regarding the division between perishable and non-perishable agriculture products. Vis-à-vis canola, barley, etc. being exported, we grow some of that on our farm, and I know it ends up worldwide. I would definitely not have the ability to do that with our chicken.

Ms. Colleen Beaumier: The other issue—and it hasn't been alluded to here—is do we produce enough chicken, eggs, milk, and turkey to supply the Canadian consumer, or is there a need for the imports?

I'll tell you why I'm asking this. I have a chicken processor in my riding, Maple Lodge Farms. I get a tremendous amount of complaints from them, because they think the DOA numbers should be lowered and they want more access to the U.S. market to buy products. Do we in fact in Canada produce enough to take care of Canadian consumers?

Mr. Don Sundgaard: I'll speak on the chicken side first.

Chicken has a very short life as far as production is concerned. We can hatch an egg in 21 days, providing we have access to the eggs. We do buy a lot of them from the U.S. as well, and have in the last couple of years. We can put them through the barn in six weeks, and we have chickens coming out for the consumer. That's not exactly true for other meat varieties, but given the opportunity, if the market is there, we've been responsible for filling requirements in our market. As a matter of fact, today Canada has approximately 25 million kilograms of chicken in storage, which is in excess of the normal level of about 8 million to 10 million kilograms.

So your processor is probably looking at some other agendas, such as maintaining levels, etc. We've heard some of that before. The U.S. exchange rate comes into it, as well as guaranteeing supplemental requisitions on product when it's not available to the specific size, colour, etc. that they particularly want. They want the best of both worlds.

If it came down to a yes or a no for processors on whether we should maintain supply management Canada, I would think you have resounding support from all the processors in Canada to support and maintain supply management. That's the bottom line.

Ms. Colleen Beaumier: Okay.

Mr. Bruce Beattie: From a dairy perspective, on a national basis, as far as your supplies of cheese, yogurt, butter, and those types of things go, that quota is according to demand.

The Canadian Milk Supply Management Committee, which I sit on representing Alberta producers, meets about four to five times a year to consider what the current trends in the marketplace are and whether or not quotas should be increased or decreased to match the market. We always set production quotas somewhat higher than the market and have had in place what's called a sleeve, which is about 0.5 million hectolitres over the past year, in order to accommodate any increase in the market that might happen during a period when we set the quotas. Keep in mind, once again, that you don't just turn these cows on and off.

Generally speaking, there's always been adequate supply and we've always had some exports. In fact this year, while our domestic quota will be about 44 million hectolitres—that will be the market demand for industrial product—production in Canada will be around 49 million hectolitres. So we'll be trying to find a home on the export market for about 5 million hectolitres. We do that collectively at this point, and subsequent to whatever the panel decision comes up with, we may have to deal with it differently.

• 1345

We also have in place what's called an optional export program, where producers can contract directly with a processor who has found an export market and can use that avenue to plan some production and find export markets. Unfortunately, the returns in that market have not been particularly good simply because of all of the export subsidies that are happening within the world market.

As far as your table milk is concerned, that is the first priority. It's administered by the provinces. In every province it's considered to be the number one priority, so that's the first market that gets filled. So there's always milk for that. In fact, when quotas are set for fluid milk, they're set between 20% and 25% above what they expect demand to be, so there's always an excess there. That milk flows, then, into the industrial market. So those are the two ways we handle the domestic market.

It's kind of interesting that over the past year the processors were complaining that there was too much milk. About three years ago they were complaining that there wasn't enough, and so they had problems. Over the past year or two they've been complaining that there's too much. Because there's too much milk in the system, it's hurting their market and therefore driving down their returns. So it's really hard sometimes to keep our processor partners happy when it comes to supplying them with the product.

I think it's really important to consider the changes supply management has gone through over the last few years. That's certainly true for the dairy sector. Since the end of the last round we've gone into pooling arrangements where, for example, the entire western market is shared among all producers with regard to returns and markets. We've really tried to adjust to those realities of the marketplace so that milk can move anywhere it's needed within western Canada, and the same is applicable to eastern Canada. There are no restrictions on the interprovincial movement of milk, either retail or raw, so we can move that product around to meet a market.

The other thing I think is really important is that if you look at the productivity of our dairy farms, you'll see that we're second to none in the world relative to production and quality of the product. Supply management has not created a bunch of lazy producers who just have to sit back and say, I'm going to get paid for my milk and I don't have to worry about it. We have the best milk in the world and some of the highest-producing cows in the world. That's why Canadian genetics are used in Europe and New Zealand.

The problem is that we can't compete with the treasuries. That's the kind of thing that we in Canada can't get into and why we believe so strongly in the system we have.

Certainly in terms of the retailer and the consumer, over the last two or three years—and I think we heard Minister Vanclief quote that—in the United States, prices to the consumer have been significantly higher than those in Canada. In fact, the last one was about 17% higher. So not only are producers here making a living but also consumers are getting a good deal.

Mr. Charlie Penson: Why don't we sell to them?

Mr. Bruce Beattie: They don't allow access to their markets. I really agree with the idea of bringing them to the table. I think that's a great idea, but, geez, I'm wondering how you do that with the United States.

Mr. Murray Calder: Just remember that they have more access to our market than we do to theirs.

The Acting Chairman (Ms. Sarmite Bulte): Thank you. Mr. Enarson, please.

Ms. Colleen Beaumier: I grew up on a turkey farm too. They're nasty little creatures.

Mr. Dale Enarson: I always say that when God created the turkey, he created a fantastically intelligent species, but when man domesticated them, he took all the brains out. That's the problem.

Some hon. members: Oh, oh!

Mr. Dale Enarson: In answer to the question asked earlier, are we capable of providing sufficient product for our processors, within the turkey industry we are consistently being told by our processors—who now, incidentally, sit on the board of the CTMA and have a vote—that we're producing too much, we're flooding the market. They want a tighter supply than what many of the people around the table want. So there's no problem in supplying an adequate amount for the Canadian market.

Sometimes you do hear individual processors making waves, again sort of like the games that were referred to earlier. For example, one processor—well, I won't say in which province, but it's one to the west of us—wanted a certain size of turkey. It had to be so many kilograms and only that for his ovens and for his particular further processed product. He had a fantastic demand for this particular product, supposedly. But it was a game that he was playing, because as soon as these were available to him in sizeable volumes, he backed off. He refused to sign any long-term commitment.

• 1350

We work extensively and regularly with our processing industry to see that we provide what is required, when it's required, in the style, shape, colour, and whatever else is required. But if some processor comes along and says he has to have a tom turkey with three left legs, I'm sorry, he's not playing fair. If he plays fair, we'll sign a long-term agreement. Some of these guys who like to make headlines about shortages here or shortages there refuse to be pinned down and say, “I want x number of kilograms per month on a long-term basis.” If he were to put that down on paper, we'd be delighted to provide him with product. But there are these games that keep being played.

Thank you.

The Acting Chairman (Ms. Sarmite Bulte): Thank you.

Mr. Calder.

Mr. Murray Calder: Thank you very much, Madam Chair.

I'd just like to read a couple of sentences out of a presentation made to us this morning by the Western Canadian Wheat Growers Association, whereby they say:

It is unrealistic for the supply managed sector to expect continued high levels of protection from outside competition and continued inflated returns from the marketplace at the expense of Canadian consumers. These highly protected and managed industries are going to have to mature, as the grain industry has, to allow access to the Canadian market for their sensitive products and to take advantage of export opportunities.

So that is basically the battle you're going to have to fight out here, from what I can see. Every day I trying to educate Charlie over there, and it's an uphill battle.

In 1993 we obviously were faced with the fact that we were one of the few countries in the world that extensively used article XI, section 2(c) for supply management, and that was a trading hindrance for us. We successfully adopted the U.S. form of tariffication for our industry, and that's basically what all the other countries of the world have also adopted. So now instead of being the oddball, we're right in with the rest of the pack.

I'd like to hear your comments as to whether you think that is going to be an advantage or a detriment for us in the upcoming negotiations.

The other thing is the SM5 position we have established. I would also like to know whether the processing industry agrees or disagrees with these principles. That's another strength of our negotiating position.

The Acting Chairman (Ms. Sarmite Bulte): Mr. Wooldridge.

Mr. Tony Wooldridge: That's a broad question, sir. Let me attempt to answer the last one first.

In the processing industry, as I think Don said just moments ago, honest questions answered honestly would indeed get the support, and have gotten the support, of all of our processing industry.

I'm an egg producer. We have taken significant steps in the last two years particularly with regard to egg processing. The chicken guys are doing wonderful things in terms of what products are available and what the costs are versus what they are for other competing products. In southern California eggs sell for about $2.20 Canadian a dozen when they're not on loss leader. When they are on loss leader, they sell for about $1.60 a dozen for grade A large. That's what you now buy them for in Calgary. So we can compete very favourably in terms of our processors being able to deal with product.

The problem the egg producers have is that one of several producers in the United States has as many chickens as all of Canada does. So in terms of capital and loss leaders, we simply can't compete. And we don't want to compete. That's not our style. We promote the family farm.

• 1355

So to answer the question of whether we have the support of the processing industry, yes. We get stupid situations, such as the restauranteurs wanting cheaper eggs. If you bought breakfast in this hotel this morning, you paid $5 for a 10¢ egg. If we gave it to them for free, you'd still pay the $5. So what's the point? That's of no value. But that's not the processes. The processes are well behind us and in favour of us.

Help me, sir. What was the first part of your question?

Mr. Murray Calder: The first part was article XI versus tariffication.

Mr. Tony Wooldridge: I think that's hurt us because it has given people like the wheat growers this morning the opportunity to trade us off for something they want, or to recommend that they want to do that. Article XI was unique. It gave us border controls, not tariffication. It was politically and practically more sound, more controllable, and it put us in a special position. We've lost that. Now, we can have the barley boys and the wheat boys say let's do away with tariffs, let's reduce tariffs, let's cut them back. They think they're going to get something for that. Maybe they will and maybe they won't. So I think the switch to tariffication has been detrimental to Canada in general, and particularly to SM5.

But with regard to the specific questions on the wheat people, if you talk to most of the commodities that are talking about getting rid of tariffication and ask them specifically where the tariffs are, where they're being bothered—and canola is an exception—they could well manage if their TRQ access were clean and free, rather than games being played and what not. They're overstating their position in hopes of gaining something more than what they really need. If they truly looked at how much access they need and where they need the access, if it were clean access, they could support our position with regard to tariffs. They don't say that publicly; they say it off the record. But it's said nonetheless. If you have good access, clean and fair, then there's ample opportunity for everybody, except the canola oil people, to do what they want to do.

Mr. Murray Calder: Any other comments?

Mr. Bruce Beattie: First of all, I think it's really unfortunate that we're in a position in Canadian agriculture where we're so good at it, we circle the wagons and shoot inward. And here we are at it again.

The CFA, Canadian Federation of Agriculture, has been successful in putting together a trade position that's supported by the supply-managed groups, as well as their membership. It basically adopts, certainly agrees with, the position that supply management's taking. So from the perspective of some grain groups.... I find it extremely ironic that most of these groups were set up through government funding. For example, the Alberta Barley Commission received funding from the Government of Alberta to get started. The Alberta Milk Producers has never got a penny from the government as an organization.

First, I find it ironic that they're supported by government to get started. Second, if I look at what the grain sector receives from government in terms of crop insurance, interest-free cash advances, and all the bailouts they've got over the years to keep them going, I really get tired of their complaints about our system and their insistence that somehow we're doing something bad and they're above reproach. I think we've put together a position that is in support of what grain farmers are trying to do. If you eliminated the export subsidies, what would happen? Theoretically, grain prices in the world would rise.

Mr. Murray Calder: That's right.

Mr. Bruce Beattie: I only say theoretically, because if you eliminated domestic support, and if a European farmer didn't get $800 just for owning the land, then maybe he'd have to get a return for his product, he wouldn't be able to give it way on the world market, and our grain producers would be able to compete.

• 1400

The other thing I don't understand is this. I don't think they realize how much barley I buy, and how much barley the supply-managed sector uses and pays good money for. I find it really disappointing, because we've tried to work very hard, and certainly I have worked very hard myself. For instance, we worked very hard as a member to try to work with the AITG, one of the groups that was in this morning, to find a way that agriculture in Canada could at least bring forward a united position and not try to pick on each other. So it's frustrating when that happens, and there I am doing it myself. Sometimes you get frustrated with that kind of thing.

Mr. Murray Calder: I hear you.

Mr. Bruce Beattie: I think it's really important we take a position. As far as the tariffs and article XI are concerned, I think it's interesting that article XI was put in by the United States. We used it legally, it was a legal part of the GATT, and they found they didn't like the way we used it, so they had to get rid of it. Irony keeps coming into the whole trade negotiation. I think that's what we have to clearly understand as a country and as an industry. We're in a negotiation, and we don't want a level playing field; we want one tipped toward Canada for a change. It would be nice. Maybe that's not realistic either, but let's start out with that expectation.

If we can do better than that or at least get level, that's great. The whole concept of the level playing field, when you're talking to Americans and Europeans, is going to be a long way down the road. So I think we need to go into this round, and whether it expands into a full round.... That worries me, because it might take 15 years to get an agreement if we get into every sector, not just agriculture. So what happens if it is expanded into these other groups, I'm not sure. I'm certainly not well enough informed to comment on what would happen in that regard. We need to have the current rules cleaned up. We need to have the Uruguay Round finished, because I don't believe it was finished properly in 1995.

The Europeans and the United States wanted to get it finished, so they said, “Here's what we're going to do.” And the rest of us said okay.

Mr. Murray Calder: Well, that's obvious to me, Bruce, because the philosophy in 1993 when this thing was being negotiated was that low prices would stop low prices. And they haven't.

Mr. Bruce Beattie: No.

Mr. Murray Calder: So obviously there are subsidies being paid there, or we wouldn't be producing at not even break-even prices, and we are. I informed AITG this morning too that there was the SM5 principle and position and it had been accepted by the CFA. They were aware of the position, but they weren't aware of that, so they're going to go back and read it.

The Acting Chairman (Ms. Sarmite Bulte): Mr. Enarson, and then Mr. Wooldridge.

Mr. Dale Enarson: Thank you. If you could open your little booklet to the middle page, there's something that is of significant interest. You can see the total support received for agriculture in various countries. The only weakness I can point to in this whole booklet is the fact that we're not able to work with exact, up-to-date statistics. These are the best statistics we have available.

As mentioned, GATT started from a base year, and from that base year you can see that by 1995 Canada's total support for Canadian agriculture dropped from $7 billion down to $4 billion. At the same time, American support, in all its forms—green, blue, amber, red, purple, and turquoise—grew from $50 billion to $61 billion. The Europeans went from a base of $90 billion to $88 billion. It's obvious Canada, for fiscal and financial reasons, has had at the same time.... The crunch came, with politicians in Canada everywhere realizing that the deficits had to be brought into line. That coincided very conveniently with the GATT, so our governments were very delighted to conform. The treasuries of the other two major players on the international agricultural scene are obviously a little more flush than we are.

This is one of the other reasons we're asking, among other things, that a cap be put on the total support that's available to agriculture in all its forms, whatever box you want to put it in to. But it illustrates what we're up against internationally in this agricultural trade.

• 1405

Thank you.

The Acting Chairman (Ms. Sarmite Bulte): Mr. Wooldridge, do you have any comments?

Mr. Tony Wooldridge: I may have lost the moment with all this vigour here, but I wanted to comment just a little bit on what Murray was saying about AITG this morning. AITG is a good thought, but unfortunately there are 115 members, as he said this morning, and only seven of them have signed on to what their position paper is at the present time, of which five are here present. We're only five of the balance of 100-plus people in the sectors who haven't bought on to that.

So it's failing in terms of what I want to do, which is too bad because it was a really good thought. But it's being driven by the wrong parties at the present time, I think, and that's part of their problem. We're meeting, and we'll continue to meet, with them to get them to come on side, to understand. But the two most difficult parties were at the table this morning, and you heard what their positions were.

Mr. Murray Calder: Yes, I did, and as far as I was concerned, some of their positions are not defensible.

The Acting Chairman (Ms. Sarmite Bulte): Thank you.

Mr. Speller.

Mr. Bob Speller: Thank you, Madam Chair.

Actually, I don't have a question. I've spent time over the last number of years speaking with your industry, not only in Ottawa but across the country, and I want to thank you for early on in the process putting together a well-thought-out position on this, and also for joining together with other farm organizations in terms of putting that position together, because I think it's important going into negotiations that the Government of Canada knows it's speaking on behalf of the one voice of farmers. And I know as difficult as that is, and it might be, it helps us in terms of our work to know that the farming community is behind us.

Saying that, as Murray was pointing out, I think there is some more work yet that you need to do, not on your position but in terms of coordinating the various positions in agriculture across the country. And I look forward to working with you further on that.

Thank you.

The Acting Chairman (Ms. Sarmite Bulte): Thank you.

Yes, Mr. Sundgaard.

Mr. Don Sundgaard: Madam Chair, if I may go back to Mr. Penson's remark right at the beginning regarding where we're at and how we intend to conduct ourselves in the future relative to world trade, the U.S., etc.—and perhaps this would help out not only from an Alberta perspective but from a Canadian perspective as well—I'd like to give a couple of quotes on stats from the Canadian chicken handbook. I don't think it was biased because it was based on Agriculture Canada statistics, but it does show that chicken did increase in consumption from 1978 to 1997 by 61.5%—that is, it went from 15.6 kilograms per person to 25.2—whereas other commodities that were non-supplied actually had decreases. And we can go through the numbers there. It's not to pit one against the other, but it shows that supply management has worked for Canadians, has produced good product and acceptable product as far as chicken is concerned. And I think if you were to look at the other commodities on supply management, you'd find something similar.

Also, from an Alberta perspective, to go on the offensive side, we in Alberta on the chicken side—and I can speak somewhat on the hatching eggs, the turkeys and table eggs, and Bruce might want to comment on it as far as milk goes—are taking proactive steps. For example, on the marketing side we are dealing with a project called value chains. You may be aware of some of the principles in that. It's a relatively new theme. It's not the flavour of the month, but it's something we hope to have in the long-term future for the consumer to drive out unnecessary costs and provide the consumer with a product that he or she wants and needs and that will help her or his daily life.

We're doing this through developing on-farm hazard programs to provide safe product. It's a national perspective as well, food safety being a primary issue. I think that helps us for our World Trade Organization talks worldwide. Every country has different perspectives on that, but we're not lagging behind; we're doing our thing as far as food safety is concerned—but not only for food safety, we're projecting it onto food quality in the chicken area as well.

• 1410

I wanted to relay some of that. It's being done with our partners in the industry, the people who supply feed to us, the feed mills, the hatcheries, the processing plants, and we actually do involve the retailer and wholesaler as well. So we're putting an offensive front forward.

The Acting Chairman (Ms. Sarmite Bulte): Thank you, Mr. Sundgaard. It's a perfect lead-in to Mr. Penson's second round.

Mr. Charlie Penson: I was listening to your response to Mr. Calder's question about essentially the grains industry, which was here earlier today, and I didn't detect much sympathy for the concerns they have that they've been frozen out of the European Union in terms of access because the European Union has turned inward and largely has a lot of domestic support, which means that Canadian grain, oilseed and beef basically don't access that market. But also there's the fact that the European Union overproduce as a result of their system and tend to dump their product on the world market at depressed prices, which is even worse, because it drives down the price to Canadian grain farmers.

I know in my riding, in a lot of areas, grain farmers are hurting very badly. They are asking for access, and they're asking for these subsidies to be reduced, because the expectation in the Uruguay Round was, yes, we got everybody started last time but the big gains will come this time. There's a number of them who feel that this so-called balanced position hurts their ability to achieve that. And that all ties together with what Murray was saying.

Mr. Murray Calder: You want to put my neck on the block?

Mr. Charlie Penson: Mr. Wooldridge, you had suggested that if we just got a little higher clean access through the minimum tariffs, that might be enough, I think I heard that. But surely the problem is bigger than that. It's not just tariffs, it's domestic subsidies in the European Union as well. It's not just the European Union either, I have to say, but they are....

Mr. Enarson, when you introduced us to your chart it was a great argument for your case, but it's also a great argument for why Canadian producers in Canada can't compete with these international subsidies and therefore for the need to address that issue. It's probably a rhetorical question because there's probably no answer for it, because it seems to me we're coming from two polarized positions.

Mr. Tony Wooldridge: Excuse me, we are 100% in agreement with what you're advocating. We're advocating the elimination of export subsidies. We are advocating the reduction, if not a cap or eventual elimination, on domestic subsidies. This is entirely consistent with what you are advocating and what the grains people are advocating—

Mr. Charlie Penson: Which would give us market access.

Mr. Tony Wooldridge: Which would give us market access. It has nothing to do with tariffs. You were talking only about export subsidies and domestic subsidies. We are 100% in favour of elimination of those trade-distorting activities.

Mr. Charlie Penson: Thank you. That's helpful.

The Acting Chairman (Ms. Sarmite Bulte): Mr. Enarson wanted to comment too, Charlie.

Mr. Charlie Penson: Okay, but I want to raise one more element here that might stimulate debate.

I'm playing the devil's advocate, I guess, but it seems to me that the problem with this balanced position Canada has is that we are going there asking for a phase-down of subsidies and tariffs that will allow us market access, and yet those other people are pretty smart people at the table too from other countries, and they're saying, “What about you guys? You're not giving us market access, because you have prohibitive tariffs.” Therein lies the difficulty, I think, so I put it to you.

The Acting Chairman (Ms. Sarmite Bulte): Mr. Dale Enarson:

Mr. Dale Enarson: Thank you. First of all, the point was just getting developed when I initiated my asking for the floor. If you look at what we're asking for here, and this is the SM5's position, the very first point we're attempting to make is to eliminate export subsidies. That is the point we are making, not to protect our domestic market. The first point we have to have is the elimination of export subsidies. It's not until we get to about step three or four that we even make any mention of how the TRQs are going to be maintained.

But please, Mr. Penson, don't use that term “balanced position”. That was the GATT. Our Canadian position is still being developed, but I would pray that we would stay away from using that catchphrase. It was a disaster for us.

• 1415

Mr. Charlie Penson: We may not use the term, but the principle is the same, I suggest. The CFA's position is kind of schizophrenic, in my view. They're saying we want market access, let's phase down domestic and export subsidies and at the same time protect the tariffs we have. It seems to me that it's one foot in each canoe. I understand where supply management is coming from. You don't want to have tariffs reduced. I understand that completely. But for an organization like CFA, which is trying to serve both interests, how can you do that?

The Acting Chairman (Ms. Sarmite Bulte): Mr. Beattie.

Mr. Bruce Beattie: The basic question that I think needs to be asked is, are you going to try to get...? I think someone made the point that if you had 5% access to the European market tariff-free, you'd have more market than you'd know what to do with. I don't know that. I don't know what the numbers are. But it's pretty substantial.

I think we just signed a major contract with China, which is not even a member of the WTO and certainly doesn't have any import tariffs relative to grain. In fact, I asked one of the members of the grain group who was in our little work group in Ottawa if he faced any prohibitive tariffs when he was trying to export his products. He said no. I recognize there are some going into Europe, but certainly in the major markets—China has been one of them and Russia used to be one until they ran out of money—there's no protective tariffs to import grain into those countries.

For the life of me, I do not understand why they see this need to eliminate tariffs. It's not going to help them unless they truly believe that if we give up our TRQs, along with the other 36 countries that have them in the WTO, then all of a sudden all these other countries are going to stop supporting domestic industry and they're going to stop export subsidies. I'm not confident of that.

Mr. Charlie Penson: That would be part of the deal, wouldn't it?

Mr. Bruce Beattie: I don't think that's going to happen.

Mr. Charlie Penson: You don't want that. But using your model, that would have to be part of the deal.

Mr. Bruce Beattie: What we're saying is let's get 5%. let's get this access that they promised, because they said 5% and they're giving 2% or 3%.

Mr. Charlie Penson: Are you talking about grains and oilseeds and all those other things?

Mr. Bruce Beattie: Generally speaking, we're saying that in terms of domestic access of any market it should be 5% of the domestic market. Now, in some cases they're giving 2%, some are giving 3%, and it really varies an awful lot across commodities. If you looked at the United States for butter, it's point something. For cheese, it's even less than that. So it all depends on what commodity you're talking about.

Mr. Charlie Penson: It would be helpful, Mr. Beattie, if you have evidence that would back that up. If with a tariff reduction or no tariff to up to 5% of the European market, Canadian grain, oilseed and beef would flow there.... My understanding is that's not the case.

Mr. Bruce Beattie: I don't think beef has a TRQ. It's a matter of hormones. That's the sanitary and phytosanitary issue, which we think should be dealt with as well.

Mr. Charlie Penson: But my understanding is that this isn't the only restriction to trade. There are floor prices whereby consumers pay a very low price and yet the producers get a high price for a tonne of wheat or whatever. And the tariff alone would not be a significant factor in giving us access. There has to be something done about the domestic subsidies as well.

Mr. Bruce Beattie: From my understanding of the situation, it's the domestic subsidies, the domestic support and export subsidies that create the problems as far as trade distortion goes. I'm not a grain producer so I don't know historically what markets we've had into Europe. I'm not sure we've ever settled those. I know we've sold to India, which is now an exporter.

Mr. Charlie Penson: We sold wheat to Britain.

Mr. Bruce Beattie: We used to sell a heck of a pile of cheese to England until they went into the EU.

Mr. Charlie Penson: Yes.

Mr. Bruce Beattie: All of a sudden, we weren't selling any more cheese to the English market. Our major market for Ontario cheddar used to be Britain. So our feeling is—and that's why I said first things first—let's get these things cleaned up before we start talking and before we start opening all the doors to have all this product come in that may be low priced because the guy doesn't care what he gets for his product.

They talk about decoupling support. It's ridiculous to suggest that because a producer instead now gets a cheque from the government regardless of what he produces, as opposed to getting a cheque from the government because of what he produces, somehow that's decoupled. He doesn't care what he gets for his market and he can sell it for anything. He can sell it for a low price and I can't compete with him, because I can't compete with the European subsidies.

• 1420

When the agricultural ministers in Europe meet and decide they're going to reduce it by 15% and then all the head guys get together and they say, “No, I don't think we will, because there's too much political pressure so we'll leave it where it is”, it doesn't give me a lot of confidence that in this next round they're going to say, “We're going to do all these things because you're going to reduce your tariffs.”

I'm not convinced even the reduction of tariffs has a significant impact, because we've had, what, a 15%...that was the theory. We were going to have this 36% over the period of this GATT. Well, I don't think grain prices have exactly bounced back. I mean, grain prices have not been significantly better since we've had this lowering of tariffs. I don't believe lowering tariffs is the answer to the problems, and I have a lot of sympathy for the grain producers. Why wouldn't I?

Mr. Charlie Penson: Let me pick up on your challenge.

Mr. Bruce Beattie: That's why we're saying get rid of the export subsidies, get rid of the domestic...let's cap the domestic support. Let's clean up the 5% access, no in-quota tariffs, zero tariffs on in-quota.

Mr. Charlie Penson: You asked the question, Mr. Beattie, and there are people in the grains industry who have a feeling that it's not in the interests of supply management to have grain prices increased, or in the case of the cattle industry as well, because they're consumers of Canadian product.

Mr. Bruce Beattie: Actually, because of our supply management system, our prices are based on our inputs. For example, we have a fluid formula that's based on the price of grain, so if the price of grain goes up my price goes up. The consumer will pay a little more, just as she should or he should.

Mr. Murray Calder: I told you that this morning, Charlie.

Mr. Bruce Beattie: That's the way the system would work. Why should a farmer give his product away? It's not right, and consumers need to understand that. Consumers support the dairy industry, not government, and if our sales are down then we'll adjust our prices.

Mr. Charlie Penson: My final question is, as part of the idea that we should reduce domestic subsidies worldwide, there'd be no problem with the dairy industry giving up the $300 million they still receive?

Mr. Bruce Beattie: It's down to about $130 million and we're embarrassed about it, and it's going to be gone in another two years, because as of three years ago, it was introduced to be reduced by 20% per year. So it was reduced again in this February by another 20%, and that amount was then added into the price the consumer pays for the product. Then she or he makes the decision. The consumer makes the decision whether or not they want to buy that product as it's priced.

If it's priced too high, then as producers we're going to have to go back and say, okay, what do we do about that? Are we asking too much for our product? Then we're going to have to change it. In our fluid pricing formula in Alberta, that's one of the components that establish what our fluid price is—consumer demand. That's measured as a component when we determine whether or not prices should go up or down.

Mr. Murray Calder: That's not the utilities board.

Mr. Benoît Sauvageau: You are not the dairy president?

The Acting Chairman (Ms. Sarmite Bulte): I want to thank all of you for coming today. Thank you for your submissions. Thank you for the question and answer period.

If there are additional issues or additional information you wish to share with the committee, please feel free to do so, either to the clerk or to the individual members. What we're hoping to do with this consultation is start a dialogue that will be ongoing, so this is not the end of our consultation.

I'm sorry we've had to move our time up, but we had to shorten things to bring on our final speaker a little bit earlier so we can catch the flight at 5 o'clock. Thank you again for coming.

Benoît, do you have a...?

Mr. Benoît Sauvageau: No, it's on another subject.

The Acting Chairman (Ms. Sarmite Bulte): Okay. Thank you very much for coming, and thank you again for the pen.

• 1424

• 1434

The Acting Chairman (Ms. Sarmite Bulte): Mr. Watson, welcome, and thank you once again for accommodating your schedule to fit our flight schedule this afternoon.

I understand you're chairman of the export trade committee of the Alberta Economic Development Authority.

Mr. Peter Watson (Chairman, Export Trade Committee, Alberta Economic Development Authority): That's correct.

The Acting Chairman (Ms. Sarmite Bulte): Welcome, Mr. Watson.

Mr. Peter Watson: Thank you, Madam Chair and committee members. I appreciate personally, and certainly the Alberta Economic Development Authority appreciates, the opportunity to meet with you today and give you our input to this significant series of negotiations that are coming up in the future.

• 1435

My comments will be very general and very preliminary. I hope we will have an opportunity later to input maybe not to this committee, but perhaps through the Alberta government, in a more specific sense than I might be talking today.

The Acting Chairman (Ms. Sarmite Bulte): We hope this is an ongoing consultation and dialogue and we are recommending to people that they continue to use the committee to voice any issues and concerns and specifics, either through the clerk or through the individual members of the committee. We would welcome that.

Mr. Peter Watson: Terrific. I appreciate that.

As a little bit of positioning, if I may, the Alberta Economic Development Authority is referred to as a government-business partnership, which was established in Alberta by the premier five years ago, in 1994.

I think you have the handout.

The Acting Chairman (Ms. Sarmite Bulte): Yes, we do. Thank you.

Mr. Peter Watson: We have our mission written down there, which is basically to assist government in breaking down barriers to trade and creating more opportunities for Alberta businesses to trade.

It consists of some 90 volunteers drawn from the private sector, largely CEOs of something in the province. We're organized into ten different committees, five of which are industry focused: forestry, energy, agriculture, tourism, and technology. The others are longer term and cross-sectoral: taxation, infrastructure, and export and trade—and I have the privilege of chairing that committee.

We are not government. I'm asked that frequently. I'm not in the government. I run a company and I'm involved in this. To summarize what Alberta Economic Development Authority really is, it's a private sector sounding board for the premier and his economic ministers. About half a dozen of them there are considered to carry economic portfolios.

The position of Alberta, whether you're talking industry or people in general or, I think, the government—and I certainly am not speaking for the government and can't speak for the government—has been long-standing and consistent support for trade liberalization.

There is one figure in the handout that I'm going to correct immediately. I wish I could say it's 230%; it's 130%.

Here is a quick snapshot of what has happened since the Canada-U.S. Free Trade Agreement ten years ago. All of this is certainly not due to the free trade agreement, but we believe it's a significant factor in the results.

Exports have increased significantly, well over double. In the major sectors of the Alberta economy, in agriculture, the industry has been able to diversify and get into specialized crops that they weren't in before simply because there wasn't a large enough market in Canada to support things like mustard seed or canola, which is a very big industry now. There has been an increase in the food processing industry—as opposed to primary production, getting into secondary production.

The petrochemicals area and natural gas is a very big thing now, and that was provided for by the security of markets that was allowed as a result of the free trade agreement ten years ago, with a number of value-added products like polyethylene and various other derivatives of the petrochemical industry.

Similarly, forestry is moving into secondary levels of manufacturing and processing.

In manufacturing, there has been a significant growth in those elements of the manufacturing sector that relate to the primary sectors of the Alberta economy. So again we're back to the energy industry, things like bits and pieces for drilling equipment, downhole equipment, and so forth.

Similarly, there is a growth in the service industries that again relates to a grow-out of the primary sectors of the Alberta economy.

• 1440

The result of all of that has been a diversification and broadening of the economy, a reduction in our volatility, and therefore a reduction in our vulnerability to the economy. So the volatility of our employment has shrunk significantly, which is a very positive thing.

If I were to summarize our whole position at this point, it would be that more is better, in the sense of liberalization. We believe Alberta industry has won over the last 10 years and we see more opportunity in the future from more liberalization.

Agriculture is certainly a significant sector of the Alberta economy and is represented in the Alberta economic development authority. But I understand you've been hearing from agriculture all day, so I won't dwell on that. That position is complex and has been under development for over a year.

So let me speak only briefly, not about agriculture but about the trade in goods and services. There has been significant progress over the last 10 years in reducing barriers in the primary and industrial goods, but there are still barriers out there. Going back to the theme of what I said, more liberalization is better. One of our people coined a little phrase, that the fences are largely gone but there are still occasional landmines out there. Since Canada wants to get rid of landmines, let's get rid of these.

Again, the theme you might see in here is that the barriers we see that affect Alberta industry are largely in the secondary stage of the economy from our primary industries. So they're from energy, forestry and petrochemicals. We note and would like to see spread and increased the benefits of the kinds of things that have come out of the WTO ministerial declaration on trade and information technology products. That's an example of something where there has been a sectoral approach to breaking down barriers. Again, we see Alberta industry has won as a result of it.

One of the specific successes in Alberta in the last few years has been a growth in transmission apparatus in the telecommunications industry, which is related to this. There's a very growing and successful industry in Alberta in that very dynamic industry. We would support the growth or development of similar sectoral agreements in other industries, and maybe even the broadening of the particular one I'm talking about, although my understanding is that it already covers some 90% of the trade in that product.

Turning to services, it's much more difficult to get a handle on services because there is not a common agreed definition of what services are, amongst other things. So they have a difficulty measuring the success or lack thereof in the service sector. In goods, obviously, products move through and they're counted, but services are much more difficult. Services, however, make up approximately two-thirds of our domestic product and less than one-third of our exports. Services are a very growing sector of the economy.

We see major opportunities in the services sector if we can pursue them to a better degree, and we are. Alberta business is pursuing that. But there are barriers, and they're the kinds of barriers I'm sure you're familiar with. There's the lack of recognition of credentials, the favoured status given to local firms and so forth, lack of transparency, and in some cases outright prohibitions or restrictions on foreign service providers.

• 1445

Speaking from our own self-interest, the kinds of services we would be talking about in Alberta are ones that grow out of those primary industries, such as consultation in the areas of energy, forestry and the environment, engineering services and such.

The issue of environment and labour standards is the last point I would like to make. There are some who would suggest that environment and labour standards should be built into the trade agreements. We would disagree with that. That is not to say we do not believe in environment and labour standards. But we believe those standards should be established in their own environment, if I can coin a phrase, in their own jurisdictions, and dealt with by the appropriate bodies that look at environmental or labour standards, rather than being built into the trade agreements.

A successful model for that approach was brought forward as part of NAFTA, where side agreements were struck, and there's a critical difference between the two. A side agreement would establish that the country had its own sovereign right to establish, say, environmental standards. They would establish whatever standards they wanted and then would have to enforce them. If they did not enforce those standards, there would be penalties or some means of dealing with it, as opposed to building it into the trade agreement where, if one could argue that a country or a company had not met a certain environmental or labour standard, they could apply a trade restriction, put tariffs or some kind of quotas back on, or something like that.

We think that is not the right way to go. They should be kept separate.

Those are my points. As I said at the beginning, these are very general. We hope to get the information to have more specific input later on.

In summary, as I said at the beginning, Alberta industry and Albertans have benefited significantly from liberalized trade over the last 10 years, and we believe more is better.

Thank you.

The Acting Chairman (Ms. Sarmite Bulte): Thank you very much, Mr. Watson.

Because Mr. Speller and Mr. Sauvageau have to leave, we'll let them go first.

Mr. Sauvageau.

[Translation]

Mr. Benoît Sauvageau: Yes but we can stay another 15 minutes.

[English]

The Acting Chairman (Ms. Sarmite Bulte): You can start.

[Translation]

Mr. Benoît Sauvageau: Thank you. It is very nice of you.

Mr. Watson, thank you for your presentation. I have a few questions to ask you.

As an economic organisation, do you know how the Alberta government consult its population so that there is less opposition to its free trade agreements? Is there a provincial consultation? If so, what is the process for consulting?

At the very end of your presentation you talked about environment and labour standards and said that penalties or some kind of quota could apply to those who do not enforce those standards but that you think that is not the position that you support. What position do you support?

Like Madam Chair told you, we have to go. I am sorry to take your speaking time to talk about something else but I would like to thank right now the interpreters, Cindy, Claudia and Henri, the support staff as well as the Chair and the other members of the committee. As usual, we had a very interesting trip.

[English]

Mr. Peter Watson: Thank you, sir.

Again, I cannot speak for the provincial government as to their process for consulting. They have a process for consulting on a wide variety of issues. They use the body I am a member of, the Alberta Economic Development Authority, as a way to get feedback from industry—and it's just industry. Because the Alberta Economic Development Authority is involved in putting it on, I happen to know they are having a round table discussion for the next two days in Edmonton on the issue of climate change and the environmental issue. I also happen to be involved in hospital work. I know they've had a wide variety of what they refer to as round table discussions on soliciting input on health care issues. So they have a number of mechanisms for soliciting opinions.

• 1450

On your second question on labour and environmental standards, I'm sorry I wasn't clear. Let me try to be as clear as I can.

I was not saying that the Alberta Economic Development Authority does not believe in environmental or labour standards. We absolutely do. What I was saying is that we do not believe that the mechanism for enforcing environmental and labour standards should be through a trade agreement, because they are separate issues. There are forums and there can be and should be mechanisms for enforcing labour standards, environmental standards, or any other standards for that matter. They should be dealt with there, rather than a trade agreement being triggered as a means of enforcing a labour standard, which may have implications that weren't considered.

[Translation]

Mr. Benoît Sauvageau: I had understood that aspect well. You said that in the case of NAFTA there should be side agreements on environmental and labour standards. You added that there could be sanctions if those side agreements were not enforced but that it was not the position of the Alberta Economic Development Authority. This is not dealt with in the WTO agreement but with side agreements. What would your position be, that there be sanctions or not?

[English]

Mr. Peter Watson: Yes, we would be in favour of penalties or sanctions. It is my understanding that the side agreements now exist on things like the environment, and others. If a country, in effect, fails to enforce its own laws in that regard, then it is subject to some kinds of penalties under an enforcement mechanism in the labour area. Whatever the sanctions may be...I understand they're mainly fines, and we're certainly in favour of that.

[Translation]

Mr. Benoît Sauvageau: Thank you very much.

[English]

The Acting Chairman (Ms. Sarmite Bulte): Mr. Speller.

Mr. Bob Speller: I did want to follow up on that, because it is an interesting concept. We've had a lot of people come and say, sure, you can do all you want at the ILO to set core labour standards, but unless you have a mechanism to enforce them, then they're not workable.

In terms of the environment, we had another group of people come and say, look, isn't lax environmental policy a subsidy? If it's a subsidy, why can't it be handled in the trade area with the WTO? Would you agree that it would be a subsidy? What I'm trying to figure out is how you bridge it between the ILO and the WTO. You mentioned there may be some fines, but a fine is nothing. How do you actually enforce this stuff?

Mr. Peter Watson: That's beyond my area of expertise. What we're really saying is that because there happens to be a mechanism for settling trade disputes, which is essentially putting tariffs back on or putting quotas on—putting something on that moves in restriction of trade—the fact that this exists shouldn't be used to settle labour disputes.

So what kinds of mechanisms can be put in by the ILO or some other body in the environmental area? I'm really not sure, but certainly there is some way to do it. I'm not sure there should be a link between the two, in other words.

The Acting Chairman (Ms. Sarmite Bulte): Mr. Speller, I'd like to follow up on the same line of reasoning and then bring it right back to you.

• 1455

Mr. Watson, I understand what you're saying, but the problem is that Canada's environmental regulations have been challenged by other countries. It's been used by other countries to challenge our rights to regulate...to use the MMT case as an example. Notwithstanding the fact that it wasn't decided under NAFTA, they're using that vehicle to challenge...to actually ask us not to have that ability to regulate. That's what we're grappling with and that's some of the criticism: the WTO takes away our sovereignty to make these regulations.

Mr. Benoît Sauvageau: And sovereignty is important.

Mr. Peter Watson: That's falling into the trap, is it not? I will go back to the point again. If there happen to be mechanisms for resolving trade disputes in place, once those dispute resolution systems are set up, someone is going to use those mechanisms to their own advantage in whatever way they can, just as any lawyer is going to use a contract to the advantage of his client. So if we allow the trade dispute mechanisms to be used to settle environmental standards questions, then we're just giving them a method for pursuing their own advantages.

The Acting Chairman (Ms. Sarmite Bulte): Sorry, Mr. Speller, for continuing on this topic.

Mr. Bob Speller: Would you agree that lax environmental programs are a subsidy?

Mr. Peter Watson: They could be.

Mr. Bob Speller: So could you see a way there, perhaps, where the WTO could—

Mr. Peter Watson: We might not like the environmental standards that Mexico has, but in their own wisdom they've decided those are the standards they're going to set. If we want to trade with them, we're going to have trade with them.

Mr. Bob Speller: If you're going to compete against the company that doesn't have to keep up to the same standards as you do, and you're in another market, obviously the cost of production is going to be much lower as a result. So wouldn't you see that as a subsidy and, therefore, see some sort of role for the WTO?

Mr. Peter Watson: It may be a subsidy, but it's not a perfect world out there. Maggie Thatcher said it's a funny old world and so you deal with what you can deal with. Rather than try to get perfection, our suggestion would be to work on the trade side and liberalize trade as much as possible, and coincidentally have others perhaps working on the labour and environmental standards, and whatever other standards might be out there too.

Mr. Bob Speller: Thank you.

Madam Chair, before I go too, I want to put this on the record, as Mr. Sauvageau did. On behalf of myself and my party, I want to thank the staff, the interpreters, the console operators and everyone for all the hard work they've done this past week. They've gone well beyond the call of duty.

The Acting Chairman (Ms. Sarmite Bulte): Thank you, Mr. Speller.

Ms. Beaumier, do you have a comment or question?

Ms. Colleen Beaumier: No, I don't.

The Acting Chairman (Ms. Sarmite Bulte): Mr. Sauvageau? Mr. Calder? Okay.

Mr. Watson, I think we've touched on the key area in this conundrum we are in with the environment. As I see it, if it affects trade somehow, if it's trade distorting, like the lax environmental regulations that could be seen as a subsidy, then the conundrum we face is how to deal with it.

Mr. Peter Watson: My understanding is that the side agreement model used with NAFTA is working reasonably well. Is it not?

The Acting Chairman (Ms. Sarmite Bulte): That's a matter for debate.

[Translation]

Mr. Benoît Sauvageau: I can tell you that Ms. Barlow would say no.

A voice: I understand.

[English]

Mr. Murray Calder: A credible source....

The Acting Chairman (Ms. Sarmite Bulte): We just heard that the NAFTA commission on the environment recently testified in Winnipeg, so we'll look forward to seeing a transcript of that.

Again, Mr. Watson, we also have notes for public discussion on our website, so we'd ask that you follow those. If you come up with more specific proposals, we certainly would welcome them.

• 1500

Mr. Benoît Sauvageau: At www.wto.

The Acting Chairman (Ms. Sarmite Bulte): Yes, that's correct.

Thank you again, Mr. Watson, for joining us, on behalf of all the committee members. Again, thank you for rearranging your schedule. Please, I want to repeat and confirm that we do look forward to your continuing input in more detail. You don't just have to put it through your government; please feel free to do it through the committee.

Mr. Peter Watson: Thank you very much.

The Acting Chairman (Ms. Sarmite Bulte): I am heading back and passing the chair on to Ms. Beaumier tomorrow. I want to thank all the committee members for their hard work. I want to thank all the translators, the technicians, and everyone who has been on the trip with us. Our research clerks and our clerk have done an incredible job. Thank you very much.

The meeting is adjourned until 8.30 a.m. in Saskatoon.