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, March 11, 1999

• 0914

[English]

The Chairman (Mr. Bill Graham (Toronto Centre—Rosedale, Lib.)): We'll get going here, members. To get the agricultural representatives in here is like trying to herd the animals into the barn. You never can move them along.

Mr. Odina Desrochers (Lotbinière, BQ): It's the grassroots this morning.

• 0915

The Chairman: Okay, sit down. I want to thank you very much for coming.

This is for our witnesses. The committee is doing a series of hearings into the upcoming WTO round, assuming that there will be a round started in Seattle in November. The purpose of these hearings is to enable this committee to give its advice to the minister on what our position should be in those negotiations. We must report by June of this year to be able to do that.

I can see this is a serious agriculture meeting because I can see Senator Whelan coming. This proves it's agriculture.

I understand we're going to start first with the Canadian Federation of Agriculture.

Mr. Friesen, would you be our lead-off? We try to keep the witness interventions to about 10 minutes, and that leaves lots of time for members' questions.

Mr. Robert Friesen (President, Canadian Federation of Agriculture): Thank you very much, Mr. Chairman. It certainly is a pleasure for me to attend this round table. I am also particularly pleased that you managed to attract such a large crowd. That, of course, shows a keen interest in agriculture and what we have to say to you today.

In order to set a brief basis for agriculture in Canada, I can't start talking about trade unless I mention the fact that, of course, agriculture and agri-food in Canada generate upwards of $85 billion a year. Agriculture and agri-food contribute approximately 9% to the GDP and one out of four employees in Canada. So it's a very important contribution to the Canadian economy.

I am also very proud to say that at CFA we represent well over 200,000 farmers and we count as our members 10 provincial general farm organizations as well as national commodity groups. We are particularly pleased to have welcomed two new members this last year: AgriCorp—that, of course, is the amalgamation of Alberta Wheat Pool and Manitoba Pool—as well as the Canadian Pork Council.

As we work around the trade committee table at the CFA, we do it through consensus. We do a lot of hard work, and when we achieve consensus we are comfortable and confident that this consensus has been achieved by a very important cross-section of agriculture in Canada, by a very important cross-section of all the commodities that are produced in Canada, as well as by a good regional and geographical cross-section.

That forms the basis of what I am going to briefly present to you today in the way of CFA's trade statement. Of course, I will not go into very great detail. You have the packages available to you and a more extensive trade position in your package. I will highlight a few very important issues.

I should also say that as we have achieved consensus at the CFA, as we continue to understand the dynamics of the upcoming trade negotiation better, as we continue to understand better where other countries are coming from, of course, this trade statement continues to be improved. I'm very pleased to be able to tell you that as late as two weeks ago at our CFA annual meeting we again made considerable progress in our trade statement.

I'm going to touch on four main issues in my presentation: export subsidies, market access, domestic support, and the effect of non-tariff barriers. I again want to emphasize that as we move towards a negotiating position when the next round starts, it's important that we realize that we need to improve our position incrementally as we go along. We do not have to come out of the gates too early and volunteer all kinds of things out of Canada. It's very important that we set goals and objectives for Canadian agriculture. As the negotiations proceed, it's important that we ensure that we build the tools we need to in fact achieve those objectives.

At CFA we have two main goals as we approach the negotiations. One is of course to improve market access and the other one is to continue to remember that we need to make sure that we maintain the stability and viability of our domestic policy interests. We have to consider that we have import-sensitive commodities in Canada as well. My presentation is within the context of those two goals.

• 0920

We don't consider those goals mutually exclusive. In fact, if you look at other countries, you'd see that every other country has the same kinds of goals. As we proceed into the negotiations, this becomes more and more evident, and we don't accept the argument that these goals are mutually exclusive. We don't accept the argument that they are not a credible, negotiating position. So we feel quite comfortable in seeking improved access and at the same time looking after our domestic interests, as every other country at the WTO will do as well.

Let me start then by talking about export subsidies. Of course, at CFA we promote the complete and total elimination of export subsidies. We also need to be very careful that export subsidies are not disguised as export credits and as food aid. So we need to make sure that we focus on those. As well, we need to prevent changes to the definition of “export subsidies” that would undermine the effectiveness of our Canadian agricultural marketing bodies.

It's interesting to note as we looked at the last round that there was an agreement to decrease export subsidies by 36% in value and 21% in volume. However, Canada, in its own wisdom, decided in its domestic policy to take its export subsidies to 0%. While Canada has brought their export subsidies to 0%, we see other countries in fact starting to use export subsidies again. Of course, it looked very good after the last round because commodity prices were high.

Now that commodity prices are low, we see bodies like the EU using the roll-over provision. While they decreased or did not use export subsidies in the first several subsequent years to the last round, they are now using export subsidies in greater force again. Of course, that has detrimental implications for our agriculture and for the fact that our domestic policy says we have no export subsidies at all.

I want to go to market access. Market access has become a very peculiar problem in that we see other countries belly up to the bar when it comes to trade negotiations. They seem to have a willingness to negotiate commitments. They seem to have a willingness to close trade negotiations. After the negotiations are made, they have unique ways of finding ways either to contravene the commitments they've made or to impede market access.

If you look at Canada, we have been very clean in the market access issue after the last negotiations. If you look at the some 13,070 tariff rate quotas that we have subsequent to the last round, Canada has only 21 of those. We have an average TRQ fill of 85%, while our American counterparts have a TRQ fill of only about 54%. Of course, when you look at the minimum 5% market access that was agreed to in the last round, Canada has been very clean with allowing other countries to achieve that access. In fact, some of our commodities are well over the 5% minimum market access.

However, if we look at some of the other countries, we see there are three definite problems, and probably more than I can list. One of them is in tariff rate quota administration, and I'll give you an example. After the last round, the Filipinos allocated their import quota to hog producers in that country. Of course, hog producers had no interest in encouraging imports and so they impeded their minimum access commitments by doing that.

The Chairman: I'm sorry. I'm not sure whether everybody understood exactly what you were saying there. I didn't quite understand. Were you saying that within the Philippines itself the government, rather than administering the TRQ system, turned it over to the very body whose interest it was to stop imports? Is that what you're saying?

Mr. Robert Friesen: Yes.

The Chairman: Okay. This happens in other countries as well?

Mr. Robert Friesen: Yes.

The Chairman: So this falls within a non-tariff barrier...an opaque, but hidden form of it?

Mr. Robert Friesen: Exactly.

The Chairman: Okay. Thank you. I think everybody understands that.

• 0925

Mr. Robert Friesen: The second example I want to use is insistence in some areas to continue to have very high in-tariff-quota tariffs. Of course CFA, at its annual meeting, included in its trade statement that we feel in-quota tariffs should go to zero. Other countries have managed to keep their in-quota tariffs fairly high and in that way impede the minimum access.

The third example I want to use is the aggregation of tariff lines. An example I'll use there is again pork. In the last negotiations you will recall that Canada thought we would achieve a fair amount of increased access for pork into the EU, and then after the agreement their interpretation of the agreement was that they could aggregate their meat access. As a crude example, and possibly an exaggerated example, they increased their meat access, say, for something like...I remember someone used the example of pigeon meat. I don't know if they in fact imported pigeon meat, but they had the ability to aggregate, to give increased access to pigeon meat and give very limited access to pork, and so we achieved approximately 75,000 tonnes of pork access into the EU where initially we thought it would be something like 10 times that amount, if I'm correct.

The Chairman: And you cut your pork to make it look like a pigeon a little bit, put some feathers on it or something....

Mr. Robert Friesen: I'll let you address that to the pork people later on.

The Chairman: Okay.

Mr. Robert Friesen: So there we have three examples of how other countries interpreted the last trade agreement and tried to impede minimum access, where Canada made a very real effort to make sure they were clean.

The other thing I want to mention in market access is that we should continue to pursue the maximum possible access for agricultural exports but, as I said earlier, also protect the domestic interests that we have.

Another thing we can do to ensure increased access in agricultural commodities is to achieve parity of access for competing products, as well as parity of access between the primary and processed forms of a product. An example is that canola should enjoy the same access as soybeans, and canola products should achieve the same amount of access as in fact canola itself.

So we have again added to our trade statement that for those sectors in Canada that are interested in pursuing zero-for-zero negotiations, we should proceed with that, and at the same time we should ensure that our over-quota tariffs are maintained at a level to ensure that the TRQs we have in Canada maintain some creditability.

Last under market access, we need to pursue the elimination of unjustified sanitary and phytosanitary measures and other non-tariff measures that have been used by other countries. Of course we have quite a list of those, but I'll mention a few of them: certainly achieving clear-cut agreements on veterinarian and inspection standards; we have unrealistic trade provisions established by certain environmental groups, and an example is the biosafety protocol negotiations that are going on; sudden changes of standards....

I guess I'm a friend of pork here today. I should say that on my own farm I have the perfect Canadian balanced position in that I produce turkeys as well as hogs on my farm, so perhaps that gives me some legitimacy when I talk about pork as well as poultry production. But certainly we had a problem with Taiwan in some shipments of pig meat bones going to Taiwan, and they were halfway there when the Taiwanese government, in their wisdom, suddenly decided to change the criteria as to how much percentage of meat should be on those bones. Of course it was then tough to find a home for that product.

Further, we had problems with genetically modified products. The EU of course has put an embargo on genetically modified products. Biotechnology, I don't have to tell you, will be a very, very important issue in the future as well.

We would further call, when it comes to increased market access, for the elimination of country-specific allocations, which of course, as you well know, is the provision through which countries can allocate market access to specific countries and in that way keep other countries from enjoying a share of that market access or in fact competing for that market access.

• 0930

I would also like to touch on domestic support. As you well know, Canadian agriculture has experienced a reduction of 60% in domestic support over the last four to five years, while our commitments in the last GATT round were only to reduce by 20%. So again, our farmers have experienced a considerable decrease over what in fact we had to decrease given the commitments that were made in the last round.

As we continue to compare domestic support, it at times seems a little redundant to negotiate trade deals based on competitive advantage and comparative advantage when in fact we find our producers competing against the government treasuries in other countries. I can cite you several examples in looking at the commitments that were made and in looking at the reductions that were made in other countries.

Canada is at 15% of their commitments on amber support. If you look at the U.S., they're at 27%. In fact, the EU is at 60%. Now while those other countries are within their limits, they are still much higher than we are. If you compare actual domestic support as a percentage of the production value, we see that Canadian agriculture receives only 16%. The U.S., in fact, if you include domestic food aid, is at 32%, and the EU is as high as 42.5%. Japan still sits at 61% of domestic support as a percentage of their production value.

So, again, if we are going to go into trade negotiations, we need to somehow harmonize our trade policy with our domestic policy so that we have some sort of equity between producers in Canada and producers in other countries. This is because of course that can become a considerable competitive disadvantage if our producers have to compete against the very large treasuries in other countries. So that certainly is a priority, that we ensure that we either have the domestic commitment or perhaps in some way cap the domestic support that other countries give to their producers as a percentage of their production value as well.

I would also like to stress that as we continue to improve market access, at the same time we have to continue to ensure that we maintain the right to have orderly marketing structures in the sense that we need them in Canada, to make sure we have stable and viable industries in those commodities that need them. We also need to maintain the right to maintain the Canadian Wheat Board as we see it today, because of course that is something our producers want to maintain.

We know very well that the U.S. is going to continue to put incredible pressure, specifically on the Canadian Wheat Board as well as on orderly marketing structures. What we need to do is vigorously pursue achieving allies in that field to ensure that we can continue to uphold that right.

In conclusion, Mr. Chairman, I would like again to emphasize that instead of Canada going into this next trade round and volunteering things too early, we need to very early on establish goals and objectives for Canadian agriculture. Then what we have to do is build our trade policy around it. We have to build trade policy in such a way that it gives us the tools to achieve the goals and objectives we have in all the commodities we have in Canada.

Again I want to stress that we have considerable export interests around the CFA table as well as having more import-sensitive commodities. I want to stress again that as we work around the trade committee table at the CFA, there's considerable understanding between the commodities and the industries in achieving a credible trade position.

I believe we have the start of a trade position here today that will allow the federal government to hold its head very high when they start the next negotiation. I believe we represent a large enough cross-section of, again, agricultural commodities as well as geographical regions that we have a trade position that has to be accepted, and it makes it very, very hard to argue against.

So agriculture is very, very important in Canada. We make a considerable contribution to the economy in Canada. Let's make sure that our objectives are such that the agriculture industry can continue to thrive. Then let's make sure we build the tools and the trade policy around those objectives so that those objectives can be achieved. Thank you very much.

• 0935

The Chairman: Thank you very much, Mr. Friesen. Just before you go, you gave us the production report based on total production value in a country. Could you just give us those figures again? Japan was 61%. But you gave us Europe, the U.S., and Canada.

Mr. Robert Friesen: The Canadian percent of domestic support as a percent of production value is 16%; the U.S., if you include their domestic food aid, is 32%; the Europeans' is around 42.5%; and the Japanese is 61%.

The Chairman: Thank you very much.

Next we go to the Canadian Alliance of Agri-Food Exporters, Mr. Asnong.

[Translation]

Mr. Edouard Asnong: (President, Canadian Pork Council, Canadian Alliance of Agri-Food Exporters): Thank you, Mr. Chairman.

In lieu of an introduction, I would like to tell you that the Canadian Alliance of Agri-Food Exporters welcomes the federal government's proactive approach with these consultations in view of the next round of WTO negotiations. We are well satisfied with the government's commitment to supply precise information to all involved parties and, through platforms such as the exploratory hearings of today, offer them the opportunity of contributing to the definition of Canada's role. This approach allowed for debate and discussion from the start of the process and will allow for the successful development of a realistic Canadian position.

The Canadian Alliance of Agri-Food Exporters includes 18 members representing almost all production and processing export- focused sectors . We have come together to show Canada and the entire world that an important part of the survival of the Canadian agri-food business depends mainly on the international market. In total, our members have sales of more than $30 billion, of which more than $20 billion are exports; this represents more than 7 per cent of all Canadian exports. From 40 to 80 per cent of the products of our members is exported. In addition, our members mean hundreds of thousands of jobs in Canada.

Our Alliance is based on the common objectives of development, export markets and the elimination of unfair trade practices. During the next round of negotiations, Canada must make significant progress in terms of market access and the elimination of export subsidies in order to ensure a real increase of agri-food exports in a large range of sectors.

Canada must be a leader and continue to demand reforms during future multilateral negotiations. To be efficient, Canada must however be perceived as a credible player and come to the table with a coherent and realistic strategy.

I will now move on to our general comments on Canada's negotiation strategy. The negotiations should deal with enough areas to really push members of the WTO to negotiate an important and constructive trade liberalization. Given the established framework of agricultural disciplines, the next round of negotiations must reinforce negotiation methods based on principles or formulas and, as far as possible, avoid compromises.

The next round of negotiations must allow for more predictability in terms of the liberalization of agricultural commercial exchanges. To reach that goal, we need specific requirements in terms of the gradual elimination of obstacles and the elimination of products' global approach, in other words the establishment of tariff quotas, as well as other measures that would allow the liberalization process to become more transparent and more objective. Finally, future negotiations should allow us to obtain significant results from the very start of the process.

[English]

Mr. Martin Rice (Executive Director, Canadian Pork Council; Canadian Alliance of Agri-Food Exporters): Although Canadian agri-food exports have shown strong growth throughout the 1990s, market development activity and potential gains were limited by several factors, including prohibitively high over-quota tariff rates, aggregated commitment levels, a lack of effective disciplines on the administration of border measures, and limited transparency in TRQ administration. Future negotiations must result in significant tariff reductions that will permit the entrance of product and the actual opening of markets globally.

It has been the alliance's position that this will require a significant and meaningful increase in access commitments applied to products on a disaggregated basis, obtaining maximum reductions in over-quota tariffs, restricting the practice of tariff escalation, and minimizing in-quota duties in instances where countries maintain protection of their domestic market through a tariff rate quota.

• 0940

Beyond minimum access commitments and tariffs, there are several other market access issues that continue to hamper our export initiatives. Canada must address these issues as follows: negotiate transparent and predictable administration procedures; develop a system for reallocating underfilled quotas; and ensure countries cannot exploit consumer safety or environmental concerns by employing unjustified sanitary and phytosanitary barriers to limit imports.

In regard to export subsidies, further work is required. Not only do Canadian exports remain vulnerable in world markets, but subsidies continue to depress price levels, directly reducing returns for Canadian producers and providing unfair import competition. It is essential that future negotiations ensure the total elimination and prohibition of all export subsidies and develop effective disciplines on the use of agricultural export credits. The Canadian agri-food industry must be permitted to respond to market forces and opportunities without the burden of competition from heavily subsidized products.

Canada should also attempt to negotiate limits on the use of export restrictions, as these restrictions are often placed only on the export of raw product, providing a cost advantage for foreign processors in procuring their raw material.

Regarding domestic support, future negotiations must lead to significant reductions in domestic agricultural support levels that distort production or influence trade. Blue box expenditures should be considered a transitional measure and be eliminated altogether.

The Chairman: You'll have to tell us what you mean by a blue box measure.

Mr. Martin Rice: The blue box was created toward the end of the Uruguay Round. I believe it was a concept initiated by the European Union to acknowledge some internal agri-food policy reforms. In order to sell a package of reforms to the common agricultural policy, they introduced some transitional measures that would basically buy some support from the agricultural industry to accommodate or to be able to have political acceptance of those measures to reduce the internal support. In order to have those subsidies exempted from their overall subsidy reduction commitments, this category, blue box, was invented.

This was supposed to be transitional. It was supposed to allow the expenditure of those funds to buy internal acceptance. There was to be a period of time after which those subsidies would no longer qualify to be exempted from the total measure of subsidies. They would have to be brought in or eliminated so they would be in conformity with their subsidy reduction commitments. So it was a special exemption, and I believe the U.S. then also used the same category for some of their programs that they introduced, again to bring their industry more in conformity with open-market philosophy and eliminate some of the subsidies they had before.

The Chairman: But your point is that these were supposed to be a temporary bridging measure, and nobody has ever got to the end of the bridge. Is that your point? It's still in the blue box when it should have come out. Is that the—

Mr. Martin Rice: Yes.

The Chairman: Okay.

Mr. Martin Rice: We're coming to the end of that period where it's acceptable, at least based on the original expectation, so it should be brought into the total measure.

The Chairman: I see.

Mr. Bob Speller (Haldimand—Norfolk—Brant, Lib.): There are green and amber boxes too.

The Chairman: Mr. Speller tells us there are green and amber boxes too. I live in a city where a blue box is where you put your bottles and your tins. In the grey box, we put the papers. So you're going to have to tell us if you have other boxes.

Mr. Charlie Penson (Peace River, Ref.): You'll have to travel in rural Canada.

The Chairman: Exactly. We're going there. That's why we're going.

Mr. Martin Rice: I don't know if it's like this at your place, but sometimes our blue box disappears. And that's what we're asking for here, that either the blue box programs disappear or they're brought into.... Amber is considered to be programs that are accepted, but are part of what a country has to commit to reducing. When the Uruguay Round was completed, there were obligations to reduce internal subsidies, total domestic support, by a certain percentage. The green programs are considered those that have no trade-distorting effect. They include things such as research, education, and food inspection. They are considered not to have a trade-distorting impact and therefore are not part of the total government programs that have to be reduced.

• 0945

The Chairman: So it's just like the red, green, and amber subsidy categories. It's a form of category to determine where you are in the progress of being either permitted a grey area or not.

Mr. Martin Rice: Yes, that's right.

The Chairman: I think we've got it.

Mr. Martin Rice: I guess we'd like to see the export subsidies become a red subsidy, that is, not permissible at all.

The Chairman: Yes, I understand. Thank you very much.

Mr. Martin Rice: So while decoupled support payments distort trade—decoupled would be non-trade-distorting—in a capital-intensive industry such as agriculture these capital injections will quickly influence future production decisions. The extent to which such support distorts world trade needs to be examined and taken into account in future negotiations.

Finally under this category of programs, Canada must also address the issue of domestic support issues within the context of international competitiveness and work to maintain the current countervail and anti-dumping exemption status for green programs.

I'll leave it with Mr. Asnong to conclude.

[Translation]

Mr. Edouard Asnong: In addition to these questions, the multilateral negotiations give us the opportunity of raising other questions that our Alliance believes to be very important, especially: the need to renew commitments that sanitary and phytosanitary measures be based on scientific data, and the guarantee that these technical restrictions will not become trade barriers to imports or will replace customs barriers that used to restrict market access, and work to ensure that countries use only scientific data to ensure that genetically modified organisms, the GMOs, and their products are acceptable and that the labelling standards do not represent non-custom barriers to commercial trade.

Recently, the Agriculture ministers have agreed to work with the sector to double Canada's agri-food exports and achieve the objective of 4 per cent of wold-wide agri-food sales by the year 2005. In the future, to attain its full economic growth potential and job creation possibilities, Canada must come to the next round of WTO discussions on agriculture with a negotiating position that supports an internationally competitive agri-food industry.

We fully approve of Canada's role in the Cairns Group and of the opportunity that has been given to it to chair the free-trade discussions in America. However, if it wants to capitalize on this, Canada must be considered a credible participant in these discussions. It is therefore important that its representatives go to the meetings with a coherent and realistic negotiating strategy.

We appreciate the fact that you have invited us to give our opinion on the public consultation papers and we hope to participate in future consultations. Thank you very much.

The Chairman: Thank you, Mr. Asnong. I now yield the floor to the representatives of the Dairy Farmers of Canada.

[English]

the Dairy Farmers of Canada, Mr. Core.

Mr. John Core (Vice-President, Dairy Farmers of Canada): Thank you, Mr. Chairman. I'm John Core. I'm vice-president of Dairy Farmers of Canada and chairman of Dairy Farmers of Ontario, and I am a dairy farmer from Lambton County.

We've distributed to you a folder that contains two policy statements as well as the statement I'm going to read this morning. The one policy statement is from Dairy Farmers of Canada. This statement was endorsed at our annual policy conference held in January of this year.

The second policy statement is endorsed by what we call the SM-5, which groups the five national organizations of producers under supply management. These organizations are the Canadian Broiler Hatching Egg Marketing Agency, the Canadian Egg Marketing Agency, the Canadian Turkey Marketing Agency, Chicken Farmers of Canada, and Dairy Farmers of Canada. The SM-5 represents close to 30,000 farmers with a production value exceeding $6 billion or 21% of total primary agriculture here in Canada.

While Dairy Farmers of Canada's trade policy statement goes into more detail and brings forth new policies, it fully endorses and incorporates the SM-5 trade policy position. Since I have only a few minutes for this presentation this morning, I will concentrate on four key elements of this particular statement and I'd like to raise one other issue with this committee. I should point out that my comments are going to be very similar to Mr. Friesen's from CFA.

• 0950

Our position at the Dairy Farmers of Canada is based on four fundamental elements. One, it relates to government-financed export subsidies. The second is that we insist on a rules-based system, particularly for market access issues. Third, we believe that over-quota tariffs should be maintained. And fourth, we believe that domestic support should be capped and reduced in all countries.

The first element is that all government-financed exports subsidies should be completely eliminated. The United States and the European Union together represent more than 90% of all subsidized agricultural exports. It is mostly the European Union, and I want to emphasize that, but in some products the United States is also important. In the case of butter, for example, 94.4% of all subsidized exports actually come from the United States. It's 95.6% for cheese and 99.4% for poultry. Therefore, before we start talking about all kinds of new subjects for the next round of negotiations, what we should have first is a commitment by the key players and the people who have the most influence in the next round—the United States and Europe—to actually get rid of their export subsidies.

The second element in our statement is that the system should be rules based. That may be a surprise to you because everybody tells us now that we have a rules-based system, but that's not the case. The fact of the matter is that the Uruguay Round was not completely rules based. Countries' commitments had to be made in three main areas: export subsidies, market access, and domestic support. The agreement on agriculture, however, establishes rules in the reduction of export subsidies only. Commitments on market access, and this includes reduction in tariffs, establishment of minimum access, and calculation of tariff equivalents, and on domestic support, which includes the reduction in the aggregate measure of support, otherwise known as AMS, were based on modalities and guidelines that were not incorporated into the agreement. Countries either followed, ignored, or interpreted to their advantage those modalities, thereby resulting in commitments between countries that were highly unequal.

As an example, let's look at what's offered in minimum access. We would all like to believe that countries have put on the table 5% of their consumption by the year 2000. We all know that in practice, however, that is not the case. For the dairy sector, Canada on an aggregate basis will have offered 4% access to its dairy markets; the United States about 2.7%; and Europe 3%.

This is not comparable and not equitable. There have been all kinds of games played on this issue. It's time the countries look at establishing rules so that when we look at the offers we know that everybody follows the same rules and have made the same offers and that they're both reciprocal and fair.

The third key element of our position is the maintenance of their current levels of over-quota tariffs or what we refer to as tariff equivalence. The tarrification of non-tariff measures did not alter the justification for maintaining some protection against the lack of a level playing field in international markets in some commodities. Dairy is a good example of an industry where the greater part of world trade continues to benefit from export subsidies. Of the 36 countries that participated in the agricultural trade negotiations during the Uruguay Round, 34 of those 36 established tariff rate quotas on dairy products.

The over-quota tariffs, which vary between 100% and 350%, is a reflection of the tariff levels required by each country as an equivalent protection against heavily subsidized exports. Suggestions to reduce these tariffs to a more uniform level, for example 100%, ignore the original concept of equivalency and would only increase the disparity between countries, leaving some countries more protected against imports than others.

Furthermore, one of the key principles of the WTO is to ensure predictability and stability as a means of encouraging investment and creating jobs. In Canada, supply management programs have pursued the same principle. Reducing what is known as tariff equivalence will only do the reverse of what this principle is trying to achieve.

If the goal of the next WTO round is to increase access, then let's clean up the access. Let's make sure everybody has offered 5%, and let's make sure that this 5% is actually achievable and available. Let's also make sure that exports are no longer dependent on government treasuries. This is not the case now. Export subsidies remain a reality.

• 0955

Minimum access offered by most major countries is not reflective of a level playing field. If Canada is to pursue an objective of increasing trade, it should focus on removing all trade distortions and inequities that still exist in the minimum access offered by WTO members rather than seek to reduce the levels of over-quota tariffs.

The fourth element deals with domestic support. There hasn't been a great deal of change in the degree of support offered by the two major players to their agricultural producers, even though they both have met their reduction commitment by cutting their aggregate measure of support or what we call the amber box. We're back to colours again.

What we've seen in Europe at the same time, however, is a major increase in both green box and blue box. In the United States the green boxes doubled. The same situation did not occur in Canada, where we've seen a significant reduction in total support to agriculture. So the reality is that regardless of the colour code system, we don't have an agricultural industry around the world that is less dependent on government support other than in Canada.

When we compare different countries, we first look at the European Union and realize that in 1995 total domestic support represented 42% of the total value of their agricultural production, the same numbers Mr. Friesen used. In the United States it was 32%; in Canada 16%.

If we expect to have fairness and equity within a competitive environment, then there's a need for governments to agree that they're either going to have to be competitive with each other and offer the same degree of support to their respective industries or cap those supports, regardless of whether they're green, amber or blue.

Therefore, since we do not believe that Canadian governments can directly compete with other treasuries, what we're recommending is that we cap, in addition to the reduction commitments in the AMS, the total support as a percentage of total value of production.

Those are the four elements of our position. I'd now like to take a few minutes to raise one last issue.

To break a deadlock in negotiations after more than seven years, the negotiators agreed in the Uruguay Round to allow all countries to play a dirty game when it came to making offers. As no one could agree on a set of rules, country offers were unequal. As you can see from the position we've taken, our strategy is to seek that countries clean up their act and follow a single set of rules applicable to all. This strategy requires a great deal of transparency, something I know Minister Marchi has been committed to and something I'm sure this committee is prepared to endorse.

We are truly frustrated by the fact that currently both the process of preparation for the next round of negotiations and the base data from the Uruguay Round continue to be confidential. For over a year the WTO agriculture committee has been preparing for the next round of WTO negotiations, which will start in December. The process initiated by the WTO is called the analysis and information exchange. A large number of documents, well over 40, have been actually tabled by many countries, including Canada, on concepts, ideas, problems, and solutions that may be brought up in the next round of negotiations.

Clearly this information will have a major influence on the negotiations. All this information is confidential. How can we, as an industry participant, possibly develop a position without access to all of that information? Furthermore, while the commitments of each country have been made public at the end of the Uruguay Round, the manner in which such commitments were calculated has remained confidential.

This information is contained in schedule 4 of each country's offer and has not been made public. For example, these schedules would contain the consumption number on which countries were to offer a minimum access of 5%.

We fully recognize that these schedules, once public, will clearly outline how dirty every country, including Canada, has played the game. However, if there is any clean-up to be done, this information needs to be made available and needs to be public. We have to start this next round, not on the perception of what was achieved in the last round, but on the reality of what was actually done.

I appeal to you to use your influence to seek that Canada ensures, as we start the next round, that all the information necessary for a truly transparent process is actually made available and no longer classified as confidential.

Thank you, Mr. Chairman.

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

I have one question. I take it that most of the things you said are applicable across the board to all agricultural products and that most of your observations in respect of the system and what we're facing in the way of subsidies in other countries, etc., means it is not just a dairy problem.

Mr. John Core: No.

The Chairman: It's for all agricultural issues?

Mr. John Core: I raised some dairy-specific issues, but we believe the issues we're talking about apply to all of agriculture.

The Chairman: Thank you very much.

[Translation]

I would invite Mr. Proulx, the representative of the Union des producteurs agricoles du Québec, to speak.

• 1000

Mr. Yvon Proulx (Senior economist, Union des producteurs agricoles du Québec): Thank you Mr. Chairman. My presentation will be very brief because I understand that you will be going to the provinces during your consultation process and that we will then have the opportunity to present the position of the Union des producteurs agricoles du Québec on this issue.

The Chairman: As we say in English, you get two bites of the cherry.

Mr. Yvon Proulx: I will be brief also because our position, which has not yet been presented to the Government of Québec, is very similar to that of the Canadian Federation of Agriculture. You know that we are members of this federation and that our President is its Vice-president. As a result, our positions are very similar. Therefore, I will not repeat each of the specific elements of the negotiations raised by the president of the Canadian Federation of Agriculture.

I would like to stress certain principles that strike me as fundamental in this upcoming round of negotiations. To begin, this morning I would like to remind you that less than two weeks ago between 25,000 and 50,000 European agricultural producers marched on Brussels to express their formal opposition to an agricultural policy concocted or stirred up in the process of trade negotiations. They had mobilized to oppose a reform whose aim was to reduce agricultural prices from 15 to 30 per cent thereby reducing and rendering the revenues of European agricultural producers somewhat chancy. I believe that their approach gives us a very clear lesson.

The objective we have to pursue when we start new trade negotiations should be the search for positive results not only for the whole of society but also for all individuals affected by a reform. Quebec and Canadian agricultural producers would not accept, any more than the Europeans, that these negotiations be undertaken with a view to imposing reforms on them, for ideological reasons or any other reasons, that are aimed at reducing or destabilizing their earnings. The next trade negotiations must absolutely be aimed at maintaining or increasing the level, security and stability of Quebec and Canadian agricultural producers' revenues.

This position aimed at looking for positive results should prevail for all sectors of production. Consequently, in undertaking these trade negotiations, we must remember that we must avoid making tradeoffs where one sector of production is used as a bargaining chip to win gains in another. The negotiations must strive for positive results for all sectors of production; this principle cannot be ignored.

I want to emphasize the second principle which cannot be ignored, namely that the collective marketing systems developed here in Canada must be maintained. One of the characteristic features of Quebec and Canadian agriculture in the global trade environment is the importance given to collective marketing systems and supply management, particularly as an instrument that, on the one hand, enables producers to get a larger part of their revenues from the marketplace without cost to the public purse and, on the other hand, improves income level and stability.

Let us recall that this ability to maintain and protect our affairs collectively has been first and foremost in our claims and the source of the battles that Canadian and Quebec producers have fought during all trade negotiations over the last ten years, including those that lead to the FTA and NAFTA and the last round of WTO negotiations.

• 1005

We absolutely insist on the protection and maintenance of the systems whereby we can intervene in our markets in order to discipline them. It is another inescapable issue. The viewpoint of agricultural producers has not changed in the last ten years or so of negotiations. They feel it is an absolute priority that Canada's ability to keep such systems and to allow them to work efficiently be maintained. This belief on the part of agricultural producers has been strongly reinforced over the last years by the significant crisis in two important product areas in Canada, pork and cereals, which have seen horrifying price reductions that translated into very serious problems in their income. In the sectors where there is supply management, we manage to prevent and control such crises. These accidents in significant agricultural markets have reinforced the need to maintain market disciplinary powers in a certain number of other markets.

The next principle that seems inescapable to us as we start the next negotiations is maintaining the ability of the Canadian government to intervene and support and stabilize the income of agricultural producers. As I said earlier, any trade negotiation must have as its objective the search for positive results in terms of maintaining, protecting and promoting the income of agricultural producers. Negotiations must absolutely be undertaken with the idea that we will maintain our government's ability to intervene in order to ensure income security and stability for agricultural producers.

There is an interesting coincidence. About two weeks ago, in Washington, the Secretary of State for Agriculture admitted quite candidly, at the opening of the conference on the future of American agriculture, that the American government had made a mistake in 1996 when it adopted the Farm Bill, which drastically weakened the American government's ability to maintain and stabilize the income of agricultural producers. He said that it was adopted thinking that the markets would always be excellent, that consumption and demand at the export level would always be significant and that therefore there would no longer be agricultural income problems. But the situation in 1998 and what we expect for 1999 categorically refute this overly optimistic forecast. The American Secretary of State for Agriculture used this forum to announce that their government had been forced to take measures to spend $10 billion to remedy the weakening of the agricultural producers' income security as a result of that 1996 bill. That gives us a good lesson. In fact, the Secretary of State admitted that these ad hoc interventions, like the measure the Canadian government was forced to take recently, are not the right way to go.

I therefore believe that we need to start this round of negotiations by seeking to protect Canada's ability to continue to intervene in its market to ensure income stability and security for Canadian agricultural producers. If we do not start from that principle, we will surely find the agricultural producers in our way.

I will not speak any longer about the various elements of negotiations regarding market access or abandoning export subsidies. It is clear that our position agrees with that of the Canadian Federation of Agriculture on the question of eliminating export subsidies and maintaining tariffs above tariff quotas. Our position is in full agreement with that of The Canadian Federation and the five national organizations that deal with supply management.

As for internal support, you will have noticed from my earlier comments that it is obvious we will insist on the Canadian government studying the means of support other governments have given their agricultural sectors so that it can be competitive compared to what is done elsewhere. Canadian and Quebec agricultural producers have often been asked and reminded to be competitive in terms of their colleagues from other countries. Now we are asking the Canadian and Quebec governments to be competitive and to offer us advantages similar to those offered by the other governments to their agricultural sectors in order to maintain them.

Thank you, Mr. Chairman.

• 1010

The Chairman: Thank you very much, Mr. Proulx. Your presentation was very interesting. I agree with you completely that we must not forget to take into account the experience of other countries.

[English]

Mr. Miner.

Hon. Sheila Finestone (Mount Royal, Lib.): Mr. Chair, as a point of information, the remarks just made by Monsieur Proulx indicate to me that it might be very helpful if we had a comparative chart of all these countries so that we can see where the differential is of a negative impact for Canada and so we can listen and participate in a more transparent and knowledgeable way. Perhaps the research staff could do that.

The Chairman: I think we will be working on that. You'll notice that in the dairy production materials they gave us there's an actual chart showing—

Mrs. Sheila Finestone: Yes, I know.

The Chairman: —42%, 16% domestic support and all that. But I agree.

Mrs. Sheila Finestone: Yes, but it differs per country and we have major markets...where our major markets are.

The Chairman: Yes, what are the barriers that are there?

Mrs. Sheila Finestone: Oui. Not only that, but we have major markets that are not only those three. I think it's important.

[Translation]

Mr. Odina Desrochers: We already have that information about Canada.

Mrs. Sheila Finestone: For all markets, including those where the producers that Mr. Proulx represents work?

Mr. Odina Desrochers: Yes.

Mrs. Sheila Finestone: Thank you.

Mr. Odina Desrochers: He even said it.

Mrs. Sheila Finestone: At least it's transparent.

Mr. Odina Desrochers: Since he said that his opinion was the same as that of his colleagues, I believe it is clear.

Mrs. Sheila Finestone: Thank you for those clarifications.

[English]

The Chairman: Also, following up your line of thought, I think we'll also have to hear at some point from some foreign witnesses about the situation there. We'll work that out as well.

Mr. Miner.

Mr. William M. Miner (Senior Research Associate, Centre for Trade Policy and Law): Thank you, Mr. Chairman. It's an honour to be invited to assist the committee and examine the agricultural issues and our interests in the next WTO round. I will focus my comments on the agreement on agriculture in the WTO and how I think it is assisting our sector to respond to what is going on in the world around us. I think it's also important, Mr. Chairman, though, to examine the other WTO agreements in the context of agriculture, particularly the sanitary and phytosanitary agreement as well as regional trade agreements such as NAFTA, in developing our approach in the WTO, given the linkages between these agreements.

As part of the North American market and with a greater reliance on farm and food trade than either of our NAFTA partners, Canada must use the WTO, I believe, to advance its interests both regionally and offshore. Some issues among NAFTA partners, such as the use of agricultural subsidies and the issue of state trading, can only be resolved through multilateral negotiations. The problems of export subsidies, or removing all barriers to trade in one sector such as oilseeds, require a multilateral approach, I think, but a common position among all western hemisphere countries would greatly strengthen Canada's approach in the World Trade Organization.

It's important to consider as well, I think, the emerging policy context in which we'll be developing our negotiating positions and playing it out. For the background of the committee, I did suggest that my latest review on the policy environment be made available to the members. I think this looks carefully at a number of specific issues of that environment, many of which are positive and should lay the groundwork for a successful negotiation in agriculture. But at the same time, I must acknowledge that the political drive to achieve a successful result in the current environment is still necessary.

In the approach to the position, I think it's important to look at the trends that are occurring in developing policies around the world in addition to our own. The fundamental reforms that we have seen occurring over some time now in a number of countries are likely to continue. They're certainly common globally in all regions. This is leading to a change in the structure of food markets and in the processes of production, as well as in farming operations, I believe, and this will continue because technology and consumer demand will drive us in those directions.

The shift away from trade in traditional commodities towards semi-processed food components and fully manufactured foods will continue, I think. Market reforms seem to have become an integral part of the policy approach of most countries in today's trading environment.

• 1015

So despite the recent setbacks that we have seen in the economies of several regions, I believe investment and trade flows will continue to expand, as they're so essential for economic growth and rural development in emerging economies in the world.

These trends have led, I think, to the direction of the last GATT result, and its essential element was to take a first step through a multilateral program to make progressive reductions in the way agriculture is supported and also in the protection accorded that sector.

This establishes the basis, I believe, for the next round. I'm saying the framework of the existing agreement of rules for most issues and commitments dealing with all sectors should form the basis for establishing a committee, an approach. In other words, the process that was begun in the current agreement is likely to be continued.

This agreement made quite a lot of progress in establishing what is referred to as a market-oriented system, but one has to acknowledge—and the comments already made would indicate this—that the improvements in specific access have been modest. A good step was made on the subsidy side, particularly the export subsidy side, and in developing technical standards based on science, but this hasn't removed many difficulties, and of course the number of disputes is continuing to plague this sector.

The committee on agriculture has been undertaking a review and has been looking at approaches, and I would like to comment on a number of the specific points that seem to be coming forward, which have appeared in the public domain.

The first point, which has been emphasized already, is that better market access is essential to a successful agricultural result. This means that there must be a strong tariff negotiation. Not only must there be a general reduction for success, but I think peak tariffs are going to have to come down dramatically. They tend, on the extreme, to range from 100% to 200% and 500% and upwards, and these can hardly be necessary for a reasonable level of protection to a sector.

For many farm commodities the tariffs on value-added products are a particular target for Canada, and I agree with the comments that there was too high a level of aggregation in the final result and that a much more precise and specific approach is needed this time. In that context, I might add that the Uruguay Round went on for so many years that I think it left too little time to address the specific offers and the schedules the countries put in at the end of the round. There needs to be time for a more thorough negotiation of those positions to get the balance that some of the comments would indicate is needed.

But in the tariff negotiation, I believe we should not allow some sectors to be held back in terms of reductions because other sectors are not prepared to move very far or very quickly. In other words, I think for oilseeds, to take an example, Canada ought to push strongly for a zero-zero approach, which means the removal of subsidies and trade barriers that affect that sector. In fact, I would tend to recommend that Canada consider that approach for a number of our main export sectors, such as cereals and red meats, to move in that direction globally within a negotiated timeframe.

The question of tariff rate quotas I think was an unfortunate result of the manner in which the Uruguay Round managed to convert non-tariff barriers into forms of tariffs. I think TRQs can only be justified if the above quota tariffs are prohibitive. Hence, if you can get those down, the TRQs should not be necessary, but if they are to continue, the TRQ regimes must be cleaned up, as has been said. They have to be operated openly and on a most favoured nation basis and without discrimination between suppliers to the world market. In the context of the access negotiation, I think state trading import monopolies must be made subject to the same disciplines. They already are in reality, but in practice it isn't occurring, as has already been pointed out. So there must be ways to ensure that these monopolies operate sufficiently openly that you can see that the rules and disciplines are being respected.

• 1020

Export subsidies continue to be extremely trade distorting, particularly in the current market environment. The timeframe for their elimination is I think the only satisfactory outcome.

This will bring to the table, however, the need to discipline in some manner other export-competitive practices. Export credits have been mentioned. Multiple pricing schemes on the export side should be included, and the use of monopoly state trading for export will also come to the table, I think, in the context of negotiating down export subsidies.

State trading organizations or parastatal entities and private monopolies must be able to demonstrate that they are observing the trade rules on both the import and the export side, particularly if you consider that Russia, China, and a number of such countries are applying to exceed.

The Chairman: Could you give us an example of a private monopoly? Would you consider Cargill a private monopoly?

Mr. William Miner: I wasn't thinking of it in that context. That type of monopoly would normally be subject to competition law within a country. I was thinking more of a situation where a government gives a private company exclusive rights to import, or for that matter to export, a particular good.

The Chairman: Thank you.

Mr. William Miner: Export taxes, embargoes, and sanctions haven't been mentioned this morning, but they do disrupt trade and they're really not compatible with opening access to markets and with improving food security, so I think they should and probably will get attention in the next round.

With respect to domestic support from government transfers and consumer price supports, these of course need to be reduced in step with the lowering of protection and the elimination of export subsidies. The agreement in the last round on domestic supports that are not considered to distort trade, and these are so-called green box policies...they brought a considerable degree of discipline to the subsidy game. However, there is still room to distort the market, and this has been mentioned by some speakers. What we need, I think, are clearer rules and perhaps tighter rules in terms of what types of expenditures are considered to be acceptable.

The pressures from Europe and Japan to emphasize the multifunctional nature of farming and to broaden the criteria for these programs, I think, should be resisted because it will tend to erode the usefulness of these disciplines.

Related to the green box is a so-called peace clause, which shields programs that are considered non-trade-distorting from countervail and anti-dumping action. This protection is of limited duration, and it will lapse in 2003 unless it is renewed.

We know well in Canada that countervail and anti-dumping actions can be very trade disruptive, and they often represent another form of protection. Either countries must negotiate effective rules to avoid such abuses, and this is proving very difficult, or the immunity for green box programs should be continued in a new agreement.

With respect to health, sanitary, environmental, and technical standards, clearly we need to go somewhat further than we have to cover areas of current difficulty. I think the scientific approach is really the only approach that can be used, and probably we need somewhat tighter criteria and perhaps more jurisprudence on which to base further agreements.

These negotiations in the WTO do provide an opportunity, I believe, to formally address many of the issues that were left outstanding between Canada and the United States following the free trade negotiations on the NAFTA as well as what occurred in the WTO. A review of trade performance demonstrates that trade agreements are helping the Canadian agri-food industry compete and with growing success in the North American market and with further value added to product, which is very encouraging.

As was said recently by Minister Goodale, I think we should work for a common approach between Canada and the United States in this regard. In fact, I would tend to extend that observation to cover the western hemisphere, because to the extent that we in the Americas can develop a common position, I should think our approach in the WTO would be that much stronger and more successful.

• 1025

Thank you.

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

Thank you all, panellists. We'll now go to questions. You can start with beef hormones and bananas, Mr. Penson.

Mr. Charlie Penson: There are a lot of issues that we could chew on this morning, Mr. Chairman. I'd like to take this opportunity to welcome the panel here.

I'll start with just a bit of background. The Uruguay Round, as was mentioned, was seven years in the process. It was probably not as good for agriculture as a lot of people would have liked. It was recognized as a first step to bring agriculture under trade rules for the first time.

There has been a lot of expectation created that in this next built-in round there is going to be some substantial progress, especially for cutting out export subsidies and access for grain producers, oilseed producers, and beef producers, for example. They are essentially tariff and subsidy free. They are looking for that access, especially into the European Union market, and they are being denied this at the moment.

The fact that we haven't had that has put Canada back into the export subsidy business. Our subsidy business, again, is $900 million by this government over two years. That may continue unless we can get that kind of access. I throw that out as background.

This morning I'm disappointed. I can understand the position of the dairy producers. I can understand the Quebec agriculture producers wanting to stay with the situation we have. It's working for them. Be that as it may, I don't think it's a very realistic position, the status quo, going into another round.

I can't understand the CFA's position trying to wear two hats, trying to give us advice that we can have it both ways. On behalf of grain and oilseed farmers, we can get market access, but we don't have to give up anything ourselves on the supply management side where we have 300% tariffs.

Mr. Friesen's talking about whether we give a market access of 4% or 5%. The European Union is stuck at 3%. It needs to move to 5%. This is inconsequential in the total scheme of things. We're being told that the over-tariff amounts are essentially the same. For example, it's 300% or so for the butter that Canada uses. We'll take the minimum access up to 5%. That's a great move. It's not going to do much for a credible position for Canadian agriculture in this next round. So I'm concerned about that.

I think the constructive element here this morning has been Mr. Miner. He has said that we need to have a credible position going in to this next round. A lot of Canadian agriculture producers are saying just that. Let's not have this so-called balanced position that gets us nowhere. Canada has to take a lead this time around. We have to have a credible position. So I'm looking to Mr. Miner for some ideas on how we might adapt, if our supply management sector does get hit. I think it's a very real possibility that tariffs could come down substantially.

If we are hit, what are the barriers to our industry that would allow us to survive? What are the barriers into the United States? For example, the school lunch program and the state level program...what can we do at the negotiating table to try to get better access into the American market? I would have to agree that if we're able to put together a common position with the United States, it would greatly strengthen Canada's negotiating position. It seems that the European Union is where we need the major movement in terms of access for grain and oilseed and beef farmers who are going through some very tough times.

Mr. Chairman, perhaps I'll just stop there and try to get a response.

The Chairman: Should we start with Mr. Friesen and then go to Mr. Miner?

Mr. Charlie Penson: That's fine.

Mr. Robert Friesen: Thank you very much, Mr. Chairman. The comments made by Mr. Penson, of course, come as no surprise. We're basically continuing the discussion where we left off when we last met in Singapore. Our position has changed substantially, and if those points weren't recognized, perhaps we need to go over all of them again.

However, first of all, our trade position is that the WTO should be the primary vehicle where we negotiate fair and equitable trade rules.

• 1030

Secondly, our position is that we should increase market access to the maximum wherever we can for our export interests, and we should continue to be sensitive to import-sensitive commodities. I say that unabashedly, and I say it unabashedly for several reasons. To go into the next negotiations and do what Mr. Penson suggests, I believe, would be nothing short of being naive. I'll give you some examples of why I say that.

First of all, if you look at the European Union—and we've talked about subsidies and we've talked about the elimination of the blue box. In listening to a representative from the EU at our annual meeting, the Europeans have absolutely no intention of getting rid of the blue box. In fact, if you look at their agenda 2000, they have every intention of maintaining their exorbitant subsidies at the level they have been in the last several years. For us to start with the position where we clearly know that other countries are not going to acquiesce would be foolish for our agricultural industry.

Let me give you another example. In 1995 the U.S. of course notified support in the blue box. For 1996 they didn't notify any support in the blue box, but, surprise, that money showed up in the green box. Just in the last couple of days we heard another announcement from the U.S. that they are now looking at building for the first time a comprehensive livestock income stabilization program on a commodity-specific basis. When asked whether this was not a WTO risk, they said it's worth the risk. So we have other countries playing the games.

As far as our own trade statement is concerned, we are looking at zero in in-quota tariffs. For those sectors that have export interests, we are suggesting that we should negotiate zero for zero. At the same time, we are also suggesting we have industries that need a higher level of rules so we can protect those interests.

When we discuss these issues around the CFA table, we have grain exporters, we have red meat exporters, and we have supply management around that table. When we discuss contentious issues, none of the members have the position that this is our position, that's your position, sorry. They actually help each other in trying to come to a resolution.

Mr. Charlie Penson: This would be the AgriCorp you suggested?

Mr. Robert Friesen: Yes, AgriCorp and Sask Pool both. Now I would like to—

Mr. Charlie Penson: Can I ask you a question about that?

Mr. Robert Friesen: —continue by saying first of all, Mr. Chair, that in the last trade meeting we had, we approved this trade statement. We also welcomed, as I said earlier, the Canadian Pork Council on our CFA board. They had some concerns. This is on the agenda for the next trade committee. We are going to have a discussion on it, and we will discuss it again until we come to a resolution. It will continue to strengthen our trade statement, which I might add represents a cross-section of all the commodities in Canada.

Mr. Charlie Penson: Mr. Friesen, I have a son who is farming. He deals with AgriCorp, so he's bought a $10 membership so he can haul his grain to AgriCorp. Are you speaking on his behalf then?

Mr. Robert Friesen: Absolutely, they're full members of CFA.

Mr. Charlie Penson: So that would be part of your membership that you're talking about, the AgriCorp membership? I suggest to you that you're not speaking for a lot of farmers I'm talking to in my constituency. When you take the position that you've prejudged there will be no movement by the European Union...and therefore why bother trying to get that access in there and why bother going there with a credible position since you're not going to get movement anyway?

The Chairman: Mr. Friesen and Mr. Penson, these are fascinating issues, so I don't like to interrupt, but you have only a couple of minutes left. I think we should hear Mr. Miner's answer to your question as well.

Perhaps you could address that, Mr. Friesen. I'm sure other members will want to come back to this issue, because it's one we've been hearing for many years—the challenge to find a coherent position reconciling the two Canadian agricultural realities, if we could call it that. It seems to be everybody's trying to find that.

Mr. Robert Friesen: Mr. Chairman, what I did suggest is the positioning that other countries are currently doing. Canada should be very careful that they do not volunteer things early on that other countries have no intention of negotiating on. An example is what happened when we started the last round, where Canada came up with a very early position, in fact, before we understood the dynamics of that negotiation.

In fact, later on other countries had offers that were much lower than what Canada offered. So we have to set our objectives early and then build our trade policy and our trade rules as we better understand the dynamics of the negotiation and what other countries will be offering.

• 1035

The Chairman: Thank you very much.

Mr. Miner.

Mr. William Miner: Mr. Chairman, in response to the questions raised, it's difficult to answer the question of how does one adapt, because this is really an industry issue as opposed to one I can handle.

In terms of the so-called balanced approach, I think one needs to recognize that if you go to a negotiation unwilling to discuss an issue, you'll be sidelined in that regard and perhaps cornered eventually. So I think one needs to go into a negotiation ready to discuss all of our sectors on the table, not necessarily evenly but at least in terms of their interests. In other words, it's all negotiable. We then need to be confident, I think, that we know where we can make progress from that sector, particularly if it's an exposed one, and where we can't, of course, and then steer the negotiations in that direction.

The other point I would make, however, is that I don't believe a general position can suit all of the commodity sectors. In other words, in my view, for the export sectors, the further you can push toward an open market, the better in the longer term. But make sure the focus is on processed components in addition to the traditional bulk commodity.

With regard to the issue of adaptation, the only point I would like to make is that my history of trade goes back far enough that I was working in the U.K. when we were exporting 30 million pounds of cheese.

I think we can compete with some aspects even of our exposed sectors. Then we need to work toward arrangements that allow us to move our product down the processed road. I notice today that some of the French cereals groups are now recognizing that they should be working at world prices because they think they can compete, and they may be right. I believe the same is true of aspects of our so-called exposed sectors, and we should approach the negotiation in the sense of building on our strengths even within our more protected sectors.

Thank you.

The Chairman: Thank you.

[Translation]

Excuse me, Mr. Proulx, but we have to move on to the next question. I believe we will have time to come back to your presentation. Mr. Desrochers, you have the floor.

Mr. Odina Desrochers: First, I will allow Mr. Proulx to complete his answer and then I will ask my questions. Mr. Proulx, please continue if you wish.

The Chairman: That's a soft lob.

Mr. Yvon Proulx: I only wanted to add

[English]

and I will repeat it in English after,

[Translation]

that our position on the question asked by Mr. Penson is no different from those of the 38 other countries in the world that have included in their list of notification, equivalent tariffs on 1,366 products.

[English]

With regard to the very specific question you have raised, I want to tell you that our position in Canada is no different from that of the 38 countries that have included in their list of notification tariffs equivalent on 1,366 products. That's true in the U.S. The peanut, sugar, and dairy sectors in the U.S. are highly protected, and I suspect they're not willing to abandon this. It's the same thing in Japan and the European Union. So this balanced position is the same in every country. We don't have to be shy about this.

[Translation]

Mr. Odina Desrochers: Mr. Chairman, first I have a question to ask you.

You know that the Standing Committee on Agriculture studied the WTO from September to December and presented a report. In the course of the consultations that you are now having, have you read this report? Secondly, have you been apprised of the memorandums that were submitted?

• 1040

We discussed this question in depth during those meetings. I mention this so that you can have more complete information. I also say it out of respect for my colleagues on the Standing Committee on Agriculture as well as for the witnesses who came to present their position on this issue. I agree with the principle of consultation, but I also believe we must look at the documents that are already available before we enter into a new round of negotiations. I would not like to see us go through the same process twice.

The Chairman: I agree. Mr. Desrochers, I admit that I am not sure we have that report. I will have to find out. I have been told that we do not have it.

[English]

Mr. Bob Speller: The standing committee has not reported yet.

[Translation]

Mr. Odina Desrochers: At the Standing Committee on Agriculture we approached the issues on two fronts. We talked about the WTO and also about income security. The minister used this document to announce his $900 million program.

I assume that somewhere there are tidbits of information about eventual WTO negotiations. If your report does not reflect what has been heard, you could consult the people who were heard during those four months.

The Chairman: I have spoken to the Chairman of the Standing Committee on Agriculture and we will do everything in our power to ensure that your work is integrated into ours so that all the testimony you have heard is given to our researchers when we write our report. I can assure you of that. However, we want to hear for ourselves a lot of witnesses so that we can have personal knowledge in this area. We will therefore be repeating some of your work but we will try to benefit from what you have done.

Mr. Odina Desrochers: Perfect, that reassures me. At least you are communicating. Thank you very much.

The Chairman: There are communications between the two committees. There is no problem at that level.

Mr. Odina Desrochers: I would like to ask this morning's witnesses a question. I concluded, during a mission to the United States two weeks ago—and I also participated in the congress of the Canadian Federation of Agriculture—that Canada, in the spirit of its Uruguay Round commitments and negotiations, had greatly reduced its export subsidies. We are seeing a decrease of internal support measures and turning more toward the market. You have spoken at length about this.

The statistics we have, those from 95-96—we will soon have those from 1998—indicate that other countries have a lot of catching up to do. When there are negotiations, there are agreements and signatures. Don't you think that Canada's initial position should be to demand that its trade partners honour the agreements they made before beginning new negotiations? I would like your opinion on this matter.

Mr. Yvon Proulx: Is this addressed to me?

Mr. Odina Desrochers: My question is addressed to all the witnesses.

Mr. Yvon Proulx: It is obvious that the first negotiating position is to analyze very closely the commitments of each of the different countries and to determine to what extent each one has honoured them. It is absolutely necessary that this be an absolute priority in the negotiation process. We must constantly check on how countries are honouring their commitments.

Now, as we explained in a previous statement, as for the level of commitment of the countries, since the rules were not absolutely clear or absolutely binding on everyone, there were all sorts of levels of commitment that were not necessarily equitable. I believe that an extremely important starting point in the next negotiations will be to see that, for example, all the rules regarding market access are equitable and binding on everyone. If we agree to give access to 5 per cent of our domestic market that has to be a very clear and precise rule and all countries must do the same. Otherwise, like the last time, where it seems the rule was not absolutely clear, precise and binding, there will be countries offering 1 per cent of their market. For example, we had offered 5 per cent of our market whereas another country had offered only 2.5 per cent. Obviously, that is not equitable.

One of the first negotiating positions is to ensure that the rules are precise and that they are the same and fair for everyone.

Mr. Odina Desrochers: Do any other witnesses want to comment on what Canada's position should be?

[English]

Mr. John Core: I totally agree with Yvon. We have to make sure that countries are fulfilling their commitments, but the second point he made is more important. The commitments are not the same, and if we're going to have a rules-based system, which everyone talks about the WTO as being, then we have to have the same rules of market access applying to all commodities and administered on a fair basis so that countries cannot play games with that market access they've in fact offered up. If it's going to be 5%, then it will be 5% offered globally on all products so that all countries have access without it being given to some specific country. So I agree totally. The first thing is whether people are meeting their commitments. Secondly, let's make the commitments the same. That will be very important.

• 1045

[Translation]

Mr. Odina Desrochers: I agree.

You talked about market access, but what do you have to say about the reduction in export subsidies? They have almost been eliminated in Canada. On the other hand, we note that the European Union subsidizes generously and that the United States—according to Mr. Proulx—it has been so expensive that they will no doubt try to catch up when they come back to negotiate. Thus we again see a distortion between the Canadian position and that of other countries.

You talk about market access. We talk about reducing export subsidies and internal support. When we sit down to negotiate, Canada will have to say where it is really at and what it expects from its partners in terms of the agreements that had been made during the last negotiations.

Mr. Yvon Proulx: On that, our position is clear, especially on the issue of subsidies. We want them to be eliminated or at least reduced. Realistically, we cannot expect them to be completely eliminated in one shot. The change process in this area cannot be done overnight in a very radical fashion.

Clearly, the Europeans are not ready. They are unable to completely abandon their export subsidies overnight. It is a process of gradual change. Our initial position could be the elimination of all export subsidies, but it is obvious that we will not achieve that result...

Asking the Europeans to do so overnight would be asking them to take a position that would entail significant costs for their agricultural producers. I am willing to concede to them that it will be a slow and gradual process. It is obvious that ideally the export subsidies, especially those financed by public monies as opposed to those financed by the producers, be eliminated. That is an ultimate goal, but it will not be achieved overnight.

Mr. Odina Desrochers: I have a last question, Mr. Proulx, if you will allow me, Mr. Chairman.

What do you think of Canada's position of associating with the Cairns Group, which is much more right-wing?

Mr. Yvon Proulx: We are certainly comfortable with an initial position that asks for the elimination of export subsidies. However, we all know that the Europeans are not there yet. What we can probably get, in the next round of negotiations, is a 36 per cent reduction, as it was last time. I would be astonished if we got much more than that.

Mr. Odina Desrochers: Thank you Mr. Chairman.

The Chairman: Thank you, Mr. Desrochers. You can come back during the second round if you wish.

Ms. Bulte.

[English]

Ms. Sarmite Bulte (Parkdale—High Park, Lib.): Thank you, Mr. Chair,

My question is for Mr. Miner. You stated that the Americas could possibly develop a common position. As the FTAA negotiations are coming up, and bearing in mind that Mr. Friesen believes the WTO is the proper place to do it, would it be possible during those negotiations to have the technical discussions as a preparation for the WTO round? Mr. Friesen, is this something your group would be involved in?

Mr. William Miner: In quick response to your question about the linkage between the FTAA and the World Trade Organization, I think there are certain issues where a common North American or hemispheric position could be developed, and it would be in the context of the FTAA talks. In other words, they're looking at subsidies as a particular area of difficulty in the context of the FTAA. I think they would have little difficulty with elimination of export subsidies, but there might be a problem of related competitive devices. But I think a common position in that area amongst the hemisphere is quite possible.

• 1050

If you were to move into some other areas, it would be less likely. But I think in terms of access, for example, in the oilseeds sector, the western hemisphere takes a similar approach. Brazil is very much involved. Consequently, I think one could have a common approach that would emerge as a result of the FTAA negotiations perhaps, but it certainly would be a concerted approach in the WTO and give you greater leverage in achieving what you wish in that context.

The Chairman: Mr. Friesen and then Mr. Rice.

Mr. Robert Friesen: Thank you, Mr. Chairman.

It is our sense from the consultation we've done with the trade people involved in the FTAA that this negotiation will not result in trade rules that go beyond what Canada is prepared to do at the WTO.

The Chairman: Mr. Rice.

Mr. Martin Rice: I was at a conference recently where there were several people from Latin America who were indicating that the MERCOSUR countries, which is Brazil, Argentina, Paraguay, and Uruguay, are about to embark on some discussions with the EU for a bilateral agreement of some sort, which they indicated would likely leave out agriculture.

This frightens us a bit in that if we're going to start to see bilateral discussions that exempt the agri-food sector in Europe from having to adopt freer trade rules, it could set a precedent that may extend into the FTAA discussions. I think we'll see what we can do to get Canada to object to any trade agreement that does start to carve out sectors. It would significantly lessen our ability to get Europe to ultimately move to much freer trade than they now provide.

The Chairman: Maybe I could ask a question, and then we'll go to Mr. Sauvageau.

I don't want my question to become too rambling, but it's so complicated, this sort of multi-layered chess game that's being played. I guess it's no different from other trade rules.

It seems to me, from watching for the last few years and hearing evidence in this area, that the world system—and, Mr. Miner, you made the point in your paper—is moving towards being more market based. So we're moving away from domestic closed systems where the consumers support their farmers, maybe with different price levels, and to a system that's more open and a global trading environment.

The assumption for that is we have to have access into those global markets if you're going to give up your protection of your other base, because otherwise you're going to starve. Mr. Proulx's point is that we can't create a system that in fact makes farmers go broke, or starve, because nobody is going to accept that and it isn't going to be to anybody's advantage.

The theory, at least as I understand the trading theory, is if everybody played by the rules, it would be open and we would all be better off because we'd have the global market instead of our local markets, so we could give up our protection. That's the same as any other system. But what I don't understand about the position in the agricultural field is that....

My advice is that while we complain about market access to the United States, to Europe, etc., in fact the Europeans and the Americans are presently vaguely within conformity of their WTO obligations. If that is the case, where are we going to go in these negotiations? How do we get those markets open?

Ultimately, what is your advice to us? We're going to have to inform the minister on this. What is your feeling about what happens if we don't get satisfaction on a lot of these points? We aren't going to win everything. You never do in negotiations? Are we going to walk away? Does the farm community tell us we should walk away from the WTO, or does the farm community tell us, look, we have to be there at the WTO and accept the fact that it's not a perfect world and work within it, even if we don't get everything we want? I get the impression, or I'm being told, that presently, while there are problems—there is the beef hormone case, there's bananas; we know there are disputes—generally the level of protection has gone down and that for whatever we negotiated last time we almost have everybody where they should be.

• 1055

Am I wrong on that first presumption, and can you help me with the second one? Are you as the farm community telling us...? Do we stick with the WTO and live within that system and keep working at it, or at some point do we have to say this isn't working at all?

Mr. Core.

Mr. John Core: I think it's fair to say the WTO system is the only system we have. If you're going to deal in international trade and have some forum for making agreements and resolving disputes, it's going to be the WTO. We believe that.

As for your question about whether or not countries have met their commitments, that's the point we're trying to make. Yes, they have, but the commitments are all different. The rules aren't the same for every country.

They made commitments in modalities. They offered up what they would give for access, for instance. They offered up the issues of tariff reduction. They made offers. Yes, they're meeting their offers, but the offers are not the same rules-based offers that other countries made. We're saying you have to go back to what the WTO Uruguay Round first talked about.

They said we're going to create a rules-based system. We're all going to offer 5% market access. We're going to reduce our tariffs x percent. We're going to reduce our export subsidies x percent. But it only happened on the export subsidies. It didn't happen on market access. That's the point we're trying to make, that you have to put the same rules in place. What we're trying to say is negotiate; that's what we should negotiate. Don't talk about how we're going to make trade freer. Come back to the actual things that will cause goods to move around the world—market access. They'll move if countries have to give 5% market access, if they can't cover it up.

The Chairman: Can I stop you there?

In terms of the subsidies, let's talk about the export subsidies to Europe, because we heard for years about the export subsidies. The problem with that was of course access to third markets. So you say that problem is starting to go down vis-à-vis Europe and you can now look more at trying to get more access to Europe itself, as opposed to them distorting our access to third markets.

Mr. John Core: On export subsidies, the rule was there would be a reduction. Some countries' export subsidies are here, some are there. We all agree we reduce them the same percent. If you reduce them the same percent, down they come, but the gap still exists.

The Chairman: It's the same with our tariff rate quotas at 350%.

Mr. John Core: No.

The Chairman: We could reduce them, but to what?

Mr. John Core: On the issue about export subsidies, the only way you're going to compete in that marketplace with export subsidies is to have export subsidies at zero. No country can use export subsidies, government subsidies, end of discussion. That totally removes the problem. But if you're just going to reduce them another 20%, 30%, or 50%, you still keep all the distortion in the marketplace.

Market access is made up of three elements. The one element is the TRQs. That's the 5%, 4%, or whatever. There are the within-quota tariffs. We're saying reduce them to zero. That gives you the guaranteed access into those markets of 5%.

The over-quota tariffs are put in place to recognize the distortion that existed prior to the Uruguay Round. They were put in place and they said look, it's going to do two things. They're going to be there because the playing field isn't level on export subsidies, on market access, and so on. Then once the level playing field is there, if it's ever achieved, maybe you can start to think about those higher tariffs.

But the other thing the GATT agreement was supposed to give us was predictability, and for those commodities that ended up with the higher over-quota tariffs, that gives them the predictability.

We fully support those commodities that want to go into a situation of zero for zero for over-quota tariffs. If there are commodities that want to do that, fine, but recognize that for some commodities...as I said, 34 out of 36 countries have these high over-quota tariffs for dairy, because that's the reality of the dairy marketplace. If it's different for grains, it's different for grains. If they want to have a policy of going after reduction of those over-quota tariffs, we'll fully support them in that.

The Chairman: Does the dairy industry envisage a huge export potential to Europe itself?

• 1100

Mr. John Core: For those countries that want to export dairy products, if you could get 5% access to the European market with no tariffs on the within-quota tariff and fully administered access for some countries, there would be interest in that.

The Chairman: No, my question is for you here in Canada. Do you envisage substantial exports of your products to Europe, apart from—

Mr. John Core: If you can clear out the export subsidies, if you can reduce the domestic support so you're competing farmer to farmer, those goals of moving products may be achievable. In the short term there is some product movement, but it's not into Europe because it's a protected environment.

The Chairman: I will have to stop because other people are waiting, but I still don't understand. You have to help us understand. My understanding is an export subsidy in Europe is not going to interfere with market access into Europe. It only gives export subsidies to European exports, which then interfere with your access into third markets.

Mr. John Core: If you have an export subsidy in Europe, the revenue the European milk producer is receiving is higher than it would normally be. I am not getting government export subsidies in Canada. My revenue does not have that source of government support. My ability to compete with that European dairy producer is totally distorted because of the export subsidies.

The Chairman: That's helpful; I understand that. That's what the Americans are complaining about with some of our cheese and things like that.

So if all this were dealt with, does your industry envisage that Canadian dairy producers would be able to ship to Europe? That's my question; it's just a simple one. I understand why we might get into the American market. I'm just trying to understand if there is the potential to actually go to Europe as well with our products.

Mr. John Core: If we ever had a total level playing field, with non-government intervention in the dairy industry around the world, that possibility would exist.

The Chairman: Okay, thank you. We'll have to go to some others. Maybe we can come back to that.

Mr. Sauvageau, and then we'll come back to Mr. Penson.

[Translation]

Mr. Benoît Sauvageau (Repentigny, BQ): My first question is very general and is somewhat similar to the one Mr. Penson asked Mr. Friesen when he inquired as to whether he represented all the agricultural producers. At the end of these consultations, public opinion may be up in arms against us, and among others, the agricultural producers may say that we should not negotiate on a particular issue or that we should negotiate another one.

My first question is about transparency and consultations. Do you believe that the producers feel they have been consulted, involved and informed in this round of consultations? Are there enough consultations?

The committee intends to travel. The Standing Committee on Agriculture also did that. Are we inviting enough people to get the pulse of the producers for all products? Are the deadlines realistic? Are the provinces consulted adequately?

[English]

Mr. Robert Friesen: The CFA has consultations, of course, with our members. As I said earlier, we have the ten provincial farm organizations. We have one in every province. In Saskatchewan, Sask Pool is the member at CFA. Then we have AgriCorp, which is an amalgamation of the Alberta Wheat Pool and the Manitoba Wheat Pool. We have the SM-5. We have the Canadian Pork Council and the sugar beet industry.

Any other national commodities in Canada that are not directly represented are represented through the general farm organizations of every province. The cattle association is not a member of CFA. However, by virtue of the provincial general farm organizations, we would in many cases represent beef producers as well.

We consult very transparently with them, and when there are concerns we don't avoid them. One group does not try to coerce the other group into agreeing with their position. We work it out, and it's been very gratifying to work with that committee.

It's also incumbent on those organizations to go back to the people they represent. I know there has been a fair bit of consultation in the different organizations on trade. Some provinces have their own provincial trade statements as well. Certainly at the CFA level we're comfortable that the consultation is open, transparent, and equitable to everyone.

• 1105

[Translation]

Mr. Benoît Sauvageau: Thank you. In one of the briefs submitted to us and in all of your positions, it is underlined that Canada—and this is obvious—must arrive at the negotiations with a realistic position. Should this realistic position be taken with or without consultation with the Americans? I ask you this because at the Uruguay Round everything ended up in a Europe-United States confrontation if one can put it that way. Must Canada adopt a convergent position in order to be able to defend it in the face of the American government or the European government, or go its own way? I believe that it is in front of the Americans that we have to defend our position.

[English]

Mr. Robert Friesen: I believe it's important that we build the trade tools we need to achieve the objectives we have for Canadian agriculture. In response to what was mentioned earlier—perhaps it's tied to what you're asking now—I know we've made the point several times that the WTO needs to be the primary vehicle to negotiate fair and equitable trade rules.

When I once asked the former trade minister, Art Eggleton, how they were going to broach a certain trade issue with the Americans because they had said they would not talk about it, he said the thing about the WTO is the Americans sometimes have to talk about things they don't want to talk about.

The issue of consulting with the Americans and having a joint trade position is something that is very fresh in our minds. I need only go back a few months, where some of the sub-governments in the U.S. ran amok of the commitments that were made by their national government at the WTO and created considerable hardship in Manitoba and Saskatchewan on grain and on pork.

So again, the U.S. clearly intends to do whatever they want. In many cases they don't care about the commitments they've made and they don't care about what happens to other countries. Again I want to stress that we need to achieve the objectives we have for agriculture in Canada.

[Translation]

Mr. Benoît Sauvageau: My last comment deals with a realistic position. Please allow me to quote a document that was given to us by our research service. I will quote the relevant passage:

In Canada, it seems that the debate about the split between the sectors open to trade, such as cereals, pork and beef, and the sectors that are more import-sensitive, such as milk and poultry, is unending. However, it seems that almost all countries have agricultural sectors that are more sensitive to an opening of the markets and that almost all manage to reconcile this vision.

It is interesting to note that in this split between two types of agriculture, the groups of agricultural producers seem to have come to an agreement but that the debate is going nowhere at the political level.

To arrive at a common and realistic position, can we solve this conflict, which, based on this paper, exists between East and West or between open sectors and those that are said to be sensitive?

[English]

Mr. Robert Friesen: Let me respond to that. I certainly don't want to dominate this question and answer period. Some time ago I attended a trade consultation meeting OMAFRA put on in Guelph. I made a presentation and Mike Gifford made a presentation as well.

After our respective presentations, Mike Gifford was asked “How embarrassed were you or were you very embarrassed, and how much did the position you tabled in the last round hurt Canada?” I recall his comments and they're not direct quotes. He said “I wasn't embarrassed. It was 100% legitimate. It was not different from what other countries did. We did not lose anything by asking for what we did in our respective commodity organizations.”

The Chairman: Mike Gifford was our negotiator, was he?

Mr. Robert Friesen: Yes.

The Chairman: Okay, thank you.

[Translation]

Mr. Proulx, I believe that you want to add something.

Mr. Yvon Proulx: Yes. I would like to add only one thing on this subject. As you have observed and as the text you read says, Canadian agricultural organizations have come to an agreement among themselves. If at the political level in Canada such an agreement has not been found, the politicians will have to find one, and quickly, or they will find us in their way.

[English]

The Chairman: Merci.

Mr. Penson, and then Mr. Calder.

• 1110

Mr. Charlie Penson: I want to follow up on the discussion the chair just had, just to recap. We haven't had agriculture under trade rules. We've had trade rules after the Second World War in a lot of products, moving forward into services and other things, but agriculture has been very difficult. It's been a maverick because of different reasons in different countries—sensitive sectors, if you like. There was the start made, the hope made, that we would achieve something in the Uruguay Round. But all that could be achieved was a modest first step. I think, Mr. Core, you alluded to that, that there were problems even with the Uruguay Round, but at least we got a start.

The point I want to make is, yes, there were problems in the past. Let's address those and try to move forward to achieve some of the things we want and not necessarily have confrontation in the Canadian industry itself. I'm hearing you, Mr. Core—and correct me if I'm wrong—say that your industry is not opposed to getting market access into Canada if you're able to get market access that will allow your industry to survive in the European Union, the United States, or whatever. If that's the case, shouldn't we be concentrating on those very things?

I guess you have identified some of those. Export subsidies—I agree with you, they do distort the market. We have the problem with domestic subsidies, especially in the European Union, that also distort that market. But isn't that where we really should be working, putting our energies into trying to resolve those problems that hurt our ability to have market access? If other sectors have been able to demonstrate that it's been beneficial to their industry, in industry, in services, in all kinds of other areas, increased trade, and so on, and Canadians are better off as a result of it, isn't that really what we're looking for? Wouldn't it follow that the closed system we have here, where we restrict market access—as long as we get market access into other areas so we're able to survive, and in fact maybe even compete very well if we were to reduce some of these problems you've addressed, isn't that what we're looking for?

Mr. John Core: That's what I've attempted to say. I used the example in the dairy industry that market access here is 4%; the United States is 2.7%. We've suggested that if all countries agree to 5%, that would be a position that Canada could lay on the table. That would affect the dairy industry and it would affect other industries that don't currently allow 5%. But we're saying if the rule is 4%, then we'll all do 4%, or if the rule is going to be 2.7%, as it is in the United States, we'll all do 2.7%.

Mr. Charlie Penson: What about if it was open, sir?

Mr. John Core: But it isn't open.

Mr. Charlie Penson: No, no, I understand it isn't open. I understand the problems of the past. But we're trying to move forward. We're trying to discuss how things can be improved. My question to you is, what if there weren't any percentages, if it was an open system, such as it is in other sectors?

Mr. John Core: But it isn't and it will not be.... No, I'm not being argumentative. I'm just stating a fact. It is not open. If we were all on the same set of rules, even close to being on the same set of rules, then you could start to speculate about that, but you have to set an achievable goal. An achievable goal might be 5% access. An achievable goal might be zero export subsidies. An achievable goal might be capping domestic support at 20%. Those are achievable goals. To simply say, let's have a policy of opening it wide open, that's non-achievable. Other countries will not allow that to happen.

Why would Canada put its neck on the table and say they're prepared to do this when it's obvious that the Europeans and the Americans have no intention of doing that? What you have to do is start putting realistic goals on the table. If you can achieve those, fine, you're moving down the path that you suggest is desirable, but until you achieve those goals there's just simply no point. Bob made the point earlier that you don't offer something up that no one else is going to offer up and then get stuck with it at the end of the day because you were the country that wanted to offer this up. It doesn't make sense.

Mr. Robert Friesen: If I may just respond to that as well, there seems to be a sense of discomfort that we are not offering improvements on the last trade round. Just very briefly, if we didn't have the aggregation products in Europe—of course, I already mentioned earlier what that would do to the pork industry. It was mentioned before about some of this market access that we're trying to achieve, whether that will make any difference in our industry at all.

• 1115

I can tell you that our own provincial hog board in Manitoba would be for it if we could increase our market access in Europe by 10 times and we got a fair chunk of that.

The other thing we're asking for now in our trade statement is the elimination of country-specific allocations. A consummate free trader such as New Zealand, if country-specific allocations were eliminated—and the dairy industry certainly is more familiar with this than I am. Some of their export industries would collapse because they depend very, very heavily on country-specific allocations. If we talk about zero within TRQs, tariffs, the grain industry has told us that for Japan alone, going to zero within TRQs would give them an extra $120 million with what they are currently exporting to Japan. That's what we're asking for in our trade statement. So we are suggesting improvements, but they are qualified improvements because initially we have to certainly wait to see how other countries are positioning themselves.

Let me use one more example. I mentioned earlier that Canada has been very clean in market access. Well, you need to know that in the NAFTA agreement, an industry such as chicken is giving far more than the 5% access they committed to in the WTO. So the market access we are asking for is improvement and our trade statement is an improvement. It's not the perfect document yet. It's not yet necessarily the perfect negotiation position, but it is improvement and it's making progress. More important than that, it is for the benefit of all the commodities we represent.

Mr. Charlie Penson: I have a short question for Mr. Miner. It has to do with international competition law because he introduced it in his paper. Mr. Miner, you talked about the need for transparency in state trading enterprises. There is some discussion at the World Trade Organization about international competition law. How do you see that related, especially if we get a country like China coming on board at the World Trade Organization, where they have a lot of state trading enterprises? Will that be able to be rolled into this round and be beneficial in the discussions?

The Chairman: This is a short question?

Mr. Charlie Penson: Well, maybe he can answer it briefly.

Mr. William Miner: I would like to be optimistic that rules in the area of competition law were possible in the next round. There may be a possibility of some progress, but this is an extremely complex and difficult area and we haven't moved very far at this point.

My reference to it related more to the question of the use of state trading organizations in the agricultural sector. What I was suggesting is that when you look at export competition and hopefully the removal of export subsidies, other forms of export devices are going to be looked at, or organizations such as state trading organizations. It's in that sense that I believe there may be in agriculture some progress in terms of how we treat such organizations' activities in terms of the rules. In other words, we may require that they be able to demonstrate either through the way they operate, openly or partially openly, that they are in fact respecting the rules, or alternatively, there may be enough transparency in their system that it's evident that they are in fact—

Mr. Charlie Penson: Don't they need international, WTO...?

Mr. William Miner: These are the rules within the Uruguay Round itself, or within the agreement on agriculture itself. There is also a committee of the WTO working on state trading. This would apply to all goods, including agriculture. Again, there may be something come out of that in relation to the rules that apply to all state trading organizations. But I'm suggesting that these are likely to be linked in agriculture to specific commitments relating to either export or import access.

The Chairman: Mr. Calder.

Mr. Murray Calder (Dufferin—Peel—Wellington—Grey, Lib.): Thank you very much, Mr. Chair.

In fact, Bob, the access to our market up here for chicken is 7.5% and is considerably higher than what it is for the Americans.

The Chairman: They're all going straight to his farm.

Mr. Murray Calder: There was an Angus Reid pollster about three weeks ago who speculated on the fact that Canada is 10 years ahead of the United States in subsidy reduction.

• 1120

We were down in Washington two weeks ago. One of the things we found when we met with Larry Combest and Dick Lugar was that they were very interested, almost bordering on a bit of concern, about what is happening right now in the European Economic Community, especially with the introduction of the euro. When we were down there, there was a lot of speculation on their part about a North American trade position to counter the EU trade position.

I've got some concerns about that, because I'm worried about Canadian agriculture being absorbed into American policy, for one thing. I also wonder how that would affect Canada's position within the Cairns Group. I was wondering if any one of you would speculate on the possibility of a North American trade position.

Mr. Robert Friesen: I'm sorry, Mr. Calder, was that question directed at me?

Mr. Murray Calder: Any one of you.

Mr. Robert Friesen: I just wanted to respond, because I was a little puzzled by what you said about the chicken access. What I meant before about chicken access is that the agreement we made at the WTO for minimum access is based on the base period.

Mr. Murray Calder: Yes.

Mr. Robert Friesen: The agreement we have in NAFTA for American access into Canada on chicken is based on last year's consumption. And because the chicken industry has grown considerably since the base period, they are giving up more access.

Mr. Murray Calder: That's exactly what I'm saying.

Mr. Robert Friesen: Okay.

Mr. Murray Calder: Now, do you want to speculate...? Well, there goes Martin. Okay.

Mr. Martin Rice: We share a lot of common trade objectives with the Americans. There's no doubt about that. I think we both certainly would like to see greater access into Europe and Asia.

I'm not convinced of how strong the American commitment is to elimination of export subsidies. My sense is that the administration certainly talks the right talk; that is, they want to see it eliminated. But in talking to U.S. farm organizations, I don't think the commitment is much there. I think they like to take advantage of these instruments whenever the world price falls.

I was in Washington as well as you a couple of weeks back. There were a lot of calls for using export subsidies to get more U.S. product out of the country. So I'm not sure whether we would be able to hold as strong a position in that regard.

I think also perhaps in the area of domestic support we are certainly in a better position than they to be pursuing a stronger reduction. I think Canada needs to avoid that EU-U.S. trade-off that occurred in the last round—we were given the “take it or leave it” kind of presentation by those two parties. At the end of the Uruguay Round we really had no opportunity to work on some of these issues that we talked about today, that is the TRQ administration and so on.

We've certainly got to keep ourselves working within other groups, the Cairns Group, as much as we can. But personally, I don't think we would want to get too strongly entrenched in a North American position.

Mr. Murray Calder: Yes, Mr. Core.

Mr. John Core: I agree with Martin. I think it's clear that U.S. policy in agriculture is so much driven by domestic policy issues within the United States. The best example was when the congressional elections were being held last fall and suddenly $6 billion appeared for domestic support for agriculture in the United States. The most galling part of it was that even though the U.S. dairy industry was at their highest prices ever, in fact higher than in Canada, they were given $200 million out of that $6 billion as support for their industry. That was being driven by domestic political considerations.

To try to bring the United States into a position where they want to cap domestic support or totally eliminate export subsidies.... I just don't see the domestic support for that kind of a position. Until you have that kind of support at the world stage, that playing field is totally uneven. So I don't see us being in a position to form that alliance with the U.S.

Mr. Murray Calder: Okay. The reason I asked that question is that it basically leads into the second question that I think is very important about this whole thing.

When we negotiated this in 1993, I think the philosophy was that low prices will stop low prices. In other words, you can't produce something at a loss for a long period of time before the bank is at your front door.

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Obviously, right now we're seeing that if farmers are on the international market, they're not making any money at it, because the commodity prices are that low. The question at this point then is how our trade negotiators can negotiate a cost-benefit target if they don't know what the economical spinoff of this is in the first place. Do you see where I'm coming from? The other countries right now are putting out subsidies. They haven't, in fact, reduced them. They're still subsidizing. The United States still has EEP. The Europeans have their carry-forward on wheat, amongst other things. This is the situation we're in. All these problems were supposed to be solved by the time we got to the year 2000 negotiations. They're all there. None of it has been solved. How do our negotiators handle that? What would be your recommendation?

The Chairman: Who wants to try that?

Mr. John Core: I'll start, Mr. Chairman. I think, Mr. Calder, it comes back to the fundamental issues we were talking about today. If we didn't achieve what we thought we had achieved in the Uruguay Round, then you come back to the fundamental concerns again of creating the rules-based system. Martin was talking about the export subsidy question. Yes, we had a reduction. But a reduction doesn't solve the problem; it simply maintains the imbalance. So you have to go for a zero-zero rule on export subsidies.

In regard to the domestic support question, as long as Europe can flip between green and blue, and the United States can create programs that fall into the green category, the domestic support questions are not going to resolve those pricing questions you were talking about in the world marketplace. You come back to those fundamental issues again. Until you resolve those, you can't really resolve these other bigger issues. So the trade people are going to have to come right back to the negotiation table and say, let's come back to ground zero again; we all agreed we're going to deal with export subsidies, market access, and domestic support.

Those are the issues. We've made a little bit of progress, but we certainly haven't made the type of progress we wanted to, so let's come back and see if we can negotiate some real rules on those fundamental issues.

The Chairman: Thank you.

Mr. Speller, I think you had a question. Actually, we have three senators here—witnesses may not realize—from the agriculture committee. They've been so patient and well behaved, but now Senator Taylor has decided he's determined to get in. We'll give him a chance to ask a question.

Mr. Speller.

Mr. Bob Speller: Thank you, Mr. Chairman. I'll be brief. I first of all thank the presenters today. I think your work, and particularly the work the CFA did in bringing together all the different commodities across this country to put forward a united position.... Of course, the pork council and the alliance and their involvement in there leads us in the government to believe that it will help us in terms of our negotiations, knowing that when we go in there we will have one united front. As you know, last time along, it came late in the game, and it's good to see you're out front this time around in putting together a united position.

Mr. Proulx, it wouldn't be our intention to put forward our position until just before the Seattle round of talks. I don't think it would be appropriate for us to throw that on the table right now. Certainly, we're continuing in terms of our consultations. The Minister of Agriculture next month is putting together another meeting with all the agriculture groups to make sure we know clearly what your position is. I look forward to hearing the outcome, Mr. Friesen, of your talks with Mr. Rice in terms of fine-tuning your position.

Also, Mr. Core, I want to thank you and the SM-5 for putting together a strong position too. I think it's a realistic position and one that certainly addresses some of the concerns put forward by other sectors. I thank you for the work you've done there.

I just have one very quick question. Unlike Mr. Penson's, this one, I think, should be fairly quickly answered. I'm wondering what you're doing internationally with other farm organizations in other countries. Do you have any insight into where they're coming from on these issues? Are you talking together in terms of alliances you can have with these groups in order to help your position?

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Mr. Robert Friesen: I'll answer from CFA's perspective. We do international consultation on two fronts. Of course, as you well know, the CFA past president, Jack Wilkinson, is vice-president of the International Federation of Agricultural Producers. He is also currently their trade chair. It's gratifying, in reading the IFAP trade statement, that a good chunk of that statement has elements of the CFA trade position as well.

That negotiation did not come easily either. In fact, going into the IFAP in Manila last spring, it was thought that the Japanese were going to walk away from it. At the end of the day there was consensus, and again, it's very good progress. On that front, there are between 60 and 70 countries in IFAP.

At the other end, we also meet with the European and North American farm leaders, and we met with them last October in San Diego. Those discussions are quite interesting at times because certainly the dynamics of our agriculture, the EU agriculture, and the U.S. agriculture are very different, and yet, certainly between the EU and Canada, we often see some common threads. Actually, two years ago, we were at a meeting and there was a discussion on biotechnology between the U.S. and the EU. Someone once told me that the definition of diplomacy is to tell someone to go to hell in such a way that they look forward to the trip. The Europeans did a pretty good job with the U.S. on the subject of biotechnology.

But those are the two fronts on which we consult with other agricultural producers.

The Chairman: Thank you.

Could you let the committee have a copy of the IFAP position paper? I think it would be helpful for us to see that.

Mr. Robert Friesen: That would be no problem.

The Chairman: Thank you very much, sir. I appreciate it.

Senator Taylor.

Senator Nicholas W. Taylor (Bon Accord, Lib.): Thank you very much, Mr. Chair, for allowing us in. We have the steering committee for the Senate agricultural committee here. Senator Whelan is the deputy chair and Senator Gustafson is the chair.

Our committee just spent about 10 days in Europe, in England, Belgium, France, and Italy, talking not only to producers and agricultural people, but also about equal time with processors and consumers.

You just touched on it here, but we have a very distinct impression that a revolution has already occurred over there and it's on the way here, whether we like it or not, with the consumer, on biotechnology or genetic modification and hormone displacement and everything else. I get the strong feeling that not only what the Canadian producers but the American producers are doing is saying, hear no evil, speak no evil, and we're asleep at the switch.

We're not going to penetrate markets over there unless we wake up and go after that. I suppose a lot would want you to do away with a lot of it, but it does mean accurate labelling. What little I can get here is we're still trying to sell 1985 foods to year 2000 consumers in Europe.

So my question is, what are you recommending to your participants and people who produce in order to try to penetrate this so-called more sophisticated market, which is not only there but is rapidly spreading over here? People are not going to stand still being fed genetically modified or hormone-enhanced food when they don't know what the heck it is. I get the feeling you're sort of hoping the whole thing will die and go away. I'm sure, after our committee went over there—and I think Senator Gustafson will back this up—that it's not going to go away. So how are you going to tackle that?

Mr. Robert Friesen: I believe biotechnology probably touches several commodity sectors. We are still fine-tuning our biotechnology position at the CFA. One of the things we have stressed in meetings is that there needs to be very good communication with prospective customers and certainly with the end user, the consumer. Of course, the WTO text talks about not using allegations and conjecture when it comes to impeding market access with things such as biotechnology and other sanitary and phytosanitary issues. So there needs to be very good communication.

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As you well know, GMO canola has not been exported to Europe for quite some time. It's my understanding that the EU is starting to open up a little bit on some varieties. But we have been in close touch with the negotiations on the biosafety protocol, which, as you know, is a negotiation at the UN that is seeking to make it very onerous for countries to export products that have been genetically modified. I won't go into detail on that one, but we have worked very closely with the negotiators on that. If that one were negotiated and agreed to with the principles some of the NGOs would like to attach to that agreement, again it would put our grain industry in significant trouble because of exporting GMOs and the EU's resistance to GMOs.

When I mentioned earlier that the EU and the U.S. had discussions on it, of course you're right that the U.S. version of it is we need to do it, it has to be done, and we're going to force it through at all costs. Who cares what the consumers think? Let's go ahead with it anyway.

Of course, the EU is very sensitive to that approach because of some of the problems they've had in the past. So they don't rule out the benefit of biotechnology, but they want to do it with caution and they want to tread carefully. Yes, we are currently working in some of those areas as well.

The Chairman: Thank you.

I have a couple of other questioners. We'll now turn to Senator Gustafson.

Senator Leonard J. Gustafson (Saskatchewan, PC): I just have a short question for Mr. Miner. I'm pleased to see your statement about similar treatment for cereals and red meat. It seems as if we're talking about apples and oranges here. On the one hand, we're talking about a protected market for the dairy industry, the feather industry, and so on. On the other hand, we have an open market in the west on grains and so on. I will tell you that the western farmers feel they've been traded off to eastern Canada, both politically and trade-wise, because of the quota system and so on. It was raised here earlier by a colleague.

Mr. Murray Calder: You get a subsidy. We don't.

Senator Leonard Gustafson: What is a subsidy? We gave up the Crow. That was the one thing we gave up. I didn't agree with Mr. Friesen's suggestion that we didn't give up anything. The feather industry and the milk industry didn't give up anything, but the western producer gave up $1 a bushel on the Crow. In fact, it was Otto Lang who said we'd need a $15 billion subsidy over 10 years if the Crow went. What did we get? We got $1.6 billion.

I do want to say something very positive about the report.

The Chairman: That was supposed to be a very short question, not a political statement.

Senator Leonard Gustafson: Minister Goodale stated recently that Canada and the United States should be allied in world trade talks. He said in his view we should both join our partners in the western hemisphere in pursuing our trade policy goals in the WTO. I couldn't agree more. I think we have to go to the Americans and say, you know the problem over grain at the border. Yet they don't recognize it. If you go into any farmyard in western Canada, you will see green John Deere machinery, Case machinery, and International machinery. Trade is a two-way street.

I'd just like to hear Mr. Miner's comments on those. I think they're significant in his report.

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Mr. William Miner: I welcome the observation, and clearly that's the way my thinking goes, but it goes perhaps a little further than some of the comments made here.

It seems to me that we in Canada, in the agricultural sector as well as other sectors, are not only part of the North American market but increasingly our food systems are becoming integrated on a North American basis. This goes beyond our relationship with Europe, although there is some relationship there as well. It's with that in mind that I believe we should be developing coordinated positions to the extent it's feasible.

I can't argue, of course, with those who observe that not all groups in the United States want to get rid of export subsidies. Obviously, that is the case.

On the other hand, if we don't have the U.S. on side on that issue, we're not going to get rid of them either, so we must begin from a position of relative strength on an issue of that nature.

When you get to access, a similar observation can be made. In many areas we do agree on our objectives, and some we perhaps do not, but in general we are moving down the same path. Again, we must because we're part of an integrated system here, not fully integrated, but moving quickly in that direction. Unless we move the trade rules to accommodate that, we're going to continue to run into serious bilateral disputes that recognize areas where we haven't completed the negotiation.

The final observation, sir, is that with respect to domestic support, the commitments there are more general and obviously less binding. In fact, it's very difficult to negotiate hard commitments on how governments support their own industry at home. On the other hand, again, if the United States is not part of a move to bring subsidy support down generally in the sector, then we're not going to succeed. In relation to Europe and also to other parts of the world, the Pacific, China, we need to have a coordinated position to achieve these objectives. If we don't have it, I suspect we won't achieve them.

The Chairman: Mr. Miner, perhaps I can follow up on your answer to that question, because you said we're moving to an integrated system. Just looking at the banana war, you have the United States that doesn't even produce bananas fighting with Europe that doesn't produce bananas either. It's creating huge trade tensions and it's side-swiping cashmere producers and everybody else.

Is this where we're going? This seems to me to have the potential for the agricultural production problems to be spilling over into everybody else's world. Up till now, Mr. Penson has been saying this has been a discreet world that has been working out its own thing. Is this issue of integration going to in fact mean that Canadian producers are going to be involved in international disputes because of ownership rather than local production? That's the reason why the United States is taking on this. It's because United Fruit Company is owned by Americans. They don't produce the bananas, but they have the money at stake, and we have to know that there's some campaign contribution issues involved in it too.

Those are interesting problems. Is this the future of the agricultural area as well?

Mr. William Miner: I would hesitate to use the banana example as a basis to look forward.

It goes back a long way in history, as I'm sure you're all aware, and in fact it is linked to the preferential tariff treatments that were given, and still are given in some respects. We are definitely moving away from those types of preferential tariff arrangements, and I think that is the direction to move in.

The complaint is favouring, of course, some countries and some companies that are not benefiting from the preferential arrangements, and consequently we have a dispute. I'm personally pleased that we in Canada are not directly involved in it.

If you look forward in terms of where we are headed, obviously we're not going to be fully integrated, but in terms of adding value to our agricultural sector, even down to the farm level, we are beginning to sell in such precise specifications and such particular products, often with some form of processing or segregation involved. That seems to be the direction.

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Clearly, in the North American market it is occurring in a number of sectors very important to Canadian agriculture, and again, I would refer to the grains and red meat sectors as being outstanding examples, but there are many others. Consequently, I do feel that is the direction we are going in. It may lead to disputes.

I frankly think that the question of the large companies' interests is best pursued through the competition law route, and here perhaps we will be successful in getting some international rules.

The Chairman: Just following your thinking, if that's the way we're going, where we have to focus our negotiating area would be more on the phytosanitary and sanitary area because that regulatory area will be where the interruptions in this type of new trade flow will take place rather than in tariffs in the traditional way. Is that correct? Is that a fair summary?

Mr. William Miner: I would agree that as you get larger barriers down, the technical requirements of the market become more important. So in that sense you're right. I wouldn't necessarily concentrate on those alone, but I'd certainly put them on the agenda.

The Chairman: Thank you very much.

Mr. Friesen, I think you wanted to answer first.

Mr. Robert Friesen: I have a few comments, but Mr. Proulx would like to make a few first.

The Chairman: Mr. Proulx.

[Translation]

Mr. Yvon Proulx: On this issue of a concerted and coordinated position with the Americans, I would like to say that when I look at what the Americans do and the overall harassment they have practised over the last few years, with their attacks on our dairy industry and our grain exporters in the West, I say yes to a concerted position where possible. But in general I believe the position we should adopt in terms of the Americans is to attack them much more often. They are always attacking us. Do we attack them? In turn, we should attack them regularly and watch everything they do very carefully.

As for the $10 billion they recently injected into their agricultural sector, because of the grain and pork crises, has anyone in our governments looked into whether this is in agreement with the commitments the Americans made during the latest trade negotiations? If it isn't, why don't we attack them? Why? I am in favour of cooperating with the Americans, but they don't want it. They attack. There is an old saying: "If you want peace, prepare for war." I think we should make war with them much more often.

The Chairman: Mr. Proulx, that is a principle that we have rejected in our report on wold denuclearization. You are proposing for the agricultural sector what we have rejected for the nuclear sector. There are always complications in life.

[English]

Mr. Friesen.

Mr. Robert Friesen: Thank you, Mr. Chairman.

In response to some of the points Mr. Gustafson made, we were very supportive and in fact were involved in the consultative effort that the Canadian government made with the U.S. with regard to the border dispute that happened. We wanted the hogs and the grain to move as quickly as possible through the borders.

Incidentally, we had a case of a transport truck that was already in sight of the processing plant when the American police stopped and told him to turn around and he had to go back and reroute the trip. We were very supportive of that consultation to ensure that this illegal contravention did not continue.

With respect to what Mr. Goodale said about consultation with the Americans, I read a speech he made in the U.S. a few months ago, and perhaps it was the same one. In that speech he said the Canadian Wheat Board is totally within the commitments and the rules of the WTO. At their request, he said we've audited it, I believe, somewhere around six times. He said, now leave us alone, because we're within the rules. He was very firm about that.

As far as your comment about losing the Crow rate with respect to protecting supply management is concerned, I do not believe this was the case. Certainly Mike Gifford said it was not the case. Might I remind you that I mentioned earlier that Canada jumped out of the gate and said we would go down to zero with our export subsidies, only to see the other countries commit to only a 36% reduction in value and 21% in volume. I believe that was a domestic policy decision to save money.

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Mr. Bob Speller: What is the name of the former U.S. ambassador? He wrote a book and said something about Brian Mulroney giving up the Crow rate.

The Chairman: Mr. Bachand is not here, Mr. Speller.

Senator Leonard Gustafson: Could I have a response to that?

The Chairman: No, I don't think so. We're not getting into that one.

Okay. I've got Mr. Penson and Mr. Sauvageau on the list.

Mr. Charlie Penson: I have a short question that has to do with the best approach to trying to get some movement in this next round, whether we should stay on a sectoral approach with agriculture...or what would your advice be as to whether we should try to roll it into a general round? I'd like the panel to comment on what your thoughts are, what would be our best approach.

Mr. Robert Friesen: Mr. Chair, I just consulted with my expert. This is a new subject at CFA, and we did in fact discuss it recently, but I believe our members had a consensus that a comprehensive round would be better able to achieve what CFA members wanted to achieve.

Mr. Martin Rice: Certainly I think we'd reinforce that. Europe will be much less willing to concede to better access if they don't, on the other hand, get better access for their manufactured goods and services, for which they really do want to have improved access. So I think it would be a fairly limited scope for negotiation if it's not a comprehensive round.

The Chairman: Mr. Miner.

Mr. William Miner: My only comment would be to not only agree that we need a comprehensive round, but to suggest that this doesn't mean, however, that agriculture wouldn't still be treated as a separate negotiating group within that broader round. Within agriculture I think the sectors would all be on the table as well. I believe our own objectives, however, ought to be sorted out by sector and issue as well as generally in a comprehensive round. In other words, you have to take it down to the individual sectors to really sort out what it is you want to pursue.

I might make the other point as well, however, that in the general or comprehensive round we need to have some interest, as I indicated in my earlier remarks, in other agreements. Of particular importance I think are the subsidies disciplines that apply generally to all goods, as well as the dispute settlement aspects of the WTO, which in agriculture are very important. The reason I bring that out is that while we may have special rules for agriculture now, looking further ahead it seems to me that we will eventually see agriculture treated as other goods are treated generally within the WTO rules.

[Translation]

The Chairman: Mr. Sauvageau.

Mr. Benoît Sauvageau: I have a brief question for Mr. Proulx. I would like additional information.

If I understood correctly, you said that in the negotiations we would have to take into account the guaranteed income for producers who are looking for a viable and interesting income. At the same time, you said you agreed with the elimination of subsidies and programs designed to establish a uniform price. Can we do both?

Mr. Yvon Proulx: I said I was in favour of eliminating export subsidies but that we had to maintain stabilization and income security programs in terms of our domestic market.

Mr. Benoît Sauvageau: Thank you.

Mr. Yvon Proulx: As all countries do in fact.

Mr. Benoît Sauvageau: Agreed.

Mr. Yvon Proulx: Previously we presented statistical data that in other countries, especially the European Community, Japan and even the United States, the total level of support for the agricultural and agri-food sector is even higher than it is here.

Mr. Benoît Sauvageau: Agreed. This additional information enables me to understand better.

I heard something else. I don't know if it is true or not, and I want confirmation on this subject. I have heard that in the United States wheat was transported on American navy ships. If we eliminate subsidies to certain programs but the army transports the wheat, we are not in equivalent situations. Is this information true?

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Mr. Yvon Proulx: I don't know. If it is true that the American army is transporting the wheat at its own expense, it is a form of subsidy to which....

Mr. Benoît Sauvageau: Does anyone else want to answer?

[English]

The Chairman: Mr. Calder tells us he can answer that, Mr. Sauvageau.

Mr. Murray Calder: The military engineers maintain the Mississippi water system, and basically after that the barges are all still run by private interests, but it would be the same thing as the Canadian army maintaining the St. Lawrence Seaway. They get around it by saying, well, we're doing this because this is how we train our engineers.

[Translation]

Mr. Benoît Sauvageau: They transport the wheat because....

[English]

The Chairman: Mr. Leduc.

[Translation]

Mr. Yves Leduc (Assistant Director, International Trade, Dairy Farmers of Canada): To answer Mr. Sauvageau's question, I believe that a lot of work remains to be done at that level.

That brings me to the subject of aid programs in the United States. We still don't have all the documentation on this matter, but there seem to be aid programs that require the purchase of American goods through the intermediary of these structures. As far as we are concerned, there is a lot of work to be done at this level. We will try to get more information on these programs and clauses in the coming months.

The Chairman: Thank you, Mr. Leduc.

[English]

It's time to wrap up, but maybe, Mr. Friesen, one quick question to you. You made the point quite often about how clean we are in Canada compared to other countries. When you go to the IFAP meetings, do your colleagues from other countries say, yeah, you're doing pretty good and we aren't, or do they say, oh come on, you guys are cheating like mad too? Do you get into fights with them? Does your perception of Canada being clean correspond to what foreigners would say about us, the ones you deal with in the IFAP, for example?

Mr. Robert Friesen: If we raise the issues and the facts and the numbers that we've raised today, yes, they would have no choice but to agree with it. And, yes, we do certainly discuss domestic support and are quite frank about it. Of course, countries like Japan, who are not in the EU—there are comparisons there as well. So that is discussed fairly frankly.

The Chairman: Well, thank you very much, everyone. It was a very, very interesting and very helpful panel. We really appreciate it, and

[Translation]

as Mr. Proulx said, there will be other opportunities since we will be travelling across the country.

[English]

But thank you very much. We're adjourned until Tuesday morning at 8.30 a.m.

I just want to remind members that Tuesday is going to be a difficult day. We are going to have to start at 8.30 a.m. to fit our panel in because we have the director general of the OSCE coming. We have him in Ottawa. As you know, we've been discussing Kosovo. This is an opportunity to hear from him. We'll fit him in for an hour and a half between 11 a.m. and 12.30 p.m., and then we have another panel in the afternoon. So it's going to be a heavy day. I apologize for that, but we've got to get through this study.

Thank you very much.