AGRI Committee Meeting

STANDING COMMITTEE ON AGRICULTURE AND AGRI-FOOD

COMITÉ PERMANENT DE L'AGRICULTURE ET DE L'AGROALIMENTAIRE

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, October 28, 1999

• 1635

[English]

The Chair (Mr. John Harvard (Charleswood St. James—Assiniboia, Lib.)): Ladies and gentlemen, we'll begin this meeting, which I consider a very special meeting of the committee on agriculture and agrifood. We have some very special guests with us.

I think, just for the benefit of the media, we'll allow you to take your pictures during the introductions, and then you're going to have to vacate the room.

While the media are here, I just want to welcome very warmly, on behalf of all members of the committee, our guests from the west. I certainly recognize some of the people. I understand, at least at the beginning, there will be a couple of spokesmen: Rosann Wowchuk, who is the new Minister of Agriculture from my province of Manitoba; and Mr. Lingenfelter, who is, I guess, the new Minister of Agriculture in Saskatchewan. Mr. Lingenfelter, I knew your predecessor, Mr. Upshall. Welcome. I'm sure you may want to identify or introduce to us some of your cohorts who are sitting at the desk with you. Of course, I see my good friend, Leroy Larsen.

Who's going to lead off, Mr. Lingenfelter or Ms. Wowchuk?

Hon. Dwain M. Lingenfelter (Deputy Premier and Minister of Agriculture and Food, Province of Saskatchewan): We drew straws, and I think I lost.

The Chair: You lost, eh? I guess we lost too. I guess we're going to hear from Manitoba first.

Mr. Dwain Lingenfelter: Speak for yourself, Mr. Chairman.

The Chair: Anyway, I'll invite the media people to take their leave now. We don't want to snub you, but we have rules around here. We'll begin our meetings. Thank you very much; that's appreciated.

You can go ahead, Mr. Lingenfelter.

Mr. Dwain Lingenfelter: Thank you very much, Mr. Chairman.

I just want to say how very pleased I am on behalf of the Saskatchewan delegation to introduce my colleagues who are here with me, and I would expect the minister from Manitoba will introduce her delegation as well.

We have Leroy Larsen from the Saskatchewan Wheat Pool with us, representing many thousands of members in the Saskatchewan Wheat Pool; Sinclair Harrison, who is with the SARM, the Saskatchewan Association of Rural Municipalities, also representing many local governments in rural Saskatchewan; the leader of the Saskatchewan Party, Elwin Hermanson, who will make a short presentation; and Jim Melenchuk, the leader of the Liberal Party.

I make those introductions because they have put in a lot of work preparing for this trip to Ottawa. I want to say that it's not every day you get all political parties, especially within a few weeks after a hotly contested election, as Elwin was saying earlier, coming together with all the farm leaders, those on the right of the spectrum and those on the left—the Western Canadian Wheat Growers and National Farmers Union. I won't put particular labels to either, only to say that this is a very, very diverse group, and anyone who would think that this could happen without a situation of some crisis really doesn't understand the politics of western Canada.

This is a crisis, Mr. Chairman, and I just want to take a few moments to outline why we believe there is a huge need for the federal government to come to the table in order to help with what is obviously the worst situation we've faced in agriculture in Saskatchewan since the dirty thirties.

The fact of the matter is that in Canada we have agriculture in every province, but in Saskatchewan we have over 40% of all the cultivated land in Canada, and we export at least 50% of all the export cereal grains in this country.

There's a reason why net farm income in provinces like Quebec and Ontario has been relatively stable the last five years, and in some provinces it has actually bumped up a bit, while in Saskatchewan net farm income this year is 107% below the five-year average. And actually, by Statistics Canada and Agriculture Canada numbers, our net income this year will be minus $48 million.

So anyone who wonders about how serious the problem is need only read the federal government's own reports out of Agriculture Canada. Today there were reports out that those numbers might change slightly. What we want to be very careful of, here in this committee and outside, is getting off the idea of the crisis and onto some recounting of numbers. This is not a numbers issue. Whether the crisis is that farmers are losing $48 million, or even making $48 million, does not take away from the fact that there is a crisis that amounts to a five-year average of $730 million. I really would like it if we could keep focused on the fact of the problem, as opposed to getting sidetracked onto counting whether it's $50 million lost or $50 million made. The fact is that either one of those numbers is a crisis, so I want to start out on that point.

• 1640

I want to say as well that the subsidies as they affect Saskatchewan and Manitoba are very different from any other agricultural commodities. I want to quote a couple of numbers.

As it would relate to the distorting subsidies, on eggs, between Canada and the United States, three cents of every dollar in the U.S. for egg producers comes from their national government; in Canada, 24 cents of every dollar comes from our national government. So that's not a bad position to be in.

On poultry, in the U.S., two cents of every dollar comes from their national government; in Canada it's four cents of every dollar.

Take the commodities we produce in Saskatchewan. On wheat, in the United States, 38 cents of every dollar comes from their national government; in Canada, nine cents. On canola and oilseeds, eleven cents of every dollar in the U.S. comes from their national government; it's six cents in Canada. For barley, it's 38 cents in the United States, and nine cents in Canada.

So there's a fundamental reason why Saskatchewan producers are in this crisis and other farmers may not have seen the drop in income. It's because of the trade-distorting subsidies that the Americans and Europeans are in as we go forward into the round of trade talks in Seattle.

If that formula were applied to any other industry in Canada, if it were the auto manufacturers or steel producers or the oil industry that were getting those kinds of subsidies from the national government of the United States versus Canada, not one of those industries would last for more than a couple of months before they shut down. There would be an outcry from the federal government that would be heard all across the world. What we can't understand is why the quietness when the Clinton administration announces this year that they will have subsidies of $22.5 billion U.S., which is $35 billion Canadian? That's the highest level since the other peak of $16 billion back in 1987.

So at a time when Canadians in, I would argue, boy scout style have been cutting subsidies to our farmers in western Canada, the Americans have not only not cut subsidies, but have increased them by as much as 50% off their peak subsidy in 1987.

I want to close on the comment that we really shouldn't assume that if we are turned down by the federal government today this assembled group will quietly go home and this issue will go away. The men and women who have come together to focus on this issue believe fundamentally that it's the responsibility of Canadians through their federal government to support the crisis that exists in our province.

Finally, I want to say that rather than getting better, this crisis will become even more relevant as farmers go to their bankers and institutions next spring to borrow their operating loans to seed next year's crop. We have had a situation for the last four years where the price of farmland in western Canada has been increasing, probably by 15% over the last four years by the FCC's numbers. In the first half of this year, for the first time in five years, we've seen a decrease, and in the last half of 1999 we're going to see an even more substantial decrease, which will mean when our farmers go to the bank to borrow money against their assets, there will be a crunch like we haven't seen for a long time.

So I urge the committee, and ask and implore of you, that whatever mechanisms and thoughts and work you can bring to bear to help with this very serious crisis, we can count on your support. Thank you.

The Chair: Thank you very much, Mr. Lingenfelter.

We'll hear from the Minister of Agriculture from Manitoba. By the way, I guess you'll be introducing your friends from Manitoba. I see Mr. Dewar.

I didn't see you there, Mr. Dewar, when I recognized Leroy Larsen. Sorry.

Hon. Rosann Wowchuk (Minister of Agriculture and Food, Province of Manitoba): Thank you, Mr. Harvard.

I want to thank all the committee members for being here today to hear about a very important issue for us in Manitoba and Saskatchewan and in fact western Canada. As Mr. Lingenfelter indicated, this is an unprecedented situation where you can pull together all political parties and farm organizations into one group. That just emphasizes how serious the problem is and is a recognition that we have to work together to resolve this.

• 1645

With me at the table today is Don Dewar, who is the president of Keystone Agricultural Producers; Andy Baker, who is a producer and a representative of the National Farmers Union; Maxine Routledge, who is also a producer and the representative of the Women's Institute; Larry Maguire, who is the Progressive Conservative candidate from Arthur—Virden in the southwest corner of the province; Marcel Hacault, who is here from the Manitoba Pork Council; Art Petkau, from Manitoba Cattle Producers; and Wayne Motheral, who is here from the Association of Manitoba Municipalities.

We have come here, joined together with Saskatchewan, to outline how serious a problem we're facing and to look to you for support. I have a written presentation that was circulated to you, and rather than go through the whole document, I'm going to highlight some of the issues that state our case.

We know from the numbers that have been put forward by Agriculture and Agri-Food Canada that the forecast is that Manitoba's net income will be in a negative position of $100 million for 1999. This will be the first time since the Depression that the net income of Manitoba will be in such a severe situation. The total decline is about $400 million.

In the package that you have, there is a graph that shows the average net income from 1990 to 1998 has been about $300 million, and now the forecast is for a decline to minus $100 million. That kind of loss in a province the size of Manitoba is very serious, and one our producers cannot carry on.

We have many producers who are talking about dropping their keys, walking away from the farm, particularly at this time of the year when it comes time to pay those taxes and to start paying the fuel and fertilizer bills. In some parts of the province there is a good yield; in other parts of the province the yield is not very good. Even with a good yield, the prices that the producers are getting are very low. In fact farm prices for products such as wheat, barley, and canola have dropped 40% to 50% since 1995-96.

Certainly when we have other countries subsidizing their farmers at the rate at which they are being subsidized.... I'll be repeating what has been said before, but certainly here on the prairies we know that our wheat producers or farmers get about 9% of their farm-gate value from government supports, while in the United States it's about 38%. With the announcement that was made yesterday, particularly in North Dakota, which is just across the border and whose producers our farmers are competing against, the substantial amount of money that was announced there is going to bring them up to somewhere close to 50%, while the Europeans are at 56% of their income coming from supports in government.

I want to emphasize first of all that provincial treasuries cannot support farmers to the level that national treasuries are supporting their producers. The money that was announced in North Dakota yesterday did not come from the Governor of North Dakota; it came from the President, from Bill Clinton. That's where this kind of support has to come from: it has to come from national governments.

Certainly if provinces can't do the support, it means our producers are the ones who are left. And if the national government doesn't provide that support, it's going to be our producers who are going to be the ones, and are the ones, who are fighting the international subsidies, and they will not survive.

• 1650

There are numbers out that say we could lose as many as 15,000 to 16,000 farmers across western Canada, I believe, between Saskatchewan and Manitoba. We have to start thinking about what the impact of that is on our rural communities, on the social fibre of our communities, and where our responsibilities lie in those areas.

Certainly there are existing safety net programs, like crop insurance, NISA and AIDA, that help to some extent, but if we get into the whole issue of AIDA, producers will tell you that program isn't working. However, I shouldn't even get into that topic, because our purpose here today is to talk about the international subsidies that are driving the prices of commodities down. Those must be addressed, and what we need now is bridge financing for our farm families until such time as the international trade wars can be addressed.

Certainly there's talk about addressing those issues at the world trade talks, which are coming up very soon. I think they are something we all have to work on very closely to ensure that subsidies are reduced and to send a very strong message. But before that message trickles down and has any effect, it's going to take two or three years. In the meantime, we're going to be losing farmers and losing families, and we are going to be having some devastating situations.

When you look at what provinces have done, certainly in Manitoba the provincial government has stepped forward recently to address some of the income crisis. There's money: $40 million has been put forward in emergency loans; $62 million has been contributed towards the AIDA program; and $71 million has been put in through the Manitoba farm disaster assistance program.

We want you to recognize that as a province we are contributing to our farming community and are trying to stabilize that community, but that is impossible for provincial treasuries to do. We know that the federal government support for Manitoba farmers has dropped from $419 million per year in the early nineties, to $100 million in the current year. That's a drop of $319 million that we've had in annual reduction, in support for agriculture in our province. So there's been a tremendous reduction in farm support as we look at the difficulties we are facing.

Agriculture plays a very important, key part in the economy of our western provinces, given the spin-off and the other jobs that are tied to it. You will hear other people talking about farm businesses that are in trouble, such as stores and farm machinery dealerships that are closing down. There are huge ramifications to this whole situation, and we are here to ask you for your support and to put in place bridge financing for Manitoba. The amount that we have come to ask for is $300 million in additional funding.

I hope you will recognize the importance of the situation and will work together to come to some solution to resolve the situation, so that we can indeed have those families continuing to produce some of the best food in the world. That is a very important part of the trading by Canada.

I also hope you will think about those families who live in western Canada. Part of the government's throne speech talked about children. We have children in western Canada. We have children who are going to be in pretty tough shape this winter. Families are coming into a season of celebration, Christmas, and it's going to be tough. I hope we can work together to find something that will move quickly and flow into the hands of those people who are in desperate need right now.

Thank you.

The Chair: Thank you.

I gather, Mr. Lingenfelter, that you want want Mr. Hermanson to go as well.

Mr. Dwain Lingenfelter: Yes.

• 1655

The Chair: I should just remind people that we should be out of this room by 5:30 p.m. and I was hoping that maybe we could have about half an hour of questioning. Normally we go seven minutes in the first round, but if it's all right with the members, maybe we could set five minutes or something for each party.

So we'll turn to you, Mr. Hermanson. Welcome back to the Hill. We'll hear from you, and then we'll go to questions.

Mr. Elwin Hermanson (Leader of the Official Opposition, Saskatchewan Legislative Assembly): Thank you, Mr. Harvard. And yes, this is a familiar setting. I think I spent two years or more of my life doing what you folks are doing. I recognize that your heart is in agriculture, and I appreciate that and recognize that we have both opposition members and government members here, just as there are both opposition and government members and farm leaders who are presenting to you as well.

We have prepared a brief, and I believe it has been circulated to all the members. I was going to focus my comments more on the material in the brief, but in consideration of the shortness of time, and also in consideration of the fact that there are some other things that are perhaps more in my heart than what's in the brief—you will read that, I am sure, as I know all members read every piece of paper that crosses their desk—I just wanted to say that this committee deals with big problems and little problems. Let there be no doubt in anyone's mind that this is a big problem. Please put it in that category.

The situation is severe in Saskatchewan and Manitoba. It's less so in Alberta—yes, they have more of a livestock-based agriculture sector—but the problem there is also severe. All of the trend lines are going down—and I'm talking about the last number of years.

I know there is some debate about the numbers—the numbers in AIDA and the income numbers in the prairie provinces—but mark my words that the trend line is going down and it's going to continue to go down. Yes, we've just completed a harvest, but the quality of that harvest was reduced because of bad weather and the lateness of getting the crop off.

The trade war is escalating. New billions of dollars are being pumped into the pockets of our competitors in the United States and in Europe. That's a fact, and that is what is driving those trend lines down. I know you get partisan and you want to defend AIDA and you want to talk AIDA, but I would encourage this committee to look at the facts. The facts say the situation is deteriorating, it's getting worse, and it needs to be addressed.

The other thing that I would mention to you is that trade is a federal responsibility. I'm not here to shirk the responsibility of the provinces. There are responsibilities assigned to the provinces. We're going to have some debates in the Saskatchewan legislature, and there are going to be some debates in the Manitoba legislature. As far as safety nets are concerned, there are some areas in which the federal government and the provincial governments have to work together. We recognize that, and we recognize that there are responsibilities at both levels of government, but trade is a federal responsibility.

The provinces did not sign the WTO and the provinces did not sign NAFTA. I'm not against trade agreements, and I'm not criticizing the government for signing trade agreements. Heaven knows, I believe we need rules in the marketplace. But the trade agreements are not working for Saskatchewan and Manitoba, nor is AIDA working for Saskatchewan and Manitoba.

I know AIDA was supposed to be a targeted program that was supposed to be based on net eligible sales, but it's not working. There is plentiful evidence to indicate that while it may be working properly in Ontario, and while it may be working well in British Columbia, it is not working in Saskatchewan and Manitoba because of the export nature of the commodities in those provinces. This issue now even goes beyond just cereal grains, because it's affecting oilseeds and is beginning to affect specialty crops as well. You can't even point a finger of criticism and say that the prairie provinces have not diversified their agriculture sector. They have diversified, but the problem is not deteriorating, the problem is accelerating.

Trade is a federal responsibility. That's why we have come to you with a united voice, and that's why we are asking the federal government to show leadership in two areas: to fix the inequities that are created by trade agreements that aren't working for Saskatchewan and Manitoba; and secondly, to provide short-term financing until those inequities can be fixed and until we can sort some things out with regard to safety nets at the provincial level.

The situation is such that AIDA, when it was promised, was to be a bankable program by Christmas of last year. It was to be something that you could take to your banker in order to negotiate lines of credit, negotiate operating loans, restructure your financial situation if you were in some trouble. It never showed up. There was still uncertainty by seeding, and as applications came in and many farmers who knew they had suffered severe shortfalls in income saw the return of their application being marked “rejected”, they became aware that it's not working, even though they have tried to encourage their bankers that they were going to get their fiscal house in order. They've amassed some more fertilizer bills, some more chemical bills, more operational debt, and they now have land taxes due as well for another year. The problem has deepened.

• 1700

That's why I say don't mind whether the numbers have gone up 25 million or down 25 million; the numbers are going down, and the problem needs to be addressed, both on the short term and the long term. And it's on the short term that we come to the federal government.

We don't come in an adversarial mode to you. We don't come in alignment with the opposition or in alignment with the government. We come sincerely to tell you that there's a huge problem out there that needs to be addressed, and we would encourage you at the federal level to work together and to work with us to solve the problem and to solve the short-term problems quickly, because we don't have a lot of time. The bills, in many cases, are past due. And a lot of the hurt is caused by the international trade war.

Here's where I perhaps digress mostly from my notes. I've been involved in a lot of debates on Parliament Hill. I won some and lost some—being in opposition, I usually lost, but that doesn't matter. The important thing is we all believe in Canada. This is a country we want to make work. We love this country. People in Saskatchewan and Manitoba love this country. We're not coming down here just to stir things up, just to make life difficult for the rest of you Canadians. What we have done is in Confederation we have willingly supported other initiatives to help our fellow Canadians when there was a need. When there was a need in the Atlantic fishery—yes, there were debates, and I was probably involved with some of those debates as to how we best address that problem, but at least we all agreed there was a problem and we all agreed it needed to be addressed, and there was money, and it was federal dollars, a lot of federal dollars, earmarked to address that problem.

Friends, other crises come up. Some are of a weather-related nature, like the floods in Quebec or in Manitoba. Right now Canada needs to work for Saskatchewan and Manitoba. It needs to work for our provinces and it needs to work at the federal level, because let's recognize it's the federal government that has the biggest purse; it's the federal government that has a contingency fund of I believe $3 billion a year. What's a contingency for? A contingency is for unexpected expenses. So I would urge you to talk to your finance minister. Those of you on the inside talk to your finance minister. Here's a need for some contingency funding for something that was perhaps somewhat unexpected by the Department of Finance. Canada needs to work right now.

You're all politicians sitting around this table. I happen to farm, but I'm also a politician. I make no bones about the fact I'm a politician. We have just come through hotly contested elections in both Manitoba and in Saskatchewan, and yet you see government premiers, ministers of agriculture, opposition members, farm groups as diverse as the Western Canadian Wheat Growers and the National Farmers Union. We have the wheat pool and I believe UGG is here. This is a united, unified team with a single message that there's a trade problem and the federal government needs to address it. It's that simple.

If there was an international problem and suddenly the Prime Minister of this country, along with every opposition leader, got on the same page, and brought in business as well, brought in Paul Desmarais, brought in the CEOs of Onex and Canadian Airlines and Air Canada, and they all agreed, people would say there's a problem that needs to be fixed. And what if they even went beyond the jurisdiction of Canada and brought in Clinton and brought in George Bush junior, maybe even brought in Jesse Ventura, maybe brought in Bill Gates, people would say something is going on here. There's a problem. It needs to be fixed. All these people agree there's a problem.

That is what you are seeing from Saskatchewan and Manitoba. We're trying to make this as impressive as we possibly can with the resources we have. We come and ask you not to get your hackles up, but to understand there's a problem that needs to be addressed and work with us to solve it. And, believe me, you can play a key role in solving that problem.

Thank you very much.

The Chair: Thank you, Mr. Hermanson.

We're going to hear from Larry Maguire, I gather. Larry, are you not going to speak? That was my understanding. I leave it to you.

We have to be out of here by 5:30 p.m.. I'm hoping for some questions. How many more were you expecting? I understood it was just Mr. Maguire. Or were there others?

Mr. Larry Maguire (Progressive Conservative Member of the Legislative Assembly of Manitoba): I don't know.

The Chair: I gather it's Mr. Maguire.

We have about 26 minutes. I think what we'll do, members, is whatever time is left over, we'll just divide it by five. We'll try to get each party represented in any questioning.

Mr. Larry Maguire: If I could, Mr. Chair, I want to thank Ms. Wowchuk for the opportunity to say a few words here as well.

The Chair: I should say that Mr. Maguire is a newly elected Conservative MLA in Manitoba. I guess you're representing the official opposition in Manitoba, are you, Larry?

Mr. Larry Maguire: Yes, I am.

The Chair: Okay.

• 1705

Mr. Larry Maguire: And because they sent a rookie MLA, I want to make sure that you don't detract from the seriousness of the situation because our interim leader is not here today. They sent me because I live in probably the most heavily impacted areas of southwest Manitoba in regard to the weather crisis that's out there. But the one today that I want to make clear we're here to talk about is more of the commodity price crunch that Ms. Wowchuk, Mr. Lingenfelter, and Mr. Hermanson have just outlined to you. As you're aware, this is brought on by the crisis in world trade.

I'm only here, and I'm only going to take a minute to say it, because we want to express unanimity on this crisis. You have seen the divergence of the group that has been here; that was outlined in the previous meeting we had with some of your minister colleagues, very clearly, to the Minister of Finance, Minister Goodale, Minister Vanclief, and others.

The only point I want to make is that as we go through the income crunch of farmers in the prairies trying to make the change into the diversification that is taking place, and we are growing less wheat and are less dependent on some of those issues as we continue, the diversification is taking place but it does take capital to do it. And when you're impacted as negatively as we have been by an exterior, external issue like trade, then it's very hard for farmers to make the change on their own. And given the low commodity values, as well as the impact of weather on us in many parts of both provinces, it's a double whammy in this particular time, having seen some of the other impacts that have made it necessary to make the changes in diversification since 1995.

I'll leave it at that. I want to express upon you, though, that I'm here to back the delegation as far as the unanimity of it is concerned. And Dr. Gerrard is with us, as well. He stayed over at the other meeting, the Liberal leader in Manitoba, as well, now. So thank you very much.

The Chair: Thank you, Mr. Maguire. And thanks to all of you. We appreciate your message.

I think we'll have about four minutes each for each party. We'll start with the official opposition here, Mr. Hilstrom.

Mr. Howard Hilstrom (Selkirk—Interlake, Ref.): Thank you, Mr. Chair.

Certainly the message is clear to us down in Ottawa here that you want bridge financing. Really, with the programs not working there is no option but bridge financing. I appreciate you using realized net income, because farmers are not sustainable unless they include the cost of depreciation. So I appreciate you using those figures. The chairman will explain probably later that we have just passed a motion to in effect assist the advisory committee on safety net programs, where we understand they're not exactly getting along all the time, to help provide some third-party independent accountability for their performance through the agriculture committee. We are not as partisan on the agriculture committee on dealing with major issues as what might be perceived. All parties here agreed quite easily on doing something in regard to the solutions. We know the problem. So we're doing that.

My question would be to both the Manitoba and Saskatchewan representatives. The federal government can take some immediate action without legislation or providing direct money, such as the four cents on fuel excise tax, some user fees, and fixing the grain transportation system. All these things will put money into the farmers' hands. Is there any room for the provinces to move quicker on fairness in taxation in regard to education taxes? I ranch, I farm up in Manitoba, and I pay on every quarter. I'm happy to pay on my home quarter and my home buildings, but I feel it's unfair to pay on all the land that I have to have for my farming operation. I guess that would be my question.

The Chair: Okay. If that can be answered, say, roughly three minutes or less.

Mr. Dwain Lingenfelter: Mr. Chair, I want to, if I could, introduce Doug Thompson, president of the Western Canadian Wheat Growers Association, who is with us as well.

Doug, do you want to give a wave.

The Chair: Welcome, Mr. Thompson.

Mr. Dwain Lingenfelter: If I could, I think what's important here is that, first of all, I'm going to say when there is a payment made from the federal government to western grain farmers to make up the difference in subsidy, the issue will then be whether the provincial governments should put in 40% of the money. That will be the question. Our strongest argument to the committee is that, no, the provincial governments, when dealing with international trade wars, should not go back to their treasury to get 40% to make up the subsidy.

• 1710

Now, the reason I say that, and the reason it relates directly to your issue of taxation, is if we're forced to take 40% to fight the international trade wars, then obviously that 40% comes from the taxpayers in Saskatchewan. That comes from your land tax, it comes from income tax, or it comes from sales tax. So if the area that's depressed and being hurt the most by the international trade war is also told not that the government has to put in the money, but the taxpayers have to put in the money, then it takes away all the leeway of doing some of those things on the education portion of land tax that people talk about that we should be doing. And we will be doing that, as long as we're not hamstrung and hand-tied into putting 40% into what is not our legitimate responsibility. If you go across the border from Manitoba into North Dakota or into Montana, they're able to do that sort of thing because their taxpayers at the state level don't put 40% into their national subsidy programs.

So I really caution the committee, when we get to that point of the federal government saying, okay, here is a little bit of money but you have to put in 40%, that is not the way trade subsidies can work within our system if we're going to be competing with the United States across the border, where the state level doesn't put in that kind of money. If we're forced to, then obviously the tax system and the tax regime will have to reflect that.

The Chair: Thank you. We're going to have to move on.

Madam Alarie, four minutes.

[Translation]

Ms. Hélène Alarie (Louis-Hébert, BQ): I'll make a few comments rather than ask any questions. It goes without saying that everyone here is aware of the crisis you are going through and perhaps, too, of your shock at the difference between U.S. subsidies and the support measures you receive. Your province obviously competes with the United States, which is just next door.

My second comment concerns subsidies. It seems to me that, if we use bridge financing, subsidies should be provided on a by- sector basis because they are directly related to commodities prices.

I listened attentively to your remarks on diversification. Although this is an interesting principle, I know, since I've worked in agriculture, that you can't diversify overnight. It's not just a matter of financing and capital; you also have to acquire some knowledge before entering another agricultural industry.

Lastly, the question I'm still considering, and I've put it to others, concerns the cost of moving or supporting the 16,000 families you referred to a moment ago. This isn't just a capital cost, but also a social cost which is very hard for farming provinces to absorb.

Those are my comments. Thank you for being here today.

[English]

The Chair: Thank you, Madam Alarie.

Go ahead, Mr. Murray.

Mr. Ian Murray (Lanark—Carleton, Lib.): Thanks, Mr. Chairman.

It's interesting that Howard Hilstrom mentioned how non-partisan we can be, because I think his first question was the same question I had. I have two questions, both relating to land.

First of all, I understand you want to use a land-based payment system. I'd like you to explain to me why that's the fairest way of doing this. But when Mr. Hermanson mentioned the farmer who is faced with paying his land taxes, it occurred to me that perhaps it is something the provinces could do.

I mean, essentially you're asking the federal government for a cash infusion. You're asking for loans, you're asking for $1.3 billion, and I want to remind you the federal government does have some fairly heavy obligations staring us in the face. We have a pay equity ruling, for one, that could be $3 billion to $5 billion, just as an example. So that's my question as well.

I think I may have heard the answer on the land taxes. I'm not sure whether or not provinces would be willing to forego those land taxes, as a contribution the provinces would make, if the feds were able to come in with some cash. Also, again, please explain to me why a land-based system is the fairest system.

Mr. Dwain Lingenfelter: I think what I'll do is turn that over to Sinclair Harrison, who probably has that file as a representative of the group.

Mr. Sinclair Harrison (Saskatchewan Association of Rural Municipalities): Thank you, Mr. Minister.

We're looking for something that's not trade-distorting, and when you pay an acre, you can do many different things on that particular acre. So by paying the acre, you're not influencing the farmer to grow wheat, barley, or whatever. So we see it as helping the federal government in world trade.

• 1715

When you look at paying on an acreage basis, the federal government suggests it should be targeted toward those that need it. What we're suggesting is pay every acre and then through income tax claw back from those that don't need it.

We would also suggest don't pay it through NISA, because if you pay it into NISA, that's a tax shelter for those that don't need the money. If you get this money out before Christmas, and that's what we're suggesting, a portion of it will be back in the provincial treasury and the federal treasury by April.

We also suggest that by paying every acre, you raise the margin of every farmer in Manitoba and Saskatchewan, and that's that basis of AIDA. If you raise everybody's margin, that leaves more money in the AIDA pot, and we're all interested in where the $1.3 billion is going to come from. When you leave money in AIDA, that's a source of funding for the acreage payment.

Administration is always a problem in any kind of a program—to get it out early. PFRA have an administration. We have offered that through 260 rural municipal offices our administrators, who are taking no increase in pay this year, would administrate it for nothing. So if you want to cut us a cheque, I can guarantee it will be in the farmers' hands two weeks, no administration. It's clean, it's simple, it's effective, and it's out before Christmas.

The Chair: We'll squeeze in a question from Larry McCormick.

Mr. Larry McCormick (Hastings—Frontenac—Lennox and Addington, Lib.): Thank you.

I congratulate all of you for getting together to be here to remind us and to remind all Canadians that this is not a political crisis. I also have already used the advertisement that Saskatchewan put in the Globe and Mail that tells more Canadians, as I try to tell them, speaking just for myself, that it's not a farm crisis, it's not just about farmers; it's about people, about families. We've got to avoid the tragedy that could be facing us.

But with bridge financing...I didn't get the amount that Saskatchewan would need. For both of you, how long might this bridge financing last? There's no solution there tomorrow. So whether we're talking about the $300 million for Manitoba or Saskatchewan—

The Chair: One billion dollars for Saskatchewan.

Mr. Larry McCormick: I'm talking about Manitoba right now, and I heard 300; how long might this projected help assist?

Ms. Rosann Wowchuk: The $300 million we're looking for is for immediate bridge financing. We're hoping that through world trade talks subsidies can be reduced. We're also hoping the negotiations and the work that's being done on long-term safety nets that's been talked about for a long time will become a reality and there will be other tools that can help farmers.

Hopefully there will be some increase in price, and we're looking at this for the immediate. To say we may not need it further—I can't say we won't need it. But we would hope this would be the short-term, then we would start to look at developing the long-term safety nets that farmers would need, and hopefully trade subsidies will be reduced to address some of those issues as well.

The Chair: Thank you, Rosann. Mr. Proctor.

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

Welcome to all of you here this afternoon at this very important meeting.

I wanted to go back to Mr. Murray's land-based payment. I listened intently to Mr. Harrison's response. What I didn't hear him saying.... We have asked about acreage payments on seeded acres, and we're told regularly that we think there would be a problem with our international trading agreements if we attempted to do that.

I guess my question would be to one of the ministers present. Have your officials looked at that? What is the response you can give the committee?

Mr. Dwain Lingenfelter: Well, let me just respond to you, Mr. Proctor, by saying that it's interesting as we approach the WTO meeting in Seattle, which starts a month from now—I think November 30—and runs through to December 3, that the reaction of the Americans to put more pressure on Europe isn't to cut their subsidies, but to increase them—

Mr. Dick Proctor: Right.

Mr. Dwain Lingenfelter: —without any sign or word coming from our federal government about there being a problem with the $8 billion that Clinton just put into subsidies. They're already at 38 cents of every dollar to our nine cents, and they throw in another $8 billion and there's not a word said by our federal government.

• 1720

So the argument that at nine cents on every dollar we're even bumping up against any barrier if we want to be creative is nonsense. It can't be. If the Americans can put in 38 cents on every dollar and our government doesn't say a word about it being illegal, how can it be possible that at nine cents on every dollar, we somehow will be found to be in an illegal position? It doesn't make any sense.

Mr. Dick Proctor: I have just one supplementary, Mr. Chair.

I don't know whether it's just me, but it's intriguing that as the two provinces with the largest number of cultivated acres, Manitoba and Saskatchewan, you are required to put up a substantial amount of the $600 million. Saskatchewan puts up $140 million of the $600 million, because you have 47% of the cultivated acres. But when it comes time to pay it out, the government says they can't pay on a cultivated-acre basis.

Am I the only one who sees the anomaly here? Provinces have to put it in on an acreage basis, but you can't pay it out on an acreage basis, because the federal government is saying no, no, that would be trade-distorting, or that would be against the law. Do you have any comments?

Mr. Dwain Lingenfelter: On the issue of trade distortion, I'd make the strongest comment. We believe there is plenty of room, if it's done creatively, to put $1 billion into Saskatchewan without any challenge from anyone on the trade distortion.

Mr. Dick Proctor: Right. Thank you.

The Chair: Mr. Borotsik.

Mr. Rick Borotsik (Brandon—Souris, PC): Thank you, Mr. Chairman.

First of all, I would echo the comments of this committee in thanking such a high-profile and certainly very homogeneous group for coming here.

We've said all along that perhaps agriculture hasn't attained the profile necessary. We've tried, I can assure you. Every member, on this side particularly, has mentioned the crisis and the seriousness of the issue, as well as on that side. I was getting to that.

Unfortunately, it seems our message hasn't been getting through. The $1.5 billion and the $900 million from the federal government seem to be the numbers that stuck in people's minds. That's changed today, and I thank you for that; I really do. Don't stop.

Mr. Lingenfelter, you said “when, not if”. Trust me; let's keep with that philosophy, “when, not if”, because we all recognize it's so very important.

We talked about the clause in the WTO that says for extraordinary circumstances and emergencies, there is the opportunity for governments to make aid payments. In your opinion, does this in fact consist of an emergency or a crisis? I guess I don't even have to ask the question, but I'll give you the opportunity to answer.

Second, Mrs. Wowchuk, in your report it says there has been a $2 billion reduction in federal contributions to agriculture programs. I should correct you just a bit. In 1991-92 the federal contribution was $6.12 billion. In 1999 it is $2.1 billion. That is almost a $4 billion decrease in federal contributions.

If we were ever back to the degree of that original contribution, I suspect—and I'll ask the question—that in fact the crisis we are now experiencing would not be a crisis.

Ms. Rosann Wowchuk: The first question was whether we consider this a crisis. We have considered this a crisis for some time, and I think in any other part of Canada, if you had thousands of families at risk of losing their livelihoods, losing their homes, and having to change their lifestyles completely, it would be considered a crisis. We believe this is a crisis.

On the numbers, certainly if we had more money in agriculture budgets and if we had the supports we used to have, which were removed because of trying to be compliant with world trade, we would not have the crisis we have now.

Mr. Rick Borotsik: Do you believe it was simply a matter of complying with world trade? Because quite frankly, we're well below what we can give in support payments and still be.... We have an ability to go up another $2 billion and still comply with world trade. So do you think it's just simply a matter of compliance with world trade, or perhaps more of a money-saving issue?

Ms. Rosann Wowchuk: If you look back, the federal government was trying to reduce the deficit, and our feeling is that a large portion of that deficit was reduced on the backs of the farmers and on the backs of western Canada.

Certainly there is room in world trade for extraordinary circumstances, and this is one of the extraordinary circumstances where the federal government can put in money.

The Chair: A timely answer.

We'll have a short question from Mr. Ritz and then go to Mr. Solomon. It will have to be very short, though.

• 1725

Mr. Gerry Ritz (Battlefords—Lloydminster, Ref.): Thank you, Mr. Chair.

I have just one question on the acreage-based payment, which has been bandied about. When the acreage-based payment was used in the Crow payout, it turned into a nightmare. Banks, the FCC, landlords, and all that seemed to get more than their fair share. How do we make an acreage-based payment work and get it to the producers this time? How would we do it differently?

The Chair: Mr. Larsen, would you like to answer that?

Mr. Leroy Larsen (President, Saskatchewan Wheat Pool): First, I want to comment on Mr. Murray's question as to why we would recommend a land-based payment. It's very popular with farmers. He knows how many acres he has. If there's a dollar number, he can have that multiplication done on what he's going to get before I finish speaking here, and he can take that to the bank. So it's very popular. It can be administered, as Mr. Harrison said, very efficiently.

The question you asked is related to the Crow buyout, and I think that was resolved rather nicely. I would hope that this payment would be directed to the actual producer and farmer. I know there was a lot of debate about the landowner and the actual producer. But it's an issue they can resolve, the landlord and the renter or producer. I think they've had the experience, and they'll be able to resolve that one as well.

Mr. Gerry Ritz: Some of them are still in court.

The Chair: Thank you.

We haven't heard from Mr. Melenchuk, who is the Liberal leader and a cabinet minister in Mr. Romanow's coalition government. Do you have just a couple of things to say, Mr. Melenchuk?

Mr. Jim Melenchuk (Leader, Saskatchewan Liberal Party): I have just a couple of points.

I'd like to reiterate that the problem is being identified, and we're still looking for solutions, obviously. But we have some common threads we've identified here as a group, and some of those common threads are that the base we're working from in Saskatchewan and Manitoba is the 1993 to 1997 realized net income averages. The other factors in terms of whether it's a minus 48 or a plus 50 in Saskatchewan need not apply. Let's work with the averages. There's going to be a deficit regardless, 107%, 80%, or whatever.

But the perception that this is somehow part of a farm safety net program needs to go away. This is a trade equalization investment. It's for the future of the farm families of Saskatchewan. The fact is that farm safety nets need to be there. We need to have crop insurance and NISA. NISA is a relatively new program. It started in 1990 and was expanded in 1994. If that had a 20-year track record at this point, this wouldn't be as big a crisis. There would be more money to draw down from NISA. But 50% of producers in Saskatchewan right now have very small NISA accounts, and they can't draw that down. They would be able to if the program was in existence longer.

I have just one other point, Mr. Chairman, and that's with regard to the fact that it is a crisis. It's a real crisis. The perception for land-based payments is that it is fair and equitable, and that is 99% of the way there.

The Chair: Thank you very much.

I have a question for Mr. Lingenfelter. You were mentioning how generous the supports were in the United States for the grains industry, and you used a particular number. I think it was 38 cents compared with nine cents here in Canada. In the United States their supports have been sort of weighted in favour of the grains industry, and they've given very little to the cattle industry, say. In Canada we've tended to be more egalitarian, if I can use that word. Are you suggesting that we adopt the American model, or are you suggesting anything in that regard?

Mr. Dwain Lingenfelter: I think as it relates to beef—and there are other people who can speak more articulately on this than I can—our numbers show that in the U.S. four cents of every dollar comes from their national government. In Canada it's six cents for every dollar.

The Chair: So we're better than the Americans in that area.

Mr. Dwain Lingenfelter: A two-cent difference is okay. If you took our grain and put it to 36 cents, two cents less than the Americans, I would be very happy with that. I wouldn't mind that at all.

So my point is that this is not about all of agriculture in Canada. This is about one specific area, namely, Manitoba and Saskatchewan. The realized net income has gone down by 80% in Manitoba, 107% in Saskatchewan, 2% in Quebec, and 2% in Ontario, and has actually gone up in the Maritimes and B.C. So this is not about whether AIDA does or doesn't work. With AIDA in we're losing $48 million. AIDA doesn't work for this trade issue.

• 1730

The Chair: On behalf of all members, I want to thank all of you for coming.

This meeting is over.