[Recorded by Electronic Apparatus]
Tuesday, May 2, 1995
.0938 
[English]
The Chairman: Colleagues, could we begin?
This morning we are considering expenditure plans and priorities in the future. We have with us the president of the Canadian Federation of Agriculture.
Welcome. Hopefully you're feeling better this morning.
Mr. Jack Wilkinson (President, Canadian Federation of Agriculture): A little bit.
The Chairman: Good. I understand you already saw one committee yesterday and are going to see a couple more committees today. It seems to be your two days in the spotlight here in Ottawa.
As you know, this committee has an ability not only to review the present estimates, but also to comment on the future spending of the department. You have a fairly long brief here. I hope you're not going to read the whole thing, because we only have until 11 a.m. I would remind colleagues that we have to be out of here at 11 a.m., so I ask you to use your judgment in terms of the time you use for questions.
Mr. Wilkinson.
Mr. Wilkinson: Thank you very much. We have with us today Yves Leduc, from staff; and Sally Rutherford, executive director of CFA; as well as some other upper staff members from the Dairy Farmers of Canada.
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We have a six-page executive summary, and I would like to highlight some points. I'll try to keep it down to about twenty minutes to half an hour for our presentation, and then entertain questions at that time. I think it would be a more useful way of going through it all. If we can in fact have the entire document submitted into the record, we would appreciate it.
As I said, we would like to highlight a number of points here. I won't be my dynamic self today; I was so sick that I actually went to bed yesterday at 3 p.m., and I slept through until about 8 a.m., so people should stay away from me. We'll see how it goes, and if I pass out, I'll hand it over to Sally to finish the brief.
In relation to the safety net discussion, we are very concerned with the expenditures in terms of both the allocations of expenditures and the development of the whole farm program. I'm sure some of you have seen some of our letters that have been sent around, both to provincial agriculture ministers as well as the federal agriculture minister, on this issue.
There are two points we would like to make very clear here. One is the concern about budgetary cutbacks of a further $250 million within the three-year time period, and about what allocations and processes will in fact be put in place to evaluate how those dollars should be spent in the most meaningful way.
The other point is a very major concern from the CFA's point of view. It deals with how the policy ADMs within Agriculture Canada and provincial governments appear to be working on a process parallel to what the national safety net committee was working on and how they are in fact making changes and suggestions to their ministers without the full involvement of the farm community. These are major structural changes in the safety net program that, from our point of view, would substantially gut the benefit of such a program and change it substantially. Despite the fact that everyone gives us the rhetoric about consultation with the farm community, I think this puts in question a major area of just what is meant by it when these changes are being suggested behind the scenes and without the farm community's full involvement.
We are also very concerned with what appears to be the hardball politics of provincial governments in relation to Agriculture Canada; with what could very easily develop from requests by some provinces for block funding to run their own safety net programs; and with what this could in fact mean in relation to U.S. countervail trade law, which is fairly clear in the whole area of basically equal treatment of producers and the involvement of all producers in a program. Pork and beef are examples of where some provinces have excluded the entry of their producers, while in other provinces they've been included. So we are very concerned as to what's going to develop on this and we will answer any questions on it later on.
In relation to dairy subsidy, it's our concern that the cuts that have in fact occurred within the dairy subsidy are a problem. We are opposed to any further dollar cuts and the movement of those dollar cuts into adaptation programs. I think the dairy industry has made it fairly clear that if there is in fact going to be a continual phasing out of those dollars, the idea of recovering them within the pricing formula should be looked. I know they are involved in a process with Mr. Vanclief to that end, and I believe they have filed such a position paper with him.
I think there is a major concern from the dairy industry about being pushed into a NISA-type program, especially with some of the issues I've just talked about, and in terms of whether or not they will have a program that will be of any value to them down the road. So they're very reluctant to use those dollars to have an adaptation fund set up.
On research and development, the concern there is clearly.... We feel the research and development dollars are an excellent expenditure in return for investment in Canadian agriculture. They have allowed us to develop a number of major commodities and crops like canola, and have allowed for the adaptation of lentils and a whole host of products, both in primary agriculture and in the agrifood industry, thus allowing us to lead the pack from an international point of view. And if we are in a situation with changes in transportation, with a host of adaptation circumstances taking place, the last place you would want to cut dollars is in the area of research and development.
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We understand the philosophy of the minister - at least we understand what he says - in the context of matching industry dollars, and that five years from now we could in fact have more research and development money than we currently have. I think two questions arise out of that.
First of all, who is going to have the rights involved in product development? If someone comes in one year from commercialization, to what degree are they going to have control over the genetics or over the product developed through that research?
Secondly, because the check-off legislation hasn't worked in relation to research and development, many of the farm organizations are of the opinion that it has to be changed. We felt it wasn't easily accessible right from the day it was introduced. It's our sense that for commodities that do not have the ability to have check-off, this legislation has to be adapted so that they can in fact raise dollars in primary agriculture in order to take advantage of matching research and development.
Even though there are many more listed, there are two main points on trade and marketing. In a broad context, one is a concern about the structures put in place to take advantage of international marketing - the trade agreements we have signed; the need to have environmental and labour agreements that go along with those; and the need to have the focus of the agrifood industry and the ministry on maintaining both a domestic concentration as well as their concentration on exports.
Even though the export sector has gone up substantially over the last number of years, it's our sense that it has to a great extent been focused on the U.S. We've had all sorts of trade concerns with the U.S. and a nervousness about over-concentrating on one country and the vulnerability to which that exposes Canadian producers.
Second, we've also had a major increase in imports in the agrifood industry, particularly on the value-added side of imports. We're running a trade deficit of around $400 million, I believe, in the value-added side. That creates concerns in relation to job creation in the agrifood industry as well as in relation to locking us into the continuation of exporting raw product and importing finished product at a high value-added point. We think the concentration of Agri-Food Canada on exports has to be looked at and has to be balanced in relation to the development of the domestic market.
For example, I was out in B.C. last week. A grower group in raspberry production was trying to get promotional money to promote raspberries for both drinks and other uses in B.C. They were unable to get any dollars for the domestic market, but they could get any dollars they wanted for exports. As of yet, we can't even fill the domestic need, so that seems to be a bit absurd from our point of view. And there are more examples that can be listed in those areas.
From a credit point of view, we have had a major change to the cost of borrowing relative to that of the U.S. It was substantially out of whack a number of months and years ago. It has come into line somewhat, but we think there are possibilities for putting up more competition in the area of credit.
One program we have been pushing for some time - with little acceptance from the bureaucracy, it appears - is a program that was introduced through the provincial government in Ontario around three years ago. It was a commodity-based loan in which the crop insurance was used as the guarantee for lending money. In fact, over the last three years of lending, they have been able to lend money out at 0.75% below prime. That sort of competition in the lending business really goes a long way towards keeping supplier credit low, towards keeping banker credit competitive, and towards keeping the costs of borrowing down for very capital-intensive agriculture.
So we think there are areas there that need to be looked at, along with the whole area of the cash advance and the dollars within the cash advance. We have concerns that in the estimates the allocation is lower - I believe between $30 million and $40 million - for the cash advance. One can only be concerned about whether this means further cutbacks in this area, or whether the government thinks the cost of this program can be streamlined so that it can move from the $50-million-plus that it is currently costing to the $30 million.
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As for farm safety, there is a host of adaptation issues we have listed here that were announced by the minister around two weeks ago and as well were indicated within the budget. Most of these programs we have been lobbying for and are quite supportive of. We would like to make sure they are developed in a quick way so that they're out and available. The farm safety program we think is a valuable one. A coalition has been set up to work on it because I think, as we're all aware, the farm accident rate is unacceptable and anything we can do to lower that is welcome. So we're pleased with the coming forward of that.
As well, with the HACCP program, even though we think it's a good first step to introduce it to the processing sector, obviously the next stage is to allow resources to be made available to commodity groups that wish to move that closer to the farm gate. Some European countries are ahead of us substantially in that area and can guarantee quality control really to the farm gate in both the transportation and production sides and can basically give buyers whatever they want. We think those things are going to be critical to take advantage of trade situations, and we're going to have to continue to pursue those goals as well.
Regarding the farm income review, even though the farm debt review program and the sidebar programs have been extended for a number of months while a program is developed, we have a meeting after this one in which we'll be pursuing what we and the people in Agriculture Canada think is the type of program that needs to be in place, and hopefully we'll have some success in that area.
We're pleased with the extension of farm business management and the business planning for the agriculture ventures. That is something we think is absolutely critical if in fact you're going to fully utilize the mandate change of FCC and possibly even change it further, as has been indicated by the minister, so that you do not have to be directly involved in farming to take advantage of the post-farm gate activities. Then you really have to have an extension arm to that which is going to help people, similar to the case program that's available through the Federal Business Development Bank, to help people analyse their operation, where they're going, and take full advantage of market opportunities in the value-added side.
As for WGTA, we obviously see that there are going to be major changes in prairie agriculture with the announcement of the buy-out of the benefit of WGTA. We will be meeting with the subgroup of the transportation committee later on today on this specific area. Our concern really is that we maximize the efficiencies that can possibly be within the system that have been set off for some time period and delayed for some time period, because if in fact we're going to deal with transportation costs, particularly with Saskatchewan and Manitoba, with the distance from export points, we're going to have to be very, very aggressive in trying to lower the cost of transportation for those people. We're going to have to do a great deal in relationship to the labour situation as it affects the handling of grains, so that we have a system that's in place.
We have suggested a number of changes in the clauses and we can go into detail if people would like to discuss that here - the whole question around pooling and a host of areas there, and the way the $300 million adjustment money is to be paid out - but it would probably be best if there are questions on transportation to go into detail at that time period.
We're involved with the FFA and dealing with that question. Our sense is that most of the farm groups in the Maritimes are relatively well advanced and have done a great deal of work ahead of time and have some suggested changes. Our sense is that those dollars are going to...even though we don't want to pre-judge the outcome of the committee work, it appears as if they're going to want to have the bulk of the money up front to deal with adjustments versus extending them out over the 10-year time period.
We will possibly need the help of MPs in those particular areas to encourage those dollars. If we can find the money for paying out of the WGTA fairly early, if the program suggestions that come forward from the committee are for major pay-outs for building infrastructure for the FFA areas, hopefully we will have the political support of the MPs to in fact allow those dollars to flow early versus later.
.0955
As well, with the two other changes, the MFRA and ARFAA, we urge the committee to press for the allocation of funds in such a way that it best addresses the needs of the agrifood industry, and there are some concerns that this may not be the case right now.
We have a host of taxation points here from the goods and services tax, the lifetime capital gains exemption, small business investment tax credit, deferral of business income, and gasoline tax.
Without going into any of them in detail, we were pleased with the continuation of support for the $500,000 capital gains exemption, obviously. We would like that to exist within the future, and we have some suggestions about the need for the small business investment tax credit. We assume that the federal government will be getting its budget deficit problems sorted out in the near future and will be able to move forward with hopefully the introduction of a number of these tax credits and what not, to encourage investment activity.
They have slacked very substantially in Canada in the primary and food industry over the last number of years, and when they were in place, we thought there was great benefit for minimal cost to the government.
I've already talked about cash advances, and as well, the extension and broadening of the farm improvement and marketing co-operatives dollars.
On environmental issues, you may be aware that there's a national environment committee that was set up, which was co-funded by AgCanada and the environment ministry, in which we were trying, from the farm community, to be extremely proactive in - and a number of the provinces have really led the charge - putting in place farm plans, suggesting pesticide applicator use certificates, and making suggestions about the way the housing of these products should be put in place. To a great extent, with intensive pest management systems in Canada, we feel that the farm community has been relatively aggressive, or very aggressive really, in the last five to ten years of trying to adapt to the needs of the consuming population in guaranteeing safe use and minimal use of pesticides.
But we're now at the point where a lot of these issues require remedial action. If someone is going to upgrade the manure storage on their farm operation to, say, move from a lagoon system to sealed concrete, those items are going to be very costly investments in a farm operation, and there may be extreme difficulty in getting credit from a lending institution to make those investments because of the inability of a quick payback from a production point of view.
We're doing an analysis of the green plan money, and hopefully we'll be making presentations to government on where we think the investments have been useful in the farm community and what will need to be continued into the future. In our opinion, it's clear that you can only go so far with self-change from the farm community, and then you run up a wall of capital investment that is required and that just isn't available currently.
User fees have been a major concern to our sector - the cutback in a number of what could be considered green programs under GATT, increasing costs to the farm community in those areas, and at the same time, being very aggressive in cutbacks in those amber and red programs from the farm community. It appears that even in those areas of inspection and grading and a host of other ones, educational ones and so on, we could do more quite easily in those areas.
We're concerned as well, and we've made presentations before, that the farm community be more involved in what type of program is in place, that there are a number of requirements for certificates for export, a host of areas in which the farm community is effectively being asked to pick up part of the bill with no say in the cost of the service. On the need of the service, the cost of the service, we've just said that we have no input in that area but we will pick up 50% of the cost in that area. We feel that this is absolutely inappropriate, and we need some changes there.
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There are two other points, one on the pesticides. We are pleased with the announcement in moving forward; we're not pleased with the cost that appears to be within the pesticide system. I think from a CFA point of view we will give it a chance, and we hope the system that is put in place is a workable system.
Our sense is that if it truly is designed in such a fashion that it delivers product on time to producers in a fair way, we will be able to minimize the cost down the road and hopefully not have as costly a system. We're expecting that government will do everything within its power to guarantee that, that it is a fair system and it works towards harmonization at the international levels within a very short time period - something we thought should have been within the GATT process and still needs to be done - and that everything possible is done in regard to cost-effectiveness. So we will continue to make comments and suggestions in that area.
The agriculture employment services is an area where we know there has been a consultation process with most provinces, in which they have suggested some needs for their agricultural employment. With some of the major changes taking place, we know that labour and training of labour will be a problem in the future and that we're not prepared in many provinces to take the full cost of delivering a system on a private sector basis, as far as doing that with no transition time period is concerned. We suggested that in fact there needs to be an evaluation to see how we maintain those services as much as possible, knowing full well that we'll have to move to a different model down the road. But there needs to a transition period in there so that we don't lose the bulk of that service in the next time period because of the inability to adjust and adapt.
With that, I'd like to stop now and entertain questions.
The Chairman: Thank you, Mr. Wilkinson.
Mr. Chrétien.
[Translation]
Mr. Chrétien (Frontenac): Mr. Wilkinson, when we look at the share for agriculture in the 1996-97 estimates, it will be down to 1.2% of the overall budget, while in 1988-89 that figure was 3.6%. It means that government funding for agriculture will have been divided by three within a very short time frame.
As a representative of all Canadian farmers, do you believe that the philosophy within the central government has remained the same regardless of what party is in power?
We are headed for a very substantial decrease in funding, despite the fact that the Minister of Agriculture has set a very commendable goal of $20 billion of agri-food exports by the year 2000.
You talk in your brief about increased share of salaries and operating costs. In 1995-96, 47% of the total budget will go to pay for salaries and operating costs, while three years ago the proportion was only 28%. Therefore, almost half of the total budget will go to pay for salaries and costs associated with employees.
I would like you to tell us in an unbiased way if the government's vision for agriculture is on the right track or if you have concerns about the direction. Could this have a negative impact in the medium term or the long run for all Canadians?
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[English]
Mr. Wilkinson: That's a very large question. There are clearly concerns within the farming community about how we can possibly deal with all the budget cuts that have occurred not only in this last year but really...as you've indicated, for three years running we've had substantial budgetary cuts in program spending on the producers in Canada.
Also, with major changes in transportation it will be difficult to see how, unless we have substantial price increases in a number of commodities, producers in provinces like Manitoba and parts of Saskatchewan are going to cope. It is clear they cannot absorb all the costs that are going to be transferred over to producers. With the proposed pay-out on transportation, for example, if it goes to landowners and not operators, as appears to be being suggested, there will be people who will have substantial increases in costs next year with absolutely zero compensation.
So there is a host of areas - the list goes on and on - in how we are going to be able to deal with and meet reasonable net income figures for Canadian agricultural producers and remain competitive as an agrifood industry with what appears to be still substantial support for U.S. producers and industry. Their expenditures for their export enhancement program appear to be at the legal limit allowed under the GATT. The list of what we still have problems with in the international community goes on and on.
Whether the farm community will be able to respond will be hard to analyse. To a great extent it will depend on price outlook over the next few years. As you know, a lot of the budgetary expenditures in the past were supporting extremely low prices that were brought on with the U.S.-European trade war that started in 1985. Substantial expenditures were made during that period and they clearly would not have to be made if prices were at reasonable levels.
As we've indicated, the allocation of resources to salaries and staff versus programming within AgCanada - we had a great deal of discussion before the budget to try to point out that we thought it was inappropriate to continue to cut agriculture programs and still to a great extent keep the staff component in place - is obviously a concern. Even the reduction of 18%...I think many people feel that is clearly no higher than it needs to be.
For example, Laurent Pellerin, the president of UPA in Quebec, indicated to me at a meeting that there are around 15,000 commercial farm operations - these are his numbers and his words - in Quebec, and when you take AgCanada employees and provincial government employees in departments of agriculture, there are 5,000 employees. So we are getting fairly close to the day when my farmer dies as a bureaucrat, because we're three to one now, as he told me in Quebec, for commercial farm operations.
That is a major concern: where the resources are being allocated.
I know I didn't answer your question totally, but we would have to start the presentation again.
Mr. Reed (Halton - Peel): Jack, I had a unique experience last winter. It began in the constituency I serve. I toured a research facility that does nothing but canola. It's a private research venture very close to my farm.
Later on in the winter I had occasion to go to Saskatchewan, to the university. I met the geneticist who is really responsible, they say, for at least two-thirds of the canola that is being grown in the west at present.
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I wonder if you might comment on the research and development values, private versus public. The private sector will tell me that they consider it to be overlapping of course, that one is duplicating the other, that it's an unnecessary venture, and so on.
The other question I have was raised by the proactive canola group in Saskatchewan about the impact of the WGTA and what it might do. Their emphasis is on value-added. They're most interested in processing what they grow rather than shipping it raw, and they believe the WGTA experience has given them an additional incentive to do that. I had a similar experience in northern Manitoba, where I met with two groups that are interested in building ethanol plants. They are of the same mind. In all cases, these are farmer groups.
Mr. Wilkinson: On public versus private, we get into concerns in that with Canada a lot of the production can be in minor acreage crops. We see it all the time in pesticide registration, for example, where it is not commercially of benefit to have a private consortium put together to do the long-term research and development because the acreage potential possibly is not there.
That becomes a number of our concerns. I hear what you're saying today, but would canola have been developed through the private sector? I think that's an open question on which a lot of people have opinions. It's opinion; there's no way in which you can know factually. Would the dollars have been put in to stick over the long haul to develop those sorts of things? Now that we've got a large acreage crop, of course we have the availability of the private sector to continue the research and development there.
The next question is, if you have no publicly funded research, where will those areas be - as far as small acreage crops and looking at a lot of long-term development both in the agrifood sector and processing and what not and packaging, as well as primary production, are concerned - in particular with a northern climate such as we have? Will we be limited to a very few types of crops available to producers?
For example, I understand that we don't even have a corn geneticist left in Ontario, or in Canada. So will we continue to have the development of short heat-unit variety corn, or will that just move by the wayside, and we'll basically take whatever is available from the U.S. and grow it only in those heat unit areas it works in, and the rest of the areas below 3,000 heat units just won't have any hybrids available to them?
So those are open-ended questions where we are very nervous about the outcome. There is reason to believe that we're not going to have that development work done in minor crops. We think it is a bit pre-emptive to move away from the research side of things as fast as they are moving.
We desperately hope that the value-added is going to move as quickly as some groups in the prairies say it is. I guess now's the time for everybody to put their money where their mouth was, because people who've been advocating the elimination of the WGTA for a long time have blamed that for all the things that haven't happened in the prairies.
We'll find out over the next few years just whether the vision people had of great things happening in the prairie region in the value-added will come to be. We clearly hope that that will be the case, because if not, there will be some very serious ramifications.
One of the things that is obvious about this, though, is that the relationship of movement of product into the U.S. is going to become very critical for, in particular, Manitoba and parts of Saskatchewan, where, with the added transportation costs, they're clearly going to want to....
For example, I was in Saskatchewan a couple of weeks ago as well, and there was the indication of 1,200 sow farrow-to-finish operations. In fact, there was a company that was looking at putting in 20 of those in the next three years. That's a lot of hogs. Clearly those hogs are not going to be eaten in Saskatchewan. Once again, with all these movements to diversification, we still don't have the population and they still have to find a market.
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I think the success of that will be critical to our ability to move product into the U.S. in the future and offshore through an effective transportation system. Canola meal and its products still have to be transported on train cars. It will be critical to streamline the transportation and make it as effective as possible.
Mr. Reed: Thank you for those comments.
Mr. Hermanson (Kindersley - Lloydminster): Thank you, Mr. Wilkinson and Ms Rutherford, for appearing before the committee.
In your presentation, Jack, under trade and market development you talked about identifying key elements of a strong domestic agricultural industry and providing support via infrastructure and negotiation of appropriate trade rules.
As far as the WGTA is concerned, amongst your requests you talk about section 181.18, dealing with the review in 1999. You talk about looking at whether farmers shared equally in the benefits or cost savings.
I realize that's looking forward to 1999, but how would you respond to the fact that a constituent of mine in Saskatchewan whose farm is two hours from Saskatoon sent a sample of barley to Saskatoon and found out it was pearling barley and he would receive a good price for it. He made arrangements to have the barley trucked to Saskatoon and had to pay the trucking costs, of course. He also had to pay the elevation charges even where he did not use the elevation system. The clincher was that he got a bill for rail freight of almost $1,000. Of course, he didn't use the rail transportation system at all. It didn't go one inch on steel.
Had he lived in Beausejour, Manitoba, and made that same deal he would have had to pay the trucking and the freight cost, but of course the freight would have been far less because he would have been so much closer to Thunder Bay.
How are we going to bring in efficiencies to our transportation system to make it more viable for the domestic value-added and processing and marketing of our products if we have this restrictive regime in place now that farmers are paying 100% of the transportation costs?
Mr. Wilkinson: Without going into an incredible amount of detail, my sense is that when you hand the producer the full bill over the next year or two there are going to be incredible pressures on all sorts of fronts to rationalize and make sense out of the system. To some extent in the past people have had concerns about it, but while they weren't picking up the full cost, there were anomalies in the system and it just carried on.
Now there are going to be certain areas where producers are going to see astronomical bills handed to them, and they're going to want to have some say and some influence over how we resolve a number of problems. We've seen that in a number of areas, as we said, including the inspection and grading service. The government is going to have to be more proactive in responding to these things in actions rather than words.
We've had case after case where particular commodity groups have just been handed bills stating the way things are going to be done, with absolutely no say in asking the fundamental questions: Does it need to be done that way any more? Do we need the number of people on the line that we had in the past? Do they need to be, for example, vets versus technicians to meet the quality control at the end of the time period?
All of those questions will have to be up for open discussion and debate. I think because of the changes the pressure is going to be incredible to sort out problems that are currently in the system. I think there'll be pressure to make amendments or the whole system will break down.
Mr. Hermanson: Is the CFA bringing in recommendations for how to implement efficiencies in the transportation of product, particularly in light of the WGTA decision?
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Mr. Wilkinson: No. I'll give you the reason why that wasn't done in the past. The WGTA was one of those areas in which within our membership base we basically were split right down the middle as far as commenting on it was concerned. That was one area, and I think the only area, where we were asked by our membership to just stay the hell out of it because we had nothing meaningful to offer other than giving both sides of the argument.
Effectively, when the changes are in place, we've been asked by the membership in a number of places to work with them to suggest some changes. To that extent that's why we were not heavily involved in it in the last three or four years.
Mr. Hermanson: After the budget, will you reverse that position and take a more active role?
Mr. Wilkinson: I think the membership is much more interested now; they have indicated they're much more interested in our working with them. We're sitting on the FFA committee and there's been a desire to have us involved with them on the WGTA.
Now that the decision has been made, it isn't a contentious debate over one side or the other, which was the problem in the past. My sense is we'll be able to do a lot more constructive work over the next number of years.
Mr. Hermanson: You make another interesting statement in the trade and market development portion of your brief, and I agree with it totally. In fact, it almost looks like a very similar policy we were promoting prior to the last election, respecting the right of the Canadian farmers to use the marketing system best suited to the needs of their commodity.
You go through the list of supply management, marketing boards, Canadian Wheat Board, and say further that changes to the agricultural marketing system should be initiated and directed by farmers. In light of that statement, would you support producers selecting commissioners to the Canadian Wheat Board and would you urge the government to move in that direction?
Secondly, what is the CFA's position or recommendation to the federal government and the agriculture minister with regards to a continental barley market and the possibility of a plebiscite? This of course was promoted by both sides of the issue, depending on which side had the upper hand.
Mr. Wilkinson: In the past we have supported the election of commissioners. From our point of view, the sense is that there has to be ownership in the Canadian Wheat Board by the producers if it's going to survive and adapt into the future. We're strong supporters of orderly marketing, and at the same time we view that the producers have the right of choice. If they choose a free market system, so be it.
To respond to the continental barley question, we felt it was inappropriate with the last government when Mr. Mayer made the changes without having a plebiscite or a more open consultation with producers. It skewed the benefits substantially, depending on where you lived. We felt it was such a fundamental issue and such a fundamental change that it needed to be addressed by producers, so we were in favour of a vote as well.
Mr. Hermanson: Do you still have that position?
Mr. Wilkinson: Yes.
Mrs. Cowling (Dauphin - Swan River): I have two issues I'd like to question you on. One is on the safety nets program and moving to whole farm support. You mentioned that the provinces are playing some hardball tactics at the moment, which may have implications for whole farm support. I want to know how you feel that process is unfolding. If in fact there are some difficulties within the provincial perspectives, how may we as members of Parliament influence the outcome?
My second question is about R and D. You mentioned that the check-off isn't working. I'm wondering what you might suggest would work for check-off provisions under R and D and what we might explore as a better alternative.
Mr. Wilkinson: Sally will answer the R and D question because she's been much more involved with that and what changes we would suggest than I am.
The problem from the safety net side is that two things are happening. One is that with the policy ADMs there's been this movement afoot.
For example, now the government money comes out of the program under NISA before the producer money does. What is being suggested by a number of provincial ADM and policy ADM people is that we would change that around so that no government money would flow out of the NISA account until it was green in their eyes, which would mean a reduction of 30% of gross sales margin before any federal dollars could flow.
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When you take product variation, a lot of numbers came in front of the national safety net committee that gave normal pricing variation by crops. Horticulture, for example, was particularly interesting. It's a group that had been advocating for an enhanced NISA for quite some time; their variation on average was around 10% to 11%. They're a highly capitalized system and they can't afford much variation before their net income varies substantially, but under what's being suggested, they would effectively never, ever see a provincial or federal dollar under that program because it would never trigger. It would never vary by more than 30% on the gross. That is one major concern we have.
We on the national safety net committee have never advocated an absolute green program under the GATT rules because at this time period the sense is that to meet those criteria as we view them being written would be so restrictive that you would effectively have no program. It would only be producers' dollars that would in fact ever be triggered out of that unless there was an absolute catastrophe.
What we've advocated is minimizing the threat of countervail and trying to work towards as green as possible a scenario of programs. To minimize countervail, clearly where the major problem is in that is to make sure we have appropriate treatment across the board. We have to try to get all commodity production under it in the long term even though we know what supply management has said in the interim.
In some provinces, when they've received letters from producers to be put under NISA, the provincial agriculture minister has refused to put them under it. In horticulture, for example, some provinces have given enhanced coverage under NISA, some have given no coverage.
We think those variations are very critical to the continued development of this program. We think we're at a very serious time period as to what's going to come out at the end of the day. These changes, for example, that were suggested by the policy ADM group really had no participation from the farm community. On the national level, we in the national safety nets committee were clearly recommending the opposite of what the policy ADM group was recommending as far as the farmers on the national committee were concerned.
We're hoping it will get sorted out. Alberta, for example, has asked for block funding, as I've indicated, and they would run their own program. That gets to be a major problem, because how many variations can you have before you have nothing.
On one hand, we have the rhetoric coming out of federal-provincial agriculture ministers meetings of moving towards, in glorious terms, a national whole farm safety net program that will do this, that and the other thing. Our concern is that's not what's happening behind closed doors and behind the scenes. We're going to aggressively pursue sorting this out.
The Acting Chairman (Mr. Pickard): I have Mr. Easter for one minute, and then I have Mr. Calder and Mr. Collins for ten.
Mrs. Cowling: Sally wanted to respond as well. I raised a question on R and D and they haven't had an opportunity to respond.
Ms Sally Rutherford (Executive Director, Canadian Federation of Agriculture): As Jack said, it's something we've been concerned with since before the law actually made it into Parliament. We've been agitating pretty heavily for the past couple of years, since the legislation was actually passed, to have it altered. In the past couple of months there appears to be finally some interest within the department to look at what kinds of legislative changes could be made to accommodate that kind of check-off.
The problems are essentially that the same provisions were made for research and promotion check-offs as were made for supply management, because the legislation falls under the Farm Products Agencies Act. The lawyers who did it didn't have a clue, obviously, about what they were doing. They didn't understand the precedents that had been set in the courts in relation to that legislation, and while it looked pretty clean on paper if you actually knew what the words meant, it's simply impossible.
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it's also very expensive and very cumbersome to actually take on as a process. So for a smaller commodity group such as, for example, the Canadian sugar beet growers, who have a real interest in trying to develop a check-off for research and promotion, research in particular, they would have to recreate a body. There is an association in each province. What they would have to do is create a separate incorporated body in each province where sugar beets are grown to form a national agency that would then collect the funds and determine their distribution.
That would be the same for any commodity. So for a commodity like raspberries or something, which I think are grown commercially in every province, and they probably have a small association or a marketing board in each province, under this legislation they would have to create a separate incorporated body in each province, which would have to come together. Administratively, that would be just too difficult. It's very expensive, very time-consuming, and there are other ways to do it. We're working with other farm products councils at this point, and Gilles Lavoie from Agriculture Canada, to try to find a way of getting around some of these things.
We're sure it can be done, and we have the assurance now that Mr. McIsaac, who is the chair of the National Farm Products Council, is behind us and that he has spoken to the minister and the minister has an interest in trying to see that something gets done. So we're hoping that once we have a draft we can actually sell it to Mr. Goodale, and you'll get the sales pitch as well.
Mr. Easter (Malpeque): I'd like to point out for the record to Mr. Hermanson that in terms of his continental barley market question, 10 out of 11 pro-orderly marketing candidates opposed to the continental barley market were elected in the Canadian Wheat Board advisory election. I just think that should be pointed out.
Jack, I'm surprised there hasn't been any outrage from the farm community over the budget, in terms of the hard hit that agriculture has taken. There's no question it's taken a hard hit - doubly impacted because of the transportation changes.
You mention in your brief, in terms of talking about the adaptation initiatives, that farmers will have to adapt. But I wonder if that's enough. Have we gone too far under the GATT? On the transportation question and some areas, it's always pursued by the various bureaucracies, or put forward by them, that we have to do A,B,C and D because of the GATT. We didn't need to go, as a government, as far as we did under GATT.
If we're talking about being competitive, and our main competitor is the United States, they're not so much adapting as they're changing the names of their programs. The export enhancement program is being changed to another name. They're continuing to fund it to the maximum level allowed under GATT, whereas we have cut far more than that.
So have you any concerns that maybe we've gone too far in terms of our cutbacks relative to GATT, and do you see any other way those funds that went beyond our commitments under GATT can be recommitted in other ways to make farmers more competitive, such as under green programs or whatever?
Mr. Wilkinson: The reason I think there wasn't a great deal of outrage is that the farm community is exhausted in its fight to try to deal with a host of these questions. People are just tired of trying to get government to respond to issues. You can be involved in only so many consultations at any time period. Some organizations used all sorts of resources, people power and money around, for example, the GATT negotiations and the adaptation coming out of that. The list goes on and on and on.
To some extent I think there was an acceptance among the farm community, even though they didn't like a number of the budgetary items, that the deficit situation was a serious one. As I say, they didn't like the cuts to be as deep as they were, but there was a bit of a resignation that they were going to be coming. That was just it.
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As for being competitive, very clearly there are some major concerns. There is concern around the whole area of the green plan - the green money spending that doesn't have to be cut by the government and that appears not to be a coordinated strategy within AgCanada. The departments are given... you must cut your department by 25%, even if it doesn't make any sense in relation to the holistic picture of the services and resources that are made available to the farm community.
We're in a situation right now where if market forces are not strong over the next number of years there is going to be deep pain in the farm community and people are not going to have programs available to them to handle downturns. Clearly a NISA program is a minor, marginal program unless you've had a number of strong years in which you've been able to make contributions into that, or you're going to use all the resources in one or two downturn years and after that nothing is available.
The CFA has tried to deal with these things by trying to maximize within the budgetary dollars and trying to sort things out internally so that resources, people power as well as dollars available in AgCanada, are spent the right way.
Mr. Easter: About the restructuring within Agriculture Canada, I'll admit up front one of the things I'm opposed to in that restructuring is privatizing the economics branch. It seems to me if we as a government and as a department are talking about being competitive, and about market information and so on, the minister himself needs some analysis from his own department on where to go. I really think we need the outlook conferences again, so farmers can be given the facts and the information on the markets. If we have to cut something, then let's cut some of the theoretical paper-pushers at the department.
What's your view about the changes within the department itself? Is privatizing the economics branch going to provide less information to the farm community? What's your view on that? What can the department do in this global environment to assist the farm community to be competitive on an economic information basis?
Mr. Wilkinson: It's not only the economic information going out. It's the transmission of it that's been a major problem. We've been trying to get things sorted out so we have one type of software, for example, that transmits between the farm business management people and the other information systems within AgCanada. Besides, they've been funding the development of totally different regional systems, so you can't even lock into one information network, as an example, to receive information.
We're hard pressed to think the privatization of the economics branch is going to have many purchasers of the information, unless they're different in the future. There are a lot of people out there in the marketplace who do market analysis from a strictly commercial point of view. There's a question about what information needs to be made available to government. But if you go solely to a privatized system to sell to the cross-spectrum, what are they going to offer that's going to be different from anyone else who is out in that marketplace? A host of others recommend on that to the minister. I think that's a totally different question. But it would be interesting to see whether anybody buys their market information in the future.
Ms Rutherford: One of the things that really disturb us is the fact that, for example, Agriculture Canada buys all its international analytical data from a private company. This private company has opened an office in Ottawa recently, and at the opening it actually thanked Agriculture Canada for making it possible for them to have an office in Ottawa, which we thought was an interesting turn of events. AgCanada regularly holds information sessions that Sparks Companies Inc., which is the name of the company, gives.
Mr. Easter: It's an American company?
Ms Rutherford: It's an American company. They very kindly invite us to come along, which is great. When we asked for them to provide Canadian outlook data, we were told it wasn't available. They were hoping they'd get there.
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So it really does beg the question about who's deciding what kind of data should be collected, who's doing it, and what it is they're actually doing with it. We know they're privatizing the essential market information services. I know they've talked to the hog industry; I know they've talked to the poultry industry; they're talking to the dairy industry about privatizing market information and some pretty basic production information as well.
So it's not clear that there is a plan, and in terms of privatizing that particular section of the department, if you read the words carefully, it's not clear that it's actually going to be privatized. It's sort of ``yes, they'll be privatized if it works; if it doesn't work we'll take them back''. If I was working in that section I'd feel pretty peculiar about that particular statement.
The Chairman: Pretty worried about it, yes.
Ms Rutherford: It's a problem, and I think the basic problem is, at least to us, there doesn't appear to be a real plan as to how this is going to be addressed.
The Chairman: It would be something for us to take a look at. Thank you.
Mr. Calder.
Mr. Calder (Wellington - Grey - Dufferin - Simcoe): Thank you very much, Mr. Chairman.
Jack, I would like your opinion on a couple of things here.
I share your concern about the safety net programs. Ten different voices are going to mean definitely ten different ways of looking at it. And unfortunately any of the product that comes out of Canada, the United States looks at from one point of view because it comes from Canada. Maybe you could speak a little bit more on that if you feel it's necessary.
But in particular, the small business investment tax credit could be worked in with the Farm Improvement and Marketing Co-operatives Loans Act that we're working with right now.
Last year I was out on the task force for access to capital for small business, and one of the ideas we came up with was a 20% tax credit on a rollback of business profits. In other words, whatever your profits were that year, you could take up to 20% of that and you could roll it back into your business and you could get a tax credit out of it. I would like your opinion on that. It's something similar to the 10% on new machinery that was there for 1993.
The other thing I'm concerned about is agriculture employment services. Right now I'm concerned about that. I would like to see it rolled into the CEC. I would like to see part of the staff from the agriculture services rolled into the CEC too, because I've got apple growers, for instance, who are up in the northern part of my riding. Agriculture services can lock right into people in hours if they need people to go and pick apples, whereas if it goes through the CEC, as it stands right now, it takes days and it's too late for my apple growers. So I would like your opinion on that.
Mr. Wilkinson: As far as the agriculture employment services, there has to be an acceptance that there are needs in the farm community that just don't fit into other program needs. That has always been a major problem, whether it be with human resources and training needs, or agriculture employment services, or whatever. One would think you shouldn't have to have a separate program to deal with these questions.
Invariably, when you try to fix the system to make it work and respond to agriculture needs, it's almost impossible. Our concern is that with the potential within the nation of the agriculture employment services, we're going to have the loss.... It will take some time to privatize that, and whether it's going to be, as you suggested, rolled into.... As a possibility, I think it will vary from province to province.
There are farm organizations, for example the Canadian Horticultural Council, which in some provinces have put together coalitions that are looking at the potential of delivering those services on a cost recovery basis if given a three- to five-year phase-out period. In Ontario, for example, there has been a group set up to see if they can basically take on the role of handling that program as long as they have a three- to five-year phase-out period.
So I think it will vary across the province, but clearly there needs to be some transition; it can't just be eliminated. The sense was that it was eliminated and then there were some very major concerns. There was some money put back into it for at least a 12-month period, but with no indication as to where that was going to go after that 12 months. We are meeting with Mr. Axworthy on that. It falls, as I said, into a host of training-related issues.
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For example - and we have the support of Mr. Goodale on this - there is the whole question of why we've had rural transition programs in the past to make training available to people who are exiting agriculture and having to basically pay unemployment benefits before people can get access to any training. That is a major problem in rural Canada, because a lot of people are on unemployment insurance. So any upgrading is done privately and out of one's own resource base if these programs are eliminated.
Mr. Calder: I know in the other one, the investment tax credit -
The Chairman: Yves, would you like to speak?
[Translation]
Mr. Yves Leduc (Canadian Federation of Agriculture): When you talked about an investment tax credit, you gave the example of a tax credit of 20% of profits earned, which would be reinvested in the business. I believe that this is an avenue that we should really look into. I think it would be particularly interesting for the agricultural sector and most probably for all small businesses.
This type of tax credit would have to be put in place on a permanent basis in order to send out long-term signals to small business. In other words, it must be clear that the tax credit is not going to be applied on a one year basis, which would bring about distortions within that farming business or companies producing farm equipment.
Take what happened with the 10%. From December 1992 to December 1993, there was a major increase in farm equipment sales. One of the problems that could arise if it is something that is not put in place permanently, is that some people will be able to take advantage of the measures whereas others won't, because they won't have the necessary resources on hand when the credit is put in place. If these measures were permanent, then that would certainly encourage investment in small business generally, and in farming businesses.
[English]
The Chairman: Thank you, Mr. Calder. Your time is up.
Mr. Calder: I have just one comment. I think one of the things about this idea - and we as a government are stuck with on this - is that it has to be expense-neutral to the government. Basically, that type of concept involves the business rolling the tax back. They're obviously not going to pay income tax on that profit. But if it's a value-added industry, the government is still going to get tax revenue back on new machinery purchased or expansion to a building, or new people employed. That was the point and perhaps the direction that we're going to have take a look at when we start being innovative. And that's what we have to be.
Mr. Collins (Souris - Moose Mountain): Jack, in your presentation when you responded to Mr. Chrétien, one of the statements you made - and just let me know whether I have it in the right form, and then if you could give me a little documentation to that effect I'd appreciate it. If it goes to landowners and not operators, do you have any documentation that the Minister of Agriculture has said that it's going to be in any other form? We certainly don't have that.
Mr. Wilkinson: The minister has said to me in conversation that unless there was a large body against paying the landowner, his inclination would be that the 1.6 payment would go to landowners.
Mr. Collins: When was that?
Mr. Wilkinson: I guess it would be three weeks ago or so when I was on a trade mission to South America. The line of logic that's being used is that if there's going to be a downturn it'll be de-capitalization of land, that it's extremely difficult to deal with an operator who may be up for renewal, that if you paid the benefit they might not renew the lease agreement. So he indicated that his thinking was that it would be to pay the landowner.
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Mr. Collins: Since that time - and maybe you haven't been following the same correspondence - I've certainly heard statements from the minister to the effect that it would be in consultation and it would have to be both parties. It was stated very clearly that this was going to be the situation and that if they couldn't come to agreement, then they would have to have an arbitrator in place.
This is in regard to the pay-out of the Crow. That comes to, I think, about three weeks ago.
What I am saying is that I'm concerned that as we go through the consultation process, we will all stay up to date on what's transpiring as time goes by.
Let me turn to another one. In your paper, on page 4, you make a statement about the goods and services tax and you favour the status quo. Is your favouring the status quo in light of the Minister of Finance, and certainly others in government, attempting to get provincial counterparts on board... that we're holding up this GST resolve? Once we go through that, will you favour some changes to that GST approach?
Mr. Wilkinson: We have said in the brief that we favour the amalgamation of the provincial and federal sales tax in the context of the status quo. We went in front of the Standing Committee on Finance some time ago. There was a suggestion of another tax system. Our concern was, number one, that farmers have put accounting packages in place in their farm operations to deal with the GST. If there were going to be changes that would effectively have significant ramifications for accounting packages, then we saw no net benefit in this, even though we've indicated in our brief that we're in favour of the coordination of provincial and federal sales taxes.
Mr. Collins: Certainly that's the point. You talk about it in research and development. You talk about a whole series of areas. We have provincial people going one way and federal people going the other, rather than our getting together and getting a unified approach on a whole series of things. It's critical that we not have provinces going off, whether it's on block funding or some other arrangement, so you have no continuity between any two provinces.
Mr. Wilkinson: There is no argument against that point at all, and that's a major concern from our point of view. I don't understand the point, though, that you're making about transportation, that an arbitrator would be put in place to deal with the...
The minister has talked in speeches about encouraging people, if the pay-out was to the land owner, to pass the benefit on to the operator. I think that's a legal impossibility.
In Saskatchewan, for example, 45% of the land is leased to rent. Farm Credit, as a major holder of property, have indicated that they would pass the benefit on as part of their policy initiative. If the minister can find a creative way of doing it, then all the more power to him. But I don't think he's got any legal authority to tell a credit union or a chartered bank or any land owner that, when the benefit is paid to me as the land owner, I have to sit down and negotiate with my lessee and pass the benefit on.
I think it's a statement that is being made that will turn out to be legally impossible to implement. He can encourage as much as he wants, but I think I'll be very interested in seeing what legal operation he's going to put in place to deal with the thousands and thousands of rental and lease agreements in the countryside. That was one of the points he made clear in a conversation with me. With the variations out there, it's almost impossible to deal with it in any way other than by paying the land owner, because the computations of the variations of share-cropping and lease arrangements are just so vast that they can't really deal with it.
Mr. Collins: The Bank of Montreal have indicated that they're going to pass it through, certainly from Saskatchewan's perspective.
Mr. Wilkinson: They mustn't have any land, then. No, that's good if they are.
Mr. Collins: You're entitled to your observations. I've had people come here, and I'd rather be an optimist. I think there is an opportunity, and if we have an agriculture minister to do it, I think he will find the way. There are all kinds of problems, but I don't think you're going to have it resolved without them coming into an agreement with both parties to pass that through.
Mr. Vanclief (Prince Edward - Hastings): I wish you would expand again on your statement on the agrifood export initiative at the bottom of page 2, because I'm not sure it sends the message that you did in your comments. You make the statement that the CFA believes the benefits of increasing exports still need to be proven in the case of primary agriculture.
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My first reading of that says that... it is exactly what it says, but 46% of the farm gate average dollars in Canada comes from exports. Are you saying that the CFA doesn't see any benefit to expanding exports? Now, I don't think that's what you mean, but that's clearly what that statement says and I hope it's taken out of context.
Mr. Wilkinson: What we're trying to get at here is that you can increase volume without having much net benefit. To pursue exports regardless of price may be good for an agrifood industry, it may be good for a trucking company, it may be good for a railroad, it may be good for the economy of the country, but price determines the net income, and profitability is critical as well. I think what we're trying to point out here is that as long as we're being EEPed for wheat around the world, and for flour etc., to concentrate totally on exports and not domestic, and displacing imports, etc... we're not convinced that is the right track to follow with the amount of energy that's been put behind it by the ministry.
What I was saying about the raspberries is an example, and the list goes on and on. You can export a lot of raspberries around the world, but export them at what price? Doesn't the domestic market make more sense if you're already short on the domestic production side? So I think that's what we're trying to get at in here. I appreciate the -
Mr. Vanclief: The domestic market has to be profitable too.
Mr. Wilkinson: Yes.
Mr. Hermanson: Thanks to Wayne Easter for that little bit of information, but I would add in response that if it was the barley producers voting on a plebiscite that might be one thing, rather than all of the producers on that advisory council board. It would be a little bit like all the wheat producers voting on dairy policy. I don't think you can mix apples and oranges.
With regard to the Crow pay-out to operators versus the owners, Mr. Goodale stated that the rationale for paying the landowner was that it was easier to administer. Since that statement there has been some controversy; in fact, some have stated that it would be easier, administratively simpler, to pay the operator, as was done in some of the ad hoc payments in the past. Does the CFA have a position on whether it would be administratively easier to expend the money to the operator versus the landowner?
Mr. Wilkinson: No.
[Translation]
Mr. Chrétien: Research is being directed more and more towards the private sector, but I have grave concerns here and I would like to take a few minutes to tell you about something that happened in my riding.
A maple sugar processor manufactures maple sugar chips that are used to make maple sugar chip ice cream. A representative from the Department of Agriculture was supposed to go in to make sure that all the health protection measures were being followed. The owner refused to let the department official in in order to protect his secret maple sugar chip recipe. He had to appear before the Quebec court where he was found guilty and given a $700 fine.
My fear is that if research is handed over on a broad scale to the private sector, it will only be used by a small group that will jealously guard all its secrets. You know what I mean. What is your position concerning a broad transfer research activity to the private sector?
[English]
Mr. Wilkinson: It may not be answering the question directly, but we have asked, for example, on joint research dollars that have been proposed by the government, as to a policy directive as to who is going to own and profit from the product created. That is a major concern to us.
If someone comes in one year before commercialisation of a product in the private sector, what control are they going to have over that versus the nine or ten years of primary research and government research that may have been done ahead of time? That's a major concern. If it's totally privately controlled research from beginning to end, I don't think we have any problem with the fact that obviously the proprietary rights to that belong to the individuals who have done the research.
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But where it becomes a very serious question is when it's joint research dollars. To a great extent many thousands of dollars of taxpayers' money may have been put in place, yet the rights could conceivably be sold to offshore interests and the product not even be available in Canada. That's where we're very concerned.
The Chairman: Thank you, Mr. Wilkinson.
Colleagues, our time unfortunately is up. We were going to have a motion concerning the replacement of a Reform Party person but we can't get to it. The Reform Party is not sure who should be on the committee. We'll deal with it next time.
Mr. Wilkinson, thank you very much for coming before us today. You had a very informative brief, a somewhat quite brief but very informative, and we thank you for your interest.
The meeting is adjourned.