AGRI Committee Meeting

STANDING COMMITTEE ON AGRICULTURE AND AGRI-FOOD

COMITÉ PERMANENT DE L'AGRICULTURE ET DE L'AGROALIMENTAIRE

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, November 3, 1998

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[English]

The Chairman (Mr. John Harvard (Charleswood St. James—Assiniboia)): Members, we'll bring this meeting to order.

It's nice to see everyone bright-eyed and bushy-tailed, because we have a marathon ahead of us—a total of four hours of hearings today. The first two hours will be devoted to the WTO, and the next two hours, between 11 a.m. and 1 p.m., will be on farm income. We'll be hearing from the same organizations, so each organization gets two appearances at the plate. We'll throw you the same hardball though, Jack.

We have a quorum to hear witnesses, so we should start. We're going to be hearing in the first round from the Saskatchewan Wheat Pool, represented by Leroy Larsen, who's the president and chairman of the board of directors; and Gordon Pugh, the vice-president. We'll also hear from Agricore, the new player, the new boy on the block, from Manitoba, represented by Kenneth Edie and Patty Townsend. And representing the Canadian Federation of Agriculture, we have the inimitable Jack Wilkinson and of course Sally Rutherford, who is the executive director, the brains of the organization.

Voices: Oh, oh!

Mr. Jack Wilkinson (President, Canadian Federation of Agriculture): It's going to be a good morning, I can tell.

The Chairman: It's going to be a great morning.

At the suggestion of Patty Townsend—I always take her advice—we will hear first from the Saskatchewan Wheat Pool, followed by Agricore, and then we'll give Jack Wilkinson the opportunity to bat cleanup. We always need a good, strong 300-hitter in cleanup. Jack, that's what you face today.

Leroy, welcome to you and your organization. We'll hear from you and the rest, and then we'll get to questions.

Mr. Leroy Larsen (President and Chairman of the Board of Directors, Saskatchewan Wheat Pool): Thank you very much for that introduction, John. I'm not going to apologize for Jack's reputation preceding him with this group, but I know he'll do a good job as the cleanup hitter, as you identify him.

We in Saskatchewan Wheat Pool are very pleased to be able to address the Standing Committee on Agriculture and Agri-Food. Our organization and the members we represent certainly recognize the importance of future multilateral trade negotiations. We see today's take-note hearings as a unique opportunity to help define Canada's role in those future discussions.

• 0905

Saskatchewan Wheat Pool is a publicly traded cooperative comprised of over 74,000 member owners. We are western Canada's largest grain-handling company, employing more than 3,000 people and handling over 30% of the grain, oilseeds, and special crops delivered to country elevators in the prairie region.

In addition, Saskatchewan Wheat Pool has grain-handling facilities in Saskatchewan and Manitoba, as well as terminal elevators in Thunder Bay, Vancouver, and a jointly owned facility at Prince Rupert. We are involved in a wide range of value-added and further processing initiatives.

Saskatchewan Wheat Pool firmly believes that the agrifood industry holds significant potential in terms of both raw commodity and growing value-added exports. However, for the Canadian industry to realize its full potential, it must have access to markets around the world and the opportunity to compete internationally.

Earlier in the year, Saskatchewan Wheat Pool released a farm income strategy. It outlines our organization's ideas for mitigating the worsening financial situation that is confronting the prairie farmers. Today's presentation represents a continuation of that earlier work. The points we will present are designed to improve our international competitiveness and enable producers to maximize returns from that marketplace.

Working through our democratic structure, Saskatchewan Wheat Pool develops and promotes various policy positions on issues important to our members. On trade issues, we have engaged our membership to articulate that role. To that end, Saskatchewan Wheat Pool supports initiatives leading to international trade liberalization, provided that the arrangements enhance our agricultural trading opportunities.

I want to take this opportunity to thank the government and members of this committee for the role they played in the trade disruptions we had just recently with the United States. I'm sure that by sitting down and talking about the Canada-U.S. issues, we can resolve them to the advantage of producers on both sides of the 49th parallel.

However, this support does not imply that the organization endorses the termination of any programs that assist Canadian agriculture, nor do we support a reduction in the level of autonomy that the Canadian governments have in assisting farmers. We still need Canadian programs that are beneficial to Canadian farmers.

Today's brief is comprised of two separate sections. The first deals with the resumption of agricultural negotiations as required by article 20 of the WTO Agreement on Agriculture. These negotiations will deal with further commitments on market access, export competition, and domestic support.

The second section will deal with trade issues that are outside the Agreement on Agriculture but that have the potential to significantly affect Canadian agriculture in the future.

The first topic is market access. The Uruguay Round changed the way the world addresses agricultural trade issues. However, to achieve future gains, Canadian producers need additional and more secure access to international markets. Our goals should be: further increases in minimum access commitments, reduction in tariff levels, and greater transparency in the TRQ administration. This should relate not only to bulk grains and oilseeds but also to consumer-ready goods and value-added products such as barley malt, canola oil, meal, flour, as well as livestock and meat products.

Today Canadian producers cannot afford lengthy delays similar to what happened in the previous negotiations and implementation period. They must see substantive change early in the process.

Number two is export competition. Governments must eliminate export subsidy programs that distort world trade, depress prices, and erode the incomes of our producers. Canadian producers must be permitted to respond to market forces and opportunities without the distortions created by competition from heavily subsidized products.

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Given recent market developments, resolving this issue in future negotiations may be too late for many Canadian farmers. While the Uruguay Round left both the U.S. and the EU with the capacity to heavily subsidize exports, Canadian grain producers today pay the full costs of transporting grain. Those additional costs are being felt and reflected in farm income numbers. Canadian farmers cannot absorb another subsidy war that would leave U.S. and EU producers relatively unaffected. We can't compete with those treasuries.

Third is domestic support. As a major exporter, Canada should support further reductions in amber support levels, the elimination of the blue box payments, and spending caps on decoupled income supports. It is important to recognize that even decoupled income supports, when provided in an excessive manner, influence production decisions and therefore distort trade.

There will be long-term consequences if Canadian producers are placed at a competitive disadvantage in the marketplace. It is important for Canada to ensure secure, adequate funding for safety nets, infrastructure expenditures, and research. Programs such as NISA and crop insurance must not be subject to countervailing duties or reduction commitments.

Number four covers other trade-related issues. Beyond the WTO agriculture negotiations, several other trade-related issues arising from multilateral discussions will affect the sector. As, I hope, a strong proponent for the complete elimination of export subsidies, Canada will face pressure to accept restrictions on the operation of state trading enterprises such as the Canadian Wheat Board. However, Canada must vigorously resist being drawn into making such concessions.

While it is recognized that STEs, especially on the import side, can distort the marketplace, numerous investigations into the Canadian Wheat Board's operation have always shown it to be a fair trader. With an institution such as the Canadian Wheat Board being such a key component in the Canadian marketplace, Canadian producers cannot afford to accept restrictions that would place them at a commercial disadvantage or limit the Wheat Board's ability to operate a price-pooling system.

Countries should not be allowed to use sanitary or phytosanitary barriers to block access to their domestic markets. Science should be the guiding criterion on these issues.

Developments arising from both the WTO Committee on Trade and Environment and international negotiations related to the Biosafety Protocol will affect Canadian agriculture. These issues must be addressed from the standpoint of ensuring an international, competitive agrifood industry.

By adopting clearer, universally applicable rules, the various trade agreements attempt to create a more predictable and stable trading environment. Future negotiations offer the potential of increased market access opportunities and a reduction of various trade barriers, making Canadian exports more competitive in the world market. The agrifood industry holds significant potential in both commodity exports and value-added activity. However, if we are to realize future gains, Canada's objective must be to achieve freer, more predictable, and transparent access to international markets, and the complete elimination of export subsidies.

Saskatchewan Wheat Pool and its members rely on economic opportunity generated by international trade, and as such will continue to work for positive change.

I thank you very much, Mr. Chairman, for this opportunity to make this summation. When we get into the Q and A, I am prepared to participate at that time as well.

The Chairman: Thank you very much.

Just before we go to Mr. Edie, we have a short piece of business that I trust will be palatable. We're very democratic around here, and if we're going to have lunch, we need a motion in support of that. The motion would go something like this, and I would invite someone to move it: that a lunch be ordered whenever the committee meets during lunch hour to allow members to continue working properly.

• 0915

Mr. Rick Borotsik (Brandon—Souris, PC): Mr. Chairman, I have a point of order. There is a supply day motion in the House today with respect to agriculture. I think if you would ask around the table, a number of us who are speaking to that motion will not be available for lunch. We may well not be available for the better part of this particular session. Mr. Chairman, I apologize to the panel. However, it is a supply day that speaks to the very heart of the issue of supports for agriculture.

Mr. Howard Hilstrom (Selkirk—Interlake, Ref.): Mr. Chairman, I make the motion that we have lunch here for our guests and whoever is able to stay.

The Chairman: Does somebody want to second it? Mr. Calder seconds it.

(Motion agreed to)

The Chairman: Great, we're going to eat today. I feel great.

Now that I'm all pumped up, we'll hear from Mr. Edie, who represents Agricore from Manitoba.

Welcome, Mr. Edie. It's nice to see you.

Mr. Kenneth Edie (Board Member, Agricore): Thank you very much, Mr. Chairman. I'm certainly very pleased to be here today to speak to you on behalf of the Agricore Cooperative. I come with two messages, first and foremost a message about agricultural trade, but also to introduce you to Agricore.

Agricore is a brand-new farmer cooperative that was created through the merger of two of Canada's oldest farm cooperatives, Alberta Wheat Pool and Manitoba Pool Elevators. We're now one of the larger, with over 60,000 active farmer members and over 2,000 employees. Agricore handles more than 50% of the grains, oilseeds, and special crops delivered to the country elevator system in Alberta and Manitoba, and holds 23% of all handling capacity on the prairies.

Alone or in partnership, we own and operate terminal elevator facilities at the export ports of Vancouver, Prince Rupert, and Thunder Bay. Agricore is also a very significant supplier of agri-inputs such as fertilizer, seed, and crop protection products to prairie farmers. All our business and other activities are directed by our farmer member owners, and the benefits of these activities are returned to farmers.

The birth of Agricore fits well with the theme of your take-note hearings. Agricore was created to position ourselves to compete in the domestic and international market on behalf of farmers. We are looking forward to the growth in our business, both internationally and overseas.

We will help farmers to produce more; we will handle higher volumes with greater efficiency; we will market and process more; and if the environment is right, we will export more. Our cooperative and our farmer member owners will thrive.

We know it can be done. In 1995 the Government of Canada set a target for agriculture and agrifood exports of $20 billion by the year 2000. We reached that target in one year.

Now another target has been set: the Canadian Agri-Food Marketing Council says Canada should double its exports—that's $40 billion—to capture 4% of the world agrifood trade by the year 2005. We're getting ready to meet that goal too, but this time we're going to need help. If we can't make some major breakthroughs on the international market, that goal is going to be virtually impossible to meet.

I personally attended the meeting where that goal was set, and it's a very ambitious goal. It will not be met unless some activities are undertaken on our behalf, internally and externally, by the federal government.

What I'm going to say is quite similar to what Sask Pool said, but we feel it's important that it's on the record, and there are some things that we highlight in a different way.

We had high hopes for the Uruguay Round when it was launched in 1986, and it was an historic round. For the first time, rules were established for agricultural trade. However, as we approach the end of the implementation period, we still face insurmountable barriers to access, export subsidies are still depressing world trade and encouraging oversupply in world grain markets, and no one expected the extent to which countries would use health and environmental concerns to block imports.

As we look to the start of the next round in agriculture negotiations, we must establish as our primary goal the achievement of freer and more access to international markets and the elimination of unfair trading practices. And we have to do it much more quickly than we did it last time. The Uruguay Round took seven years to negotiate and six years to implement. We need results earlier than that.

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We urge the Government of Canada to push for a very tight negotiating timeframe and a short implementation period. In addition, in order to ensure that farmers benefit as soon as possible, countries should be required to implement the major portions of their commitment early in the transition period. Negotiations should be conducted on as broad a basis as possible. The larger the scope of the negotiations, the better the chance for significant results.

I want to spend some time talking about what Agricore believes should be included in Canada's negotiating position. Keeping in mind that the overall objective must be the achievement of greater access to world markets and elimination of unfair trading practices, we urge the government to focus on the following areas.

We must make significant gains in market access. The Uruguay Round took a major step in this area when input restrictions were converted to tariffs. However, due to the level at which some tariffs were established, the aggregation of products, and the creative ways in which some countries have administered their commitments, we have not achieved the access we had originally anticipated.

In the coming round, Canada needs to achieve the maximum possible increase in minimum access commitments, and these commitments must be disaggregated—that is, applied to specific products or tariff lines rather than the broad grouping of commodities.

The elimination of in-quota duties is also necessary. The purpose of a minimum access commitment is to permit the importation of an amount of product. Yet some countries continue to apply tariffs to the in-quota amount. In-quota duties are inconsistent with freer trade goals. Their application should be prohibited.

Canada also must strive to achieve the maximum possible reduction in tariffs. To achieve real gains in access, higher tariffs should be subject to larger cuts. A 50% cut in a tariff of 20% is a significant gain, but a 50% cut in a tariff that is over 200% still leaves a prohibitive tariff.

Some countries are administering their access commitments in such a way that they are not filled or access is skewed to favour certain suppliers. Canada must pursue clear and binding rules for the administration of tariff-free quotas.

The practice of tariff escalation must be stopped. Many countries apply a much higher tariff to value-added imports than to the raw product. An example of that is the Japanese oil tariff. Canola seed enters Japan without duty, but canola oil is still subject to a prohibitive tariff. Refined canola oil is subject to an even higher tariff than crude oil. This places our value-added industry at a disadvantage.

The use of export subsidies must be prohibited. The Uruguay Round attempted to bring some discipline into the use of export subsidies, but they continue to depress world prices, even at the end of the implementation period. As an example, the European Union is currently providing the equivalent of $36 U.S. per tonne to subsidize wheat exports, the export subsidy on barley is over $78 U.S. per tonne, and oat exports are being subsidized by almost $70 U.S. per tonne. This is allowed under the current agreement.

The United States has budgeted $320 million U.S. for its export enhancement program in 1999. In contrast, Canada has completed eliminated its only export subsidy for grain and oilseeds. While this may have set a good example for other WTO members, it has forced our producers to compete in heavily subsidized markets without tools of their own.

Export subsidies depress world prices. They must be eliminated.

It is also important that other measures that can—and, we contend, have—become substitutes for export subsidies be subject to discipline.

Export credit is a very useful tool for all exporters, including Canada. However, the escalation of its use without clear rules could spark a trade war.

Food aid is a commendable activity. We support the provision of food aid to assist hungry people around the world. However, when used in commercial markets, it becomes an export subsidy. We were very concerned when the United States government purchased large amounts of wheat from its producers and donated it to Indonesia. In 1996 Indonesia was Canada's fourth-largest commercial customer for wheat. Clear and enforceable rules need to be implemented on the use of food aid.

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Allowable spending on trade-distorting domestic support programs must be significantly reduced. Though the Uruguay Round introduced some controls on domestic support programs, which forced the European Union and the United States to move away from direct price support programs, it still allows very high spending levels on domestic support.

For example, European farmers receive the equivalent of $175 Canadian per acre just to plant a crop. In addition, European wheat producers are guaranteed a price of $205 Canadian per tonne. That is well above projected world prices. This has resulted in the highest ever government stocks of wheat in the European Union. High stocks result in lower prices for everyone else.

The next round of negotiations must result in maximum spending cuts in amber support programs. It must also result in the elimination of the blue box category of support programs. This category was created late in the Uruguay Round to allow some countries, primarily the European Union, to implement changes to domestic support programs. Most of the European Union's production-stimulating support falls into the blue box.

Sanitary and phytosanitary rules and the trade of genetically modified organisms must be based on sound and proven science. I recently heard a trader say, “Give me a high tariff anytime. At least that is predictable.” The growing use of environmental and health concerns to block access to international markets is totally unpredictable and unjustified. Clear rules must be implemented on the basis of science, not emotion or politics.

I want to close by stressing again that we have high hopes for this round of trade negotiations. Producers, handlers, marketers, and exporters are all working together to take advantage of a more open international market that is not distorted by unfair trading practices.

We thank you for the opportunity of meeting you today, Mr. Chairman.

The Chairman: Thank you, Mr. Edie.

Now we'll turn to the Canadian Federation of Agriculture and ask Mr. Wilkinson to speak for a few a minutes before we get to the first round of questions.

Mr. Wilkinson.

Mr. Jack Wilkinson: Thank you very much.

Thank you to the committee for having us here.

Sally, the executive director, is actually sitting back there. Jennifer Higginson, who does a lot of the trade work on our behalf, is here with me.

I won't go over exactly the same ground that has been covered by the previous two presenters. I'd like our document to be part of the record, and I won't cover all the same material. The fact that there's a great deal of similarity is a good thing, not a bad thing, in this case. When you're trying to develop a trade position for the Canadian government in the interests and on behalf of Canadian producers, where we have some commonality, that's always refreshing, versus presenting various differing points of view to the government.

It's fair to say that the Canadian Federation of Agriculture, which is a broad-based farm organization in Canada, does have the interest of finding the balanced Canadian agrifood industry position that we think will be where the negotiations will take place, the issues that are at hand. So to some extent, we will have some interests other than those expressed by the two previous speakers. I guess that's what we'll probably dwell on, even though we're very supportive in many areas.

The Canadian trade negotiators and others have from time to time expressed the opinion that somehow we need to take the intellectual high ground here and develop a credible position going into the next round, which somehow implies that a number of Canadian points of view from the agrifood industry need to be glossed over.

We have two goals that many countries will have going into the next round. One is to improve market access—and I'll go into that in a little bit of detail—and, at the same time, a number of commodities have a distinct domestic interest. Those are going to be similar to just about every country going into this round. It's not unusual for people to take an approach that basically says you can deal with both of those questions at the same time, because, as I would put forward, just about every country in the world will in fact have that point of view going into this round.

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So we need not move away from that, because that's exactly where the negotiations will end up: How do you deal with the question of access in a real and meaningful way that defines a set of rules in which producers can adapt to a broader-based environment, and at the same time maximize those market access opportunities around the world by having a very clear, clean set of trading rules under which Canadians and their export interests can take advantage of that?

In Canada there has been a very significant reduction in domestic support, as has been highlighted. Therefore, with the elimination of export subsidies in the last round, which from a Canadian point of view not only helped to balance budgets—and we'll be asking for some of that money back later on today—

Voices: Oh, oh!

Mr. Jack Wilkinson: Not only did it help to balance budgets, but we took the intellectual high ground on this one and in fact eliminated our support for our producers, only to find out that actually the world didn't follow suit in that regard. Hence we have even a further discrepancy between the support level of Canadian producers and the world environment in relationship to trade.

The WTO required a reduction of 20% on domestic programming at the end of the WTO round. We in Canada have in fact reduced it by 85%, so again, we took the intellectual high ground here and set an example for the world, only to find out that we've even broadened further the discrepancy between Canadian agriculture producers and other trading interests.

Therefore we want to, as has already been expressed, try to deal with this question in a very basic way going into the next round. How do we, in this next discussion, push all of the countries to eliminate the export programs they have in place? That is going to be critically important for our interests. And how do we improve market access in the environment, as I said, but also having some sensitivity to our domestic interest? That can be achieved in this round. It isn't hypocritical, nor are those mutually exclusive goals.

With the way certain countries have dealt with their minimum access requirements under the WTO, the federal government can achieve substantial gains in the interim, going into the next round and during the next round, to make those real commitments, as we have lived up to in Canada.

For example, on our supply-managed commodities, nearly all of the quota that was allocation of imports is filled, from a Canadian point of view. We were very upfront, and the access we negotiated is the access that was made available in a very clear and upfront way. We're saying, as a minimum, that is a starting point for this next round, because very clearly a number of countries have made access very difficult, with the way they've auctioned off permits to producer organizations; the way they've dealt with a number of phytosanitary issues, as has already been talked about; and the way they've dealt with non-tariff trade barriers, from labelling on through a host of items, such as the hormone question in Europe, where it has been very difficult for our export interests to take advantage of the minimum requirements that were negotiated in this round. Those need to be a very high priority.

I'm certainly not belittling the need for increasing market access in some of these markets. To increase meat access, for example, into Europe under the current situation can be an interesting intellectual discussion, but we haven't moved many pounds of beef into Europe under the current scenario. So from our point of view, yes, that's important, but what is important is how we deal with, for example, the phytosanitary question around hormones. How do we deal with the GMO question in relationship to canola? Those are going to be very fundamental questions. We need to make sure that when we do negotiate increased access—which will be a very important issue—we in fact are able to attain that access. Those are going to be critically important.

As well, we need to deal with the basic question of how to maintain in this next set of negotiations the rights of organizations and producers in Canada to choose the marketing structures they want, whether it be the Canadian Wheat Board or one of a host of other marketing systems they have put in place.

It's clear that the United States is going to aggressively attack state trading enterprises, and as has already been expressed by Leroy and Ken, the Canadian Wheat Board as an example has been investigated enough times to show without any doubt at all that we are playing with a very fair and transparent set of rules. There's no unfair subsidy to the Wheat Board in the context.

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It is reasonable to assume that farmers, in a very aggressive international marketplace, do have the right to choose marketing structures to maximize the return back to producers. There is absolutely nothing the matter with that.

The four or five largest international grain companies are much larger than we are and operate under less transparent rules than we do. They are headquartered in the United States and very clearly would like to see the elimination of the few advantages we have in Canada to impact on the international marketplace. It's not unreasonable at all to want to maintain those sorts of organizations to maximize return to producers.

As I said, on export subsidies, we absolutely agree at CFA with what's already been expressed: export subsidies should be eliminated and a very clear set of rules should be defined in relationship to export credits and also in relationship to food aid. We are in agreement that those aspects need to be in existence, particularly from a humanitarian point of view, for the Soviet Union and a number of Asian countries. But the rules need to clearly be identified as to when and how they can apply so that they don't take away from commercial markets. That is a critical aspect going in.

We still have the United States, for example, giving credit in some cases of up to 30 years for food products. It is absurd to think that you can actually, year after year, give 30 years' credit to a country and assume that that is somehow not interfering with the commercial marketplace. Define it as food aid, make it food aid, give a set of rules under it so that people know what it's going to be, and deal with it, but don't allow those sorts of activities. Our view is that the terms of credit should be targeted for the length of the product. If it's a perishable product and if it's assumed it's going to be used up within 12 months, then those should be the credit terms made available.

I've already made the point on the minimum access. The start point is to make sure it's clean. The next point is to do the balance. I think everybody is aware that the next round is going to be very difficult in relationship to the European Union. To anybody who thinks the European Union is not going to do everything they possibly can to not give anything in this round, I think that's misunderstanding how tough these negotiations are going to be. But real gains can be made for our export interests, and not at the expense of our domestic-sensitive commodities as a start point on all those non-tariff trade issues.

As well, it's very clear that in NAFTA we have had a higher access than is currently in the WTO round. I think it's fair to say that there's an acceptance that the start point should get rid of the worst trade-distorting subsidies, and we will deal then on a fair balance with the definition of our domestic interest as well.

With that, it's probably better to go into questions. I would like to finish off by saying that the trade negotiations won't be about black and white. They won't be about whether you're a free trader or you're going protect your domestic interests. The real discussion will be in the grey area in between. The real discussion will be about non-tariff trade barriers. The real discussion will be about labelling how we deal with those questions if we're going to get into new markets.

The real discussion is going to be about phytosanitary issues, which has already been expressed. In fact they have had the ability to block trade big-time over the last number of years, and have run the biggest risks of neutralizing the negotiations. Mad cow, BSE, in Europe is a prime example, as are the canola issue and the GMOs. All of these are very big living examples of basic questions that have to be dealt with if we're going to make gains in the next round, both for our export interests and for maintaining a set of fair rules that will govern the way we do business in the future.

Thank you very much for having us here. We'll be happy to answer any questions.

The Chairman: Thank you, Mr. Wilkinson.

Thanks to all of you for those presentations. We have about an hour and 20 minutes for questions before we get into our next round with the same witnesses. I don't believe in miracles, but if by some miracle members run out of questions before 11 o'clock, maybe we could start early on farm income. But I suspect that will happen only because of a miracle.

Before I get to Mr. Hilstrom, I have a question for Mr. Wilkinson.

• 0940

Jack, you know some of your counterparts around the world. Do you think there is an opportunity for Canada to join a coalition of like-minded countries to achieve some of our goals—whatever they might be—at the next round of the WTO? Or do you think Canada will find itself somewhat lonely, at least when it comes to some issues, and have to go it alone?

Mr. Jack Wilkinson: Well, Canada is a member of the Cairns Group, and Canada also obviously has some particular points of view that are very similar to the U.S. position in relationship to exports and elimination of export programs.

But I honestly believe that the Canadian balanced position is going to be somewhat in between the two big players—and the two big players are going to be, obviously, the European Union and the United States. We will not agree on all points with either one of those, and that's not unusual. We do have, though, many similarities—for example, with the Cairns Group and other countries—that we can make some gains on. And I don't think we should be bashful about admitting right up front, as part of that process—as we did in the last round—that we have some domestic-sensitive commodities.

Often we assume that countries such as Australia and others that lead the charge in the Cairns Group are unified and somewhat cohesive in their thinking. If you were a pork producer trying to get pork into Australia over the last two or three years, you'd find out that Australia has some domestic interests in pork. If you were a salmon exporter, you would find out that Australia has some domestic interests in salmon. The list goes on and on, as with just about every country within the Cairns Group.

So I think we'll be part of a group for some aspects, and for some issues we'll find other allies in other areas. We shouldn't be afraid of matching up to those and being flexible in that regard.

The Chairman: Thank you for that. Now we'll go to Mr. Hilstrom for seven minutes.

Go ahead, please.

Mr. Howard Hilstrom: Thank you.

The negotiations always are a continuation from the last round. You've all made that fairly clear. Would you each comment on the question of whether or not the other countries, in particular the EU and the United States, lived up to their commitments last time? Do we have to go into these negotiations and say, “Now look, boys, you didn't lower your export subsidies”? They still have the EEP available for use down in the States, and this sort of thing.

Do we have to say, “We're not going to talk about some things until we get, in this round, your agreement right off that there are going to be rules to fix up the intent of what was set out last time”? Could you comment on that general area?

Mr. Jack Wilkinson: There are some countries where that's appropriate. I don't think most of these issues would apply to, say, the United States and Europe, although there are examples where it can be the case.

Part of the problem is that there's misunderstanding by a lot of people as to what in fact was signed in the last round. For example, in export subsidy, it very clearly was... The U.S. is still playing within the rules on the export subsidy that was negotiated. All that was required as a start point—and we didn't agree with it—was a reduction of 36% over x percentage of exports.

Secondly, the flaw in the negotiations was that they were able to move that, year in and year out. So unused export subsidies in the first year were allowed to be slid—even though, again, we didn't agree with it from the farm side—and were allowed to be included in the global amount they could use at any time. And because we came off relatively high prices a number of years back, they didn't use their export program. Hence, not using it for a couple of years has allowed exactly the same number of dollars now—which we're going to fight in the next couple of years—as they had before the last round was negotiated.

The Chairman: I think Mr. Edie wanted to say something on this.

Mr. Kenneth Edie: Along that line, as Jack has said, the laws have been followed, and they've been followed to the letter, but not necessarily in the spirit. That has caused a number of problems.

One of the things we were a little bit critical of in the last go-around was our opening position. Canada, playing Johnny Canuck Good Guy, said, “Oh, well, we have this export subsidy called WGTA. We want everybody to know it's an export subsidy.” Whereas in the United States and Europe, they don't say they have subsidies; they have farm programs and so on. So it's a matter of stance, how we open the activities, and where we go from there.

The Chairman: Mr. Larsen.

• 0945

Mr. Leroy Larsen: I will add to that by saying one of the predominant things in our presentations was the need for moving quickly to implementing the next round of the agreement. That has been identified. The participants have lived up to the letter of the agreements, but the intent has been stretched beyond even my imagination in this whole exercise. We have to make sure this round covers that escape hatch that some have been using. We need something that is firm and clear on day one of the new agreement, or even some of it beforehand, if we can move into that.

I want to ask Gord to comment a bit further on that as well.

Mr. Gordon Pugh (Vice-President, Member Relations, Saskatchewan Wheat Pool): I just wanted to supplement something Ken said. Mr. Hilstrom, it's not exactly in line with your question, but it's nonetheless relevant as we start approaching the new negotiations.

Last time around in the negotiations, Canada laid out its negotiating position very early on in the negotiations. I forget the exact time, but it was two to three years prior to the conclusion of the negotiations. As we all know, the negotiations stumbled on for some period of time, and then finally came to a climactic conclusion in the so-called Blair House agreement, which was a marathon bilateral negotiating session between Canada and the United States.

Our sense is that had we known at that time what the eventual agreement between the U.S. and the European Union would be, we would not have put forward, as Canada, the same negotiating position that we had tabled two years earlier. That suggests to us that this time around—and I think you would agree as well, Jack—just as a general negotiating strategy, it might be better to keep our cards close to our vest until other players' positions are clearly on the table.

Mr. Howard Hilstrom: Okay, thank you. Certainly the starting position of any negotiations is vital, and there has to be a solid plan there. We won't get into whether or not our negotiators did a great job.

Continuing on, after that starting position, what room do we have in these negotiations? Usually in negotiations you have this give and take business. You can't normally have it all your way. I guess your opinion has been that the other countries more or less did have it all their way—and I talk of the two big ones. While we feel it was good to start movement towards freer trade—and that was accomplished—we didn't end up in a good trade position; we didn't have the access we needed for our particular export commodities, such as wheat.

What room do we have here in the primary export areas, which are represented by the pools and Agricore? Do we have anything to give up or trade off, or are we at a stand-pat position? I'd like the two pools and Jack to reply to that.

The Chairman: This is going to have to be very short, only about a minute.

Mr. Jack Wilkinson: I don't think it's a question of whether we have anything to give up here. It's very clear, going into this round, that we can do some zero-for-zero negotiations. Some countries very clearly indicated in the last round that they're willing to sit down and talk about oilseeds, for example, on a bilateral, regional basis. We can deal with some phytosanitary and some trade-related issues that are going to be very critical in relationship to GMOs and other products.

Much can be done in a very positive way to help our exports going into this next round, very clearly.

The Chairman: Mr. Larsen, very short.

Mr. Leroy Larsen: We can start this round by identifying very clearly the action we've already taken. The cuts that have been made in our support program and in the whole export area are very large, as compared to what's been happening with our competition around the world. We have to identify that up front.

We've gone that extra mile. We want to say, “You guys have to move very quickly to level this playing field.”

The Chairman: Okay, we're going to have to cut off this round. Thank you very much.

Mr. Pugh's comments earlier reminded me of that old maxim: you hold fire until you see the whites of their eyes.

Madam Alarie, seven minutes.

• 0950

[Translation]

Ms. Hélène Alarie (Louis-Hébert, BQ): Good morning ladies and gentlemen.

Mr. Wilkinson, you talked about a trap and in fact I think that perhaps we sometimes negotiated as innocents, trusting blindly.

Isn't there another trap we might fall into, the trap of the end result of what's been achieved, a result that we don't really know? We have some piecemeal knowledge; we have some results. We talk about the European Community and the United States as far as subsidies are concerned, but before going into negotiations, shouldn't we all know the end results of the last negotiations; where we lost out, where we reached our goals and even where we went beyond our initial objectives?

[English]

Mr. Jack Wilkinson: I absolutely agree. Of course some progress was made in the last round. Some disciplines were put in place that have allowed us to make some gains, as agriculture producers in an agrifood industry, over the last time period. We just happen to be in a very serious price depression that has accumulated in the last nine months, which we'll get into later this morning. It's due to a number of situations.

Canada has no choice, as a mid-sized power, other than doing its business in negotiations. We would be in a very sorry state, for example, in agriculture trade with the United States, if we didn't have a CUSTA and a NAFTA deal. We would be in a very sorry state internationally if we didn't have some disciplines that were negotiated. But trade negotiations aren't done in one session.

There was a start of a process, a start of some disciplines, in the last round. It's not the World Trade Organization's fault that Canada chose to reduce its domestic program expenditure, not by the 20% that was required by the trade deal, but in fact by 85%, which was done to balance budgets in Canada's point of view.

So yes, there are other jurisdictions that have continued to support, but there are also some countries that aren't playing by the rules. So we need to push them very aggressively. Take, for example, the way permits are auctioned off in some countries. They're in fact given to producer organizations that have absolutely no interest in seeing a pound of product come into their country. So in those cases, we can be very aggressive in the way we push, in this next round and prior to the round, to make that access.

There are as well many problems, as has already been expressed, with genetically modified, with labelling, with beef hormones, etc. Clearly, on the side of science, we've met our obligations, and other countries are playing silly in putting theirs in place. We have rules now. We can take them to panels. We can push back very hard.

So some very positive gains have been made, some rules have been put in place, and we just need to continue the elimination, for example, of export subsidies. We have a reduction of 36%. We should work very hard to just get rid of those in this next round. And there are some other places where, if we move in that direction, it will help, as has already been expressed, to level the playing field and allow our very competitive producers to do better in the international marketplace.

More can be done, but there have been some gains, yes.

[Translation]

Ms. Hélène Alarie: You also talk about eliminating the subsidies that distort the rules of the marketplace and you mention, Mr. Wilkinson, that we will have to ensure that Canada is able to implement national measures that will maintain the stability and profitability of Canadian agriculture. How are you going to get people to swallow both?

[English]

Mr. Jack Wilkinson: There's no problem at all; you just have to be creative. It's very clear that you can't solve all of the problems, for example, with world prices because of a trade agreement. The trade agreement can't deal with the collapse of Russia and cancelling all its import permits and orders. It can't deal with the fact that the Asian market collapsed nine months ago, and in fact we have a surplus now of pork on the market, where six to nine months ago there wasn't enough to go around. It can't deal with the weather. All of a sudden we've moved from a 30-year high in wheat prices three years ago, because of a short demand, to a 30-year low now. In the last three years, farmers have lived through a 60-year price cycle in wheat.

The WTO can't solve everything, but what it can do is deal with the question of how to discipline countries to not have their farm programs interfere in an undue fashion with price signals in the international marketplace. It can very clearly discipline so that if world grain prices are down...

• 0955

The European Union farmer right now is almost insulated on the grain side from the world price. They will continue to get literally hundreds of dollars an acre of support, regardless of the world price, where our producers see the lowest price in 30 years.

We can put some disciplines there so that if they're going to support their farmers, they do it in a way that doesn't disturb the production signals, so that our guys are doing okay in that international market. That can be disciplined.

[Translation]

Ms. Hélène Alarie: I understand that in theory, except that we are currently experiencing an income security crisis. We would normally tend to say that it's to make up for a shortfall, but perhaps we will have to...

[English]

Mr. Jack Wilkinson: You still can. It's okay.

The Chairman: Mr. Edie, do you want to add to this? Go ahead.

Mr. Kenneth Edie: I'd like to comment on Ms. Alarie's last comment.

Later we're going to get into income problems in agriculture, but one of the things we need to impress upon our negotiators, which happened last time... There was a red light, a green light, an amber light, and all of a sudden there was a blue box. From the negotiators' point of view, once they took it out of the red light area and put it in the blue box, they had achieved their objectives. But as we see now, the blue box internal support and things that supposedly don't impact negatively on trade really do.

To use an example of how this can work, there's barley coming from Montana into Alberta. It doesn't really matter to farmers in Montana what the market price is, because through their FAIR program—federal agriculture improvement and reform—they get an acreage payment. That covers their overhead, some of their variable costs, and so on. As long as they can get something beyond their then leftover variable cost, price becomes immaterial. That's part and parcel of the whole thing. That's what we need to make sure our people understand.

The Chairman: Mr. Pugh, did you want to squeeze something in here before we go—?

Oh, go ahead, Madam Alarie.

[Translation]

Ms. Hélène Alarie: Mr. Edie, in your presentation you mentioned food aid. I personally believe that we don't talk enough about this aspect of the work of farmers, which is very interesting. It's perhaps something that could be done internationally.

Do you have an idea of how we could contribute to international food aid without distorting the laws of the market?

[English]

The Chairman: Mrs. Alarie, we're pretty well out of time. I was expecting an answer from Mr. Pugh, either one or the other, but not both, because we're out of time on this round.

Mr. Gordon Pugh: I'd say two things, Madam.

On the first issue of what Canada can spend and what Canada can do on farm income support and whatnot, I'd like to be clear on the technical aspects. Canada undertook not to spend more than, I think, about $3.5 billion or $4 billion on farm income support as a result of the Uruguay Round negotiations. Our actual expenditures at present are less than $1 billion. So we have plenty of latitude in farm income support to continue supporting farm income.

The second issue was food aid. Our position, and I think what Mr. Edie was referring to before, is that we're great supporters of food aid as well. However, what we are having trouble with is the U.S. using food aid as a disguise for export subsidy. Essentially the issue of Indonesia is what he was referring to.

The Chairman: Thank you. We're out of time.

Mr. McCormick, seven minutes, please.

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

Thank you each for being here.

I sure would like to be here for every moment of the second half of today, but I know my schedule; I'm meeting with the Rural Physicians of Canada. It's kind of hard to be in three places at once.

I have a short comment about the hunger on this planet. I realize that any time we help people, we have to do it in a way that will not affect the producers. But for the last two years, as I've followed the North Korea situation, I've been amazed that half of the Korean peninsula was our seventh-largest trading partner two and a half years ago, then our sixth, and now, since the Asian flu started, South Korea is our fourth-largest trading partner.

Meanwhile, in North Korea, where I don't expect they're buying much from anybody, 2 million people have died of starvation in the last two years. And today they are still supplementing their diet with bark and grass.

• 1000

So I have a friendly question, really, to our pools. I should know this, but has this been done before, where we have different partnership levels with federal and provincial and perhaps the main players to help in situations like this, the most severe on the globe?

Mr. Leroy Larsen: You've used a good example there. In the North Korean situation, as you identified, they're not buying much anyway, so they are not in the marketplace right now. If food aid is provided there, it should not distort prices on food commodities that we could supply out of Canada or from anywhere in the world. That's a good example. We have to identify very clearly the countries that are needy and that are not in the marketplace now. We can identify some of the countries where there would be distorting price signals.

Mr. Kenneth Edie: Along this line, individual farmers can make grain donations, and the federal government matches them three to one. North Korea has benefited from that. Community projects have created these things. And of course the people of Canada, through various ways, have supported this.

We applaud all of those and certainly want to enhance any opportunities to carry on on that basis to help those unfortunate people.

Mr. Larry McCormick: Yes, I'm glad you mentioned that, because certainly farmers in most of our areas and our neighbours have taken this on on their own, to produce a product and either sell it and give the money to the Food Grains Bank or not.

My next question to you is about this round of negotiations, as it's approaching quickly. I want to confirm whether your groups have been invited to take part in all facets of the negotiations at all levels. If you have been, I hope we can benefit from all your knowledge.

I would also like you to comment on the perception of the Canadian negotiating team. We've heard and read comments in the press that some people do not have faith in our negotiators. I would like to give you the opportunity to comment on this.

Mr. Jack Wilkinson: Our negotiators take their marching orders from the government of the day. If there's nervousness by some, it is not necessarily justified, but I would make the case that there's concern as to what is going to be the federal government's position going into the next round.

There's always a sense, from a Canadian point of view, that we tend to be a little boy scoutish when we enter into some of these international agreements, that we always want to be the reasonable person, that we always want to be on the up-and-up. Sometimes the negotiations don't work out that way. Sometimes you have to be a street fighter with a baseball bat if you're going to win. This is serious business, and just to give without getting anything back or to be tough in negotiations...

There's a lot at stake here: the incomes of our producers, the incomes of an agrifood industry, employment in Canada, etc. This is very serious business going in. But I'm of the absolute faith that if clear directions are given to our negotiators, up front and early, they'll do a good job. My assumption is, if not, they'll be fired and new ones will be put in place, because this is serious.

In relationship to whether we'll be there hand in hand with government at every opportunity, it doesn't always quite work like that. They're not going to fill up an airplane and we're not going to all sit in the room when the negotiations are going on. But in fairness, the federal government is very open with the agriculture community in trying to define the types of positions that are critical. In the last round, we've had excellent relationships with the government of the day, the trade minister, and the agriculture minister, and we're working on the absolute assumption that it will be the same case this go-around.

Our job, on the farm organizational side, is to try to deal with what appear on the surface, to the unsophisticated, to be competing interests. I'm very confident that at the end of the day, the farm community will come to some conclusion on that and will offer a great deal of consensus to our minister, which I assume will be the government's trade position, because if we've thought it through and it's reasonable, there is no reason the government wouldn't adopt that position at the end of the day.

• 1005

Mr. Gordon Pugh: Could I just add to that? I'd like to share something with you, having myself worked in the World Trade Organization for five years prior to taking on this function. At that time I was not a Canadian representative; I was working in the World Trade Organization itself. I always found it astounding—and as a Canadian, I was extremely proud of the fact—that the quality of the negotiators and the civil servants we had working in Geneva, and I believe still have, and the quality of the negotiators specifically was unparalleled. It was equal to any who were coming to bat from any of the other countries.

As a result, Canada has played and does play a role far in excess of what you would normally expect, given our economic power within the world organization. So we have nothing but confidence in our trade negotiators.

The Chairman: Thank you, Mr. McCormick.

I just want to point out that we have a number of battle-scarred veterans who have come through a number of sets of negotiations: NAFTA, the free trade agreement, and of course the Uruguay Round. So I would hope that would stand us in good stead.

Mr. Proctor, five minutes.

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

Just before I begin, I want to extend my apologies. I have a commitment in the House a little bit later on. I hope to get back, but we'll have to see. I'm reading Rick's notes.

Mr. Rick Borotsik: Yes, I know.

Some hon. members: Oh, oh!

Mr. Dick Proctor: My first question is to Mr. Larsen.

I was interested in your comment that Canada can't compete against the treasuries of Europe and the United States. I'm curious about why you say that. The background I'm coming from is that Canada is part of the G-7, the seven largest economies in the world. We're certainly a lot bigger than a lot of European countries. Our books are balanced. So I'm curious as to why you would make the statement that Canada simply can't compete.

Mr. Leroy Larsen: I was identifying that our producers cannot compete with those treasuries, because that's the position we find ourselves in right now, with the support programs in the United States and the European Union.

Mr. Dick Proctor: So you're not saying the country of Canada can't compete.

Mr. Leroy Larsen: Well, I think the country is going to have difficulty. We don't have the tax base or the resources that some of the other players have as well, and it will be difficult.

Because of our small population, we export a larger percentage of our agricultural production than do many of the other countries. When it comes to grains, we export up to 80% of our total production, whereas the United States is at 20% of their production. It's a vastly different situation in Canada as compared to the United States and even the European Union, because of the smaller population and the smaller tax base. Our producers are right now competing against those treasuries, and they're hurting.

Mr. Dick Proctor: So would you tend to agree with Mr. Edie's comment that we came across as Johnny Canuck Good Guy in the last round of the WTO?

Mr. Leroy Larsen: Yes, I would agree with that statement. As I stated earlier, we have far exceeded our obligations under the current trade agreements, and we want to point this out very dramatically at the beginning of the discussions and say, “Come on, fellas, we want to level the playing field here.” That should stand us in good stead at the opening.

Mr. Dick Proctor: Thanks very much.

I have one question to you, Mr. Wilkinson. You talked about sanitary and phytosanitary being the key issues in the upcoming round.

Mr. Rick Borotsik: You did look at my notes.

Voices: Oh, oh!

Mr. Dick Proctor: Sorry, Rick. I have good ears as well as good eyes.

What advice would you provide to Canadian negotiators in that area?

Mr. Jack Wilkinson: Number one, we want to deal with the current situation and cut off the proliferation of non-tariff trade barriers disguised as health or veterinary drug issues or a host of others.

• 1010

Right now, a number of countries that wish to be protectionist—that wish not to live up to their commitments or to minimize the access they negotiated in the last round—are using a host of various tools to in fact impede the access that was given. For example, on hormones in beef, even though we've won the panel, they're going to continue to pursue that in Europe. We're going to have to be tough back to them, to make them live up to the science-based system that we think is the only way to deal.

For example, they're talking about multi-functionality in Europe and a host of other related issues as to the reason to continue blocking any access. We're just saying these things are going to be critical. The Biosafety Protocol could inhibit the way our trade in genetically modified products unfolds into the future.

There are a lot of critical issues that we need to cut off right at the beginning. We need to define the rules as to what and how they can be dealt with so that we don't find them as real trade barriers down the road. That's the main point: be very proactive in that regard.

Mr. Dick Proctor: Right. Thanks very much.

Mr. Kenneth Edie: I'd like to comment on a couple of things, particularly my comment about Canada being Johnny Canuck. Then we got into the members that our negotiators have to work with and the policies that the government gives them. When I talk about the blue boxes, this is a policy they have to work within. Sometimes we get into a shoot-the-messenger mode and we don't like what they say.

There's one thing I want to make a point of, and it's too broad an issue to talk about today, but I encourage every member of this committee, particularly our chairman, to look into the Biosafety Protocol that Jack just mentioned. That has horrendous ramifications, and it's very poorly understood, even in Canada. But you go into Europe and they just don't know what it means, with the Advance Informed Agreement. They have an idea that a GMO is a squiggly little thing in a test tube, rather than a seed that can then produce things.

So just keep your ears open on this one and ask questions, because it is a very major issue. If you want to call Bill Leask of the Canadian Seed Trade Association, he's on that committee, or Doug Mutch of the Canada Grains Council. Get filled in on that, because it is very important. The United States don't seem to have caught on to it yet, and it's quite incredible that they are just ignoring it as if it will go away. It won't.

The Chairman: Thank you. You might notice that around here we like to give Proctor the raspberry, because of his now famous proclivities. You might ask, “Great Scott, what's next?”

Mr. Proctor, five minutes.

Mr. Rick Borotsik: Mr. Proctor's already had his five minutes.

Voices: Oh, oh!

The Chairman: Sorry; Mr. Borotsik.

Mr. Rick Borotsik: I thank the members of the panel for being here, and I apologize, but I have to leave, unfortunately. We're dealing with support programs in the House today, and it's important that we put our positions forward in support of agriculture and farmers. So please accept that apology.

We were supposed to hear your comments on those support programs last Wednesday, but it's been obviously changed to this Wednesday, so I'm going to miss it. I know you were available, but... I know I can talk to each one individually, so I will do that.

First of all, I'd like to say that I too agree that we have a lot of confidence in our trade negotiators. We have them here on a regular basis. As Canadians, they're very qualified to put our positions forward with respect to trade. I have a lot of confidence in them. The problem they have, I suspect, is that we're a very small player in a very big agricultural world out there. Even saying that, we still have a lot of influence—more than perhaps what our population and certainly our financial ability is.

Jack, first of all, I'd like to ask you a question. You said we should go to the table and negotiate the agreements for the next five to 10 years. We talk about biodiversity, non-tariff barriers, phytosanitary, and sanitary. Are we going in the right direction there, Jack? Should we not be more concerned about our major trading partner right now, the United States, and dealing with those issues with the major trading partner, rather than perhaps watering down our message by going into markets that we haven't been in?

I'd love to be able to get into the European Common Market, but they're stopping us with those. Do you think most of our energy should be put into that area, as opposed to dealing with the trade we now have—80% of our trade—to the Americans?

• 1015

Mr. Jack Wilkinson: You have to have the capacity to deal with more than one front at a time. I don't personally believe it's an either-or scenario. We do have a defined agreement with the United States currently. We gave a lot at the office for some of the access we achieved in that agreement. Some agricultural commodities in Canada suffered a lot for what we gained.

We have a defined set of rules. We should work very aggressively to make sure that what the U.S. signed is what they deliver on that. We should push on that front, but we also have to be willing to make gains internationally.

Mr. Rick Borotsik: Do you think there's really an opportunity to make gains in those markets internationally?

Mr. Jack Wilkinson: Yes.

Mr. Rick Borotsik: Give me a timeline. Are we talking a year from now or are we talking 10 years from now?

Mr. Jack Wilkinson: I think we make them year in and year out, in all honesty. We did gain some access, for example, into Europe and some countries in the last agreement. We did define some rules on how people could play and how much they could spend, for example, on export subsidies. Yes, it's more than we would like to see and it didn't go as far as we wanted, but there is still some definition.

For example, if we had had this current agreement 10 years ago, the U.S. and the European Union would not be able to use export subsidies. A discipline was put in place.

Mr. Rick Borotsik: Let's talk about biodiversity.

Mr. Jack Wilkinson: Sure.

Mr. Rick Borotsik: Let's talk about canola and the non-tariff barriers set up right now on canola—and by the way, canola from western Canada has a huge potential in the market in Europe right now. How successful can we be and what should we be doing to get to that issue?

Mr. Jack Wilkinson: Well, the question with the European Union of labelling genetically modified product is going to be huge going into the next go-around. There is a different attitude.

Mr. Rick Borotsik: What do we give up?

Mr. Jack Wilkinson: We don't have to give up anything. We have to define the way we do business.

We have to work on the assumption that there are people in the world who want to buy our product and there are some people in between who want to protect some basic interests. So how do we negotiate a set of rules that make international trade more fair, negotiation after negotiation?

What we have to deal with is how to convince European consumers and their governments that a genetically modified organism, as Ken said, is not a squiggly thing in a test tube that you have to be afraid of. How do we create the type of regulatory framework so that when it goes through the system and gets approved in Canada, there's a degree of confidence and a set of rules, based on science, so that we can explain internationally that it has met the consumer health and safety criteria and met international agreements? That's how we'll get into Europe, and that won't be solved in one meeting.

If we don't have an international place to do that business—to take them to a panel if they in fact block our imports—we're down to this: the only big guys who are going to win are the two big players, the European Union and the U.S., and we're always going to be beaten out of that market. We need gains year in and year out. We need definitions and we need to move them progressively to a point where our producers, who have relatively modest support, can in fact succeed.

Mr. Rick Borotsik: I like your optimism, Jack. Let's keep going.

The Chairman: We have under a minute to go, so Mr. Larsen, do you want to—?

Mr. Leroy Larsen: I'll take just a minute.

We can add the Japanese oil tariff to that one. We have to keep hammering them on processed products so that we can capture more benefits in that whole area, right across the board.

Ms. Patty Townsend (Manager, National Affairs, Agricore): Could I just add something really quickly? I know everyone here likes to listen to my voice.

Mr. Rick Borotsik: I always do, Patty.

Ms. Patty Townsend: Yes, I know you do.

Mr. Rick Borotsik: It's nice to have you here.

Ms. Patty Townsend: The U.S. market is extremely important to us, but we have found that since the last round, rather than diversifying our export interests, we really have been concentrating a lot on the United States, and we know where that takes us. We're not discounting the importance of the market, but we need to diversify further.

We have made gains and we're making gains, but one of the biggest things we can accomplish right now in Asian markets and other markets is disaggregation of market access. Disaggregation means that rather than saying coarse grains and having your access provided for coarse grains, you are saying access for barley, flax, rye, or whatever.

Mr. Rick Borotsik: We've all talked about agriculture specifically. Are there any trade-offs in other industries, in the industrial industries, that will help us in our agricultural efforts?

Ms. Patty Townsend: That's why we'd like to have a very comprehensive round, because we think that is possible.

Mr. Rick Borotsik: Yes, absolutely. They've been trading agriculture too much. Let's trade somebody else.

The Chairman: Mrs. Ur, five minutes.

Mrs. Rose-Marie Ur (Lambton—Kent—Middlesex, Lib.): Thank you, Mr. Chair.

This is to my friend, Mr. Wilkinson, and if the other members wish to reply, they can.

Do you think, before we start negotiations next time, we should set the rules and definitions, hammer it out, and see what we've done in the last five years? Before we start the negotiation process, should we have a definition process first so that we all know where we're starting from?

Mr. Jack Wilkinson: Some of that work has been done. It's not a perfect system at all, I agree. But our point to the federal government has always been, if people aren't living up to the terms of the last agreement, we don't have to wait until the next round to fix that. That is the type of work we expect our government, with political pressure, to try to sort out, week in and week out, constantly.

• 1020

And some gains have been made. With canola—and the other witnesses know this better than I do—there were some serious problems of getting into that Japanese market with a genetically modified product. Very heavy-duty negotiations took place in between rounds to sort out that market access question. It's not perfect, but we're into that market. That's the sort of thing we expect our government to do constantly. If, for example, Taiwan is not living up to its access commitments, then let's sort that out right away and put a lot of pressure on it.

I understand your point that we don't always see things the same way as a different country. I don't argue that. But I do believe that we can't not make gains in the next round. We can't say that until everybody is reading from the same sheet, we won't do anything. That's the work that has to be done in between rounds, to sort that out diplomatically, put on all the pressure possible, and work on the assumption that we have to start the next round. We have to clean up what didn't get fixed as best we can, but continue to move progressively ahead. That's the nature of negotiations.

Mrs. Rose-Marie Ur: Also in your briefing, you said CFA believes a long-term trade goal should be the establishment of a multinational trade remedy dispute settlement system that cannot be manipulated by any other country. Do you want to expand on that?

Mr. Jack Wilkinson: I said that in reference to the North American market as well as the international market. Because we're a modest player in the world trade, we don't have the big sticks that the superpowers do. So our salvation is a well-defined set of rules and a dispute panel mechanism to which, when we see that we're not being treated fairly, we can take it. We have a very good history of winning panels, because we have to read the detail of the rules. That's the only way we can do things. We negotiate well, we define it, and then we go to panels, if we have to, to defend our interests.

That's all we're saying here. We need to have that international panel system with some teeth to it so that if we can't get into a market or this doesn't work out, if people aren't living up to the rules, we can take them there. We can have a defined ruling on it that allows us to in fact force those markets open and make them live up to the agreements.

We've had a number of panels, for example, with the United States. If it hadn't been for NAFTA and the CUSTA deal, we would have had a lot of difficulty in those markets, but in fact we've won just about every panel, other than a portion on live hogs. It's been merciful that we had that system, and we need it to expand internationally.

Mr. Kenneth Edie: Mr. Chairman, I'd like to go a little further on what Jack was saying. Remember, about a month or six weeks ago, there were some problems when South Dakota started some initiatives, then North Dakota and Montana. We need to congratulate our government for the cool-headed way they organized a response. We've actually got them now to say they will stop doing those things and work through the rules that Jack has mentioned.

We should remember, though, that we shouldn't beat ourselves up all the time, because just look at our record of exports. We made the $20 billion and now we're asked to make the $40 billion. Well, that's great and good, but a number of other issues, including cost recovery issues, are hurting us greatly, whether it's in the Pest Management Regulatory Agency, the Canadian Grain Commission, the CFIA, or whatever. The government needs to rethink some of those things. It's a relatively small sum of money, but the hurt it can cause if we don't get these regulatory functions done quickly, efficiently, and effectively is greater than the savings to the Canadian public by not providing that public good for all Canadians.

Mrs. Rose-Marie Ur: Each one of you said today that you're looking forward to increasing the export market. I certainly agree, but we also have to take into consideration that in the same venue, we have to remember primary producers. Are they gaining the same as we are as a country in the export market?

Mr. Jack Wilkinson: I don't think those are either-or. A lot of these things you do on different fronts. When the world price is down, just having more market access doesn't necessarily mean a farmer makes any money. We appreciate that. That's where you have to work on the assumption that you do have some domestic farm support programs to deal with some of these issues.

But in the long haul, Canada has relied to a great extent on its economic growth, agriculture and otherwise, by being an international trader. The more we can make the rules fair, the more, on average, we can get a better return out of the marketplace. But there will be instances where the world price, for a host of reasons, is very poor.

• 1025

That's why—and we'll talk about it a little while from now—we need a disaster program, funded by the federal and provincial governments, to help producers out. But in general, we do better by having...

We only have 30 million people. We can't eat all of the food we produce in this country. We need a set of fair international rules and fair market access so that we can, in most years, make a good return on the world market. Every once in a while, that won't work, though.

The Chairman: Thank you.

Mr. Pugh, our agrifood exports are up about 11% from 1996, down about 5% from 1997. Given this recent background, do you think we can hold to the 4% share of the world market as an objective?

Mr. Gordon Pugh: If the dollar keeps going down...

Mr. Kenneth Edie: Mr. Chairman, further gains can be made, but in the end, I reiterate, the government has to make sure that some of the cost recovery things are not hamstringing us.

To Mrs. Ur's comments about our domestic market—and those are valid comments—I noticed yesterday a pamphlet put out by the egg producers, broiler producers, and turkey producers outlining that since 1991, they've increased their exports very substantially as well as increased their domestic market.

The Chairman: So you say that 4% is still realistic.

Mr. Kenneth Edie: The 4% is certainly a goal that we should strive for, and strive for diligently. However, remember that that goal was really set by a government agency. Yes, we had input into it and all sorts of things. We had a nice conference near Toronto in June, and it was all lovely. That's great; I'm not belittling that. The Minister of Agriculture came and spoke.

We will keep bringing up that certain things need to be put in place to help us on that road, or we will not achieve that goal.

The Chairman: Thank you.

We'll go to Mr. Hoeppner for five minutes.

Mr. Jake E. Hoeppner (Portage—Lisgar, Ref.): Thank you, Mr. Chairman.

Welcome, panel. It's a pleasure to meet you this morning.

I was impressed with your comments, Jack. You're on the right track. We don't always see eye to eye, but...

Mr. Jack Wilkinson: True.

Mr. Jake Hoeppner: The one thing I would like you to comment on later, when I've asked a couple of more questions, is the food aid issue. Isn't that almost mandatory? If North Korea and the Soviet Union today aren't given grain, they'll starve, because they owe so much already that they can't buy any. That's the question I'd like you all to address.

The other thing I would like to ask is this. Mike Gifford was before this committee here a week or so ago, and he said we're not as squeaky-clean as we make ourselves out to be sometimes in these trade-disrupting subsidies. He said the U.S., in their payments to farmers, only maintain their trade-distorting subsidies at 16%, while Canada is at 20%. When it comes to the green boxes, where we support our farmers, the U.S. has 24% of their payments in green boxes, and Canada has only 8%. There's a little bit of room to manoeuvre with the United States, at least I think. They are one of our main trading partners.

I hate to get into the Wheat Board issue again, because I know we're probably on opposite sides, but I thank God, you know. If we didn't have the free market in special crops today, what would my farm look like? If it weren't for canola, sunflowers, and all these other things, where would we be? We would all be bankrupt. The cash crunch today is worse than I've ever seen it, not just because of prices, but because of the huge cost of inputs. They have overtaken prices by leaps and bounds. So that's one thing we have to look at.

What I would suggest to these Wheat Board supporters is this. Where you could help farmers, if you're so dedicated to that type of marketing system, is by tying your wages and compensation packages to Wheat Board grains instead of the whole gamut, because, boy, a 40% or 70% cutback would not be quite so comfortable. That's the way farmers have been taking the cuts.

The other thing I wanted to get at, Mr. Chairman, is that sometimes government gets us into these lousy problems. I want to look especially at Saskatchewan with their hog marketing issue. It wasn't just the government; it was Sask Pool that encouraged farmers to get into the hog business: “You have to get value-added. There are markets galore in Asia.” I have never seen the hog industry in such a mess as it is today. It will take $20 million to just take care of the losses in the next six months. How are they going to survive?

• 1030

We can blame everybody else for our problems, but we have to get logical and look at some of these issues. My sons wanted to go into a big hog operation two years ago, and I said, “If you want to take any advice from me, stay out. For God's sake, stay out.” I've seen this three times in my lifetime. Here we are, in worse shape than we ever were.

So how are we going to address those issues? It entails world trade, but it always seems to be an overreaction from our own industries.

The Chairman: Mr. Hoeppner has raised enough issues for five hours. We have five minutes, two and a half of which have already gone.

Mr. Jack Wilkinson: Our presentation nails down and clarifies some of the expenditures. In 1995, for example, Canada's total amber support was 15% of the WTO spending limit. In the United States—and it's here in the text—it was 26.9%. In the European Union it was 60.4%. In Japan it was 73%. So it's very obvious from that that other jurisdictions with whom we play in the international market are supporting their producers substantially more than we are in Canada. I just wanted to set that straight.

On the question of hogs and the price and a host of issues that we will be talking about later this morning, I don't think you can predict what's going to happen in the international market. All of us in this room would be very rich if we could have predicted that Asia was going to collapse.

The fact of the matter is, Canada normally produces to what the market is. The market was growing, our exports were growing, and we were producing for that. It turned out that the international market changed, so we have some very serious issues to deal with. But in this context, rules are the only way we can do business, and fair rules give us that opportunity to maximize our returns.

The Chairman: Mr. Larsen.

Mr. Leroy Larsen: I just want to identify that the Canadian Wheat Board is not the cause of the low wheat and barley grain prices. The United States have the same situation. The world market identifies what the prices are. I don't think you can blame the Canadian Wheat Board as being a depressant on the marketplace.

With regard to the hog business, Saskatchewan Wheat Pool is partnering with communities in hog production. We all know that hogs go through the cycle. It's not Saskatchewan Wheat Pool hogs that have depressed the market, because only one of our units has marketed market hogs to date. So don't blame it on Sask Wheat Pool.

Let me tell you why we have to go into adding value to barley. I can't afford to grow barley on my farm and pay today's freight rates and still make money in the international export market with my barley. I have to add some value. Hogs and cattle, which we have on our farm, can add value.

The Chairman: Thank you.

Five minutes, Mr. McCormick.

Mr. Larry McCormick: Thank you very much, Mr. Chair.

I hope we do have the person here who can speak to genetically modified seed products, so that we can learn more about this. I follow biotech because it's such a fascinating happening here in Canada, and we're leading the world in much of it. The committee has been to Saskatoon, and most of us have been to Guelph and Saskatoon at other times.

On this canola, I believe it is, going into Europe, I would just like to hear you tell me.... You mentioned that the panel has ruled on this.

Mr. Jack Wilkinson: No, on the hormones.

Mr. Larry McCormick: Not on the canola? Okay, fine, on the hormones. What I'm wondering here is how much of this is political? And what's the word on the street? Is it like rBST 20 years from now, or whenever, if something happens? I suppose it's partly information to the consumer. Will they go that route to scare people, or is it just at the negotiating table? I'd like to give you an opportunity to speak a little on this, if I could.

Mr. Jack Wilkinson: On this question, I personally do believe it's too simple to just say it's political. In general there is a fundamental difference between the European consumer and the consumer in some other countries. If we minimize that difference—we don't have to maximize it, but if we minimize it—we're going to miss what we have to do.

The European consumer does not have faith in the regulatory system that exists in Europe. We saw that in spades with the BSE question. In North America, in the United States and Canada, the consumer has a great deal of faith in the regulatory system we have in place. If it's on the market and it's gone through the process, then most consumers assume it's safe for consumption. That is less the case in Europe, and that is something we're going to have to deal with.

• 1035

Genetically modified products have the capacity to do great things in the future, for pharmaceuticals and for production and enhanced products, and we have to deal with that question. But we have to positively deal with the European consumer and figure out a way for them to have confidence that the science in this is understood, it's checked out, it's safe, and it's rigorous.

We don't know whether, a hundred years from now, something we agreed to do tomorrow will be perfect. We work on percentages, we work on the best information at the time, we work in a science-based system, and we try to have that independent third party. We assume that when I get a product available to me...

There are great savings. For example, I reduced my herbicide bill on canola substantially this year, because of some new genetically modified product out there. I had better weed control, the product was more benign on the environment, and I used a quarter of it compared to what I used historically. That needs to be factored in as well. There are some real advantages to the environment as well, by going down these roads.

Mr. Gordon Pugh: To supplement that, I don't disagree with Jack that there's an issue of the average European consumer being more mistrustful of science and of regulators than the average North American consumer. That is true. But on the other hand, when you ask if this thing is political, I say yes, it is, because the European Union has a system that should permit the approval of these canola varieties that we're trying to export there. All of the technical aspects and regulatory aspects are in place. It is the politicians who are inhibiting the movement of the system.

I'd also like to supplement one thing Jack was saying about the value. We're going to be talking about farm income here subsequently. I can speak from firsthand experience with our farm, growing transgenic canola for the last four years. Being able to grow those products is probably worth somewhere between $15 and $30 per acre to an average Saskatchewan farmer. Being able to use those varieties means that canola is being grown where otherwise it would have had to be abandoned.

Mr. Leroy Larsen: I would add to that, however, that at no time are any of us advocating jeopardizing food quality and food safety. We are strong proponents of that.

Mr. Larry McCormick: Just as a closing comment, perhaps we have to also be ready to do even more education here on how this can help with the environment, with the pesticides and the whole thing.

Mr. Chair, thank you.

The Chairman: Thank you, Mr. McCormick.

Mr. Hilstrom for five minutes.

Mr. Howard Hilstrom: Thank you, Mr. Chairman.

It's important to note in these trade negotiations that the farm sector is composed of about seven to 10 different subsectors. You're talking an awful lot about farmers as a cohesive group. The interests of the farm sectors that need market access can be conflicting with the groups that want little or no access to Canada. If we want access to other countries, other countries are probably going to want access to Canada.

Jack, I have to admire you. You are arguing on both sides of the fence, because of the people you represent, and you've put both positions out very well. Canada should fight for more market access, but we should also seal off our borders for the supply-managed products.

Along that line, what do the other countries want from Canada? This is important, going into negotiations. We now have New Zealand and the States attacking the dairy industry, and I'm not sure on the grain side.

I'd ask you to comment. Does that raise enough interest to comment on those things?

Mr. Jack Wilkinson: I appreciate the fact that you admire the CFA and its sophisticated trade position, and we do too. I'm not being tongue-in-cheek here. You name me a country around the world that does not have some domestic agriculture-sensitive commodities.

If we want to talk about the United States, it's sugar, tobacco, and peanuts. The list goes on. As they were beating us up over market access in the last round, the United States President passed a piece of legislation that said every package of cigarettes in the United States will have to have 50% domestically grown tobacco in it.

• 1040

It's foolish not to recognize the way these discussions go on. There are certain things we can achieve and there are certain things we can define, knowing full well that food as well as other products are very political issues, and we have to deal with them up front.

For example, to be fair, supply management in Canada has lived up to every dot and “t” that was in fact negotiated in the last round. We have filled the quota on market access, and if there's something else to be negotiated in the next round, I'm comfortable they'll live up to that. What we want in access around the world is for other countries to do exactly the same thing, and then we'll see how the next WTO round goes.

Mr. Howard Hilstrom: We're going to have another comment on that theme, but we had the sugar industry here the other day making presentations, and they didn't specify who they think they got sold out to in the last round, but they feel their industry got sold out to the benefit of other sectors of the agriculture economy.

Mr. Larsen, would you care to comment? You represent a more defined group that requires market access, due to the fact that a lot of the people you represent need access to foreign markets.

I'd like to point out that it's the trade sectors that are earning the foreign currency for Canada, and not the supply management sectors. So the emphasis of this trade negotiation has to be more on the area that's earning us those big amounts of foreign currency. I think we all know that western Canadian grains, and maybe the exports from Ontario also, are that gigantic earner. Could you comment on that area?

Mr. Leroy Larsen: As I identified earlier, there is no possible way we can ever come close to consuming the kind of production we can generate in Canada in the grain and oilseed sector. So we need international markets to market in, and the more access we can get, the better.

But at the same time, in our presentation we pointed out that the producers within Canada should have the right to establish their own marketing processes as well. The supply-managed sectors, which I call the feather industry, have to determine which is going to be the most beneficial for them. Ken identified that they have increased their export of those kinds of commodities in this current period as well, but the producers themselves should determine and should share with the government a position that can be taken at the next round of negotiations.

Mr. Howard Hilstrom: What specifically do the other countries want from the sectors that you represent? Do they want anything?

Mr. Leroy Larsen: As Jack identified, every country comes to the table with specific things they want to protect. There is a need to analyze the position that other people will come to the table with and see where they might be coming from in the negotiating rounds as well.

Mr. Howard Hilstrom: You don't know where that is now.

Mr. Leroy Larsen: No. We have to analyze, have accurate information, and be prepared at the negotiating table. As Jack identified earlier, the grey areas are the ones that will be dealt with this time around.

The Chairman: I think Ms. Townsend wanted to say something.

You have about 30 seconds.

Ms. Patty Townsend: I can do it very quickly.

They're right in saying that everybody comes to the table with their sensitive issues and what they want to gain access-wise. That's why we're saying that if we have a comprehensive round that includes more than just agriculture, maybe we can make some better gains there, because we're going to be looking at other sectors as well. That's why we're encouraging the Government of Canada to pursue as comprehensive a round as possible.

The Chairman: So are you going to make me a believer in miracles? I'd love to be a believer in miracles.

Yes, Jack?

Mr. Jack Wilkinson: I have just a point of clarification. Canadian agriculture is an organic thing. It's not an either-or; it's not a black-or-white.

You made some very strong points. All the production on my farm effectively goes into an export market. Every commodity, from beef to grains and oilseeds, is exported, and I know that's important. But on the other side, the domestic industry, whether it be value-added or whatever, does have some benefit to the country as well. The feather industry, for example, on the processing side, employs 15,000 people. Supply management, with both the producers and the jobs in processing, is 100,000 jobs.

• 1045

I'm not going to get caught in the trap of saying, “This is more important than that”, because it doesn't work that way. You have to look at the whole picture. There are positives, negatives, and compromises in everything we do in Canadian agriculture, and every sector has something to offer Canada.

The Chairman: Howard, you have some questions.

Mr. Howard Hilstrom: The fact is that in negotiations, something does end up getting traded off. At the current time, from what New Zealand and the States are doing, it looks as though they're attacking our supply management. You don't have to agree with it, but that's a fact of life. They are attacking that.

Going into these talks, what is Canada going to be able to do if that is not resolved? Or will it be resolved beforehand?

Mr. Jack Wilkinson: I think what it will do is what we've all identified. For example, we have eliminated our export programs in Canada. It's very easy to go to the table and insist that countries that are still playing in that game eliminate them on this round. We have reduced our domestic support in Canada by 85%, when the last WTO round only required a 20% reduction. It's very easy for us to go to the table and insist on very substantial reductions by other countries.

The list can go on and on. There are a number of areas where we have walked the talk, where we have led the pack, and we can go to this round and push for that.

Another example is market access. Other countries are playing silly on their country commitments—for example, hogs into Europe. They aggregated the way they counted red meat, and in fact the hundreds of thousands of tonnes of access we thought we were going to get into Europe in hogs turned out to be 75,000 tonnes, versus much more than that. We can go into this round, as Patty has indicated, and try to deal with that segregation question and get more market access.

GMOs, phytosanitary—the list goes on of things we can take the high ground on, without even getting to the question of what we have to give up. We've already given a lot, and we can insist other countries do more. So we can take the high ground.

The Chairman: I think my hope for a miracle is slipping away.

Mr. Gordon Pugh: From our point of view, on the grains or livestock side of things, we're going to be looking for gains. I'm not going to get into the debate on supply management or not, because this is not an issue.

Mr. Howard Hilstrom: I'm talking about the facts of life.

Mr. Gordon Pugh: But the markets we're going to want to access, whether it be Japan or Europe or southeast Asian countries, are countries where they don't have a whole lot of anything to gain with access to Canada in agricultural products. They're going to be looking for access on the industrial or the service side or those sorts of things.

As Patty was saying, unfortunately—or fortunately, however you look at it—we need a large negotiating round to be successful for prairie agriculture. It has to be one where you have the scope to trade off things other than just in the agricultural field.

The Chairman: Ms. Ur, and then we'll finish up with Jake Hoeppner.

Mrs. Rose-Marie Ur: I hate to discourage you, Mr. Chair, but Jack raised an important point. We as Canadians can go and insist—we've done this, we've done that, we can insist—but we're also pretty small potatoes in this big game. We can insist and insist, but what strengths or opportunities do we have with the size of this country, compared to the U.S. and the EU?

Mr. Jack Wilkinson: Well, 130-some countries signed on to the last round. Other countries don't have the capacity to support their agriculture. Often we think the only two negotiators—and they're big, so it's easy to forget—are the European Union and the United States. But there are a lot of countries out there that we have things in common with, that don't have money to support their agriculture, that want to see reductions of the two big players so that they also have a fair field to play on.

We can ally with a lot of mid-sized and smaller countries. That's what the Cairns Group was set up about. An awful lot of developing countries want many of the things we want going into this round, such as some discipline. We can put pressure on, and quite honestly, at the end of the day, there will be a compromise between the two big players, as they view life differently. We have some opportunity to be in early and push very hard for a sensible resolution that will be good for our agriculture as well.

Mrs. Rose-Marie Ur: This is important. I have just one more question, and it's not 11 o'clock yet.

The Chairman: We still have to hear from Hoeppner. Go ahead.

Mrs. Rose-Marie Ur: Okay, I won't be long.

That's true, but this is almost a replay of 1993, because we had allies when we went in in 1993—

A voice: Good point.

Mrs. Rose-Marie Ur: —and all of a sudden, we were left standing in the bushes by ourselves.

• 1050

Mr. Jack Wilkinson: You have to be either naive or optimistic if you're going to be a farm leader, a politician, or a negotiator. You learn from your mistakes, you get better the next time around, and you win a bit at a time constantly. That's the job description. You just have to stay at it, do a better job this time than you did last time, and better the next time.

Mrs. Rose-Marie Ur: Good.

The Chairman: You also have to be either unrealistic or naive if you don't believe there are certain fundamentals to any negotiation. You're going to find yourself sometimes standing alone and sometimes being battered, but you can't be deterred by that.

Mr. Hoeppner, you'll get the last word.

Mr. Jake Hoeppner: Thank you, Mr. Chairman.

I want to go back to Jack.

We know the Europeans pay an average subsidy of $175 an acre just to grow the grain. We know that then they put on export subsidies of as much as $2 a bushel. Where do we have to go in the model so that we can compete? To me that seems horrendous; $230 is unbelievable. To cut that back... We have to do something else. Have you done a model of where those subsidies have to go before we can compete?

Mr. Jack Wilkinson: There are two things.

Number one, when we want to try to get rid of the worst trade-distorting aspects of the ground... For example, the way their system works in Europe, as you well know—and we have some numbers and whatnot in the appendix—when prices drop to a certain level, they maintain the support of the domestic producer and allow their exporters to ratchet down the price and dump on the international marketplace, similar to the EEP program in the United States.

All we're saying is that the blue box, which allowed them in the last round to put in unlimited amounts of farm support in relationship to any kind of reduction program, we want eliminated in this next round. That will be very difficult. And we want some disciplines put in place as to how green box money can be spent.

We're going to push very hard, from the Canadian point of view. We've all said we want the elimination of the blue box. If that occurred, it would put some incredible discipline on how much they're allowed to spend.

We have to understand an important thing that's taking place in the European Union right now. They're under a common agricultural reform process that's in place. Five new countries are entering and five more are in discussion. Poland, for example, has 3 million farmers that, in the European model, are all—well, most, not all—considered uneconomic and unviable. That is going to put massive pressure on their farm support systems in the European Union, and all sorts of budgetary pressures. There are 11 social democratic governments in the EU that don't support the farm community as they did in the past.

There is a great possibility in this round that the governments there will take an opportunity to cut back their support to agriculture. We may see some gains. We need to just keep pushing, Mr. Hoeppner, in all those areas.

Mr. Jake Hoeppner: That's good.

The Chairman: This will be your final comment.

Mr. Jake Hoeppner: Jack, can you see us, in the near future, providing some green box programs that will carry us to the goal you are trying to get to? That is what we need.

Mr. Jack Wilkinson: Absolutely, and that's exactly what we'll be talking about when we get into programs later this morning—the need for a domestic green or non-countervailable support that will keep our producers in business while we go through this trough in prices.

The Chairman: Thank you.

Your chairman has been proven right again: there are no miracles around this table.

Mr. Jack Wilkinson: We're expecting one in half an hour.

The Chairman: There may be miracles someplace else, but around this table, there are none.

We shall break for five minutes—and I mean five minutes—and we'll start at the stroke of 11 o'clock. This meeting is adjourned for five minutes.