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 24, 1998

• 0904

[English]

The Chairman (Mr. John Harvard (Charleswood St. James—Assiniboia, Lib.)): Members, we'll resume our discussions on the pending WTO negotiations on agriculture.

• 0905

Today we have the pleasure of welcoming representatives of three separate organizations. From the Canadian Agri-Food Marketing Council we have the executive director, Myles Frosst. From the Canadian Cattlemen's Association we have Neil Jahnke, chairman of the foreign trade committee. From the United Grain Growers we have a fellow we all know, from Winnipeg, Ted Allen, president and chairman of the board.

Good morning, gentlemen.

Are you going to start, Mr. Frosst?

Mr. Myles Frosst (Executive Director, Canadian Agri-Food Marketing Council): That would be fine.

The Chairman: It just happened that your organization's name appeared first on the list, so let's start with you.

Mr. Myles Frosst: It's fine to start, also because there's been a fair amount of reference to the Canadian Agri-Food Marketing Council's vision of the 4% market share goal.

It's a pleasure to be here with you. Thank you for the invitation to share with you the views of the Canadian Agri-Food Marketing Council. I'd like to especially extend CAMC's congratulations for the work this committee is doing. These are precisely the types of alliance-building efforts CAMC has been advising the Minister for International Trade and the Minister of Agriculture and Agri-Food to ensure go on. They are a critical element in the development of a trade negotiation position that can reflect the diverse needs of this very diverse industry.

I'd like to focus our discussion on three points. First is exactly who and what is CAMC, the Canadian Agri-Food Marketing Council. Second is the vision you've heard much about from some of the witnesses over the last few weeks. Finally, very briefly, is the role CAMC is playing and trying to play with federal-provincial governments and other associations pertaining to that vision.

CAMC has 24 members representing a very broad cross-section of Canadian producers, farmers, and processors. I apologize that Ted Bilyea and Ken Matchett, the two co-chairs, are unable to be here today. However, I notice that Neil Jahnke, one of the members, is here but not in his CAMC capacity.

All the members—the farmers and the processors—are engaged in both domestic and export sales. Together, they export or sell within Canada grains, baked goods, fresh and industrial milk to specialty cheeses, live hogs to sausages, fresh vegetables, canned and frozen vegetables, frozen french fries, animal genetics, seeds, frozen entrees—I think I've covered them all. Neil, can you think of any others? Basically the entire agri-food sector is represented one way or another in CAMC.

In the day jobs of the CAMC members, whether in large or small enterprises, be they farms or food processing facilities, they are each responsible for strategic decisions on how and when to expand their businesses. It is clear that CAMC members bring a wide array of perspectives—from farmers and manufacturers, supply-managed or otherwise, from rural and urban Canada—to our vision.

They were invited by the federal ministers of agriculture and international trade to share their diverse marketing perspectives and their experience in domestic and international markets; to advise on export-oriented growth for Canadian agriculture and agri-food; and most importantly to do so with input from their colleagues, be they suppliers, competitors, distributors or customers.

They have one vision they have worked on, which you've heard from time to time, that CAMC is challenging producers and processors to focus efforts on winning a greater market share of the growth in food trade to own 4% of global agri-food exports by 2005. I'd like to read to you the full goal.

The Canadian Agri-Food Marketing Council challenges producers, processors as well as federal and provincial governments to link in arms in setting $40 billion as a sales goal in Canadian primary and processed exports by the year 2005. By doubling our current sales overall, the Canadian agri-food sector is aiming to stretch beyond current market share and to own 4% of the estimated worth of global agri-food exports. To reach this goal, our vision is to accelerate the export for value-added products—increasing primary exports to $16 billion and processed exports to $24 billion—in those product markets that provide producers and processors alike with profitable returns.

• 0910

The unifying vision is 4% market share. We've been urging all those to whom we speak, including yourselves, to use this goal in your long-term decision making, your day-to-day balancing of competing policy objectives, and the choices you make in your deliberations with your colleagues.

Economists can differ and argue about the precise numeric value assigned to a 4% goal, the exact growth rate in international trade from now to 2005, or exchange rates. These are variables that are involved in the calculation of the $40 billion figure. The fact remains that a 4% market share could equal $40 billion in export sales by 2005, and producers and processors around the CAMC table, as well as the hundred or so producers and processors we've been engaged with in symposia or in talks we've had, agree that's an achievable goal.

What are we trying to improve our share in? World trade in agri-food amounted to $209 billion U.S. in 1985 and $463 billion U.S. in 1996. The average annual growth has been about 7.9% over the past ten years. It's a growth market and the growth has been primarily in value-added product. On the chart entitled “Value of World Exports and Agricultural Products and Processed Foods” you will notice the growth in value-added product has outpaced the growth in processed product. There are some statistics there for you to take a look at.

The result, however, for Canada has been one of decreasing market share overall. We're at a crossroads. We can either continue along the 3% market share we've had for the last ten years or so, risking further shrinkage in our market share with all the consequences that has for investments, jobs and impact on the rural economy, or we can shoot for a new aggressive target.

Why do we want growth in market share per se? Practical business experience and extensive research has proven that growth in market share has a positive impact on profitability on the farm and in the processing plant, which makes job creation possible and increases the ability of producers and processors to attract capital investment. Increased market share also permits more competitive pricing, a business strength that can have a compounding effect on the sector's ability to capture an even greater share of growth. As well, the CAMC members are unanimous in recognizing that an increased market share has a very positive impact on the Canadian brand image abroad.

Finally, market share as a goal against which to assess the decisions the government makes with respect to policies and programs is a vision over which Canadians have some control. When we deal with numeric values, such as $20 billion by 2000, they are easily influenced by grain prices, exchange rates and not as much by programs and policies that are made here in Canada.

The most compelling reason, however, for CAMC to share this vision with you is the economic impact it has both on the farm and the urban centres. CAMC asked the Conference Board of Canada to do an impact study for us. The numbers were stunning. Over $20 billion would be added to our GDP should Canada reach a 4% market share by 2005. As well, there would be from 220,000 to 447,000 new jobs—not net new jobs—depending on assumptions of productivity and growth. That's the reason for the range from 220,000 to 447,000.

These are direct jobs on the farm, indirect jobs among suppliers, and induced jobs that flow from the purchasing power of employees and investors in the agriculture and agri-food sector. These are “21st century jobs”, high-tech jobs: technicians for breeding programs; financial management on the farm; food and biotechnology researchers; chemical, electrical, and computer engineers; and the technical expertise required for packaging, processing, and marketing.

• 0915

Economists may differ about the precise economic impact, but CAMC believes there are major economic benefits to be realized by reaching a 4% goal, where one reverses the ratio of primary to processed product from its current 40:60 to 60:40.

I'd like to turn to the value-added component. If you turn a few pages, you'll see our performance in the U.S. by bulk, intermediate, and consumer-oriented products categories has been quite impressive in terms of our ability to export value-added product. Together, intermediate and consumer-oriented products make up about 80% plus of the exports we ship to the United States. The balance is bulk.

However, when we look at the rest of the world, Canada's performance in the rest of the world, bulk predominates. In fact, intermediate and consumer-oriented products represent only about 20% of the total. This is why CAMC, in its goal, in its vision for the industry, has said we have to focus on exporting more value-added products to these markets to improve our trade performance. To attain that vision, Canadian farmers and processors need to reverse the current ratio of primary to processed product globally from 60:40 to 40:60.

According to the previous graph, according to our performance in the United States, we must be doing something right. What are we not doing relative to the other markets that is hampering our ability to export value-added product? The CAMC hosted a symposium of 81 leaders in agriculture and agri-food from across Canada to discuss the industry's vision and to discover what actions could be taken to advance that vision.

Many factors impact on our ability to gain market share, not least of which is if we are to have world-class products at world-class prices, we need to find ways of reducing input costs. We require improved interprovincial trade to facilitate investment in efficient scale operations. We need to continue to progress in building alliances between producers and processors. And that is probably the one requirement I hear time and time again, regardless of where we speak.

We need to continue to enhance R and D effort to improve transportation infrastructure and to enhance the use of the Canadian image, the Canadian logo, abroad instead of provincial images.

The CAMC itself, however, has sought to focus on four key determinants to the 4% goal—the 40:60 and 60:40 split component of our goal. These are: 1) market access, which pertains precisely to these “take note” hearings; 2) regulatory constraints; 3) foreign subsidies, also a function of these “take note” hearings; and 4) credible trade development programs. However, we see all four of them as being linked.

With respect to market access, the key to our collective success is to achieve better market access by reducing tariff and non-tariff barriers, such as sanitary and phytosanitary, in the next WTO round. We believe that can only be done as part of a concerted effort of federal and provincial governments and producers and processors together first identifying market access barriers of existing and potential exports, and secondly setting priorities based on the 4% goal.

These hearings are one of the major components of identifying those market access barriers. Because of the public nature of these hearings, because everything that is said on these hearings goes on to the Internet, on the Web site, producers and processors who are not ordinarily familiar with each others' market access interests are getting this information, which is available to all and sundry, at an early stage.

On foreign subsidies, CAMC members urge governments to get organized for the upcoming WTO multinationals, not just with respect to getting a better handle on market access barriers, but also by identifying actual trade support tools, not just those that are legally referred to as export subsidies under the GATT.

• 0920

On regulatory constraints, when Canada exports it exports to the regulatory standards that are maintained by the industry. Industry feels the regulatory system is under stress domestically. For example, it is stressed by different federal and provincial standards as they relate to meat inspection by cost recovery. Investors are uncertain about the direction regulatory changes may take in the future. Internationally there remains much to be done to ensure that Canadian exporters are not subject to politically based regulatory constraints that have nothing to do with the health and safety of consumers, especially with respect to biotechnology and genetically modified organisms.

To this end, CAMC is working now with the Consumers' Association of Canada to investigate a consumer-oriented regulatory system for Canada: one that has acceptance by both consumers and investors, and one that is transparent, predictable, and provides effective consultation in issue-resolution methods.

Finally, the fourth plank of the CAMC goal, of the 4% market-share goal, pertains to credible trade development programs. Until foreign export subsidies, or subsidies that impact on trade regardless of their legal status under the WTO, are no longer a threat to Canadian exports, Canadian producers and processors will need a credible trade promotion program. For example, small and medium-sized enterprises need better information on consumer preferences, product requirements, and other market conditions in export markets. Larger processors need help by governments to reduce tariff and non-tariff barriers and to counter unfair promotional subsidies provided by the U.S. CAMC is pushing hard to ensure that market access, foreign subsidy, and regulatory matters are all tied together in the trade development program.

On my final note, I'd like to leave you with the last two slides of the presentation that's ahead of you. We are already on the way toward reversing the ratio of primary to processed exports, as you can see on the second-to-last slide. As the next slide shows, we are also moving in the right direction toward increasing Canada's market share. With your help with these hearings, we are on the way toward winning a greater share of growth.

I thank you for the opportunity to clarify the CAMC vision. I know that it's been referred to by a number of the witnesses here over the last few weeks. If you have any questions pertaining to the vision or anything else CAMC is involved in, I'd be happy to answer. Though Neil's not here in that capacity, should Neil wish to intervene that would be good as well.

The Chairman: Thank you very much.

In my welcoming the witnesses earlier, I somehow overlooked the presence of Mr. Caldwell of the Cattlemen's Association. Sorry about that, Jim.

Mr. Jim Caldwell (Director, Government Affairs, Canadian Cattlemen's Association): No problem. I'm just a paid staff man anyway.

The Chairman: Yes. Anyway, welcome.

I want to remind the witnesses that we have only until 11 o'clock, so try to keep your opening presentations as succinct as possible, because time always seems to be in short supply around here.

I want to remind members that at 11 o'clock we'll have the Wheat Board officials here. I think the presentation, from my understanding, will focus considerably on foreign subsidies, something that is inimical to the grains industry, especially the grains industry in this country. So I think you'll find the presentation from the Wheat Board quite compelling, or at least I would hope so.

I think we're going to go to Mr. Neil Jahnke. Welcome.

Mr. Neil Jahnke (Chairman, Foreign Trade Committee, Canadian Cattlemen's Association): Thank you, Mr. Chairman.

I am the chairman of the CCA'S foreign trade committee. My full-time job is trying to make a living as a rancher in Saskatchewan. With me today is Jim Caldwell, who is a CCA director of government affairs here in Ottawa. I have a few brief comments and then I'm open for questions.

The CCA represents the interests of 100,000 beef producers in Canada. The beef industry in Canada contributes $20 billion annually to Canada's economy. It is the largest single source of farm cash receipts, at almost $5 billion. Each year we export 50% of our production, mainly to the U.S.

• 0925

There is little doubt that we are trade dependent. I am sure many of you are aware that we are currently involved with actions taken by the U.S. This is a very serious threat to our industry and the livelihood of beef producers. If we were to lose these cases it would result in unbelievable financial hardship.

Trade in Canadian beef has skyrocketed in the past decade. We support free trade and want to see further liberalization around the world. Canada is currently the fourth-largest beef exporter in the world. We also have the distinction of being the world's largest beef importer on a per capita basis, mainly from Australia and New Zealand. The United States is our biggest customer for cattle and beef. Over 96% of our exports find their way into the U.S. market.

The CCA wants the rules of trade made as clear as possible. I'm sure you're aware that some U.S. states used illegal trade action in stopping trucks carrying Canadian cattle into the U.S. markets. The governors of some states asked for this. It is our understanding that only federal governments have jurisdiction over international trade. However, governors were able to disrupt trade to their political advantage without reprisal or reprimand.

Canada must push for reform in future bilateral and multilateral discussions. If we expect to increase our exports of all agricultural commodities, then we must obtain meaningful gains in market access and the complete elimination of export subsidies.

There are still too many barriers to trade. We have, for example, the European Community using phony health and phytosanitary regulations to keep North American beef out of their market. Meanwhile, the EU spends billions of dollars subsidizing their producers, which results in mountains of beef being stored. And then they subsidize the exports, which means they basically dump beef on world markets. This type of action makes it impossible for Canada to compete for these markets, so we want to see an end to this type of action.

The cattle industry feels there should be an elimination of tariffs, or at least a lowering. At present under the NAFTA agreement we have free trade within the three countries involved. However, the EU continues to have very high tariffs on many commodities, including beef, which makes it impossible to enter their market. Asian countries continue to lower their tariffs, but we would like to see this accelerated.

The Canadian beef industry is prepared to accept beef from anywhere in the world, providing it meets our health and phytosanitary standards. However, we must have equal treatment from our trading partners. In the past Canada has taken the lead in taking down barriers to trade, but not all countries have followed suit.

The Uruguay Round did create trade rules. It improved predictability and some market stability for some commodities. The beef industry in Canada received a tariff rate quota of 76,409 tonnes, which means that in order for beef from countries outside NAFTA to enter Canada, they must keep within the quota. However, if more beef is required importers can get supplementary permits at no costs. Importers have received a supplemental quota each year since the agreement has been in effect.

The CCA would be willing to give up its TRQ if the United States eliminated a similar system. Canada cannot remove its TRQ without the U.S. following suit. If we eliminated our TRQ and the U.S. limited imports, the excess beef on the world market would flow into Canada. This has happened in the past when the EEC flooded our market.

The CCA is concerned about the growing trend toward using labelling of product as a non-tariff trade barrier. The United States tried recently to get a law passed that would require imported product to be labelled as such. This issue is still on the back burner in the U.S. Congress.

The CCA has always favoured a science-based approach to issues such as this, with the principal concern being food safety.

With respect to cattle arriving in a country for immediate slaughter in sealed trucks, the CCA favours the current policy whereby these cattle must meet the importing country's animal health requirements for importation and then are subject to the meat inspection regulations of the host country. These cattle can then be processed and sold as a product of the country in which they are processed. Any labelling beyond this should be voluntary.

• 0930

For live cattle imported for finishing, the CCA favours the application of science-based risk assessment import protocol that facilitates free trade while protecting the disease-free status of the importing country's herd. Once these cattle are imported, the cattle should be identified, approved permanent identification, by the country of origin for disease trace back purposes only. At eventual slaughter the cattle will be subjected to federal meat inspection and can be labelled as a product of the country in which they are processed.

For beef products that are imported, the CCA favours voluntary country-of-origin labelling and supports regulations to ensure that label claims are science-based and meet our truth-in-advertising and labelling requirements.

As mentioned, the CCA is concerned that a number of countries wish to use labelling requirements as a means to obstruct trade. It is important that Canada take a strong stand against this type of incursion on science-based rules for market access and promote policies equivalent to our own.

As I indicated at the start of this presentation, exports are the future of the beef industry in Canada. While consumption in North America may increase, the major increase in protein consumption will take place in Asia. I spent a few years as chairman of the Beef Export Federation, and I know first-hand there are tremendous opportunities in places such as Japan, Korea, Taiwan, as well as the People's Republic of China. For those that are members of WTO, such as Japan, we must encourage them to lower their tariffs and increase their access opportunities.

I would like to thank you for your interest, and I look forward to any questions.

The Chairman: Thank you, Mr. Jahnke.

Now I will turn to Ted Allen of the United Grain Growers. Mr. Allen, good morning.

Mr. Ted Allen (President and Chairman of the Board, United Grain Growers): Thank you, Mr. Chairman, members of the committee.

UGG is a long time proponent of free and fair trade. This position was reaffirmed at our annual members' meeting held earlier this month when 170 farmer delegates unanimously passed a resolution urging us to fight for a level playing field so that Canadian producers can compete in the global market. Our delegates also passed by a wide margin a resolution calling for a voluntary wheat board.

Your letter of invitation asked us to present views on the future of our industry and the role of international trade in that vision. Our position on trade is consistent with the resolutions adopted at the Canada-U.S. trade summit held in September in Banff. This summit, attended by many farmers and farm leaders from both sides of the border, adopted a number of resolutions pertaining to global trade.

We would summarize these in the following ways: first of all, on domestic support programs, we believe all programs should fall into the green box category, and the WTO should move to further clarify and tighten green box criteria. Aggregate levels of green box support programs should be subject to ongoing review to address any distortive aspects.

On the issue of export subsidies, export restrictions, and export credit sales, we feel that export subsidies should be outright prohibited, that all export restrictions should be eliminated, and that the WTO should establish clear rules and disciplines governing export credit sales.

On the matter of market access, we feel that WTO's signatories should pursue what are called zero-for-zero trade policies, that is, countries should eliminate all tariff and non-tariff barriers in exchange for the elimination of all export subsidies and export restrictions.

On the subject of state trading enterprises, state trading enterprises, whether importer or exporter, must operate at the risk of the market. Producer participation in any state trading enterprise should be on a voluntary basis.

On the subject of biotechnology, WTO signatories should establish a time-defined, science-based review and approval process for genetically enhanced products. WTO signatories, particularly Canada, the United States, the European Union, and Japan, should promote effective communication and coordination among their regulatory authorities. The WTO must ensure that biotechnology regulations are not used as disguised barriers to trade.

• 0935

Now, on some more specific trade concerns, which are consistent with the overall principles we've outlined previously, we've become very concerned about a particular area that is of major interest to Canadian and indeed to North American oat producers. The European Union has been shipping large quantities of heavily subsidized oats into the United States for some time, and this has had a tremendously depressing impact on oat prices for all North American farmers.

We find it discouraging that on some issues our trade negotiators will go to the wall, but it would appear that on a crop such as oats, which trades fairly and freely without subsidy or government intervention of any sort, that the reaction of our trade officials would appear to be less than energized, almost indifferent. To be fair to Ag Canada and the minister, we have had discussions with them, and it has been indicated to us that these issues have been raised in the past with the Americans, but we are not, of course, privy to those discussions, so we're not aware of how strongly the case has been made. We do know that to this point in time nothing new has come out of it.

It has been argued by some in Canada that what the Europeans are doing falls within the WTO rules. Our response to that is that's quite true, but while the same was true of a European shipment of 30,000 tonnes of barley into the United States, the Americans made such an international incident out of it that the Europeans voluntarily agreed to cease those shipments. Meanwhile, last year something like 750,000 tonnes of oats went into the U.S. with subsidies without any noise from either Canada or the U.S. It's our view that our trade officials need to put this on a higher level in their agenda in terms of their prioritization.

On the issue of the compulsory provisions of the Canadian Wheat Board Act, we feel, quite frankly, that all state trading enterprises, whether import or export in nature, have to be subject to competitive market disciplines and that the only way to really effectively achieve that is to make them voluntary in nature.

On the issue of improved worldwide access for genetically enhanced crops, there are, of course, legitimate concerns about genetically enhanced crops from a safety standpoint and some other labelling points of view. Nevertheless, it is very clear that genetically enhanced crops provide the world with the opportunity to feed in a more reasonable manner and to produce greater volumes of food at a price that some of the world's poorest people can more easily afford. We have seen examples to this point in time where regulatory authorities in Europe and Japan have, in our view, used health and safety concerns as ill-disguised barriers to free trade. So we think that these issues need to be very much on the burner in terms of our future approach to WTO negotiations.

Finally, I would say that as we enter the next round, Canada must strive for improved market access, the elimination of export subsidies, the elimination of trade distorting domestic policies, and greater market disciplines on state trading enterprises. We think Canada must also abandon its previous schizophrenic approach to trade policy. We cannot on one hand promote protectionism and single-desk selling, and then on the other hand expect to wring any meaningful concessions on export subsidies or other trade-distorting activities.

• 0940

I would conclude my remarks, Mr. Chairman, by sharing with you some of my experience in the last round. I went though the whole process. I was with our people in Brussels when the Uruguay Round failed, and I was with them in Geneva when we finally succeeded.

In my view, we insisted right to the end on pursuing objectives that 12 months earlier were obviously doomed to failure. As a result, Canada didn't have the kind of impact it could have had on those negotiations. The major victims of that failure to be realistic in that round were grain and oilseed producers, as well as some of the livestock interests in western Canada.

Thank you very much for your time.

The Chairman: Thank you, Mr. Allen. Thanks to all of you.

We have just over an hour and fifteen minutes for questions, so let's get to them right away. We'll begin with Mr. Hilstrom. Seven minutes, please.

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

I'll start off with Mr. Allen, if you could answer this question. It looks to me as if major grain companies, including, for example, Sask Pool, are putting out international agreements around the country setting up large terminals and what not. In Colombia, for instance, Sask Pool put up a new one in conjunction with a company down there.

It looks as if they're preparing for the global market, which they are. It would appear also they're setting up for the ultimate demise of the Canadian Wheat Board. Would a voluntary Canadian Wheat Board create better access to U.S. markets for Canadian producers, and if so, can you tell us how much?

Mr. Ted Allen: This is of course a multifaceted question. I would start off by saying that one of the difficulties that a single-desk seller that is a creation of the crown has in dealing with international trade issues is they are more easily influenced, if you like, by international trade issues. One hundred and fifty thousand farmers in western Canada are much more difficult, I would say, for the Americans to lobby, if you like, and influence in subtle ways.

Any kinds of disagreement about trade would in that instance have to be very much transparent and open. It would make them more difficult to pursue outside of the context of the normal type of trade agreements that are in place. It's important to recognize our exports to the United States have not breached either the provisions of the NAFTA or the WTO rules. We are in compliance, yet the Americans have continued to use our exports for political reasons.

In regard to your larger issue of the future of the Canadian Wheat Board, I'm a supporter of the concept of a voluntary board. I think there's a place and a role for it. I compare the current single-desk approach to the board to the old approach toward the continuation of the Crow. When it was obvious the Crow could not continue in its present form, there was a period of resistance and delay that lasted about 10 to 15 years before the issue finally was dealt with. When it finally did get dealt with, western farmers really didn't extract nearly as much out of that trade-off as they would have done if there had been a more constructive and collaborative approach earlier.

I think the same thing is true with the Canadian Wheat Board. The longer we resist the need for obvious changes, the more at risk the organization is in terms of its very existence.

• 0945

Mr. Howard Hilstrom: Thank you.

Mr. Jahnke, the Americans have said that on December 6 they're going to start blockading the border again. North Dakota's farmers have said that, as reported in the press, and they've said this previously. What should our government be doing? Should they be taking action right now, or waiting until the blockade goes up?

Mr. Neil Jahnke: I'm not a politician or a bureaucrat, so I really don't know what position you could take, but I think there's expertise within government that should determine when to take the action. We obviously can't hold still for it. As you know, we're fighting a countervail and an anti-dumping suit with the Americans right now. I would think if they win, they won't be blockading the border. If they lose, they will.

We started with the labelling issue in July. When we win one or get it put on a back burner, they come up with another deal. So yes, obviously we need government help to keep that border open.

Mr. Howard Hilstrom: In regard to beef and the natural growth hormones we use in our feeder cattle, Europe has been ruled against two or three times in regard to their obstructing or not allowing our beef in there. Should that be a major issue before any further discussions are held on this, certainly with the European Union, that they have to start to comply with the rulings that are already in place?

Mr. Neil Jahnke: I think that's a priority and a must when we have a ruling. The Europeans were ruled against on the hormone ban, and then they ignored it. I mean, what do we have rules for? Have we got too many rules, so that we can't enforce them? Let's have rules and let's enforce the rules.

Mr. Howard Hilstrom: Mr. Frosst, do you know if we have U.S. dairy products such as cheeses and industrial milk coming into the country?

Mr. Myles Frosst: To be honest, I'm not certain about U.S. dairy products. No, I can't... Yoghurt indeed is coming in. And I know I'm...

Mr. Howard Hilstrom: Is Canada going to end up with some kind of trade barrier due to the fact that BST is licensed for use in dairy products in the United States and not up here? When we try to start exporting into the U.S., are we going to have some trade problems because Canada is saying no, you can't have milk products coming up this way?

Mr. Myles Frosst: At this stage this is one of the reasons CAMC has decided to start a process of finding out what the consumer-oriented regulatory framework would require. So yes, we could end up having such a problem.

The Chairman: You have 30 seconds, Howard.

Mr. Howard Hilstrom: Thirty? Is that it? Not if you're going to give me more time.

The Chairman: You've lost about 20 seconds. I'll give it to you on the next round.

Mr. Desrochers, you have seven minutes.

[Translation]

Mr. Odina Desrochers (Lotbinière, BQ): I would like to start by thanking the witnesses for their briefs and their comments on the importance of treaties with respect to globalization and foreign markets.

Mr. Frosst, can you tell me what proportion of Quebec products your statistics include?

[English]

Mr. Myles Frosst: In respect to the 4% market share, that's an aggregated statistic. It has not been broken down by province at all. However, we have desegregated it by product or process product. Sitting on CAMC, however, are members from Quebec, including, for CAMC as a whole, supply-managed products, which are well represented in Quebec. But no, it hasn't been broken down. We haven't done the work by province specifically.

[Translation]

Mr. Odina Desrochers: You say that you promote and market products abroad. What is the proportion of products that come from Quebec, and I am referring to actual amounts, not your projections?

[English]

Mr. Myles Frosst: I'm sorry, I do not have the statistic on total Canadian exports that are represented by Quebec. I can get that for you relatively quickly.

• 0950

[Translation]

Mr. Odina Desrochers: That is very kind of you.

Now, with respect to the steps you want the Canadian government to take, you are aware that Canada is currently the country that has done the best job of complying with the agreements that flowed from the Uruguay Round negotiations. It has reduced its domestic support measures as well as its export subsidies.

What can the Canadian government do, now that it has complied with the conditions of these agreements in the first phase, while Europe and the United States are much slower to comply with the agreements that were concluded during the Uruguay Round negotiations?

[English]

Mr. Myles Frosst: Of primary importance to the CAMC members is to ensure the past agreements are complied with and we push that continuously and make it a key priority for our negotiators and the Canadian government generally. When it comes to market access under TRQs, for example, we should ensure the United States and the European Union are living up to their commitments to make minimum access cleaner into those other countries.

[Translation]

Mr. Odina Desrochers: My question is for all the other panel members. You know that during these negotiations we win some and lose some; we try to negotiate a win-win situation. Canada has taken some rather interesting steps to comply with these agreements, but other countries like the United States and Europe still have work to do. If we want to start on an equal footing, how will we need to proceed? The other countries should not be allowed to continue to disregard these agreements while Canada complies with them.

The Europeans are currently very closed to these ideas. You talk about modifying the sanitary and phytosanitary barriers. I think that is where we have met with the most difficulty.

While complying with the Uruguay Round agreements, what stand will the Canadian government take if the other countries still have not implemented the agreements that they concluded several years ago?

[English]

Mr. Ted Allen: You understand this is not an area in which I personally or our company have a lot of expertise. But it is our understanding that the strategy of supply management in this round will be to try to raise the sanitary and phytosanitary issues as a way of diverting attention from tariffs.

In the larger context, if it were up to me I would not adopt that strategy, simply because I suspect the whole thrust globally is going to be one of tariff reductions. I alluded in my opening remarks to what happened when Canada insisted, despite all the evidence to the contrary, we were going to strengthen and clarify article 11. We went over the cliff saying that and got absolutely nothing out of it.

If I were in their position, it would be much more realistic to try to craft some kind of alternative strategy that would ensure the long-term prosperity of those industries within the context of a global environment, which is clearly coming. I think Canada has some great advantages in some of those industries, but we have to be flexible enough to find our role in this larger environment.

[Translation]

Mr. Odina Desrochers: Mr. Allen, what would your alternative strategy be? You talk about a strategy. What would this strategy be? What do you suggest?

• 0955

[English]

Mr. Ted Allen: We should find a way to de-monetize the quota system and allow the expansion of individual facilities in a way that gives them the economies of scale that will allow them to compete. We have some great natural advantages in Canada that will allow our industries to compete very effectively in an international marketplace, if the subsidy regime elsewhere is brought to a very low level.

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

Mr. Calder, seven minutes.

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

I'm telling you, Ted, you're getting close to some very fighting words as a chicken farmer.

Let's talk about subsidies first. We have lowered ours, especially in supply management. We've flatlined at 85%. We've already committed to that. Yet in the United States they've increased their subsidy level for 1998 by $15.3 billion. That's in one year. So I'm really worried about us going into the next round of negotiations.

Let's call negotiations what they are: it's the barter system. I'm going to give away this if you give away that; you'll give away that if I give away this. We've been the good guys about this, and quite frankly I think we're behind the eight ball right now because I've heard the philosophy put forward in front of this committee that we'll tread water while everybody else catches up to us. I'd like your comments on that.

Mr. Ted Allen: I don't think we'll be allowed to do that. We should think about the end game, and if the end game is zeroing out quotas, at that point everybody will be on an equal footing. The difficult part of the process is going to be how to maintain a competitive position as you go down that road. But at the end of the day, if everybody has zeroed out their tariffs and you have a very clear trading regime in terms of non-tariff barriers—and this includes sanitary and phyto-sanitary kinds of regulations—I think Canada will be in a great position. We are a major trading nation in agriculture and in many other products, and we stand to be a huge beneficiary of a freer trade environment.

Mr. Murray Calder: But that's not true. In 1994, when this was signed, the philosophy was that low prices would stop low prices, meaning I can't produce something for nothing for a period of time or I'm going to go broke. Yet low prices exist in the commodities right now because the United States is subsidizing and Europe is countering. You just have to go to the web sites of USDA to find that out. I have a whole litany of stuff right here they've just brought in over the last couple of years. So they're still doing it.

Mr. Ted Allen: But think about what you've just said. We don't have low prices for European farmers. We don't have as low prices for American farmers as we have for Canadian farmers. So with your preamble on the old market dictum that low prices are a cure for low prices, we have selective low prices—Canada, Australia, and Argentina have low prices. The European farmer, and to a lesser extent the American farmer, do not have low prices.

Mr. Murray Calder: If you want to get into that, right now income in the United States, France, Spain and Italy is all up, but it's down in Canada and Australia because basically we're not matching—I don't know whether we can afford to match—what the United States and Europe are doing.

I want to go on to something else here with CAMC. You say you're here on behalf of both the farmers and the food manufacturers. I have a question. The pork people, for instance, were encouraged over the last few years to increase production because we wanted to go after those international markets. Yet pork farmers are phoning me on a regular basis right now saying they're basically selling their pigs for about $53.50 an animal, going out the door. They're losing about $50 to $60. Yet I don't see the wholesale price coming down.

• 1000

Somebody is profit-taking here, and I'll go so far as to say I think that somebody is the processors. If we're going to have a partnership here between farmers and food manufacturers to go out and actively take on international markets, which I have no problem with, where's the fairness?

Mr. Myles Frosst: It's not just the processors. The processors will tell you the retailers are taking the profit on it as well, and we don't—

Mr. Murray Calder: We've had the retailers here, and they say that's bull feathers.

Mr. Myles Frosst: In CAMC we have producers who, notwithstanding the disastrous drop in hog prices, continue to say our only long-term solution is to increase our market share, to increase exports. On the CAMC table at least, those very same hog farmers who are suffering are still pointing out that the only long-term solution is to continue to export through more value-added product.

Mr. Murray Calder: The thing I can't understand here is that for the last year the pork farmers have been bleeding red on their balance sheets because they're selling their product at a loss. So their farm gate price has done that. The wholesale price is still doing this and the retail price is right above it.

If you take a look at the supply-managed sector within agriculture, we're the only people who don't have a problem right now. Why? It's because we have planned production. Our farm gate price is doing this, the wholesale price is doing this, and the retail price is doing it right above—

Mr. Neil Jahnke: Where are the exports?

Mr. Murray Calder: And in fact we're more competitive now than it is in the United States.

Mr. Myles Frosst: It's true, Charlie; I have the facts and figures.

The Chairman: Just a few seconds, Mr. Frosst.

Mr. Miles Frosst: Without getting into the deep waters of supply management, what is reinforced in CAMC time and again is the need for better alliances between producers and processors. The members all point out there would not have been alliances five years ago or so. CAMC is one method toward building that alliance.

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

Mr. Proctor, you have five minutes.

Mr. Dick Proctor (Palliser, NDP): Mr. Frosst, I think your CAMC proposal to increase global agri-food exports by 2005 to 4% is quite similar to that of the provincial and federal ministers of agriculture. I think there's a meeting of the minds on that.

How can you increase market share by that amount if farmers can't compete with their American and European counterparts?

Mr. Miles Frosst: With respect to the federal-provincial ministers agreeing to that goal, that was one of the steps of CAMC to present it to them and work with them to take it on board.

On export subsidies, it is a key plank of CAMC that we cannot compete with foreign treasuries, and export subsidies must be one of the major issues going into the next round, and before then as well. However, we do say that to the extent possible we should have at least better fine-tuned trade development programs to assist Canadian exporters.

Mr. Dick Proctor: Can you elaborate on what you mean by better defined programs?

Mr. Myles Frosst: Okay. Particularly for medium-sized Canadian processors that do a hell of a lot of business with Canadian producers, one example would be product testing: the ability to have some assistance from government to go to foreign markets to test the product and the packaging requirements for that specific market and determine whether or not it meets the consumers' needs. That's a program that is not currently available to medium-sized businesses.

Mr. Dick Proctor: Does your organization feel you have a problem competing with other countries because there are so many charge-backs to the producer and the processor in this country, and that might not be the case in the United States or other countries?

Mr. Myles Frosst: CAMC has been up and running for a year. Early on in the game cost recovery was raised as an issue, but I'm sorry we have not pursued it further than that. It was raised and we just haven't had time to define a position on it.

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Neil, who has been around the table, can correct me, but, yes, cost recovery would be an issue, but I have no numbers on it.

Mr. Dick Proctor: The people around the table, aside from yourselves, are politicians. We're always interested in trend lines. The trend line, frankly, in your own stats indicates that there has been a decreasing market share in Canadian agriculture for about the last 30 years. So why the optimism that you can increase it to 4% over the next seven years?

Mr. Miles Frosst: The argument we present is that it has been decreasing because while the demand for total agrifood product, primary and processed, has been increasing, according to one of the graphs you'll see in my package, we have not until most recently been increasing our value-added shipments. So that's why. We haven't been meeting the type of demand that has been growing, which is precisely why the 4% market share is only achievable if we reverse the current ratio of value added to primary product.

Mr. Dick Proctor: Did you want to pick up on that, Mr. Jahnke?

Mr. Neil Jahnke: Yes. I think beef is a good example. We used to export feeder cattle. Now we're exporting boxed beef. So with the value added and we're supplying the labour here, it has made a tremendous difference in our dollar exports.

Mr. Dick Proctor: But the allusion to the December 6 blockade in North Dakota would suggest that at least American farmers don't see that kind of processing taking place north of the 49th parallel. What can we do, if anything, to change their mindset on that? Now, there's some suggestion that there are American cattle coming north for processing. Can you tell us what's happening there?

The Chairman: Mr. Jahnke, please give just a short answer, because we're running out of time.

Mr. Neil Jahnke: Jim can probably tell you better than I can, but yes, we're bringing feeder cattle in from the United States, we're bringing fat cattle in to be slaughtered, and we're importing barley. I think the big hullabaloo in the Dakotas and Montana is simply because they see our trucks going through, and it's the lack of information. They don't know about all the beef that's coming into Ontario. So maybe we have not done a good job of explaining to them what the real situation is.

As I said earlier in my comments, we want trade and free trade.

The Chairman: Just before we go to Mrs. Ur, Mr. Jahnke, we've heard from retailers and processors who say that they're not benefiting from low commodity prices. How about members of your association? Do your members benefit from low grain prices?

Mr. Neil Jahnke: As a cowboy, and a long-time one, I always hate to see grain prices get low, because I know there's a bad time coming for me. In the short term it puts money in their pocket, but it's not good in the long term. We don't like low grain prices.

The Chairman: Thank you.

Mrs. Ur, five minutes.

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

Mr. Frosst, you said you have 24 members in your agency, and they're producers and processors. What percentage on that board are producers?

Mr. Miles Frosst: At the moment it's about 45% producers, 55% processors. We're just slightly shy of a 50-50 split.

Mrs. Rose-Marie Ur: Are all producer groups represented on that board?

Mr. Miles Frosst: To the extent that you can with 24 individuals represent the entire agrifood sector, yes. We are in the process of trying to have a few additional members.

Mrs. Rose-Marie Ur: Right. Do you think it would be a wise idea to set up profit margins, say, with the primary producer, the processor, and the retailer?

Mr. Miles Frosst: As part of the goal?

Mrs. Rose-Marie Ur: Yes, so that if prices drop, it's reflected in all sectors, such as what we're seeing in the hog industry right now. I had the great pleasure of going to the grocery store, and you said that things weren't difficult there. I can say that the price of pork hasn't dropped at the grocery store, and you said that the retailers aren't taking it into consideration. I took the time to talk to my meat managers, and they said the wholesale prices have not dropped. So I don't know who's telling me the truth here.

Mr. Miles Frosst: No. All I was trying to say is—

Mrs. Rose-Marie Ur: So someone's making money. It's not the hog producer.

• 1010

Mr. Myles Frosst: I wasn't contesting that. I was just saying that the processors will say that it's the retailer that's making the money. That was the only reason for raising that.

You look confused. Maybe I misunderstood your point.

Mrs. Rose-Marie Ur: If you're here to work together for the producers and the processors to make sure this export market expands, would it not be a good business plan, to put it more simply, to have a profit margin with the farmer, with the processor, and with the retailer?

Mr. Myles Frosst: We did an economic impact on jobs and on GDP. We are just now doing research on the net farm income impact of reaching the 4% goal. With that additional information, that would become part of the daily discourse in and around the 4% goal.

Do I think that the 24 members would set profit margin as part of a goal? I'm not certain about that at this stage.

Mrs. Rose-Marie Ur: You're saying that you're hoping to increase the number of jobs from 220,000 to 447,000. Are you still predicting that you can expand the number of jobs with the same number of primary producers if you're not willing to go to that kind of a business plan? Will that primary producer be able to sustain those added jobs, or will those jobs be coming from products outside of Canada?

Mr. Myles Frosst: No. Actually, those additional jobs are split 50-50 between processor and primary producer, in other words, additional jobs on the farm and in and around the farm, and additional jobs at the processing level and in and around the processing level.

I think one way in which I could interpret what you're saying is that part of the goal is that this be done for those markets that are profitable only for both producers and processors, which is the reason I read the entire goal to you. We have not quantified that last part in those markets that are profitable to both producers and processors.

Mrs. Rose-Marie Ur: You may not feel comfortable answering my next question. We had presenters here a while ago from the retail sector, and they said their profit margin was about 4% to 5%. What is it for the processors?

Mr. Myles Frosst: I don't know.

Mrs. Rose-Marie Ur: Would that not be something you should be on top of?

Mr. Myles Frosst: It should be something I—

Mrs. Rose-Marie Ur: If you could at some time provide that to the committee, I think we would probably all like to see that.

Mr. Myles Frosst: It's dead on. It's right on, and I will pursue it.

Neil.

Mr. Neil Jahnke: There has been much said here about the retail price versus what the farmer is receiving. I'm a cattle producer, I have been all my life, and there are about eight profit centres in that old cow. Personally, when my price drops at the farm gate, I don't want to see immediately a drop at the retail store, because somebody else in between has to take a profit. There are accusations that packers—and I'm certainly not a packer—have been making a tremendous amount of money and ripping people off, blah, blah, blah.

The beef industry—and I don't know about the pork industry—took substantial losses for many years. So now it's their turn to make a profit.

If you lower the price of my commodity, which is beef, in the supermarket, it's easy to lower it, but ma'am, let me tell you, it's awful hard to raise it again after you have lowered it, and it just drags the whole thing down.

The Chairman: Thank you, Mrs. Ur.

Mr. Hoeppner, five minutes.

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

I want to talk to Mr. Jahnke, first of all, because beef men are very much private enterprisers. About a year ago I think you came out in favour of maintaining the single desk system so that you could maintain a feed supply. I had a hog producer come to me in 1997, and he ripped the daylights out of me for trying to make the Wheat Board accountable. I asked him, how many Wheat Board grains do you grow? How much do you grow? He said “I just grow barley for my hogs, and I want to maintain cheap feed grain prices”. Well glory be, he has them. Today he's probably drowning in them. So that is what happens when you upset the market system.

Now, is your idea still the same, that the Wheat Board should be there to maintain your supply?

Mr. Neil Jahnke: This was never the position of the Canadian Cattlemen's Association. It was one individual member of CCA who made some statements the organization does not necessarily agree with.

Mr. Jake Hoeppner: So was that corrected in the media? I haven't seen very much published.

Mr. Neil Jahnke: Yes, it was definitely corrected in the media.

• 1015

Mr. Jake Hoeppner: You're still the free enterprises that we were led to believe you are.

Mr. Neil Jahnke: You bet we are.

Mr. Jake Hoeppner: Super. We've accomplished something.

I always say that to get the market or the farm gate prices up, if we took all our retailers and manufacturers and had their wages tied to the farm gate price, wouldn't that solve a big problem?

Mr. Neil Jahnke: It sure wouldn't politically, because I think there'd be a lot of hollering.

Mr. Jake Hoeppner: There sure would be, I think.

I want to get to Mr. Allen next. He's in the grain business, and I would like for him to comment on what he feels the prices will do in the next six months.

I was in Regina here just a week or two ago talking to one of the farmers, and he was telling me that he deals through a multinational in his area and they told him if the Wheat Board wasn't involved they could move every bushel of durum that farmers in western Canada had grown. There's a market for it and a fairly decent price. Do you agree with him?

Mr. Ted Allen: I don't have knowledge of whether he's right or wrong, so I don't have expertise in that particular area at this point in time. I think that it's interesting to see which crops have had very attractive prices in the last while and which crops have been relatively depressed.

Canola and flax, and to a lesser extent oats—if we could get rid of the subsidies it'd be much more attractive—but also peas and lentils, those crops, have had pretty attractive returns. It's basically been wheat and barley that have suffered the most.

I think that the so-called farm crisis the Americans have down there is a function more than anything of the current strength of their currency. They have a very highly valued dollar. For what you're getting now for wheat, if every $3 translated into $2, you'd be even less happy than you are now.

Mr. Jake Hoeppner: The other question I have, Mr. Allen, is that we grown quite a bit of durum. We have 25,000 bushels of durum lying around right now, which was downgraded to a 3CW when we combined it because of some fusarium in it again. Then, when we started hauling it it turned into a 5CW because it had some ergot in it. I instructed the boys to leave it in the bin.

We went to the Canadian Wheat Board to get a buy-back. And do you know what the buy-back is on number 5CW durum, which has the initial price of $1.57? Have you got an idea of the buy-back is?

Mr. Ted Allen: It'd be in the dumper big time.

Mr. Jake Hoeppner: It's $5.12. Now, if that is the buy-back, if that is the price you people can get for this grain, because farmers and grain companies are supposed to be treated equally on the buy-back, why don't we have initial prices around $3.50 or $4?

Mr. Ted Allen: You're going to have Mr. Hehn appear before you next time around, so I guess that's the place to ask the questions about the board's operations.

Mr. Jake Hoeppner: You deal with the board. You export all the grain into the U.S., don't you, or the majority of it?

Mr. Ted Allen: No. We are an accredited exporter; we get our share. And generally that's a kind of a back-to-back transaction, where we get a price from the board and a price from the buyer and we take a very small margin as an intermediary.

Mr. Jake Hoeppner: Your margin wouldn't be from $1.57 to $5.12.

Mr. Ted Allen: No, it might be more like a couple of cents.

The Chairman: Thank you.

Just before we go to Mr. McCormick, Mr. Allen, in your opening remarks you said that Canada had showed concern when there was a sale of subsidized European barley to the United States, but that the same kind of concern has been lacking when it comes to sales of subsidized oats. I'm wondering whether you could, in a few words, explain that dichotomy.

Mr. Ted Allen: I didn't explain myself very clearly. I said the Americans, on 30,000 tonnes of subsidized EU sales into the U.S., created almost an international incident over it. Meanwhile, there were 750,000 tonnes last year, and already well over a quarter of a million tonnes in this current crop year, that have gone into the U.S. with subsidies with nary a ripple.

• 1020

I think there are a couple of reasons for that. One is there is not an organized oat organization in the U.S., as there is for barley, so I suspect that the... You'd know more about this than I would. I suspect the organized groups tend to have more of an impact on politicians perhaps than people who aren't organized. I think, though, that in this case also Canadian oat producers are having a severe impact on their exports, because these are European Union oats that are depressing the North American marketplace and replacing Canadian oats. There's a twofold impact.

I think it's up to Canada to raise this issue with the U.S. and make common cause with the American people. This is an issue where there's some kind of ability to create a common front toward the Europeans on these massive subsidies they have been providing to the U.S.

The Chairman: So I misunderstood you. You were alluding to American behaviour, not to Canadian behaviour.

Mr. Ted Allen: I think the Americans will not energize themselves on this issue. It's a North American issue, and Canada needs to play a lead role in energizing both our negotiators and the U.S. on this issue.

The Chairman: Thank you for that.

Mr. McCormick, five minutes.

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

Thanks for being here, gentlemen. I know I came in late, went out and back in. I had my first phone call at 7 o'clock this morning, as many people did, on the farm crisis, and then we had a meeting from 7:30 until 9 o'clock. So we have been there.

I have a question for Neil. As you mentioned, Canada is a great trading nation. It always overwhelms me that there's a billion dollars a day going across the Canada-U.S. border, both ways combined, and it's so good that we're winning in many cases, such as the auto parts and that. And you mentioned that things are changing for the better, which are jobs, feeder cattle in, boxed beef out, barley in. I'd like to hear more about the barley in.

I remember one day in the House about two or three years ago, one of my colleagues from New Brunswick asked the minister—it was a good question—about the subsidized beef imports. He asked how much were we going to let in the next year. The minister answered that the amount is being reduced every year. It wasn't the present minister. It was another friend of mine from your province, who was the minister at that time.

I wanted to ask the question a year later, but I didn't get the opportunity. But I would like to hear from you whether these subsidized imports are on the decrease or not. That's the first question I have.

Mr. Neil Jahnke: Yes. In fact they were virtually eliminated at one time. The only beef that comes in that's subsidized is from the EU, and I'm not sure what they're allowed now, Jim. It's a minimal amount and it's—

Mr. Jim Caldwell: There isn't any subsidized beef coming in from the EU at the present time. With the present problem of BSE, of course, it can't come from the U.K. But there hasn't been any come in, basically because it's not profitable for them to ship here because the price would be too low.

Mr. Larry McCormick: Thank you.

Mr. Jim Caldwell: But we don't have any safeguard any more on EU beef, you're right.

Mr. Larry McCormick: At the moment, we don't need it, but what the future will hold could be another story.

I met with a gentleman from Australia the other evening. He was going to Alberta to speak to a group, and I said I'd like to know what he was going to say. He said “You might not like what I say”, and I said that's okay. I'm still waiting to get the minutes of what he said. It seems very hard for us to compete sometimes in Canada with the grain that's grown in Brazil or Australia.

My question for my rancher friend here... Neil, I'd love to hear you include in your answer what kind of cattle you raise. It may be mixed. I have a couple of acquaintances who have a lot of Galloway in your province, so I have some fond memories of Saskatchewan, the Pennant area and that. But can we compete? We always talk about the climate, we talk about everything in place. But take the subsidies away, can we compete with Australia? Can we compete with Brazil, and so on?

Mr. Neil Jahnke: Yes, we can, and we can compete very effectively. And I know your Galloway friends very well. They're neighbours of mine. But yes, there's no question, we have some distinct advantages. The cold climate that everybody complains about is actually a real benefit to the beef industry. We don't have to raise eared cattle. We eliminate a lot of diseases.

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We're in the breadbasket of the world. We should be raising more cattle and growing less grain in western Canada. Yes, I can compete with anybody in the world, except governments. And by that I mean subsidized products from other countries.

Mr. Larry McCormick: I agree with you. You're a small-business person—I recognize you're a business person, and I hope most or all of my colleagues realize that farming is a business. And what I hear many times from small-business people is that the best thing we can do quite often is get out of their way and let them go about their business.

Mr. Neil Jahnke: I agree.

The Chairman: You have 30 seconds.

Mr. Larry McCormick: I'd like to hear a comment on this barley that's being imported into Canada. I realize we have two-way trade, but it just caught my attention there, Ted. Could you could share that with us?

Mr. Ted Allen: Well, it was ironic that while the Americans—and I think it had as much to do with their congressional election as anything—

Mr. Larry McCormick: Yes.

Mr. Ted Allen: —were blockading Canadian trucks and really raising a stink, probably one of the largest sales of U.S. barley in recent years into Canada was being executed. It was going into the southern Alberta area. This is a good-news story, by the way, because more and more value-adding is going into barley in Canada, especially in the western prairies. It's going into beef, hogs, the production of malt, and a variety of uses, to the point where Alberta will probably be a net importer of feed grains in the not-too-distant future.

The Chairman: Thank you, Mr. McCormick.

Mr. Desrochers, you have five minutes.

[Translation]

Mr. Odina Desrochers: I would like to pick up the debate on market globalization issues where we left off earlier. We talked about market access, reducing subsidies and reducing domestic support measures.

I participated in a Cairns Group meeting and I am somewhat familiar with the positions of New Zealand, Australia and Brazil. The purpose of today's hearing is to give the Canadian government a voice: what do you want the Canadian government to negotiate on your behalf? I remind you that the negotiations will not be on an agricultural sector-by-sector basis, but by segment.

This leads me back to the issue of reducing tariffs on sanitary and phytosanitary barriers. The Europeans are unaccommodating and the Americans are the watchdogs for their country. What do you suggest Canada do to equip itself with the tools it needs to truly undertake these negotiations? Anyone can answer.

[English]

The Chairman: We have a conspiracy of silence here. Go ahead, Mr. Frosst.

Mr. Myles Frosst: The very first thing Canada can do is exactly what it's doing at the moment, and that is that, I'd say for the first time, far more so than in the previous round, producers and processors—supply-managed and non-supply-managed producers—are coming to grips with what each other needs out of international trade. They are sharing their views and working together. I mean, you have a meeting out in Alberta where supplied-managed and non-supply-managed groups were discussing export opportunities and various tactics with CAMC, where that discussion is going on. You've got that discussion going on here. You see the processors and producers coming together within the Chicken Farmers of Canada. You see the dairy industry working on the optional export program.

Much more so than in the previous round, the various camps—the various political forces—are coming together and trying to work out a position. In the course of doing so, of course, they keep their extreme positions in their pockets. But this sort of process, and others that are going on throughout the country, is helping to prepare a Canadian position that can be used. It's the first thing that needs to be done, and it's being done.

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Mr. Ted Allen: I'd like to add one other suggestion. I think it is very important that a mid-size country such as Canada seek out allies and make common cause with them on a number of these issues. Whether the Cairns Group is the proper vehicle or there needs to be a new coalition put together, I think the only way that voice is going to be strong and meaningful is if we in Canada have a coherent and logical approach and we seek out a lot of allies in the process to make a larger voice.

[Translation]

Mr. Odina Desrochers: Do I have any time left?

[English]

The Chairman: You have a little more than a minute.

[Translation]

Mr. Odina Desrochers: I appreciate your answers a lot, but they are highly conceptual. I would like to hear about concrete means: consult, do, etc. We know the talk. With respect to the three main points, market access, reducing subsidies and reducing domestic measures, what is your position and what suggestions would you make to the Canadian government? That is what I want to hear.

[English]

Mr. Ted Allen: Let me go back to what we did wrong the last time, and hopefully we learned from that mistake. Canada had an opportunity leading up to the Geneva resolution, about six months prior to that, when the United States was very interested in doing bilateral deals with individual countries as a way of strengthening their bargaining position with the EU. At that time there were significant concessions that would have been available to Canada, I personally believe, if we had done a bilateral deal with the U.S. on, for instance, grains and oilseeds. We didn't choose to do that.

After the GATT was done, we had all of a sudden all these cross-border disputes with the U.S. over durum wheat and certain livestock products. I think those could have been very largely avoided if going into that round we had done a bilateral deal with the U.S. when the U.S. had a strong interest in doing one.

The Chairman: Thank you.

We'll go to Mr. McGuire, followed by Mr. Breitkreuz.

Mr. Joe McGuire (Egmont, Lib.): Thank you, Mr. Chairman.

I have a question for Mr. Allen.

You mentioned biotechnology in your presentation. It's been said Canada will not reach its goal of doubling its exports without the assistance of biotechnology. Where do you see Canada putting its resources, or how many new resources should Canada put into the industry? And where should those resources be pointed to, or who should be supported here?

Mr. Ted Allen: Well, I think government does a very poor job of picking winners and losers. I do think Agriculture Canada has the right approach on these and other issues related to research in seeking out and finding partners who are willing to put up their own money to back their beliefs. Talk is cheap, but money buys whiskey. If companies and organizations are willing to put up their own money in some kind of matching arrangement with Agriculture Canada, you know they're serious and they really believe there is something to be gained.

Now, in research not all investments turn out well. If you have two or three in ten, you've got a good winning percentage. So by doing the funding of biotech research in that way, and seeking out partners in biotech, I think you absolve civil servants of the very difficult task of picking winners and losers, in which their track record, quite frankly, has been abysmal. Because you find the projects that get funded are not on the basis of who has the best project, but who has the best salesman to promote the project. That's a personal opinion.

Mr. Joe McGuire: The system that's been set up, say in Saskatoon with grain...

Mr. Ted Allen: Right. Innovation Place.

Mr. Joe McGuire: Innovation Place. Do you see that type of model being enhanced?

Mr. Ted Allen: I think that kind of venue is useful in the sense of gathering together a critical mass of people who have skills that are synergistic, if you like. I think that's the main benefit of a place like Innovation Place.

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Mr. Joe McGuire: In the WTO discussions over the next number of years, it will be a hot topic among the negotiators. Right now, we can't get some of our canola into Europe.

Mr. Ted Allen: Right.

Mr. Joe McGuire: What can Canada do here to bring down those types of barriers?

Mr. Ted Allen: It's a fascinating subject. It's one of those things where innovation and the development of new products has gotten ahead of government and the regulatory capacity in terms of wrapping their minds around what it was and how they dealt with it in their own country. The next layer of problems is about how you can harmonize international views on some of these things.

So you're right. I don't think the Japanese problem was one where they were really using it as an impediment to trade. I really think they just hadn't expected this stuff to come down the pipe quite so rapidly.

With the Europeans, I think it's different. I think the Europeans are using biotechnology concerns as convenient excuses to restrict trade.

The Chairman: Is that it?

Mr. Joe McGuire: Mr. Frosst?

The Chairman: Oh, I'm sorry. Go ahead, Mr. Frosst.

Mr. Myles Frosst: I just wanted to put a domestic spin on that as well. CAMC members are united in pointing out that genetically modified organisms and other biotechnology issues are something that need to be worked on in international fora.

But at the same time, in response to what the government can do, it can also assist the industry, producers, and processors within Canada to help explain the benefits of biotechnology to the Canadian public. No matter how science-based the regulations may be with respect to our ability to export biotechnology, if the Canadian consumer isn't buying into it, then the Canadian producer doesn't have a domestic base from which to work. So there's a domestic marketing angle to this issue as well.

The Chairman: Thank you, Mr. Frosst.

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

Mr. Garry Breitkreuz (Yorkton—Melville, Ref.): Thank you very much, Mr. Chairman.

Thank you very much for being with us here today.

The present agricultural crisis really highlights the importance of what we're doing here. I've been reflecting on what's been happening here for the last couple of weeks. What concerns me is that we're fighting among ourselves. The supply-managed industries, STEs, grain producers, value-added industries, and so on, seem to be staking out their territory.

Do you feel we need some strong leadership here to prepare us for the next round of negotiations to bring these various groups together? Farmers see that there are some real problems—look at the present farm income crisis—with subsidies by other countries. If we're going to have a powerful negotiating position, we're going to have to develop that here.

In the last ten minutes, with all fairness, we've been talking a little bit about that. But what else can be done to really help strengthen our position? Would strong leadership help us here in this regard?

I have two more questions to follow that up, but I would really like to have some input as to how we can develop a much more powerful position when it comes to negotiating and bringing down subsidies by the other countries.

Mr. Ted Allen: There are a couple of things. First, there's been a lot of discussion about pork. I just want to touch on this very briefly because it illustrates how sometimes problems that appear to be one way are actually quite another way.

UGG has a certain amount of involvement in pork genetics, so we talk to people in the industry. In the last few days I talked to three different individuals in the pork industry. They all told me the same thing about one of the big problems. It's not widely recognized, but there's insufficient capacity to process pork. That's the biggest problem. So you have a big supply of hogs on this side and the processors have more hogs than they're able to kill.

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On the other side, though, the freezer stocks are actually declining, so you have this constriction in the middle. The constriction was created because of a decade-long period of low returns to the packers and antiquated plants. Some of those plants closed and processing capacity was reduced. Now we have a situation where the consumer, on one hand, as you said, doesn't see any reduction on the shelf, and on the other side the producers see very diminished returns. This has really accelerated in the last two months, where these returns have just absolutely gone in the tank in very short order.

I wanted to raise that as an issue where we don't want to get too simplistic because each problem has its own unique nuances. I do think we need strong federal leadership on this file, because no one player is going to be able to impact the outcome on their own. There's going to need to be an encouragement of a very collegial approach, and I think the leadership has to come from the federal government.

The Chairman: Mr. Frosst.

Mr. Myles Frosst: I think the leadership is there. The leadership is coming from the industry right at the very moment. I just noted down the Food Institute of Canada, the Alberta Agri-Industry Trade Group, the Alliance of Exporters and the Chicken Farmers of Canada. There's a group in Newfoundland right at the moment trying to bring producers and processors together on this.

I think industry—and by industry I mean farmers and processors—are providing that leadership. If there's a role for government, and both provincial and federal governments are assisting in this, it's by providing some seed money for the consulting work that's going on.

The Chairman: We're out of time, Mr. Breitkreuz. We've had five minutes. Thank you.

Mr. Bonwick.

Mr. Paul Bonwick (Simcoe—Grey, Lib.): Thank you, Mr. Chairman.

I would agree with Mr. Breitkreuz and the others that it is certainly a time that requires strong leadership. So it's good to see the Reform come onside there and acknowledge that fact. I couldn't think of any better leader to have than the present minister. I think of how strong of a supporter he has been. I thank my Reform colleagues for acknowledging the minister's leadership abilities.

Mr. Larry McCormick: They applauded him in the House of Commons two weeks ago while he was giving a speech.

Mr. Paul Bonwick: Mr. Jahnke, a half hour ago or so, you touched on a topic that I wanted some of your colleagues to expand upon. You made a brief statement on a specific benefit to the beef industry in regard to climatic conditions.

I'm wondering if on a broader scale you and your colleagues could expand on that a little bit and show various other micro-component costs and how they make up the macro cost. What I'm trying to get are your opinions on a broad scope on whether our competitors who have their farms—the producers who are located in warmer climates like Europe, New Zealand, Australia and in many parts of the U.S.—have a significant cost of production advantage over Canadian producers, rather than just looking at something vertically and saying that with regard to disease there is a benefit to producing beef in a cold climate.

On a broader scale, when we're looking at producing, manufacturing, barns and the type of equipment that's required and the amount of fuel that's required, you might expand on that a little bit further so I can get a better understanding of whether there are costs of production advantages to warmer climates. Then I'll have a small supplementary if I have time, and that is, do you have any substantive information, or are there any studies that have been done, to substantiate your positions? Thank you.

Mr. Neil Jahnke: To my knowledge, there haven't been any studies, although there might have been.

I will use personal experience, starting in southwestern Saskatchewan and going to New Mexico. Our costs of production are virtually the same, but they're spent in different ways. I buy balers and they put up windmills, but our costs are virtually the same. We buy a little winter feed, and they're buying insecticides and what not for their cattle.

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Our big advantage is the type of cattle that will grow in northern climates that won't grow in the south, the eared influence, I call it. We have great advantages because of the quality of our product. Good quality cattle grow better in cold climates, and this is an advantage. You can take this and that and everything else. As president of the Canada Beef Export Federation, trying to move beef into Asia, it was one of our strong selling points against our American and Australian competitors, because our beef is more consistent because it is a better quality beef.

Mr. Paul Bonwick: Is there time for anyone else to expand?

The Chairman: There's one more minute.

Mr. Jim Caldwell: Just as a quick follow-up on that, as Neil indicated, the costs are about the same, but there have been some things done. As we indicated, the southern part of Alberta, south of Calgary, which is the main location, is the lowest-cost feeding area in North America. Cargill and IBP, which is very shortly behind them, are probably two of the most efficient meat packing plants in North America, or maybe even in the world now. So we are developing those world-quality plants to go with the cattle, and if we're looking at exports, that's where we have to head to.

The Chairman: You have half a minute, if you want to take it, Mr. Allen.

Mr. Ted Allen: I agree with the comment that the costs are different, but the numbers are relatively the same right now. I think what's important is that we not rest on our laurels, that we be paranoid and absolutely zero in on reducing our costs, because you know our competitors are going to, and tax is one area where there is a huge discrepancy.

The Chairman: Very good.

We have two listed questioners, and I think we can work them both in. That's Mr. Hilstrom, followed by Mr. Penson, I believe, or whatever the Reform Party decides.

Mr. Howard Hilstrom: I'll defer to my colleague.

The Chairman: Okay. Go ahead, Reform Party.

Mr. Charlie Penson (Peace River, Ref.): Thank you, Mr. Chairman.

It just seems to me that to some extent we've missed the essence of this morning's debate. I thought we were talking about the future negotiations for agriculture at the World Trade Organization, which are taking place next year. It bothers me a little bit, Mr. Chairman, that we are not talking about Canadian trade negotiators having a credible position.

This committee has heard very polarized views on what should be done, from supply management saying nothing in the tariff reduction area in that sector. We hear from you people this morning that you want more trade liberalization, that it's good for us, because your industry is essentially tariff- and subsidy-free.

Just as a backdrop, as everybody knows, there is this huge crisis in Canadian agricultural sectors, especially the grains industry, that are getting beaten up as a result of large subsidies, domestic and export, forced by the European Union and the United States.

How can we come to a credible position, given these two polarizations? Canadian negotiators have to have something to work with, and if we're going there saying we want to have further movement to help cattlemen and grain producers, and we're also saying we don't want any movement on the other side where we have 350% tariffs, how can that be credible?

Mr. Ted Allen: It can't. That's the short version. That's what I alluded to in my earlier comments, that what we need to arrive at in Canada is a strategy that works for all sectors. I suggested that the last time we didn't have that, and we kept the blinders on, unfortunately, until we went right over the cliff. My sincere hope is that this time we've learned something from that, and we'd develop a strategy that has a possibility of succeeding in the larger environment and that at the same time will obviously involve some concessions from all sectors in order to try to make an overall winner of the strategy.

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Mr. Charlie Penson: As I think everybody here knows, there are two negotiations taking place in the year 2000, the service sector and agriculture. But there is some suggestion that it would be better to try to roll more issues into a general round in order to give countries such as those in the EU bloc a little bit more room to move. In other words, if they know they have to give up on some of their agricultural subsidies anyway, if more things could be put into those negotiations that might help them domestically to sell it at home, it might be some benefit that we might gain.

Do you have any position as to whether Canada should have a sectoral approach in agriculture whereby they go it alone, or should we try to move to a more general round?

Mr. Ted Allen: I guess my guts tell me that we should try to do the big package. But I don't claim any expertise in this area, so I defer to people with more expertise.

Mr. Jim Caldwell: I wouldn't want to hazard a guess either. There was some talk the last time around about using Toyota and Honda and these people to get some concessions on agriculture. We could do it over cars. It gets very complicated. Again, I'm like Mr. Allen, in that I don't have expertise in that area as whether it would be better or not. Certainly for some sectors, we would like to see it.

Mr. Penson, as a comment just before we wrap up, one of the things is that Canada needs to trade. We're like Australia and New Zealand, in that we need to trade in agricultural products as part of the Cairns Group. The EU and the U.S. basically don't have to do this. We have to coerce, struggle, push, and shove to get them to the table to make sure they'll do the things we want them to do.

Mr. Allen and I were both in Geneva the last time around. It's going to come down to that again. If they don't want to move, it's very hard to make them move.

But we need trade. In our industry, for example, we're exporting 99% of our stuff to the United States. Nobody else is doing that. That's what we have. We may not like what the Americans are doing and we wish they wouldn't do it, but what can we do to retaliate? If we say we're going to stop their beef, we're hurting ourselves, because it's a three-to-one trade. I think we shouldn't give up, but I think we have to keep pushing and pushing and pushing.

As for Mr. Calder and the supply management industry, Canadian cattlemen have never opposed supply management. We don't want it for our industry, but certainly if that's what they want... This is providing that when it comes down to negotiations, there's no holdup for us getting something that we particularly want. But we never opposed free trade.

The Chairman: I'm sorry I raised the expectations of the Reform Party representatives. I somehow missed the name of Mr. Proctor. Mr. Proctor, you'll be the last questioner.

Mr. Dick Proctor: Thank you very much.

I have three quick questions for Mr. Allen. If I may, I'll ask them all at once. Then you can pick which one you want to give more weight to or less weight to.

You mentioned in a previous answer that wheat and barley prices have suffered the most. I'd like to get your take on why that has occurred. Is it the fact that at the moment, subsidies are five times higher for U.S. wheat, or are there other things at play there?

My second question is this. As somebody who was involved in 1993, when Minister Vanclief was before this committee last month, he basically said that the U.S. and the European Union were—this was his phrase—within their boxes in terms of not being out of whack with GATT. He said they were in compliance, essentially. So the question that arises out of that is do you believe that the Canadian government has cut support or subsidies to producers beyond what was required as a result of our commitment to GATT in 1993-94?

My third and final question is this. The minister had been saying all fall that the blockade going on in the midwest was because of the U.S. mid-term elections, which ended on November 3. So is the fact that we're now on the cusp of yet another blockade because they have 23-month election campaigns in the U.S., or is there something else at play?

Thanks.

Mr. Ted Allen: Well, I'll deal with your questions in the order they were presented.

The price of wheat and barley is largely a supply and demand issue, but the reason the supply is so high is because of the previous subsidy regimes that had been in place in the U.S., and more especially in Europe.

Interestingly enough—I have just a very short one on that, and I'm sure the Wheat Board will elaborate on it—my sense is that there's a potential for the wheat supply to be somewhat more in balance with demand down the road.

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On the U.S. and the EU being in compliance, that is true. If you exclude some of the nitpicking, definitional things they have engaged in, then I think it's largely true.

Did Canada exceed our requirements? No question about it. The demise of the Crow alone went way beyond what our obligations were.

On the issue of the blockade—and I apologize, because I've been out of the country for about two weeks and I've kind of lost touch—again my instincts are that this was largely driven by the congressional elections. However, once you have a very successful political strategy—and these guys all got re-elected and all looked like heroes for beating up on a straw man—you'd be more qualified than I to know whether this would encourage politicians to continue down that road.

Incidentally, on the oats issue, we wrote not only to the Government of Canada and the minister, but also to some of these governors and the U.S. trade people, raising this oat issue with all of them, and requesting a response. So far we haven't received a response from one of them.

The Chairman: Thank you.

Mr. Allen, I think you had advice for our WTO negotiators to come up with a strategy that was, quoting you, “a strategy that works for all sectors”. I would remind you that our negotiators are human beings, and you might be asking for divine intervention.

Mr. Ted Allen: I think I helped the negotiators somewhat by saying this would require concessions from supply-managed and others. If there are concessions made, and people are realistic about what their prospects are instead of having these extreme, rigid positions, then we have a better chance.

The Chairman: Thank you.

Thanks to all of you. Thanks to the members for your short and concise questions. Thanks to the witnesses. I thought you spoke very well.

Colleagues, we will break for five minutes and then we'll hear from the Wheat Board. This meeting is adjourned for five minutes.