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37th PARLIAMENT, 2nd SESSION

Standing Committee on Agriculture and Agri-Food

EVIDENCE

CONTENTS

Thursday, October 30, 2003

1535

The Chair (Mr. Paul Steckle (Huron—Bruce, Lib.))

Mr. Tony Tavares (Chairman, Canadian Poultry and Egg Processors Council)

The Chair

Mr. Tony Tavares

Mr. David Fuller (President, Chicken Farmers of Canada)

1540

Mr. Tony Tavares

1545

1550

Mr. David Fuller

1555

The Chair

Mr. Howard Hilstrom (Selkirk—Interlake, Canadian Alliance)

Mr. Tony Tavares

1600

Mr. Howard Hilstrom

Mr. Tony Tavares

Mr. Howard Hilstrom

Mr. David Fuller

Mr. Howard Hilstrom

Mr. Mike Dungate (General Manager, Chicken Farmers of Canada)

1605

Mr. David Fuller

Mr. Tony Tavares

The Chair

Mr. Louis Plamondon (Bas-Richelieu—Nicolet—Bécancour, BQ)

1610

Mr. Tony Tavares

Mr. Mike Dungate

Mr. Louis Plamondon

Mr. Mike Dungate

1615

Mr. Tony Tavares

Mr. Louis Plamondon

The Chair

Mrs. Rose-Marie Ur (Lambton—Kent—Middlesex, Lib.)

Mr. Mike Dungate

Mrs. Rose-Marie Ur

Mr. Mike Dungate

1620

Mr. Tony Tavares

Mrs. Rose-Marie Ur

Mr. David Fuller

Mrs. Rose-Marie Ur

Mr. David Fuller

Mrs. Rose-Marie Ur

Mr. David Fuller

Mrs. Rose-Marie Ur

Mr. Mike Dungate

Mr. Tony Tavares

Mrs. Rose-Marie Ur

Mr. David Fuller

1625

Mrs. Rose-Marie Ur

Mr. David Fuller

Mrs. Rose-Marie Ur

The Chair

Mr. Gerry Ritz (Battlefords—Lloydminster, Canadian Alliance)

Mr. Mike Dungate

Mr. Gerry Ritz

Mr. Mike Dungate

Mr. Gerry Ritz

Mr. Tony Tavares

1630

Mr. Gerry Ritz

Mr. Tony Tavares

Mr. Gerry Ritz

Mr. Mike Dungate

Mr. Gerry Ritz

Mr. Mike Dungate

Mr. Gerry Ritz

Mr. Mike Dungate

Mr. Gerry Ritz

Mr. Mike Dungate

Mr. Gerry Ritz

Mr. Mike Dungate

The Chair

Mr. Tony Tavares

Mr. David Fuller

The Chair

Mr. Murray Calder (Dufferin—Peel—Wellington—Grey, Lib.)

1635

Mr. David Fuller

Mr. Tony Tavares

Mr. Murray Calder

Mr. Mike Dungate

Mr. Robin Horel (President, Canadian Poultry and Egg Processors Council)

The Chair

Mr. Gerry Ritz

Mr. Robin Horel

1640

Mr. Gerry Ritz

Mr. Tony Tavares

Mr. Gerry Ritz

Mr. Mike Dungate

Mr. Gerry Ritz

Mr. Mike Dungate

Mr. Gerry Ritz

Mr. Mike Dungate

Mr. Gerry Ritz

Mr. Mike Dungate

The Chair

Mr. Mark Eyking (Sydney—Victoria, Lib.)

1645

Mr. Tony Tavares

Mr. Mark Eyking

Mr. Tony Tavares

Mr. Mark Eyking

Mr. Tony Tavares

Mr. Mark Eyking

Mr. David Fuller

Mr. Mark Eyking

1650

Mr. Tony Tavares

The Chair

Mr. Murray Calder

The Chair

Mr. Claude Duplain (Portneuf, Lib.)

Mr. Mike Dungate

Mr. Claude Duplain

Mr. Mike Dungate

1655

Mr. Claude Duplain

Mr. Mike Dungate

Mr. Tony Tavares

The Chair

Mr. Claude Duplain

The Chair

Mr. Gerry Ritz

The Chair

Mrs. Rose-Marie Ur

The Chair

Mr. Mark Eyking

The Chair

Mr. Gérard Binet (Frontenac—Mégantic, Lib.)

The Chair

CANADA

Standing Committee on Agriculture and Agri-Food

NUMBER 052

2nd SESSION

37th PARLIAMENT

EVIDENCE

Thursday, October 30, 2003

[Recorded by Electronic Apparatus]

¹ (1535)

[English]

The Chair (Mr. Paul Steckle (Huron—Bruce, Lib.)): I'll bring the meeting to order. Today we're dealing with further studies pursuant to the World Trade Organization negotiations in agriculture.

Today we will hear witnesses from the Canadian Poultry and Egg Processors Council. Representing them are Tony Tavares, chairman, and Robin Horel, president. We also have the Chicken Farmers of Canada, David Fuller, president, and Mike Dungate, general manager.

I presume, Mr. Tavares, you will go first and then we'll hear from Mr. Fuller. Are you the one making the presentation, Mr. Fuller?

Mr. Tony Tavares (Chairman, Canadian Poultry and Egg Processors Council): Actually, Mr. Chairman, we're probably going to alternate between the two of us, if that's okay.

The Chair: That's fine. If you would present succinctly, we'll then get on with the questions. Thank you very much.

Mr. Tony Tavares: We'll do our best.

Thank you very much. Good afternoon, ladies and gentlemen. My name is Tony Tavares. I am the chairman of the Canadian Poultry and Egg Processors Council, and in my day job I am CEO of Maplelodge Farms. They're a processing company with a base in Ontario and in New Brunswick.

As the chairman stated, with me today is David Fuller, chairman of Chicken Farmers of Canada, and Mike Dungate, general manager. Also here today is Robin Horel, president of CPPC.

I thank you for inviting us to share our views on the WTO agriculture negotiations with you today. We're here as a united industry, and in fact the views we'll be sharing with you today are also shared by other poultry industry partners. In fact, we are speaking on behalf of the Canadian Turkey Marketing Agency, the Canadian Egg Marketing Agency, and the Canadian Broiler Hatching Egg Marketing Agency. As I'm sure you can all appreciate, the WTO agriculture negotiations have a huge impact on the future of our industries in Canada.

We're here together because we share a common view and a common reality, and the success of our industry is based very much on a partnership among the different sectors in the industry. Supply management is very much a collaborative process, and that's why we're united here today.

We need you to understand that the WTO negotiations will not only have an impact on our industry directly but will also impact the multitude of communities across Canada and our allied industries that depend on our industry to be viable and sustainable. So there's a definite indirect impact as well as a direct impact.

Before we talk about specific concerns regarding the WTO, we thought it was important for you to understand the structure and value of our industry and its contribution to the viability of communities across Canada and to the overall Canadian economy.

At the farm level, we have 5,000 farmers generating over $2.5 billion in farm cash receipts and purchasing more than 24.5 million tonnes of feed valued at another $1 billion.

At the processing level we operate the 112 hatcheries, 150 processing plants, and 341 egg grading stations that generate sales in excess of $5.2 billion. Together, we employ directly 28,000 people in Canada and have a capital investment of more than $3.7 billion.

We have a growing industry that contributes to local economies of all Canadian provinces--we're present in every one--and constitutes a vital source of employment for many rural towns.

We wish to point out that the successful economic activity has been achieved through providing high-quality products to consumers and very stable prices for producers, processors, and consumers as well.

When compared with other meats, you have a table there that shows a comparison of price increases over the previous 10 years, from 1992 to 2002, and it basically shows rather succinctly, we believe, that the supply chain and supply management has done a very good job of keeping prices in check over the past decade. It's a snapshot only, but we think it's illustrative of a job well done by all sectors of our industry.

David.

Mr. David Fuller (President, Chicken Farmers of Canada): Thank you, Tony.

Ladies and gentlemen, you may have the perspective that we have a closed market for poultry in Canada. You may also have the perspective that the Canadian poultry industry has taken a purely defensive position on the WTO negotiations. I must tell you that neither could be further from the truth.

First, supply management is not about closed markets. It's about being able to accurately match supply to demand. In order to effectively meet the demand, we must be able to determine the supply from both domestic and international sources. Domestically we achieve this through the quota allocation system. Internationally we achieve this through tariff rate quotas, or TRQs.

Canada meets and mostly exceeds its WTO market access commitments by providing access ranging from 5% to 21% of its poultry markets. In 2002, Canada imported almost $500 million in poultry products. On a global scale, Canada is the eighth largest importer of chicken and the third most valuable market for U.S. chicken exports. If all WTO members would provide the same level of access, Canadian exporters would see a significant expansion in their access to foreign markets.

Secondly, we have an aggressive position on WTO agriculture negotiations. We demand the elimination of all export subsidies. We seek a dramatic reduction by those countries that distort trade the most through government subsidies, and our market access proposals would provide a significant expansion on market access. The objective of this proposal is to expand global market access on an equitable basis. We view this proposal as realistic and achievable as it is focused on providing an equivalent level of real market access while providing all importing countries with the ability to maintain a viable domestic industry. In this regard, it has something to offer to all WTO members.

In the Doha Round, Canada is seeking substantial improvements in market access; however, we want to ensure that the increase in market access is not simply a paper exercise but is real and accessible.

Canada's market access position is fivefold: one, improve the fill rate of all TRQs from 60% to 100%; two, expand the minimum market access for all TRQs to 5% of domestic consumption; three, update the base period of consumption from 1986 to 1988 to a more recent three-year period; four, reduce in-quota tariffs to zero; and five, convert high single-stage tariffs that do not permit minimum market access to tariff rate quotas.

What is the benefit of this position? It stops game playing to protect a domestic industry because it does not place 100% of a market or a domestic industry at risk. As a result, the proposal would reduce the use of technical barriers to trade and sanitary and phytosanitary measures as disguised trade barriers.

It provides global food security by ensuring that agriculture production is not overly concentrated in only a few regions or countries of the world. It allows countries to develop or maintain substantial, sustainable domestic agriculture industries. This is a particularly important tool for developing countries.

¹ (1540)

Mr. Tony Tavares: What David just said, for me, is one of the key messages for our presentation this afternoon. One of the things, hopefully, that everyone takes away is going to be this: the position we're advocating is not trade-restrictive. It's often presented as such, it's often pilloried as such, but it's not. It is in fact trade-enhancing. And we're of the view that the approach we're proposing will effectively open more doors for more Canadian products than anything else that's at the WTO round today, effectively. We're not after ideology. We're looking at, effectively, opening markets. And we think it does that.

In support of what I just said and what David has just presented, we have an analysis to present to you today that looks at 10 commodities. I'll try to walk through the presentation briefly. It's not the intent to go through it in detail. If there are questions at the end, we'll gladly field them. Overall there are four elements to the analysis: where we're starting from, the access; the gains to be achieved in a clean 5% access; the additional access gains, the additional gains to markets, from rebasing to a more recent consumption period; and finally, a preliminary look at the potential additional access gains from creating new TRQs.

In terms of methodology, I'm probably not well placed to do that, but there's a summary there. The data used was based on a database of the Food and Agricultural Organization of the UN and comprises information, data, from 52 countries, including 37 that are WTO members and that implemented the TRQs from the Uruguay Round.

So first, where are we starting from? In order to properly assess how much we can gain from the approach we're describing today, we need to know where we're starting from. There is a fallacy that's spread that currently we have access to 5% of all domestic markets. That's the basis for a lot of the other positions: we already have access at 5%, so let's start there and work from there.

In the presentation, if you flip to this executive summary, there's a table there that shows--and we'll walk through it--that providing clean...that it's not the case, and if we were to provide a clean 5% access on the basis of consumption in that reference period of 1986 to 1988, we'd actually be creating another 50% access, so a 50% increase for the 10 commodities shown. What that means, effectively, is that currently the access isn't 5%; it's more like 3.3%, based on domestic consumption in those years.

And that statement assumes that all of the TRQs that are there are being used 100%. That also is not true. So, in effect, the actual effective access for those commodity products is less than even the 3.3%.

In Canada, our poultry and egg processing fill rates, the fill rates for our TRQs, are always at 100%. On the basis of numbers reported by WTO, the fill rate for TRQs globally is somewhere around 60%. So when you take the 60% and apply it against that 3.3%, really, we're not achieving anywhere near the 5%. It's more like 2% in terms of access.

What even further restricts that access is that within tariff, quotas for some commodities are actually quite high. So, effectively, there's very little or no access provided for some of those commodities. There are a lot of reasons for that, and I think David touched on some of them before. One reason is the fear some countries have of letting products in, but certainly another reason is the way the TRQ administration practices are handled.

Rebasing won't address the problem of low fill rates; however, if the following TRQ administration issues are not addressed properly, the benefits of rebasing or increasing minimum access will be blocked or severely reduced. Our government has tabled a paper on these issues at the WTO on product groupings, on aggregation, disaggregation, high-end quota tariff rates, and country-specific allocations. There are a number of issues affecting it, and there are presentations made by the government on each of those.

¹ (1545)

In terms of the gains to be had in achieving a clean 5%, I'd ask you to refer to one of the documents we've submitted. It's the executive summary on the analysis of expanding market access. If you refer to stage 1, I'll briefly walk you through the columns on that stage. There are five of them. Column A is the total WTO commitments of countries; column B is 5% of the 1986-1988 consumption in those countries; column C is the total access available if all TRQs were expanded to 5%; column D is the additional access gained in doing so; and column E is the percentage of access gained.

As you can see from the table, access for all commodities, with the exception of sugar and skim milk products, was increased by 44%. Overall, the average access would expand by more than a half, so it's quite dramatic. This is bringing folks to the access levels, as determined.

On the benefits of rebasing, it's simple enough that even a businessman like me can understand. Basically there's a growing population across the world, and if you base any access level on figures that are a few years old, actually you're providing a diminishing access. It is not stable. For example, Canada's population has grown over 20% since 1988, and effective market access, as recorded, has been reduced from 5% to 4%.

If we now look at the table described as stage 2, you see that all but butter, skim milk powder, and beef market access would increase, based on a more recent consumption period. I guess the fact that those commodities haven't increased speaks a little to some of the challenges in increasing consumption in each commodity, but as a general rule, basing access levels on recent consumption for commodity increases access.

On new TRQs, the stage 3 table on the next page provides a preliminary analysis of the benefits of addressing high single-rate tariffs that don't even permit a 5% access. The benefits in stage 3 are incremental to those found in the previous two stages.

In summary, one of the key messages for us this afternoon is that our market access proposal would provide a significant benefit to the entire Canadian agricultural industry. And it's not only for the industries at the table here today, but really also for every industry in agriculture in Canada. Our challenge is to overcome misconceptions, misperceptions, and misinterpretations, some of it, I believe, purposeful, and to sell the benefits of this approach and to get us closer to the rules-based international trading system that Canada seeks and needs.

¹ (1550)

Mr. David Fuller: Thank you, Tony.

As a concerned industry, neither the Derbez-Yeo text that emerged from the Cancun ministerial conference, nor the Harbinson or Del Castillo texts that preceded it, provide enough flexibility for the poultry industries to prosper. All of these texts, issued from February to September, constitute a serious threat to our livelihoods. Although they all present trade negotiations through a different perspective, it would be misleading to let you believe that sufficient flexibility is provided in any of these texts to accommodate the Canadian poultry industry needs.

From the outset we must tell you that it is critical that our over-quota tariffs are maintained at their current levels. Without effective over-quota tariffs there would be no stability in our domestic market and our industry would be seriously jeopardized. Our over-quota tariffs, ranging from 150% to 249%, must remain at their current levels if we want to maintain our successful industry.

Although the so-called triple-digit tariffs might appear high, they are at levels that cannot be reduced. The essence of the over-quota tariff is to be prohibitive, so imports enter the country within Canada's commitment to the WTO. Reducing over-quota tariffs to the point that they are not effective simply means abolishing TRQs.

Many variables have a direct influence on the effectiveness of the over-quota tariffs, such as changes in the currency or product prices in both the exporting and importing countries. For example, the Brazilian currency lost 64% of its value related to the Canadian dollar since January 1998. Such a decline in currency makes Brazilian products more competitive and Canada's over-quota tariffs less effective, as illustrated by the following table using a given product worth one Brazilian real.

I'd like to walk you through this table in front of you. In January 1998, on a product that costs one Brazilian real with an over-quota tariff of 200%--and then we throw in the Canada-Brazil exchange rate of 1.28--the transport price to Canada in Canadian dollars would be 35¢ and the landed price of that product, whatever the product is, would be $4.19 Canadian. In October 2003, the same product worth one Brazilian real would need an over-quota tariff of 735%, with the Canada-Brazil exchange rate at 0.46 and the transport price remaining the same at 35¢, to make the price of that product landed in Canada at $4.19. If we were to maintain a 200% tariff on exactly the same product today, with the real devaluation, the price of that product would be $1.73 Canadian.

With Brazil being one of the most competitive poultry producers, you will understand that triple-digit tariffs are not as high as they might appear to be when you take into account the impact of currency devaluation. Therefore, in the poultry industry we have no flexibility for any over-quota tariff reductions and they must remain where they currently stand.

The Canadian poultry and egg industry is a confident one. We continue to grow our industries on a profitable basis without the need for financial support from government. We are the Canadian leaders in implementing gate-to-plate food safety systems. We continue to innovate products to meet evolving consumer preferences.

Most of all, we are confident because of the support we have received from our members of Parliament and our trade negotiators. We appreciate the leadership you have taken to understand how we work together as an industry and the innovative and proactive proposal we have developed for the WTO agriculture negotiations.

We count on your continued diligence to ensure that Canada achieves a WTO agriculture agreement that secures the future prosperity of our industry for the broad range of Canadians and their communities that depend on us.

¹ (1555)

Thank you, Mr. Chairman. We will entertain any questions at this time.

The Chair: Thank you very much, gentlemen. We will now go to our question period. Mr. Hilstrom will be on first with seven minutes.

Mr. Howard Hilstrom (Selkirk—Interlake, Canadian Alliance): Thank you, Mr. Chairman. It's always a little more difficult to square supply and management trying to increase world trade when you look at the other commodity groups that come off our farms, like beef and wheat and different things, but that's a different discussion and argument.

You've come to us today and presented us with a 5% access argument--clean access, I guess, is the term for it--and the argument you make is that access for exporters would increase very substantially, and you do mention wheat and beef and other commodities. Here are some examples, and you may want to make a note or two as I go through this, since I'm going to ask you to reply.

Right now, Japan imports 55% of its domestic consumption of beef, 90% of its domestic consumption of wheat, 50% of its domestic consumption of canola, and 25% of its domestic consumption of pork. The United States imports 17% of its domestic consumption of beef, 6% of its domestic consumption of wheat, and 30% of its domestic consumption of canola.

It is clear that for most of the commodities in these important markets for Canada, the proposal to provide a clean 5% access rebased to a more current period of consumption really wouldn't result in any more access for the non-supply and management commodities.

In all of these cases, countries would likely choose to maintain the high tariffs, if they had them, and provide minimum access of 5%. Given that they already import a large proportion of their current consumption of these products, there would be no requirement to provide any additional access to their markets. How do you square that analysis with your analysis that says there would be these big increases in these commodities?

Mr. Tony Tavares: I think that establishes a sort of personal opinion as well. In the case of Japan, you're talking about commodities and products where they simply don't have a land base to support these. To me, it's totally understandable that they're going to import a larger supply of their food chain, virtually, than anywhere else in the world. So that's one comment I'd make.

º (1600)

Mr. Howard Hilstrom: And the United States too? I mentioned them.

Mr. Tony Tavares: The U.S., in terms of beef supply. Again, certainly there are limitations in terms of how much it can grow. But I'd say those numbers reflect a degree of integration, certainly, with the Canadian industries you describe. We are in lockstep with the U.S., and we do have separate agreements with the U.S.

But there are examples you haven't mentioned, and I'd like to quote a couple of examples out there that would explain it basically. Poultry, for example. The U.S. imports virtually 0%, Brazil imports virtually 0%, and Thailand imports virtually 0%. Those three countries basically account for the majority of the poultry exports around the world, and their combined imports to their countries are virtually zero. I don't know why that reflects...and it's not straight economics because there are quite a few of those countries where certain parts would be able to export and be competitive; it's just not done.

We're not suggesting for a moment that you reduce the access that's there right now. And where you have some advantages, as you do in the countries you mentioned, common sense dictates that you continue to try to get more. We're talking about opening up markets where the access is currently zero. How do you go about doing that? How do you provide an access to Canadian parts in the EU, for example, where I don't believe the numbers are as high as you have them?

I think we're always going to be able to find exceptions, and there are clear historical rules why there are. I think what we're trying to do is find out where you go from here and what best expands from here.

Mr. Howard Hilstrom: In the negotiations between countries, everybody tries to protect something in their own country, I guess. But when you do that, that's not in the spirit of increasing world trade and increasing the wealth of countries that indulge in trade, and this is where Canada greatly benefits from trade. We bring in hard foreign currency.

The beef industry, the grains and oilseeds, and all these other exporters increase the wealth of this country tremendously. When I look at the export statistics of the supply management commodities, we see very low enrichment of Canada from the earning of hard foreign currency.

Let's use an example inside the country. Supply management is not promoting trade interprovincially. We know that Saskatchewan recently has been quite insistent that it would like to increase its poultry production but is unable to do so. It's restricted by supply management. Saskatchewan, compared to Ontario and Quebec, is a poor province agriculturally.

What do you say to those Saskatchewan farmers who would either like to get into poultry or would like to increase their interprovincial trade in poultry? Do you have anything to say to them, or let them sit there without any increase in production and no opportunity to get into the chicken industry?

Mr. David Fuller: Mike has a couple of comments, and then I have a few as well.

Mr. Howard Hilstrom: You're welcome to answer that one too.

Mr. Mike Dungate (General Manager, Chicken Farmers of Canada): Maybe I'll quickly go back to your first question, Mr. Hilstrom. It's a good question because what we've done is a global analysis and the market access increase this year is a global access. That doesn't mean that each and every country has an access gain or not, because it depends on what access they provide.

The numbers you've quoted on access into both Japan and the U.S. are factored into the analysis we have here, so despite the significant access in those countries, there is still, in other markets, these access gains.

If you look, for example, at the U.S. for Canada, in fact Canada has 100% access to the U.S. market. So in terms of any access gains to the U.S., we're not going to get any from the WTO. So our proposal is no better and no worse than any other proposal on the table, because Canada will not get a WTO agreement that will give us better access to the U.S. than we have under NAFTA. It doesn't impact U.S., so we take U.S. for Canada out of this analysis.

If you look at Japan and the access that is provided there of 55%, 90%, 50%, in those ranges, there is nothing on the table at the WTO that will get us anywhere near those levels of access. This WTO agreement will not deal with a country that provides 90% access to its market, and I think a lot of us would say “If someone is only reserving 10% of their domestic market for themselves and is allowing 90% imports, we're prepared to say you're doing your part; you're pretty liberal in terms of the access you provide.”

I understand that's an issue for the Canadian industry, because they like the Japanese market. But something we have to look at is that although it's not going to happen in our proposal, it's not going to happen in any other proposal either.

In terms of Saskatchewan, I think Mr. Fuller would like to address that question.

º (1605)

Mr. David Fuller: Thank you, Mike.

I would like to start with the Saskatchewan question you had there, and I can specifically talk about the chicken industry. In the last four years the Saskatchewan chicken industry has grown 80%, more than any other province in this country. You say Saskatchewan wanted to increase their poultry industry; we responded and they have had that growth.

You've talked about access, and I want to use the pork industry in my response. In the pork industry they have 0.5% market access into the EU. They ship 75,000 tonnes of pork to the European Union. Under our proposal of 5% real market access, that would increase to 700,000 tonnes. That is a significant increase for the pork industry of Canada, which is the number one industry in the world for pork export. That is a significant increase for them.

Under our proposal of rebasing, supply management would give up more access because we're talking about an increase to a more recent consumption period. We're prepared to offer more access, but what we're not prepared to do is have an unequal playing field, as we had at the end of the Uruguay Round. Those are the key points, that at the end of this round, the playing field must be level and at the last round it was not level.

Tony.

Mr. Tony Tavares: I was just going to say with regard to the Saskatchewan comment, supply management is about managing supply. The rules are in place mostly to favour producers and producer farm incomes. That's the basis of the legislation we have in place. In the case of Saskatchewan, there was an industry attempt to make the grower base there viable and permanent in the long term—David quoted the numbers—but it is about managing supply. Again, we think we do that in an effective way. The end result, certainly for the producer sector, is stability. This is a lot better result than what you see in a lot of other sectors where you see ups and downs and calls for farm government subsidies at times of famine—the whole nine yards. It's a better form of policy in that area certainly than a few that we can think of.

But it comes with some restrictions, and that's how you have it. We operate pretty well nationally. Over the course of my 17 years in this business, I've dealt, I believe, with every producer board in Canada, with the exception of the one in Manitoba—don't ask me why, I've just never had a chance there—including the folks in Saskatchewan. When people do that, it's an easy thing to say, but with privilege comes responsibility. With some of the privileges that this system confers on farmers come some limitations, and I believe that's all you're hearing. On balance I think we do a great job for producers across the country.

The Chair: Thank you very much. We move to Mr. Plamondon for seven minutes.

[Translation]

Mr. Louis Plamondon (Bas-Richelieu—Nicolet—Bécancour, BQ): Thank you, Mr. Chairman.

I have a few questions about the negotiations in Cancun. It has been said that Canada found itself slightly isolated at the end of negotiations in Cancun, and had it not been for the fact that 23 countries contributed to the failure of those negotiations, Canada, being isolated, would have had to sign what was on the table. That would have been extremely prejudicial, apparently, for our supply management system.

In the latest monthly issue of the milk producers' magazine, after the Cancun events, their president, Mr. Grégoire, expressed his concern relative to the supply management system. He wrote that there was only very little time left before we have to confront the real problem. Did you also come back from Cancun with a slightly bitter feeling?

º (1610)

Mr. Tony Tavares: I wasn't there... [Editor's Note: Inaudible]

Mr. Mike Dungate: I was also at the Cancun meeting. There actually were a lot of differences between the WTO member countries. Canada wasn't really isolated, but it found itself torn between the Group of 21—the developing countries led by Brazil, China and India—the USA and the European Union. There is clearly concern because of the wording of the Derbez text. As Mr. Tavares mentioned, we are going to try to correct the impression that Canada is hostile to opening markets and to an equal and equitable regime for the world. So there will be technical missions to Europe, the USA and South Africa during the coming month to defend supply management, discuss matters with people, make our position known and try to eliminate the prejudices held by some.

Mr. Louis Plamondon: In that sense, the Canadian representatives, both the negotiators as well as the delegations that were present, didn't seem in too much of a hurry to explain our supply management system. I was told that the delegations who were there only as observers were spontaneously lobbying some countries and that the latter were surprised about what they were learning about our supply management system and were saying it would be marvellous to have that kind of system in their own countries. Unfortunately, the official Canadian representatives never addressed the issue very much. The impression was that Canada was a country professing free trade while being protectionist at the same time, even though the supply management system does not set up a barrier to trade. On the contrary, it is a very equitable system that should take hold everywhere, especially in developing countries. In Africa, the owners of three or four cows who milk them themselves by hand and have no other expenses cannot compete with the USA in their own countries because of subsidies. You're quite right to say that the priority is to do away with subsidies. We'll be able to work on other things after that.

After the Cancun negotiations, were you concerned by the fact that the USA had decided to enter into bilateral agreements, in other words to behave somewhat as they did with regard to the Iraq war, where they went ahead even without the United Nations' approval? Are you concerned by the fact that the USA has decided to enter into those bilateral agreements without waiting for the result of the negotiations?

Mr. Mike Dungate: Yes, somewhat, but I think that the USA won't manage to break up the Group of 21. At this point, we should be talking about the G-16, but I think that most of the leaders of the G-21—Brazil, China and India—aren't interested in entering into a bilateral agreement with the USA. This difference between the major developing countries, the Europeans and the Americans is going to last. Just think about the Free Trade Area of the Americas: there will be no agreement between Brazil and the USA as long as there is no agreement at the WTO level. That makes me a bit more optimistic.

º (1615)

Mr. Tony Tavares: I would add that we already have an agreement with the Americans. Trade between our two countries is more liberalized than in most other countries in the whole wide world. That means we're less concerned.

As for the other point of view you shared with us, Mr. Plamondon, you're absolutely right. To date, we haven't defended our position very well nor fully proven its advantages. I hope we'll be in a position to change that rather radically. To date, I'd say that we seem to be a bit ashamed of our position. We're far from being the only country in the world where there are contradictions in the domestic market. The United States has a lot of that just like all the other countries. It's time to get rid of that burden and defend our system and our proposals. I think that we're going to make greater efforts in that vein and I hope we'll succeed. I totally agree with your statement.

Mr. Louis Plamondon: Thank you, Mr. Tavares. I'm done, Mr. Chairman.

[English]

The Chair: Thank you, Mr. Plamondon.

Are you on, Mrs. Ur?

Mrs. Rose-Marie Ur (Lambton—Kent—Middlesex, Lib.): Thank you once again for your presentation here this afternoon. My first question is this. Does your group have strong allies at these negotiations with regard to your supply management perspective as to Canada and your proposal on market access? Do you have other countries supporting what you've put forth, or is this something you're just putting together?

How is it viewed in other parts, when you're part of these discussions?

Mr. Mike Dungate: The difficulty for us is with the tariff rate quota. Canada understands that with the benefit of the right to have a tariff rate quota, there's an obligation to provide that access, and in a certain sense that limits us even with those you would consider would be our allies, because they don't like how much more market access they're going to have to give by cleaning up the access they have on tariff rate quotas.

So where you might think we have great allies in Europe, a lot of the access to gains here are in Europe. Where there are countries that have over-quota tariffs, there are some that are prepared to reduce them, because in the Uruguay Round they did a really good job of putting them high enough that they can take these cuts, and they're not going to waste their negotiating....

We essentially got it from Japan, for example, on its rice tariff rate quota. We're prepared to accept a reduction on our over-quota tariff because we know it won't hurt us. We know that in the European Union they're prepared to take a cut in the over-quota tariffs as well, but they've already just changed all their domestic support programs, and they used to do it through market price support. If you reduce market price support and give the farmer money over here, you don't need as high a tariff any more to protect that market. So they can take it.

It's not going to give us any more market access. That's the point we're making. Those countries that are prepared to see a reduction in their over-quota tariff understand that they're not going to give any more market access by doing that. We're saying focus on the in-quota, get the access up, and that's where you're going to get real benefit. So we have a job to sell to a lot of people.

Just one comment, and Steve Verheul said this to us, “You know what? I don't want to be anyone's first option, but I want to be everybody's second option.” I think that's what we have a good chance to be. This is a solid proposal that would see benefits for everyone. It may not be their first choice, but it will....

Mrs. Rose-Marie Ur: You haven't put this in front of any other country?

Mr. Mike Dungate: We have. As I said, we're going out very hard in the next month and we're going to be meeting probably with negotiators and farm leaders in about 8 or 10 countries.

º (1620)

Mr. Tony Tavares: I'd just like to say that I think the comments I made before to Mr. Plamondon would apply. I don't think we've been as aggressive as we are going to be and as we've needed to be in selling the benefits of this proposal. That's certainly my view. I have not been at the table. That's what I read; that's what I understand.

I think it's time to go on the offence. Let's go and sell the benefits and present them for what we believe they are. Mike has referred to a lot larger effort, and I'm confident we're going to have some success. You have to start within Canada with some misconceptions in other sectors, some of the comments before on wheat and the like. It's not a restriction. We're going to open markets up for wheat.

Mrs. Rose-Marie Ur: Mr. Fuller wants to comment.

Mr. David Fuller: We have shared this document with a number of different countries. There are 37 countries that have signed an agreement on fair and equitable trade rules. We have presented it to them. We have also presented it to other countries besides those 37. We continue to go out and pursue selling this to other countries, because we do see some significant benefits for all of agriculture, whether you're in Canada or any other country.

Mrs. Rose-Marie Ur: In your presentation you stated:

On the global scale, Canada is the eighth largest importer of chicken and the third most valuable market for U.S. chicken exports. If all WTO members would provide the same level of access, Canadian exporters would see a significant expansion....

Which countries adhere to that and which ones are more on the guilty side? Which countries live up to that obligation?

Mr. David Fuller: Let me see if I can use one. I'll use Australia and we'll talk poultry. To put poultry into Australia, they have an SPS barrier that says you must cook chicken at 70 degrees celsius for 143 minutes and then you can bring it in.

Mrs. Rose-Marie Ur: Can you eat it, though?

Mr. David Fuller: I think everyone around this table knows what that product would look like. There are others out there that are using these kinds of barriers.

Mrs. Rose-Marie Ur: Can that not be challenged, because that's not even reasonable?

Mr. Mike Dungate: It is being challenged right now by the European Union, and some other countries have joined in that WTO dispute panel process, but it's just getting started.

Mr. Tony Tavares: It's a really good question, but if you're a domestic industry in any country--pick an example--and you're being proposed a system where potentially 100% of your industry domestically is at risk, which is what a lot of these proposals ideologically call for: just risk everything, open everything, have total free trade, nuke everything on which you're not absolutely low-cost.... If you're any industry in any part of the world looking at potentially no industry tomorrow, you're going to take other steps to protect.

You find that a lot of these measures were basically that you give access, but really you don't, because potentially it could be a lot more, versus what we're proposing, which is something that's clean, it's there, provided, and then let the trade happen. When that's your option, we'd argue, and you're an industry looking at potentially 5% market access being given, it's something you can manage. It will be difficult in a lot of cases. It could be quite difficult, but it's something you can manage. You're not looking at total annihilation.

When you're looking at potentially total annihilation from somewhere else, that's when you take these measures. That's why we think this will actually improve trade. But I think the winners and losers are all over the map.

Mrs. Rose-Marie Ur: Right.

I have one last question, because my time is running out.

In your presentation you say, “We demand the elimination of all export subsidies.” We hear that from everyone. We demand and demand, and we ask and demand, but what can we do differently? Obviously countries aren't listening.

Canadians took the high road. We lived up to our obligations from day one, but that's the Canadian way of doing things. What do we have to do now? How can we make a more forceful presentation to have countries understand where we're going on this? What can be done differently?

Mr. David Fuller: I think one of the major things we can do is to align ourselves with the developing countries. They are hurt probably more than anyone by these, whether it be export subsidies or domestic support. In my opinion, Canada can align itself with the developing countries because the developing countries in this realm are definitely the power.

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Mrs. Rose-Marie Ur: They appeared to be, in Cancun.

Mr. David Fuller: They're not prepared to hear from developed countries, “We'll look after you.” They want to make sure their interests are looked after, and I think Canada's biggest access would be to align itself with these developing countries, because it benefits us all and that kind of power will carry some weight at the WTO negotiating table.

Mrs. Rose-Marie Ur: Thank you.

The Chair: I would ask the indulgence of the committee to suspend the questioning for just a moment while we deal with a motion.

At our meeting on Tuesday we had a motion tabled by Mrs. Ur, and it's now before this committee. I believe you have had an opportunity to look at it.

We have a mover and a seconder. Are we all in favour?

(Motion agreed to [See Minutes of Proceedings])

The Chair: Thank you very much. I apologize for holding anyone back, but we wanted this on the table.

Thank you, Mr. Plamondon.

I want to thank you people for all your work.

Thank you, gentlemen. You're welcome to stay.

Now we're going to give Mr. Ritz the floor for five minutes.

Mr. Gerry Ritz (Battlefords—Lloydminster, Canadian Alliance): Thank you, Mr. Chairman.

Gentlemen, it's great. We have to start thinking outside the box, and it looks like you've done that. There's an old saying “herding cats”, but this is herding chickens, and you guys are doing it extremely well. I've tried it and it's not fun. It's hard to tell when you're winning.

Mrs. Ur was talking about allies out there in the rest of the world for this concept, and you're saying there's really no one there to ally with at this point, developing countries aside. Have you tried to find allies amongst the other 10 commodity groups you're listing here, and what do they think of your proposal?

Mr. Mike Dungate: We did this analysis, and we really got it in place in about May of this year. I'm a member of what's called the agricultural trade negotiations consultative group, and all the commodities in Canada are members of that. We shared it with that group. In fact, while we haven't had formal discussions, we actually had a good discussion in Cancun between members of CAFTA and ourselves.

We presented this proposal in Cancun. There was a non-government organization centre there. We made a presentation and had about 120 people from various countries who listened. We made it clear that each commodity, each country, has to assess it on its own and what the impact is.

Certainly as a result of a written analysis that CAFTA itself had done, we've gone back and done some more work and tried to figure out exactly what it means, because it depends on what your market of interest is. There's certainly some more work to be done, and we plan to do that with our fellow farmers in Canada, because we're trying to make this as much as possible a win-win across all of Canada.

Mr. Gerry Ritz: When you speak in terms of ten times the market access—using the example of pork—into the EU, if I remember correctly, that's global. Everybody's going to get a whack of that 5%, not just Canadian producers. So we're then starting to talk about currency devaluation being exacerbated. You guys talked about the Brazilian model, with chicken just coming into Canada. When you start talking about doing this globally, then you're really starting to have problems with currency devaluation, are you not?

What would be your response to that?

Mr. Mike Dungate: Don't give special and differential treatment to Brazil.

Some hon. members: Oh, oh!

Mr. Mike Dungate: I think you would get agreement on that across all of Canadian agriculture.

Mr. Gerry Ritz: But as parliamentarians we have to answer to all of these groups on any given day. I'm saying maybe your proposal looks great to you guys, but how do we sell it to everybody else?

Mr. Tony Tavares: The comment I'd make again is that I don't think we've done enough to try to get the other sectors in Canada aligned on this.

º (1630)

Mr. Gerry Ritz: With one strong voice.

Mr. Tony Tavares: One strong voice.

I said it in French before. I guess your translation would have been to the effect that we've been slightly ashamed of the position. I get that impression. Rather than yelling it from the tallest pulpit, we've been trying to slide it in. I think that's the wrong approach. This thing does have benefits for the other commodity groups, and we have been guilty of not doing enough to try to convince them of the same.

Obviously, the countries where you have access—70% beef, or whatever the heck it is—that's going to stay. It's mutual. We're talking minimum access levels, and you can make other arrangements, but that's not what we're talking about here.

In terms of minimum access, where you don't have any access, which is what is being discussed here, we think it is a door-opener for the other commodities as well. We have not done as good a job.... We are trying a little bit, I would think is a fair statement, to enlist folks in government in that process. We need some help.

Mr. Gerry Ritz: It's extremely frustrating to work with farm producer groups, period. That's not a word of law. Eugene Whelan said years ago that if you want a consensus of opinion with farmers and you've got three of them in a room, you shoot two.

A voice: If you have a registered gun to do it with.

Mr. Gerry Ritz: Yes, with a registered gun. As a producer I can say that, because it is frustrating.

A voice: I didn't say that.

Voices: Oh, oh!

Mr. Gerry Ritz: When you talk about the work you've done on this, you are talking about the data in this analysis being from the AMAD database. How current is that data? When you're talking globally, not every country keeps records and does databasing like Canada does.

So how accurate do you think that is, and how current is it?

Mr. Mike Dungate: The database is up to 1995-1997.

The benefit is that the rebasing in stage two is up to 1995-1997, because that was the latest data we could get for all 37 countries.

Mr. Gerry Ritz: That's still six years out of date.

Mr. Mike Dungate: Exactly.

Our assessment is that in a lot of ways, from the time we got these numbers, this analysis took us a long time to do.

Mr. Gerry Ritz: I understand that.

Mr. Mike Dungate: Our assessment is that by the time you get down to the negotiations.... Let's say we're looking at 2006 or 2007 before this happens. You should be more at the 2001-2003 period. So our assessment is that the benefits you see here should be even more enhanced by getting more current. We're not proposing 1995-1997, but we're proposing “get as current as you can”.

Mr. Gerry Ritz: So when you're working with data from developing countries and so on, and the data are based on 1995-1997, are those countries further ahead now or are they losing ground in that six years? How do you gauge that?

Mr. Mike Dungate: It does work on the assumption that consumption is increasing globally. But you are going to see specific products and specific markets where consumption would go down. You look at rice in Japan, which is going down. We're selling more wheat, so they're eating more bread. Those types of things, including changing diets, will happen. So you will see changing consumption of a product, for example, butter, which you will see in here. You will also see that margarine has been selling a lot, so butter consumption is down; therefore, that's an issue.

But in general—

Mr. Gerry Ritz: Is this your best-guess scenario—from 1997?

Mr. Mike Dungate: I wouldn't call it a guess; this is solid analysis of numbers. This isn't a guess. This is as far as we could take it with solid numbers.

If we tried to put in 2001-2003 here, we would be guessing, as we don't have those numbers yet.

The Chair: Mr. Tavares.

Mr. Tony Tavares: Yes, with reference to developing countries, I would say that the benefits of this proposal are generally twofold. One is the elimination of trade-distorting subsidies, so it keeps them in the game in certain markets, where subsidies would otherwise totally preclude them from exporting. Two is clean access. If they do have a commodity that's in the game and is competitive, providing the access allows the product the inverse of playing by all of these rules, especially if you were in a developing country that is finding a myriad of reasons why that product can't come in, which is pretty easy in some parts of the world. You don't have to be all that imaginative either.

We think it actually does a lot for developing countries as well.

Mr. David Fuller: I think I need to comment that we have presented this access paper to the Canadian Federation of Agriculture, which has agreed with it, and that of course includes the pork industry.

I just want to let you know that we have presented it to the Canadian Federation of Agriculture and they have adopted this proposal.

The Chair: Mr. Calder, for five minutes.

Mr. Murray Calder (Dufferin—Peel—Wellington—Grey, Lib.): Thanks, Mr. Chair.

Tony, I was very happy to hear you say that we have to get much more aggressive with supply management, because I did a federation meeting and I happened to make mention in one of my speeches that I was tired of defending supply management; I wanted to start promoting it.

The G-21, which is now the G-17, I think caused a lot of surprise in Cancun--the fact that they were well organized and basically stopped the talks. I guess the question to you gentlemen is, first, is the difference between the G-17 and the U.S and EU positions an insurmountable gap that has to be bridged--because obviously it has to be--and what do you think would be the best way to bring the two together?

Second, on the idea of the promotion of supply management, our strength on international trade has always been a multilateral approach. Is there an opportunity for us, with the G-17 nations, to start educating them on how supply management works, that it is not trade distorting and probably would help them establish an agricultural economy, which is what they're trying to do?

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Mr. David Fuller: Well, it's now, I believe, the G-16. It changes on a daily basis.

But one of the important things, the clear message that group wanted to send, was that neither the EU nor the U.S. was going to get what they wanted this time.

We believe firmly that this document, our proposal on 5% real access, is the bridge. We firmly believe that. And we believe we need to take this document and work with all the countries. We think this is the bridge that will bring everybody to that fair and equitable position that we all need to be at.

Mr. Tony Tavares: I mentioned before the idea of aggressively selling this position and this trade proposal. In terms of aggressively selling supply management, that could be a way of doing this, but it wasn't what I was referring to.

I agree with the comment that there are a lot of places in the world that could benefit and would probably have a lot more stability and viability in certain agricultural sectors if they had systems like this. But we're not proposing to be Johnny Appleseed across the world, planting the seeds of supply management. That's one thing. I mean, there are some things to it.

In terms of the trade position, which is what we're here to present, we should be selling it because we view it as a bridge to two extremes that just don't make sense when you look at it.

Mr. Murray Calder: What about the education aspect?

Mr. Mike Dungate: I think without a doubt one of the key parts for developing countries, in addition to what Mr. Tavares mentioned about their getting clean access to develop country markets, is that it would also allow them--which I think is one of the key parts--to establish a domestic industry, because their domestic industry isn't open to 100% access for subsidized exports. It says you have to participate in the trade game, you're not exempt from it, but you have to allow a certain amount of access, and we're going to allow you to try to establish a domestic industry.

I think we heard it from Mr. Plamondon, about people who have three or four cows. They're not exporting milk from that country to the U.S. They're trying to establish an industry domestically. To the degree that dumped and subsidized product is going into that market and they can't make any money in that market, they're never going to get to a sustainable basis where they're going to buy products from us that they don't grow or raise.

Mr. Robin Horel (President, Canadian Poultry and Egg Processors Council): There are some complicating issues when it comes to developing countries. It was touched on before. Brazil, for example, is a developing country, but they're not a developing country when it comes to the soybean industry. They're not a developing country when it comes to the poultry industry. And that just complicates things more. We have to keep our minds open to that; we have to pay attention to it.

The Chair: We'll have one more question.

Mr. Ritz.

Mr. Gerry Ritz: In regard to what you're saying, Mr. Horel, how do you define a developing country?

Mr. Robin Horel: I'm not sure it's been well defined yet. It has been agreed that this group is a developing country and this group is the least-developed country.

º (1640)

Mr. Gerry Ritz: That's mostly the underdeveloped countries that set themselves up like that. Canada uses the model of the whole farm income envelope. Is that what you do with the developing countries, say it's a whole-country envelope, so that the soybeans don't outweigh the...that type of thing? Is there any validity in that?

Mr. Tony Tavares: The way I'd answer that question is that the importance of having a definition becomes a lot lower if you have a proposal like this. If you're a developing country or not, or if you're highly developed, you can clearly gauge the access you're granting and that you have as an opportunity. It just prevents a lot of other things.

So there are benefits for developing countries, for sure. We just described those. And we'd argue that there are benefits for highly developed countries if they want to forgo some of the subsidy games they get into. This could be a venue to allow them to do that.

I don't think the definition is key. And you don't require as many exceptions under this as you do otherwise, I think.

Mr. Gerry Ritz: Going back to Cancun, we had the dairy farmers before us a week ago or thereabouts, and they were actually quite happy that Cancun fell apart. They felt they had dodged a bullet. Things were not looking good for Canadian supply management.

Do you have a plan B if it gets to that brink again?

Mr. Mike Dungate: Our plan is being put in place right now, and it's to be out there aggressively pursuing a different option that's out there.

Steve Verheul in Cancun was telling us, effectively, that he was more concerned about how far he was off his negotiating mandate on domestic support and protection of our NISA programs than he was on the wording around market access. It might give us a bit of concern, but I think the point was that what was on the table in Cancun wasn't good for Canadian agriculture at all, and we all dodged a bullet. We have an opportunity now and we need to use this opportunity.

Mr. Gerry Ritz: Do you have any idea of the timeframe?

Mr. Mike Dungate: We have to do it now.

Mr. Gerry Ritz: We have a deadline.

Mr. Mike Dungate: Right now at the WTO they're working on process, and they're getting into that. Our chance is now, before they start to refocus on the content and the text.

So I wouldn't want to guess that we have six months or a year; we're acting now.

Mr. Gerry Ritz: One thing that's not covered in your material here today is tariff escalation. You know, raw chicken going in, say, at 5%; processed, at 20%. What's your opinion of that, and how does it fit into your overview here?

Mr. Mike Dungate: It's a pretty technical question.

With our proposal, which says that you maintain over-quota tariffs where you are and you provide the access, we think that all tariffs in quota should go to zero. All right? So you would get rid of tariff escalation on the access you're providing.

For example, when we have poultry coming into Canada, the tariff on that, frankly, is the same. It comes in duty free right now. We do provide, with the U.S., zero tariff on any product. And you can imagine, there are no live birds coming in. There's boneless, skinless breast meat that's coming in--the most highly valued product--because we don't have tariff escalation.

So as long as it's not on our over-quota aspect and we're maintaining over-quota tariffs there.... I think if you look at the canola industry in Canada and such, it's not the over-quota tariff that's their issue. It's really the differentiation with soybeans, for example, and how that gets treated in countries. We're prepared to push as hard as we can on simple tariffs to get them down.

The Chair: Thank you.

Mr. Eyking, for five minutes.

Mr. Mark Eyking (Sydney—Victoria, Lib.): My question is not really on trade. I know the marketing boards deal mostly with the selling of products, but I'm wondering, in your crystal ball on the future, looking at the size of your farms and animal practices and what not, the hog industry is going through an awful session right now, with issues on the size of hog farms, municipalities not letting them in, and a whole bunch of things.

Are you people--it could be eggs or poultry--looking at where we have to be 10 years down the road, not on the marketing side but on being able to adapt to municipal bylaws, the animal rights people, and issues regarding medication in feeds?

Also, part of that is the whole concern--because we have a beef farm and we also have an egg operation--about feed products going from one to the other. I guess my question is how proactive your groups are on the other scale. Do you even get involved with that, or do you get involved mostly with the marketing side?

º (1645)

Mr. Tony Tavares: I would just start off by saying that although they're called marketing boards, these gentlemen on the marketing boards don't sell a single chicken into the market. The individual processors do.

Mr. Mark Eyking: Yes, I know.

Mr. Tony Tavares: It's just a slight thing.

In terms of addressing concerns such as animal welfare, food safety, reducing the use of certain compounds in raising animals—all of that—I'd rate the Canadian poultry industry generally as probably the most proactive and the most ahead of the game of any in the country.

On standardizing on-farm food safety programs—having a common food safety program across the country—we're essentially there. On introducing an auditable or a measurable program on animal welfare—we know we do a good job, but how do you document it, how do you quantify it, how do you measure, how do you gauge it year to year—again, we're doing a lot of work. I'd say on every measure you've mentioned we're ahead of the curve.

The other comment I have is with regard to intensive agriculture and the impact on the environment. There is one thing that characterizes supply management and is slightly different. It's not really a result of it. The average farm size in the supply management sectors—poultry, specifically, I'll talk about for a while—is nowhere near as big as some of the other sectors you've described. That's not as a result of supply management. Actually, the farm sizes here are probably generally bigger than what you'd find in integrated operations in the U.S. The average farm size in the U.S. is smaller than here.

Mr. Mark Eyking: It's smaller.

Mr. Tony Tavares: Yes, I'd say on average. You have some exceptions but you look at the average. Poultry, specifically, is the type of agriculture where you can have a relatively or comparatively small operation and still be quite efficient. You can't expect to feed 10 families on it, but you can be quite good at it as a source. It doesn't suffer from some of the same types of ills as some of the more intensive agriculture in terms of environment.

Mr. Mark Eyking: You mentioned that quite a few of our operations are larger than the United States. If for some unforeseen circumstances the border did go wide open, since a lot of our operations are larger operations, would we be able to compete?

Mr. David Fuller: Well, in all fairness, there are different structures in each country. Our tax system is structured differently than in the U.S. I think we all realize that our weather is different. There are a significant number of cost differences in certain things that widen the gap of competitiveness, clearly. We're not on the same page as far as input cost. The U.S. industry has been refocused and realigned. It's moved south to get away from the cold. The chicken industry has, for sure.

But I want to come back to a couple of things you mentioned. The poultry industries have just gone through and updated the recommended code of practice. Our industries have something else that we can do, because of our national involvement from one side of the country to the other. We can make programs mandatory because we have the legislation. I think that's a big step toward providing consumer confidence that our product is the safest.

We continue to be proactive, as Tony has indicated, and that is our goal. By being in every province in this country rather than all in one specific area, we think we're environmentally sound. There are a number of things, we believe, that because of a supply management system make us proactive. We will continue to be proactive, because we are very proud of the way we do things.

Mr. Mark Eyking: I know it's different sometimes between eggs and poultry, because you sell to the processors and a lot of egg operations sell direct to retail. Is there a major pressure from these bigger chains and bigger processors? They are not getter smaller and numbers are becoming fewer and fewer in this country, and on the supply of feed there are fewer. Is there a squeeze coming? Do the producers feel a squeeze coming from either side?

For instance, if an egg producer is selling eggs to some town in Ontario, for instance, and he's been doing it for the last 20 years, all of a sudden is the producer getting pressure from the Loblaws and Sobeys of this world? Are they saying, okay, you have to send them to a different area? Is there a whole shift happening in the marketplace that's causing any problems?

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Mr. Tony Tavares: I'll let my producer colleagues answer that. I don't know if there is a shift. There is a growing requirement and a growing need to ensure that the food chain is absolutely safe, absolutely traceable, absolutely documented. Unfortunately, in my view, what that means is if you are smaller you have a tougher time doing that. It is not necessarily a trend toward bigger agriculture. At the farm level the size of operation we have nationally works quite well, but in terms of processing and providing programs to our customers and our end consumers that assure absolute traceability and safety and documentation of every aspect, it implies a scale that a lot of processors of a certain size won't be able to do eventually. It's not a bad thing, in my view. I can say that. I represent a bigger processor in poultry. It is almost an inevitability. I'd make that statement.

I just want to pipe in a little bit on another thing. In terms of competitiveness, we have plants in this country where, basically on every measure we benchmark, assuming the $1 to be around 75¢—you begin to take the dollar out of kilter—we could kick the butt out of most plants in the U.S. It's not an issue. When it comes down to it, meat is grains and water and access to land and the like, and we have all those in abundance and are quite competitive in this country.

What we're talking about here is a system that works well for producers, consumers, and everything else. It is all about creating stability. You don't have that if you have a free-for-all. We could handle it likely. It would be very different, and we don't think it would be very positive for Canada. That's the point we're trying to make.

The Chair: Thank you, Mr. Eyking.

Mr. Calder, have you any other questions?

Mr. Murray Calder: No, I'm fine, Mr. Chair.

The Chair: Mr. Duplain.

[Translation]

Mr. Claude Duplain (Portneuf, Lib.): Mr. Chairman, I have a brief question. You talk about putting a lot of energy into explaining to other countries what supply management really is. You used the French pronoun "on". The use of that pronoun in French usually excludes the speaker. I'd like to know if you think that it's up to the government or up to you to work on that.

Mr. Mike Dungate: Both have to work at it together. In the case of the technical missions that we're looking at for November, we have worked in close cooperation with the government. Its representatives identified the negotiators we should meet and prepared briefing notes for us. They think it's best that we, the producers, should deliver the message because we are in the best position to promote our system and our proposal. At some point, the government will have to ensure follow-up with the foreign negotiators and ask them what they think. I think that lays a better foundation for the negotiations. That's our objective.

Mr. Claude Duplain: In view of the state of the negotiations, it's a bit late to undertake that promotion. Do you think there is any chance that it will help negotiations go forward?

Mr. Mike Dungate: We hope so. It's clear that it should have started earlier, but it has to be done. I hope we'll be able to do some good work and get something at this point, right in the middle of negotiations.

º (1655)

Mr. Claude Duplain: I'm very happy to hear you say so. These ideas have been floating around for some months. I'll take the lead in agreeing to that. I find this partnership between the government and private enterprise is interesting. It should help in the defence of supply management, so that we can keep it. It's very important. I'm convinced that if you need anything, all members would agree to give you a hand and support you.

Mr. Mike Dungate: We've talked about the role that the industry and government can play, but the committee might also be able to play a role which would be to meet the politicians from other countries. So there are three possible avenues to promote the Canadian position.

Mr. Tony Tavares: It may be a bit late, but better late than never. It's also possible that this could be a good time to intervene in view of the failure of the negotiations. It might be of interest to suggest that our position could be used as a bridge between the two extremes. I think that could be very important.

[English]

The Chair: Mr. Duplain, are you finished?

Mr. Claude Duplain: Yes.

The Chair: Mr. Ritz, anything?

Mr. Gerry Ritz: I'm all done.

The Chair: Mrs. Ur, finished?

Mrs. Rose-Marie Ur: I'm done.

The Chair: Mr. Eyking.

Mr. Mark Eyking: No.

The Chair: Mr. Binet?

Mr. Gérard Binet (Frontenac—Mégantic, Lib.): No.

The Chair: I will conclude.

I want to commend you for the good ongoing work that you've done since returning from Cancun. I was part of that group in Cancun. It was an enlightening experience.

I guess the one disappointment I had there was the fact that we seemed to be moving into two divergent groups as we concluded that conference. I trust the direction you're taking is with the approval of the other members of the SM-5; I trust this is being done in consideration of the others. As you know, we do very much support supply management, and I believe the direction that you want to seek your industry to take has to come from the industry itself. We are here as facilitators on your behalf.

We would encourage you, as I encouraged the grains and oilseeds and the other people who are of a mind to trade, somewhat differently from yourselves, that we need to work together and that this can be a win-win-win all around. So I would encourage you, as I know you're meeting in the next month or so. I think that's the intention of some of the senior people at negotiations, to regather and to discuss further the direction of the Doha talks. I would just encourage you to keep on it. I believe you're on a course that I think has some future, and I trust that for the sake of the industry and for the sake of consumers together we can move this thing forward and onward. Perhaps in this way Canada can become a real leader and help not only those countries that have been developed, but the developing countries. Really, that's what it's all about, feeding this hungry world in a way that is affordable. Of course, distribution is another issue, but that's for another day.

Thank you again for appearing before our committee. What you've said today has been taken in the very best of context, and we trust that we're moving in a very positive direction. Thank you very much.

The meeting is adjourned to the call of the chair.