AGRI Committee Meeting

37th PARLIAMENT, 2nd SESSION

Standing Committee on Agriculture and Agri-Food

EVIDENCE

CONTENTS

Thursday, November 6, 2003

º

1615

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

Mr. Robert Friesen (President, Canadian Federation of Agriculture)

º

1620

º

1625

º

1630

The Chair

Mr. Gerry Ritz (Battlefords—Lloydminster)

Mr. Robert Friesen

Mr. Gerry Ritz

Mr. Robert Friesen

Mr. Gerry Ritz

Mr. Robert Friesen

Mr. Gerry Ritz

Mr. Robert Friesen

º

1635

Mr. Gerry Ritz

Mr. Robert Friesen

The Chair

Mr. Robert Friesen

The Chair

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

Mr. Robert Friesen

º

1640

Mr. Larry McCormick

Mr. Robert Friesen

Mr. Larry McCormick

Mr. Robert Friesen

Mr. Larry McCormick

Mr. Robert Friesen

Ms. Jennifer Higginson (Policy Analyst, Canadian Federation of Agriculture)

Mr. Larry McCormick

Mr. Robert Friesen

Mr. Larry McCormick

Mr. Robert Friesen

Mr. Larry McCormick

Mr. Robert Friesen

Mr. Larry McCormick

Mr. Robert Friesen

º

1645

Mr. Larry McCormick

Ms. Jennifer Higginson

The Chair

Mr. Larry McCormick

The Chair

Mr. Dick Proctor (Palliser, NDP)

Mr. Robert Friesen

º

1650

Mr. Dick Proctor

Mr. Robert Friesen

Mr. Dick Proctor

Ms. Jennifer Higginson

Mr. Robert Friesen

Mr. Dick Proctor

The Chair

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

Mr. Robert Friesen

Mr. Howard Hilstrom

Mr. Robert Friesen

Mr. Howard Hilstrom

º

1655

Mr. Robert Friesen

The Chair

Mr. Bob Friesen

The Chair

Ms. Barbara Isman (President, Canola Council of Canada)

»

1700

»

1705

»

1710

The Chair

Ms. Barbara Isman

The Chair

Mr. Gerry Ritz

Ms. Barbara Isman

Mr. Gerry Ritz

Ms. Barbara Isman

Mr. Gerry Ritz

Ms. Barbara Isman

Mr. Gerry Ritz

Ms. Barbara Isman

»

1715

Mr. Gerry Ritz

The Chair

Mr. Howard Hilstrom

Ms. Barbara Isman

Mr. Howard Hilstrom

Ms. Barbara Isman

Mr. Howard Hilstrom

The Chair

Mr. Howard Hilstrom

The Chair

Ms. Barbara Isman

Ms. Barbara Isman

The Chair

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

Ms. Barbara Isman

»

1720

Mrs. Rose-Marie Ur

Ms. Barbara Isman

Mrs. Rose-Marie Ur

Ms. Barbara Isman

Mrs. Rose-Marie Ur

Ms. Barbara Isman

Mrs. Rose-Marie Ur

Ms. Barbara Isman

The Chair

Mr. Dick Proctor

Ms. Barbara Isman

Mr. Dick Proctor

Ms. Barbara Isman

Mr. Dick Proctor

Ms. Barbara Isman

Mr. Dick Proctor

Ms. Barbara Isman

Mr. Dick Proctor

Ms. Barbara Isman

Mr. Dick Proctor

Ms. Barbara Isman

»

1725

Mr. Dick Proctor

Ms. Barbara Isman

Mr. Dick Proctor

Ms. Barbara Isman

Mr. Dick Proctor

Ms. Barbara Isman

Mr. Dick Proctor

Ms. Barbara Isman

Mr. Dick Proctor

The Chair

Ms. Barbara Isman

The Chair

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CANADA

Standing Committee on Agriculture and Agri-Food

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NUMBER 054

l

2nd SESSION

l

37th PARLIAMENT

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EVIDENCE

Thursday, November 6, 2003

[Recorded by Electronic Apparatus]

º  (1615)  

[English]

    The Chair (Mr. Paul Steckle (Huron—Bruce, Lib.)): Ladies and gentlemen, I want to begin our meeting.

    We will have an abbreviated version of what was to have been a two-hour meeting today, as some have to leave on flights this afternoon.

    We regret the delay. Obviously, these occasions occur only rarely in one's lifetime and sometimes never in the lifetime of a politician. We do appreciate your forbearance and your acceptance of the fact that we had to do this today.

    This afternoon we will continue our post-mortem on the World Trade Organization negotiations in Cancun, and we will discuss how we move on from here.

    We're pleased, as always, to welcome guests to the table. This afternoon we have with us from the Canadian Federation of Agriculture, Robert Friesen, president, and Jennifer Higginson, policy analyst.

    We will continue with you until 5 o'clock at the latest. Then we'll give a half hour to the canola group. That will get us out of here at 5:30, which was our planned closing time.

    Mr. Friesen.

    Mr. Robert Friesen (President, Canadian Federation of Agriculture): Thank you very much, Chairman Steckle, for your introduction, and thank you very much for having us.

    We have passed out copies of our brief. It goes into a fair bit of detail in outlining some of the concerns we had with the Cancun text. As you've already said, the WTO ministerial meeting took place in Cancun. We believe that the last text we worked with in Cancun will most likely form the basis for any future negotiations, so we basically developed our comments and critique around that text, comparing it with our trade policy position and with what we believe agriculture in Canada needs. I will not go through that brief. I would certainly encourage you to read it. I will keep my comments brief and possibly less detailed as well. I would love to spend most of the time simply answering questions, if that's okay.

    As far as the Cancun meeting is concerned, we were extremely grateful for what we saw as some very hard work being done by the minister and our negotiators. I believe they did very well. We had access to them and were kept well informed as to what was going on. Of course, Mr. Chair, you were there as well and were part of what went on.

    I would also like to say that we certainly agree with our negotiators and our minister in defining some of the concerns we had about the Cancun text. We support the comments the negotiators made within the context of that text. We clearly support their efforts in making sure we do whatever we can to change those parts that need to be changed so that the collective interests of agriculture in Canada are well served.

    It was also very clear that the part of the text the EU and the U.S. were responsible for writing helped them to maintain the agricultural policy they have in their own countries, and now they were expecting other countries to step up to the plate. I believe that's where some of the problems arose.

    One of the things we have found with farm leaders around the world is a strong consensus that the WTO should not be about negotiating agricultural policy, but rather about negotiating an environment within which agricultural trade is facilitated and can grow. An example, of course, is how we started out in the Harbinson text with regard to the Canadian Wheat Board. That was clearly an effort to try to eliminate part of Canada's agricultural policy. It was more than just simply trying to facilitate trade. It was a direct attack on a policy we have in Canada. That's just one of the examples.

    On export subsidies, certainly the text is headed in the right direction. They do talk about eventually phasing out export subsidies. Of course, we would like to have them eliminated immediately. But they are moving in the right direction. They're also moving in the right direction with regard to export promotion programs to ensure that they are not just simply export subsidies disguised as other programs. So there is some optimism that perhaps we can make progress there.

    With regard to special and differential treatment, one of the concerns we have--and one of the issues we believe is going to be extremely tough to resolve--is how you offer special and differential treatment with the variety of development in the developing countries. We have talked to developing countries about it and have suggested that they need to work really hard at coming up with a way to offer a variety of special and differential treatment depending on how developed a country is and how developed any one given commodity may be in that country. If the poorer developing countries don't initiate something, they do so at their own peril, because developed countries will be very hesitant to offer much S and D unless that clarification is there and unless we get some sort of definition as to what is a real developing country and what is a more developed developing country.

º  (1620)  

    On domestic support we had some serious concerns. One of the positive things in domestic support is the fact that they talk about revisiting green box definitions. We're cautiously optimistic about that one because we know that the U.S. and the EU have no appetite to redefine green box. At the same time, you're familiar with our concern that what was defined as green box programs in the Uruguay Round has turned into programs that are quite trade distorting. So we really need to push that one. We really need to try to get a commitment that green box definitions will in fact be revisited.

    With regard to a general overview of domestic support--and we've discussed this with our negotiators--if that text had been implemented and if you plugged in the numbers Harbinson had in his text, it would have resulted in the U.S. not having to reduce its aggregate spending on agriculture, but it would have forced Canada to reduce its spending to below 1999 levels. That doesn't give us any progress in an area that all of us have spent a lot of time on over the last couple of years.

    You know that we've heard time and time again that Canada cannot afford to match subsidies in other countries. You've also heard the calculation as to what those subsidies are costing us. If we can't afford to match those subsidies, we have to be able to achieve significant reductions in other countries, and clearly that text did not do that.

    We're very concerned about paragraph 1.1, which talks about product-specific amber reductions. Capping amber spending based on a base period would lock in a disparity that came out of the Uruguay Round with regard to our respective domestic agricultural policies and would allow the U.S. to lock in very high levels of product-specific amber spending. We would basically be locked in at zero. That would almost institutionalize that inequity.

    On market access there is some good news. We're very happy that the text does refer to a discussion on tariff escalation. One of the things we have pushed for for quite some time is that tariff escalation should be eliminated--that is, no higher tariff should be charged on a further processed product than on the primary product. As well, we pushed for parity of access--for example, between primary products that have the same end use.

    We're also happy that the text talks about discussing in-quota tariffs. You must know that we have long pushed for zero tariffs inside TRQs, and the text does refer to further discussion on that as well. It also refers to continuing to talk about our negotiating terms and conditions on how market access is offered in TRQs, cleaning up TRQs, and creating equity in how market access is provided in those TRQs.

    I would encourage you to read the Cancun text if you haven't already done so. It's fairly easy reading and fairly straightforward.

    If you have read it, you will recall that they have a three-tiered approach to offering market access. One of the things we have said for a long time is that a simple formula tariff reduction is not going to get us what we need for our exporters. We know that there are a lot of tariffs that involve a simple formula reduction, such as an average of 36% with a minimum of 15% or even more. That will not get us profitably into some of the markets that currently have high tariffs. So we need to be much more focused on how we suggest that market access should be provided. It's not so important how a country offers market access. The priority is that market access is offered and that there is equity in the market access that is provided.

    The good news on the market access is in the last tier, where they say that a certain number of tariff lines need to be at zero. Of course you know that Canada already has between 36% and 40% of its tariff lines at zero. If we can get other countries to move in that direction, that would be good news.

    In the second tier of the market access part they say that a certain number of tariff lines should have the Swiss formula applied to them. That is good news as well because again, that's a movement toward providing better market access.

º  (1625)  

    But it's the top tier that has us somewhat concerned. One of the things you must know is that countries have played games with how they offered market access in TRQs. I've used the example in this forum before that Europe aggregated its meat access. We need to have a discussion on the disaggregation of market access. We believe that market access should be offered on a disaggregated basis. If you're going to use a TRQ to offer market access, it must be done on a disaggregated basis and of course with zero tariffs inside the TRQs. The other thing we've been pushing for--and I know our negotiators were pushing for--is that there should be an either-or scenario in that top tier. You either offer meaningful market access--and let's remember that it has to be “meaningful” market access--with your tariff reduction, or if you don't want to do that, then offer a TRQ without tariffs inside the TRQ and of course with good TRQ administration. We know that for some commodities a TRQ would give us much better market access than a simple formula reduction on tariffs.

    I have one other comment on market access, and this applies to domestic support as well. The domestic support part of that text does not give credit to a country that had low levels of spending. One of the reasons there could very well be a disparity if this text on domestic support is implemented is because of the low level and the way Canada has flowed its domestic support. They suggest that the de minimis should be reduced. Canada has kept most of its spending within de minimis. The reason the U.S. and Europe don't mind reducing the de minimis is that if you go over your de minimis by only a fraction, you have to include all of your spending right down to zero anyway. Because they're over, they don't mind reducing their de minimis because it's not going to change the way they flow the money or the level they flow it at. In Canada it's different. We've kept our spending within the de minimis. As soon as we drop it to, say, 2.5%, we would be over the de minimis, and then we would have to include all of the spending. So a country that has kept its spending at low levels and has tried to flow it at low levels using the provisions out of the Uruguay Round would not be given credit for that and in fact would be punished for it.

    When it comes to tariff reduction and providing market access, the same thing applies. There's a sentence below the suggested three tiers that says the average tariff reduction should equal x%. In other words, if you have a country that has a lot of its tariff lines currently at zero, and you have a country that has a lot of tariff lines that are already as low as what a Swiss formula application would bring them to, they wouldn't get credit for that, and they would have to reduce their tariffs even more in the top tier for the sensitive products. So again a country wouldn't get any credit. If I may use an exaggerated example, Australia could well be in the situation where it would have to offer a negative tariff because it already has so many low-bound tariffs.

    Incidentally, just as a matter of information, there's often talk about bringing agricultural trade to where industrial trade is, especially when it comes to tariffs. I have some information here, and I'll leave it with you. I should tell you that Canada is one out of four countries whose average-bound agricultural tariffs are lower than their average-bound industrial tariffs.

    Canada has made the offering. We need to ensure that we are not marginalized by what we've already done, while other countries continue to play games.

º  (1630)  

    I'll leave it at that, Mr. Chair. I would certainly be willing to answer questions of a more specific nature.

    The Chair: Thank you, Mr. Friesen.

    Mr. Ritz.

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

    I'd like to thank you folks for being here.

    Of course, you've given us information overload, Bob. You just know this stuff too darn well.

    Did Canada go too far too fast after Uruguay and is that restricting what we have as options now?

    Mr. Robert Friesen: That's an interesting question. On the way here I asked my executive director if I could use an example that was used by one of my directors at our last trade meeting. Well, maybe I won't use it after all.

    You could very well make that point in certain areas. We went down to zero in export subsidies coming out of the last round, and we didn't have to. We only had to drop it by 21% and 36%. So there Canada has nothing to offer. We're already there. With regard to domestic support, if we were close to 40% of the value of farm gate production, which the U.S. is, then we would have more to offer. It looks like they would like to decrease our spending or even change the rules on spending, which is going to hit us very hard because we were already trying to do it in a non-trade distorting way. If that three-tiered market access approach is used and you have to have an average tariff reduction, the same thing could apply. We need to make sure that other countries start offering the same thing Canada has offered.

    Mr. Gerry Ritz: How do you hold their feet to the fire when you have nothing left to bargain away?

    Mr. Robert Friesen: That's one of the reasons we've pushed very hard to make sure we clean up the disparities that came out of the last round.

    Mr. Gerry Ritz: Is there any strength coming out of the Cancun round, anything to build on? Some sectors say that supply management dodged a bullet there because it did collapse. Other sectors are saying we could have gone a little further. Is there any area where we actually gained a little bit?

    Mr. Robert Friesen: First of all, I don't think supply management dodged a bigger bullet than, say, our grains and oilseed sector.

    You need only to talk to our negotiators to identify some of the serious concerns. We had serious concerns for the collective interests of agriculture. I think agriculture in Canada possibly dodged a bullet. If we had been successful in getting the changes we needed in that text, then our preference would have been to sign it and to have an agreement. But if we didn't get our changes, then I believe we are better off by pausing for a while and trying to build allies.

    You ask if there is any strength. I think we have allies in the areas of market access and domestic support. We definitely want to make sure we make progress in the three pillars coming out of Doha, and I believe we have allies in getting there. I believe everybody agrees on the objectives. I think there is disagreement on how we get to achieve those objectives. We want significant market access improvement. The issue is how we will achieve that market access improvement. I think there needs to be more work done between countries to try to harmonize the tools we will use to achieve those objectives.

    Mr. Gerry Ritz: There seems to be a tremendous amount of strength coming out of the group that has banded together under the developing countries banner. Does work need to be done on the definition of a developing country?

    Mr. Robert Friesen: There has to be work done on that. If work isn't done on that, it's at the peril of the poorest developing countries. The poorest developing countries deserve special and differential treatment, and I don't think they're going to get it. I don't think they're going to resolve that deadlock until we can define what is a poor developing country and what is a less-poor developing country. And they know it. We've had discussions with farm leaders from Argentina and Brazil, and they know very well that in certain commodities they are just as competitive as we are. We've told them that they don't deserve special and differential treatment. They admit it. But we need to ensure that we can offer the S and D. I think it's also incumbent on developing countries to try to offer something to the WTO in that area.

º  (1635)  

    Mr. Gerry Ritz: How do you set the criteria? Where do you set the bar? How do you develop that?

    Mr. Robert Friesen: I don't have an answer to that. I don't know.

    The Chair: Because there's still a bit of your time left, I'd like to ask a question. Mr. Friesen, would there be the possibility of looking at a commodity-specific issue related to Argentina, for example, where you would treat that country as a developing country based on the product? On soybeans, for instance, you would classify that country as a developing country. I don't know whether we can do that or not.

    Mr. Robert Friesen: I think it has to be done on a country-specific as well as a commodity-specific basis. I made that comment to the Brazilian agriculture minister when he spoke at an IFAP seminar in Cancun. He admitted that something would have to be done in that area. The International Federation of Agricultural Producers is also going to start an initiative that will look at ways of defining what is a poor developing country and what is a less-poor developing country.

    The Chair: Mr. McCormick.

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

    Thank you to the witnesses for being here.

    It was a historic day.

    There's so much here. It is information overload. There are serious concerns for agriculture in Canada due to the implications of all of this.

    It's an old issue, which we probably all know, that we need to work with the Cairns Group. Is it worth our while to spend more time with these countries, and will they be there for us as we proceed into further rounds?

    Mr. Robert Friesen: I think it is worth while. But I don't think we should restrict our building of allies to any one group of countries. We have allies in the Cairns Group on domestic support and on significant increases in market access. The only problem we have on market access is that we think it should be done one way and they think it should be done another way. We have to cherry-pick the allies we want on specific issues.

º  (1640)  

    Mr. Larry McCormick: I'd like to get your comments on supply management and the Cairns Group. Some of the countries in the Cairns Group differ on that. There's one country that is always trying to meet with us behind the scenes on supply management. I think some of our bureaucrats are putting a lot of weight, perhaps too much, on the Cairns Group and its support for us. I'd like to get your comments on where we are with the Cairns Group.

    Mr. Robert Friesen: It really isn't a supply management versus exporter issue. We make a huge mistake if that's what we make the issue. We call it supply management, but other countries have similar programs that aren't called supply management. New Zealand has supply management in their dairy industry. They just don't call it supply management.

    Mr. Larry McCormick: As politicians, should we redescribe this and should we work toward a different definition in our negotiations?

    Mr. Robert Friesen: Internationally, supply management really is nothing more than the Canadian domestic policy.

    The issue is market access. If you look at the market access that supply management offered out of the Uruguay Round, their free trade industries compared with what some other countries did with specific commodities.... I think we need to stick to the issues as far as how we provide market access. Is there equity in how we provide market access? How can we ensure that other countries offer our exporters the same level of market access we have been willing to provide, not just in supply management but also in how we have demonstrated we are willing to go to zero on many of our tariff lines and to apply the Swiss formula.

    Mr. Larry McCormick: On Tuesday the Georgian Bay Milk Company Limited appeared as a witness. It is involved in a court case with DFC. We're not here to discuss that. They are exporting a bit of milk and a bit of cheese to the U.S. It doesn't take much to affect discussions with our neighbours lots of times. I'd like to hear what the effect is of the fact that 25 milk producers in Ontario are shipping without a quota. Of course, there is a lot of desire across this country for that to be expanded to other commodities. I would like to hear what you think are the implications of that.

    Mr. Robert Friesen: I'm not familiar with that case.

    Ms. Jennifer Higginson (Policy Analyst, Canadian Federation of Agriculture): I haven't followed it specifically.

    Mr. Larry McCormick: In your own province, if I understand correctly, people can export chicken and eggs without a quota, and that's what they're doing here with milk. They say both systems can be viable. That isn't a debate for today. My question is, how much can this affect our negotiations? Perhaps you'd like to give me a thought regarding the chicken or the eggs, whichever is leaving Manitoba at the time.

    Mr. Robert Friesen: You're absolutely right. I would encourage supply management to export as much product as we possibly can, because it's within the rules.

    Mr. Larry McCormick: This was without a quota.

    Mr. Robert Friesen: It's within the rules. I don't think we should ever be apologetic as far as exports out of supply management are concerned.

    Mr. Larry McCormick: This is exporting without a quota out of Manitoba and Ontario.

    Mr. Robert Friesen: That's a domestic policy issue, which differs between--

    Mr. Larry McCormick: How much effect could that have on our negotiations, in your opinion?

    Mr. Robert Friesen: I don't think it's going to affect the negotiations. It may affect how we continue to implement that domestic policy in the country.

º  (1645)  

    Mr. Larry McCormick: Thank you.

    Ms. Jennifer Higginson: Previously, it was set up so that you could export milk outside of the quota system. I think the dairy industry was very surprised by the WTO panel ruling, considering what they thought was negotiated in the last round. There certainly is concern as to the implications of that panel ruling on what the rules really are. A lot of producers who were able to ship milk on export contracts were told by that panel ruling that they could no longer do that.

    The Chair: If I may as the chair intervene here, we didn't come here to discuss this issue, but for the sake of clarity I'd like to say that the challenge before the WTO panel did not come about as a result of those who were shipping their milk without a quota. It came about as a result of those who produced under quota shipping their milk into the world marketplace. It was therefore seen as a subsidy. Those who are not producing under quota are not shipping under that regime. So we should separate those two. That's the differentiation I see between the two.

    Mr. Larry McCormick: Thank you for now, Mr. Chair.

    The Chair: Thank you.

    We'll now move to Mr. Proctor.

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

    I apologize for being late. I had some obligations in the House.

    It's nice to see you, Mr. Friesen.

    One of the things we continue to hear, whether it's with regard to the Canadian Wheat Board or supply management, is that Canada seems to have unique trading operations that most other countries don't have, so the problem is building support for our unique programs. I want to pick up on one thing I overheard as I was coming in. I think you said, Mr. Friesen, that New Zealand has supply management but they just don't call it that. If it walks like a duck, etc., it must be. So why would we be having such a problem finding allies in terms of advancing common positions?

    Mr. Robert Friesen: I think that's one of the reasons there was agreement at the North American-EU farm leaders meeting we had two weeks ago that the WTO should not be about negotiating agricultural policy, but rather about negotiating how to facilitate trade and how to grow agricultural trade.

    I believe that we do have support now for an approach that will encourage countries to offer real market access. It's important that the rules be the same, but there should also be some flexibility within the rules. Of course, the priority is that there is equity in the market access that has been offered.

    It's not so much about trying to sell supply management as the answer. It's making sure that in our efforts to expand agricultural trade it is done in such a way that countries can continue to maintain and develop sustainable agricultural industries. Let me use an example in market access. You can look at a formula approach to the reduction of tariffs. If you're trying to get into a country that has a tariff of 200% and you reduce it by 50%, you're still trying to get in over a 100% tariff. You need to do an analysis of what would give you more profitable market access, a percentage TRQ based on consumption without any tariffs inside the TRQ or the volume that you would put in over that 100% tariff. That's really the issue.

    Other countries understand that Canada needs export markets because we export on average well over 50% of our agricultural production. They know that we rely on export markets. We talked to other countries that rely on export markets as well. At the same time, we have not yet talked to a country that doesn't also have some commodities that are sensitive.

    So I believe it has to be a collective look at how we can best achieve our objectives coming out of Doha, which were the three pillars.

º  (1650)  

    Mr. Dick Proctor: I would be interested in knowing what intelligence the CFA has with regard to this business of genetically modified wheat and a market impact study before it is put on the market. Are you in consultation? The minister said a couple of times within the last few weeks that they're talking to the industry and they're going to talk to the provinces. Are there any developments on this front? Surely, this is an important piece for wheat farmers.

    Mr. Robert Friesen: It is a very important piece. We firmly support the concept of scientific justification when it comes to things like this. If Canada is to consider the production of genetically modified wheat, marketability is an issue as well. There's no point in introducing a product to the farm gate that would begin to destroy our markets in other countries. So we're encouraging the minister not to allow the registration of genetically modified wheat until we have either market acceptability or segregation at a level that doesn't jeopardize the markets we already have.

    Mr. Dick Proctor: Are you aware of where they are? Is the department in consultation with the industry and the provinces on this issue?

    Ms. Jennifer Higginson: We've been in contact with a few officials from Agriculture, and they will be coming to our next board meeting to talk to us on this issue.

    Mr. Robert Friesen: I believe that the attitude toward this has changed since, say, 16 months ago.

    Mr. Dick Proctor: I think you're right.

    Thank you.

    The Chair: Next is Mr. Hilstrom. This time it's for five minutes. You may very well take us to five o'clock. Do you want to leave a minute for...?

    Mr. Howard Hilstrom (Selkirk—Interlake, Canadian Alliance): He has direct access to the minister and the negotiating team, so I can probably use up my time.

    I noticed the support of the CFA for maintaining the Canadian Wheat Board. But the Province of Alberta and tens of thousands of farmers don't want to maintain the monopoly. Shouldn't the CFA be considering moving away from that position? Have you discussed it at all?

    Mr. Robert Friesen: First of all, the jury is in on whether the Canadian Wheat Board puts more money into the collective pockets of western farmers. That's without dispute.

    Mr. Howard Hilstrom: You're talking collectively, Bob. The Province of Alberta and individual farmers have said it doesn't put more money into their pockets. Do you not think that in order to move these talks along Canada should be willing to negotiate the STEs?

    Mr. Robert Friesen: First of all, I'm not here to speak for Alberta. The jury is in on the fact that it puts more money into the collective pockets of farmers. As far as this being an issue that is holding up the negotiations for Canada is concerned, that's preposterous. If this is an issue of domestic policy, we have the wording in the Cancun text that we hope will allow Canada to continue to maintain the Canadian Wheat Board if that is what farmers in western Canada want. But I don't believe that our position on the Canadian Wheat Board is preventing us from achieving our objectives in other areas.

    Mr. Howard Hilstrom: With regard to the use of the term “domestic policy” when referring to supply management and the Canadian Wheat Board, I think that's a very confusing way of saying it. We know for a fact that STEs and supply management are on the negotiating table. So I don't see how we can say that this is simply domestic policy so we can do what we want.

    I'd like to refer to Phil Boyd, the general manager of the Canadian Turkey Marketing Agency. He reports that all of the proposals under serious consideration now call for reduced tariffs and subsidies. He detailed why the poultry industry needs Canadian tariffs maintained at the current levels, which are amongst the highest in the world. He said that reducing over-quota tariffs even a small amount would increase the level of uncertainty in the administration of supply management in Canada. Maybe you were at the same conference. He ended up by saying words to the effect that because Canada is a trading nation, we cannot afford to come away from this without signing a future trade agreement.

    There's a high likelihood that all farmers, including those under supply management, are going to have to adjust to a new reality after the trade talks. We're the only country in the world, out of 148, that is trying to maintain supply management. Whose responsibility is it to prepare the industry and farmers for this new reality when supply management likely will not have the protection it does today and the Canadian Wheat Board may not be in existence? Is it the responsibility of farm organizations or individual farmers? Or is it the responsibility of government to say, for instance, you had better not be paying $30,000 for a milk quota because we're looking down the road and in seven years there's a high likelihood that the tariffs that protect you will not be there. Whose responsibility is it? Or do we just go ahead with these talks and then, as with the Uruguay Round, all of a sudden, bang, we have to adjust?

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    Mr. Robert Friesen: I think it's the responsibility of everybody inside this room to continue to fight in a negotiation that will hopefully make sure that our grains and oilseeds producers will no longer have the $1.3 billion hit to their pockets because of high subsidies in other countries. For exactly the same reason, I believe it's the responsibility of everybody in this room to continue to negotiate a trade deal that gives us significant market access improvement and does it in a focused way, so that not only will we get improved market access for grains and oilseeds producers, but we will get it for the hog industry as well. The way to get market access improvement in the hog industry is not the same way you might get it in the grains and oilseeds industry.

    It's time people realized that we are going to have to stop using the rhetoric of formula approaches to improving market access. Let's be more specific. Let's try to develop allies that will also understand that there are different ways to achieve our objectives in the three pillars of Doha and that a formula approach doesn't work. That includes the domestic support issue for the grains and oilseeds sector, the domestic support issue with regard to the hurt to our livestock industry because of cross-subsidization in the U.S, and negotiating a deal that will give credit to the fact that we have already given a lot of market access and now we want to see some equity so that other countries offer it as well. That includes supply management.

    The Chair: That brings us to our conclusion. We now have to move to the next element. It was an abbreviated form of what we had intended to do, but it's better than not meeting at all.

    Thank you, Mr. Friesen and Ms. Higginson, for appearing this afternoon.

    Mr. Bob Friesen: Thank you very much.

    The Chair: We now bring to the table Barbara Isman, who is the president of the Canola Council of Canada. Let me say to those around the table that Barb, our great ambassador for the canola industry, was very forthright and very well noticed in Cancun, and I'm sure she's noticed in this country as well.

    Barbara, you can make your presentation, and then we will begin the questioning. We have half an hour.

    Ms. Barbara Isman (President, Canola Council of Canada): Thank you very much, Mr. Chairman.

    The Canola Council of Canada is a voluntary association. It's comprised of all canola grower organizations, all exporters, all crushers and processors, as well as farm input manufacturers. We work together as a united value chain. Our mission is to enhance the profitability from the supply and production of canola seed and oil and meal products, based on the product providing superior value to our customers throughout the world. Our domestic subsidies represent 0.4% of the value of canola production. We have a non-regulated marketing structure. There is virtual unanimity among the value chain with regard to what our objectives are.

    On behalf of the canola industry, I'd like to thank you very much for giving me the opportunity to appear. I've watched over the years, and I know that you have a tradition of soliciting the views of the day on matters that are important to agriculture. We haven't been regulars here. We may find that has hurt us in a variety of areas. But I'd like to say thank you for allowing us to rectify that. Hopefully, we will appear before the committee more often.

    We came today because for us there is no more important issue than trade. I'm going to explain why that is.

    First, I'd like to give a quick overview of the canola industry. There are 33,000 farmers who grew canola last year. Fortunately for us, this year we'll be at six million tonnes of exports instead of four million. That means $2.5 billion in farm gate sales. One-half of this production is going to be exported as seed. The other half will be processed right here at home in B.C., Alberta, Saskatchewan, Manitoba, Ontario, and Quebec. Half of that will stay in Canada. The other half will go around the world. That changes the value of canola by $1.5 billion. About $2 billion are spent on goods and services. That makes us a $6 billion industry.

    Our objective in taking what is an unusual step for us, which is appearing before the committee, is threefold. We need you to understand why international trade matters to us and how the current trade environment is affecting our ability to access markets. Then we'd like to talk about what we'd like to have happen in the current round of negotiations.

    Why does international trade matter to the canola industry? We enjoy a 70% market share domestically. However, that is only 20% to 25% of what we produce each year. If we served just Canadian consumers, we'd need about 2.5 million acres, not the 12 million acres we had this year. We'd need 7,000 farmers, not 33,000, and half of our crushing plants would shut down. Essentially, this is an industry that enjoys tremendous domestic success but is built on trade.

    As an industry, we need to grow in the next five years by about 20%. The reason we need to do that is because we have to secure research and development dollars for the crop. We're always competing with soybeans because soybeans are a much larger crop. So we need to make sure that we keep that R and D coming in to canola. In order for that to happen, we have to continue to expand. It's only going to come from international markets, unless you would like to vote 10% mandated bio-diesel consumption. If you did that, it would soak up some demand. I need to talk about why R and D is important to us. You heard Bob talk about this. Canadian farmers do not enjoy the largesse of government the way our U.S. soybean counterparts do, and U.S. canola growers as well. We have competitors such as Brazil. They have the advantage of a lower-cost structure. For canola growers, the true opportunity has to come from new technology. So we have to make sure that we keep those dollars coming. That means growth of our sector. That's how international trade flows all the way down to the fundamental nature of canola.

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    For us it is not a theoretical or philosophical issue. At the end of the day, you have to sit down and ask, is this about farm politics or dollars and cents? We are in a really interesting position. We're the poster child for what not to get out of a trade negotiation. Look at what happened to canola as a result of the Uruguay Round. China has a 9% tariff on canola seed and a 3% tariff on soybeans. That's not all that bad. But India has an 85% tariff on canola oil and a 45% tariff on soybean oil. In Pakistan the tariff on canola oil is twice as much as it is for soybeans. In Korea, Thailand, and Taiwan, it's the same story. There are very few markets we can go into where we are not having to jump a tariff hurdle, except for NAFTA countries. We have had success in moving into Mexico since those tariffs came down, both seed and oil. We're responsible for 85% of the world trade in canola and rapeseed. What do those tariffs mean for farmers? Let's call a spade a spade. They mean lower income because we have to price lower to compensate for the higher tariff. We're basically competing against soybeans. We either have to drop the income of farmers to get into a market or we don't go into a market, such as India. We have to funnel our canola into three or four countries. What does that do? That reduces income. Plus, we're scared that if we end up having reduced R and D, the income of farmers will again be lowered. This issue of tariffs isn't some theoretical or philosophical thing. It's about bucks. The people who are paying for this are farmers.

    I'm quite passionate about this because I don't think this is fair. I really don't. I've been in the canola industry for a year and a half, and I could not believe this situation existed for canola or even worse, that nobody knew this was the case.

    What do we need to get out of this? Bob clearly articulated some of the areas of concern to us. One of them is the special and differential treatment. A lot of times Brazil is mentioned. We have to watch the countries that are self-declared. They're also potential importers. They should not be allowed to keep their barriers because they're declared. I think Taiwan is one of those. We agree with the CFA on the issue of export subsidies as well.

    We have two market access issues. Why on earth is canola discriminated against relative to soybeans? The second is tariff escalation. The CFA said they support dealing with this business of canola seed having a lower tariff than canola oil and meal. This is of critical importance to us. Our second largest customer for seed is Japan. But Japan can get canola from Europe and Australia, and Australia is closer. They can get soybeans. The one thing we have in our value-added sector is that they're captive. They have a quarter of a billion dollars' worth of concrete sitting primarily in western Canada. So they need canola, and we need them to stick around, quite frankly. Those are the issues on market access, parity and tariff escalation.

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    We really need to see reductions in what appears to be the U.S.'s and the EU's favourite form of protectionism, and that's the domestic subsidy. Canadian canola was supported at 0.4% of the value of production, while in the U.S. domestic support accounted for 36% of the value of canola production and 23% of the value of soybeans. Canola growers in Canada have 1/100 of the support level. If you combine the fact that canola is discriminated against in tariffs with the fact that our growers have to compete against 36% subsidies, you have a situation.

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    The Chair: Can you wrap it up in one minute? That will give us three questions at five minutes each.

    Ms. Barbara Isman: Okay.

    Bob talked about how those reductions occur. We have to watch how those subsidies are reduced. Soybeans is a well-protected commodity in the U.S. So we need to make sure it's done on a product-specific basis.

    We'd like to have consideration given to a new idea, which is on the value of production. We believe that the Derbez text, while not perfect, took us part of the way there.

    As you've heard, the canola industry truly needs access to world markets and the trade liberalization to do it. We ask that you as our leaders ensure this negotiation moves forward.

    Thank you.

    The Chair: Thank you very much, Ms. Isman.

    Mr. Ritz, for five minutes.

    Mr. Gerry Ritz: I have just a couple of points. I understand that we don't have a lot of time.

    Of the canola that's grown, 90% is GM.

    Ms. Barbara Isman: Of the canola that's grown, 90% is herbicide tolerant. There are two kinds of technologies to achieve herbicide tolerance. One is gene technology, and the other is mutagenesis. Sixty-five per cent of the crop is gene technology, 25% is mutagenesis, and 10% is conventional. Of the 10% that's conventional, 30% is the new highly stable canola.

    Mr. Gerry Ritz: So 65% of what we're dealing with is GM canola. Is there a concern among these trading partners that it is GM? We're hearing that from the wheat sector. I don't disagree at this point. If there's a problem with the market out there, let's analyze it before we go. Canola seems to enjoy huge trading relationships, and I don't hear any negativity on the GM side of it.

    Ms. Barbara Isman: Our market share has not been affected in our traditional trading countries as a result of our GM status. However, the EU is an exception. You know that there is a challenge being brought on that topic. What we have found is that if a country has a production base of its own, then conveniently that will pop up. That's why we've had to strongly argue in favour of the continuation of the science-based regulatory system. People love growing oilseeds. One of our problems, by the way, is that it is a well-loved industry. So we need to watch that. We deal with market acceptance. We have rules with regard to having regulatory approvals in our key markets. So it doesn't go there until everything has been dealt with. We do that voluntarily. We have the voluntary system in place.

    Mr. Gerry Ritz: What is the increasing value of the Canadian dollar doing to your trade?

    Ms. Barbara Isman: It's hurting it. There is a problem with the base levels as a result of it.

    Mr. Gerry Ritz: You say that if we could get 10% bio-diesel use, everything would be fine. You'd use up a lot more domestically. What would it cost in taxpayer subsidy to produce that bio-diesel? Is it economical?

    Ms. Barbara Isman: I think 2% bio-diesel would result in 1¢ per litre at the gas tank. It would consume approximately 700,000 tonnes of seed, which would be 1.4 million acres.

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    Mr. Gerry Ritz: Thank you.

    The Chair: Howard, do you want to continue? There are two minutes left.

    Mr. Howard Hilstrom: You mentioned Bob Friesen of the CFA, who is a pretty smart fellow. Are you part of the CFA, and do you agree with all of their positions?

    Ms. Barbara Isman: The Canola Council is not part of the CFA, nor are the canola grower organizations. But they have general farm organizations in their structure, so they will have canola growers in their structure. But we don't belong.

    Mr. Howard Hilstrom: With regard to Canada's negotiating position at the talks, do the canola growers expect that Canada is going to have enough influence to negotiate greater market access and lower tariffs when Canada has a diametrically opposed position of not wanting to increase market access for the supply management commodities and not wanting to lower tariffs for them? Do you believe that Canada will be able to influence these talks, or is Canada simply going to have to accept what the world delivers to us, while saying take it or leave it?

    Ms. Barbara Isman: We were not present as an industry at the Uruguay Round, and I believe we paid a price for that. I believe our government is starting to hear our perspective on these things. I'm a loyal Canadian. I heard Mr. Chrétien say that the people in that room serve the public, and I believe that we will see a negotiating position from Canada that also reflects our reality.

    Mr. Howard Hilstrom: You sound like a Liberal representative.

    Some hon. members: Oh, oh!

    The Chair: Mr. Hilstrom.

    Mr. Howard Hilstrom: I'm sorry, I'm finished. You're right.

    The Chair: Let her respond, please. Your time has expired.

    You may continue for a short time, not very long, if you have something else to add.

    Ms. Barbara Isman: I'm in shock because if my dad heard that, he'd probably take me out to the back of the barn and shoot me.

    Some hon. members: Oh, oh!

    Ms. Barbara Isman: I think that in part it was our fault as an industry because we couldn't articulate. If we end up with a trade agreement that still has this nonsense in it, then I'll pretty much be thinking that Canada did not reflect our interests. But I'm going to give everybody the benefit of the doubt.

    The Chair: Thank you, Ms. Isman.

    We'll go to Mrs. Ur for five minutes.

    Mrs. Rose-Marie Ur (Lambton—Kent—Middlesex, Lib.): It's most refreshing to hear you this afternoon. I can see you being a politician down the road, based on some of your answers.

    All kidding aside, we've had presentations from the canola producers. I think you certainly have done a good job. Maybe you haven't been here often, but when you come, you give a quality presentation.

    I've certainly learned a lot from meeting with the various groups that have come here. We've had some representations in the last week or two.

    With the interest in health that is out there, I think canola is certainly a viable product. I think every household in Canada should have one of those little magnets you've provided because it tells us the value of canola and how important it is to our health as well as to the farmers who grow canola.

    I'd like to ask you about the high tariffs in Korea, Thailand, and Taiwan, which you referred to in your presentation. I've had the privilege of going to Taiwan. I was asked to lead a delegation on agriculture. There certainly isn't a lot of room for agriculture there, including canola, so I was wondering why they're protecting that market.

    Ms. Barbara Isman: I will go back to the issue of how canola was treated in the last round and what will happen in this round. I can only surmise that when people went behind doors to do the hard work of negotiating, the Americans were trying to get gains for soybeans. There's no real reason for this. You're right, canola is healthier. It has the lowest level of saturated fat of any commercial oil. It has omega-3 and omega-6. I like Canadian soybeans. I'm not so big on American soybeans. I really do think it comes down to the fact that when they went behind closed doors back then, somehow or other soybean had its foot in the door better than we did.

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    Mrs. Rose-Marie Ur: In your presentation you said that you are hoping to see real reductions in the domestic subsidies of the United States and the EU. What can we do differently to present a stronger approach on that? We hear all the time that we need to do a better job. We need to hear about some new tactics.

    Ms. Barbara Isman: Every country has its favourite form of protection. This just happens to be their favourite form. I'm not going to kid you that this is going to be easy. It will come at a price for other countries. Everybody is going to have to look at their favourite form of protection.

    An interesting proposal is being developed on domestic support based on the value of production. That'll come forward to the agriculture trade negotiating committee in the next couple of weeks. It may have some appeal to the United States and Europe. We're trying to work on it. The Canadian Agri-Food Trade Alliance has been working on it with Steve Verheul. It would allow us to provide domestic support, but it would based on the value of production.

    Mrs. Rose-Marie Ur: On December 15 there is going to be a general council meeting. Is canola going to be represented there?

    Ms. Barbara Isman: No. It was the best we could do to summon up the courage to come to Ottawa.

    Mrs. Rose-Marie Ur: We're not bad people here.

    Ms. Barbara Isman: We've made a provision for CAFTA to be there. We're actually going to be in Japan talking to the Japanese about making sure we keep our canola business intact.

    Mrs. Rose-Marie Ur: The canola growers certainly have a strong advocate, and I congratulate you.

    Ms. Barbara Isman: Thank you.

    The Chair: Thank you, Ms. Ur.

    Mr. Proctor, you have the last question.

    Mr. Dick Proctor: Thanks very much.

    Ms. Isman, thanks for your presentation.

    You mentioned the very low subsidies for canola in Canada. I would assume it's the same for soybeans in Canada. Are they similar?

    Ms. Barbara Isman: I believe it's in the neighbourhood of 13%.

    Mr. Dick Proctor: So it's considerably higher.

    Ms. Barbara Isman: We're the lowest of any commodity in Canada.

    Mr. Dick Proctor: I expected you to say that they were relatively comparable.

    Ms. Barbara Isman: No. They have their provincial support programs.

    Mr. Dick Proctor: Even at 13%, that would be considerably lower than what you would find across the border in the United States.

    Ms. Barbara Isman: That's right. Overall, we're not big subsidizers.

    I'm sorry. For soybeans it's only 6.4%.

    Mr. Dick Proctor: You mentioned in your presentation the relatively high level of tariffs that are charged in many countries, particularly eastern countries. I also understand that this impacts the fact that we ship more canola seed and less oil over there. Is it of concern to the Canola Council that we're not doing more crushing here? Is that a big issue for you or a non-issue?

    Ms. Barbara Isman: Certainly, we like our customers to be captive. The most captive ones happen to be on the prairies. We'd like to have as much product crushed as possible.

    Mr. Dick Proctor: Domestically you mean.

    Ms. Barbara Isman: Yes. We're not unlike governments. We have farmers, exporters, and crushers, and we have to sit down and figure out the best thing to do for everybody concerned. So we set out some principles. One principle is that we need to create a level playing field for oil and its products versus seed. We have some markets that will always want seed and some we'd like to move oil into. India, at 5 million tonnes, is an oil market. Obviously, we'd like to send oil there.

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    Mr. Dick Proctor: You mentioned canola being grown in Europe and that they were one of our competitors. That has to be conventional canola. Or is it GM?

    Ms. Barbara Isman: It is conventional canola, and it is primarily going into the bio-diesel market now.

    Mr. Dick Proctor: The concern has been raised over the years that because there's so much genetically modified canola, it's tough to grow conventional canola. Obviously, some is being grown. Is it being grown far away from other plots? Are you familiar with where that's being grown?

    Ms. Barbara Isman: At its peak there were 12,000 acres of organic canola. That has dwindled. But 12,000, relatively speaking, is not a lot of acres.

    The best example of conventional canola that's on an upswing would be the Dow Nexera product. They are not experiencing difficulties. But it does require management, and we have to learn--

    Mr. Dick Proctor: What kind of management? Could you expand on that?

    Ms. Barbara Isman: The farmer needs to--

    Mr. Dick Proctor: In terms of crop rotation and things like that.

    Ms. Barbara Isman: Yes, and weed control.

    With regard to the conventional or non-GM business, I know there has been a lot of publicity, but there haven't been a lot of actual problems, and we would hear if there was one.

    Mr. Dick Proctor: Thank you.

    The Chair: Thank you, Mr. Proctor.

    Thank you, Ms. Isman, for appearing before us. It's an interesting industry. We did appreciate your presence today.

    Ms. Barbara Isman: Thank you very much.

    The Chair: It may be early, but I wish all of you a Merry Christmas.

    The meeting is adjourned.