AGRI Committee Meeting

STANDING COMMITTEE ON AGRICULTURE AND AGRI-FOOD

COMITÉ PERMANENT DE L'AGRICULTURE ET DE L'AGROALIMENTAIRE

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, November 17, 1998

• 0902

[English]

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

I was just advised by the clerk that the heritage committee will be meeting here at 11 a.m. They have asked for a particular courtesy from us. Apparently they have some machinery to set up and if there's any way we can get out by, say, 10.45 a.m., or 10.50 a.m. at the absolute latest, it would be appreciated. Considering the fact that we have only a couple of witnesses, maybe we could try to aim for closing at 10.45 a.m.

Members, continuing our “Take Note” hearings on the WTO negotiations on agriculture, with us now is Charles D. Milne, who is the vice-president of government affairs of the Crop Protection Institute. We also have—apparently he's not in the room yet, but we expect him shortly—Danny Dempster of the Canadian Horticultural Council. We'll hear from Mr. Milne first.

Good morning, Mr. Milne. We invite you to make your presentation, and then we'll get to questions.

Mr. Charles D. Milne (Vice-President, Government Affairs, Crop Protection Institute): Thank you very much. There's a brief being circulated. To establish where we're coming from, maybe I'll take a few minutes and read the brief, and then entertain questions following that.

The Crop Protection Institute is a non-profit trade association that represents the developers, formulators, and distributors of plant life science solutions for agriculture, forestry, and urban pest management in Canada. The remit of our institute is currently being broadened to embrace plant biotechnology, which includes what are commonly known as both input and output traits, in addition to our chemical pesticide technologies.

In 1997 our industry sales were $1.43 billion.

The institute appreciates the opportunity to share its perspective on the upcoming World Trade Organization negotiations with this committee. The members of the Crop Protection Institute, as providers of essential technologies to agriculture, have a profound interest in the health, viability, and global competitiveness of the Canadian agrifood sector.

Committee members, this morning I'd like to focus on non-trade barriers in particular. It is our view that the increase of non-trade barriers places the ambitious Canadian agrifood export goals in great jeopardy.

Other exporting countries are anticipating this round of WTO negotiations to be dominated by more subtle forms of trade restricting tactics and are organizing themselves accordingly. For example, the position of agriculture minister in New Zealand has recently been redefined as Minister of Food, Fiber, Biosecurity and Border Controls, with corresponding expansion of remit to reflect the latitude they feel is necessary to function effectively in the realm of international trade.

• 0905

I would like to speak a little about the U.S. Food Quality Protection Act, which is commonly known as the FQPA. It has been positioned as a plethora of extremely complicated science to reduce health risks. However, its overarching effect upon Canada is that of a non-tariff trade barrier and an externally imposed obstacle to competitiveness. For example, the canola industry in Canada has been a source of great pride and global recognition. Because of that it has benefited from a considerable amount of research and development focus. Its success now risks becoming its downfall.

Canola is the only crop in Canada that enjoys more crop protection materials being available in Canada than in the U.S. This advantage has become a point of contention in the U.S. under the FQPA, threatening the loss of the hefty level of exports to the U.S. In contrast, the Canadian horticulture industry has long coveted the wide selection of crop protection materials available to their U.S. horticulture competitors. Now the limited selection of crop protection choices for horticulture in Canada stands to be potentially reduced further due to the FQPA, yet Canada must still compete in the global arena with the U.S.

The science, as the PMRA officials will attest, is the subject of considerable ongoing debate. Unfortunately, the FQPA instantly became law without any review two years ago in a pre-election frenzy in the U.S. Currently, as the first phase of the FQPA is in the process of being implemented, the truly ill-founded and far-reaching nature of this act has become apparent. The impacts of the FQPA on Canada have the potential to be very severe. Agrifood exports to the U.S. risk being significantly diminished and the overall global competitiveness of Canadian agriculture stifled due to a reduction of vital crop protection products in Canada without adequate, or in some cases any, alternatives.

While it is appropriate that the PMRA establish itself as the Canadian source for FQPA scientific information, it is a concern that Agriculture and Agri-Food Canada and the Department of Foreign Affairs and International Trade have not led or taken higher profiles on this issue. The Canadian government must make a strong effort to expose the FQPA as a non-tariff trade barrier and challenge its legitimacy under NAFTA and the WTO.

Unfortunately, to date the FQPA has been primarily viewed as a Canada-U.S. issue. It is not. The FQPA effectively curtails the import into the U.S. of agrifood products from any country that uses crop protection materials that are not sanctioned under the FQPA in the U.S. and/or have no import tolerances established for the product in the U.S. Hence, this piece of domestic U.S. legislation carries significant international implications.

Rising awareness about the impact of the FQPA with other countries is essential so that Canada can have high-profile international traders, like the French wine industry, as allies to assist us in fighting the issue and bringing this matter to the attention of the WTO. The Crop Protection Institute encourages this committee to speak with the Minister of Agriculture, the trade minister, and the health minister about approaching FQPA as a trade issue, and to direct the trade department to pursue the issue as a non-tariff trade barrier.

I would like to now change gears a bit and speak about the biosafety protocol. As you know, biotechnology is becoming very important to Canada. Biotechnology risks becoming the basis for the restriction of trade. The biosafety protocol is complex, but its positive resolution is critical to the future success of Canadian agriculture. The protocol must not be permitted to inhibit Canada's growing strength in agriculture biotechnology and its corresponding trade potential.

• 0910

Again I'll reference the canola industry. Its success has placed it among the most advanced crops in embracing the advantages of biotechnology. This too has led to uncertainty about future access to attractive and growing export markets, in particular Europe. Export market access depends on the outcome of the biosafety protocol. Canada's opportunity to turn its momentum in agriculture biotechnology into global leadership requires a strong Canadian position supportive of biotechnology at both the WTO and the biosafety protocol negotiations. The Crop Protection Institute requests that this committee support the BIOTECanada funding request for assisting in the biosafety protocol negotiations.

Finally, I'd like to reflect a bit on how the Canadian regulatory system has an unrealized potential as a competitive advantage in world trade. Currently the competitive disadvantage that Canadian producers are experiencing due to the slowness of NAFTA and OECD harmonization processes in the registration of crop protection materials through the PMRA risks being compounded by the WTO if not quickly resolved prior to entering the WTO negotiations.

The Crop Protection Institute applauds the health minister's initiative to recently undertake an independent review, called the Nephin study, of the PMRA. The study's findings strongly reflect and confirm the industry's assessment and experiences with the PMRA regarding inefficiencies, lagging performance, lack of management systems, and the need for an increased accountability. The Nephin study provides a starting point for immediate focused discussions between industry and government about priorities and approaches to remedies for the agency. Fixing the PMRA does not require money, but it requires the will to make and keep the agency accountable.

In these times of farm income crisis, making the PMRA efficient could represent a most positive step towards improving the competitiveness of Canadian agriculture internationally. A respected, efficient, and expeditious regulatory system, be it for traditional crop protection technologies or for emerging technologies such as biotech, is the foundation for attracting research and development investments that could establish Canada as a global discovery centre for agrifood despite Canada's market size. The Crop Protection Institute wishes to work with government and the agrifood stakeholders in making such a vision the reality. The institute views the changes that are befalling the inputs, infrastructure, and trading environment of the agrifood sector as unparalleled. Establishing a Canadian agrifood strategy to boldly address the challenges of the coming millennium is a necessity. I thank you for your attention.

The Chairman: Thank you, Mr. Milne.

We'll now hear from Danny Dempster of the Canadian Horticultural Council. His written presentation is not in both official languages so we'll withhold distribution of it for now, but we'll hear from Mr. Dempster. That will be followed by questions for either gentlemen.

Mr. Dempster, good morning.

Mr. Danny Dempster (Executive Vice-President, Canadian Horticultural Council): Good morning and thank you, Mr. Chairman. I extend my apologies for the lateness of the document. It was finished yesterday around 4.30 p.m.

[Translation]

We will have it translated as quickly as possible and I will forward the French version to the committee as soon as it is available.

[English]

It's a pleasure for me to be here before you, and I appreciate the opportunity to bring the horticultural sector's views on the next round of the WTO to committee members' attention. I preface my remarks by indicating to the committee that currently it's very difficult for our sector to get enthusiastic and provide a lot of input on a negotiation that will ostensibly begin in some form on the basis of principles in 1999 and perhaps conclude in 2003 and 2005. That's not to say it isn't important; it's just simply to reflect that many of the producers are probably more focused on things like growing and harvesting and marketing their crop at this point in time. However, that should not negate the importance of this next negotiation. I hope I'm around for the implementation of the agreement in 2005.

• 0915

This is based on our experience at the last negotiation as well. Relative to developing principles for this next WTO, this sector developed the principles for the Canada-United States trade agreement. Once you develop principles, you pretty well have them, I guess, for future trade negotiations.

To put it in the proper context of what the WTO means, 80% of most of our horticultural product trade is with Canada and the United States. The United States is our number one source of import competition and currently is our number one market for our export products.

If you want to understand the horticultural sector's attitude toward trade agreements and their focus right now on the issues, if you look back in time you could say the Canada-United States trade agreement was the Canadian horticultural sector's WTO, given the nature of import competition.

All other subsequent trade agreements, whether it's the NAFTA, Chile, the constant tinkering or adjustments to the Canada-Israel agreement, the Caribbean basin initiatives, or the general preferential tariffs, basically pale in comparison when you look at the significance of the Canada-United States trade agreement.

There were some principles extolled or agreed upon by governments and supported by industry under the Canada-United States trade agreement that remain as frustrations to our sector, in terms of the delivery on some issues that were of fairly fundamental importance to this sector. My friend, Charlie, touched on it, particularly in the pesticide registration. Today there is a lot of frustration with the progress that has occurred in the whole pesticide registration field.

While the canola producers are experiencing that problem perhaps more so right now, the horticultural sector, for my 22 years, has been coping with this issue. It's particularly frustrating as you move from radishes to potatoes to apples to peaches to pears. It becomes quite a challenge.

When you think of it, we are approaching the 12th year of the Canada-United States trade agreement, which is tariff-free trade on products both ways. It remains a frustration today. Charlie very adequately indicated that the FQPA has the potential to tremendously disrupt the commerce between Canada and the United States, and it does have worldwide implications.

My president sat in front of an audience in Montreal one night when I was struggling to get him something to present to a group of people. He said “Danny, where's the plaque?” I said “I'm trying, Mr. President” and he said “Please, try harder.” I guess that's the only conclusion I can give to the efforts to harmonize or work more cooperatively with the United States on the joint registration.

I wouldn't want you to think progress isn't being made; we just need more activity and concentration in that effort.

I will try to focus my comments on the WTO and some of the key objectives we've been able to come up with at this time. They're not very different from the last WTO. If this agreement is going to mean something to horticulture—and I would apply these same principles whether it's the Canada-United States trade agreement, the North American Free Trade Agreement, the Chilean trade agreement—these are fundamentally important issues.

I would deal first with the phytosanitary and sanitary issues. A lot of these trade agreements are in terms of ease of access of opening up the market. It's fine to give us tariff-free treatment into a market, but if you don't have the other regulatory things in place it means nothing to the sector.

Some of the key concerns we've noticed with the export of primary horticultural products, and even finished products down the road, is this area of phytosanitary and sanitary. If anybody is familiar with potatoes and the struggles of the potato industry in moving seed potatoes into Mexico, that's phytosanitary. It continues to be a problem for the potato industry, yet we're in year four or five of the North American Free Trade Agreement with the deal with Mexico.

What we would suggest, whether it's those trade agreements or the WTO, is effective timely binding dispute resolution through the World Trade Organization and acceptance of international science-based standards, which I think is what my colleague, Charlie Milne, was talking about. If we do not have these things under the World Trade Organization, we've really tied the hands of the industry in terms of the great potential that's supposed to exist out there in export markets.

We touched briefly on the pesticide registration issue. That is a classic situation that ties the hands of the Canadian industry and can create trade problems and trade irritants with our trading partners. I would apply that same approach in terms of these regulations, whether it was in the area of biotechnology, novel foods, technologies like irradiation, or all of these tools that could be available to the Canadian horticulture industry, and probably the agricultural industry, to move their products or adjust to the new realities of technology.

• 0920

It's unfortunate, but if what we experience with the current pesticide registration is emulated in any of these other areas, clearly we've tied the hands of the Canadian horticultural industry.

Relative to market access and the Canadian industry at this stage—and again I would caution that we have begun our consultative process and we hope to finalize this over the course of the next few months before our March 1999 annual meeting—is the elimination of all tariffs on horticultural products to zero. There are some caveats with that. We would not want to see any further reduction of ours until we see other countries meaningfully moving on their horticultural tariff reductions. The bottom line is that you can't turn the clock back relative to the tariffs that have already gone with our number one trading partner. So our industry is now trying to focus on the barriers to trade for their products in export markets.

There are some examples in my paper, and again I apologize. I would be pleased to discuss it with any member at any time. It's particularly frustrating to the sector when we've seen tariff reductions here, and we see large tariffs for our products in markets like the EEC or Japan. Even if they've reduced their barriers, there could be plant health reasons why we can't get our products into the market.

I work for exporters, importers, and the whole bunch, and I have to say that from a horticultural industry perspective that Canada has to be one of the easiest markets to get into. There are a lot of reasons for that, and it's frustrating to our sector when we see some of these other barriers to our products moving elsewhere.

All remaining quantitative restrictions to trade should be eliminated or “tariffied” immediately and reduced to zero over the post-WTO adjustment period. There are licensing regimes out there that specify the volume of product that can be moved into some of the export markets. We don't necessarily have those restrictions coming into Canada, and I guess if you're a horticultural producer you'd say “If they have them, why can't we have them?” or vice-versa, “If we don't have them, why should they have them?”

Licensing regimes, whether they're government sanctioned or whatever, can control the volume of products and also relate to the size of the tariff in terms of moving your product into that market. We would suggest they be removed, unless of course they're related to the fresh fruit and vegetable industries, where they're sort of a common standard for dispute resolution. We're talking about product where there's a complaint between a shipper and a receiver and people are just trying to be paid fairly for their product. In the fresh fruit and vegetable industry, that's very key to Canada and the United States, and that's important.

One of our early specific export objectives would be for increased access for apples. If you can trade apples duty free into Canada, I guess apple producers are expecting you should be able to trade them duty free around the world, and I'm not so sure that works.

The areas of processed sweet corn, potatoes, potato products, frozen blueberries, onions, and carrots—and that's a very short list—are where we have early indications of some opportunities for growth. I guess there are 150 different horticultural products, so we haven't really had a lot of them calling us on this. Some of them are only concerned about the Canadian market.

We've also talked about the elimination of all non-health trade standards that impact import movement of horticultural products by any country. This could possibly include U.S. marketing orders. There's been a lot of talk about different regulations countries have. This sector has seen a lot of the regulations, rightly or wrongly, adjusted to provide our trading partners with national treatment. In other words, you can't treat them any less fairly than you can interprovincial movement, which is part of the agreement.

The sector has not seen other countries move with the same enthusiasm to provide national treatment to Canadian horticultural exporters. One would assume if Canada is to live with national treatment, we would expect other countries also to share that enthusiasm to treat us fairly at the border.

We've had examples where people say the freedom to move within Europe is wonderful, but if you can't get into Europe, it doesn't matter. That's the difference. Those are the key points we're trying to focus on.

I'm rushing through this a little and I apologize, but I want to give you an opportunity to ask some questions.

Basically there are no export subsidies I'm aware of in our sector, so if you're competing against products that have export subsidies and your foreign markets are in the Canadian market, I guess you don't really view that with much enthusiasm. So we would suggest the elimination of all export subsidies.

There are issues of domestic support. We are very concerned that governments are diligent in not using other green-type programs or environmental-type initiatives to find another way to assist in industry and therefore distort the level playing field, whatever that means.

• 0925

Under trade remedy, these are some areas of concern for the horticultural sector, and we're not quite sure again how this is going to be engaged in the next WTO. When we look at these trade agreements, we have to look at it from the bottom to the final product. One of the concerns I had as a private sector adviser to the government is what I call the box management of negotiation. You have components of the negotiating team looking at one area such as tariff reduction. This can create pressure on the regulatory system or on things like anti-dumping. You have to look at the total package to make sure it's a successful negotiation.

One concern that remains from the last WTO negotiation is this whole area of anti-dumping. People have different views on anti-dumping. There's the dumper and the dumpee. What we could strive for the most under the WTO or the Canada-United States Free Trade Agreement is an acceptance of the concept of anti-dumping.

The procedure should be parallel among the trading countries, because if it's different, that's where you start creating disputes between countries. One of the things that is still absent in the WTO, and it's not for a lack of the Canadian government putting that perspective forward, is the inability for producers to have a standing. That is still deficient under the WTO.

If you're growing grapes solely for the purpose of wine making, you have no status. You have wine coming into your country, and it's being subsidized and exported into your market or it's being dumped into your market, and I appreciate there's a process you have to prove. So that's a particular frustration for producers in our sector, in terms of trying to find some remedy. It doesn't necessarily follow that the people who are importing would want to file an anti-dumping action against themselves.

There is another area of trade remedy, and it's in fast-track, and we call it a safeguard. There were attempts under the last WTO to negotiate some improvements, but really you're looking for a more time-sensitive, price-sensitive safeguard to be developed for the horticultural sector.

The current language in these agreements suggests that you have 60 days to do this or 90 days to do that, and then you have a study. I would suggest when you have a short season crop such as strawberries, where it's four to six weeks, by the time you study it the crop is gone and the problem is there. This remains a problem, certainly for your more highly perishable products.

The sector is not really looking at sustaining inefficient production. If you have market collapses of 50% in price, that's fairly hard to swallow. You also have to realize that for some of the horticultural products, you either sell it or you smell it. So it really does have a great bearing on how the product is marketed.

In any event, I have quickly gone over a lot of different issues that are important, and again I appreciate the opportunity of being here before the committee. I would ask members for some diligence or some patience. We are trying to consult with our constituents from across Canada to get some key export interests. We don't represent all of the horticultural industry; we are a voluntary, not-for-profit organization.

Most of the industry across Canada—I would say over 90% of the horticultural producers—is represented through the Canadian Horticultural Council. There are some who, for whatever reason, either cannot afford to pay the fees or choose not to pay them. We've tried to present for you a national consensus, which I think is the best we can do as a Canadian organization.

Thank you very much.

The Chairman: Thank you, Mr. Dempster.

I'm sure members will have questions for you and Mr. Milne.

We'll now go to Mr. Hilstrom for seven minutes.

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

First of all, perhaps you could just provide a couple of examples of companies that belong to your association, Mr. Milne.

Mr. Charles Milne: Members of our association would include companies such as Novartis, Cyanamid, Monsanto, Du Pont, Agrivo, Rhone-Poulenc—all of the major manufacturers in Canada of crop protection materials.

We have about 35 members. There are mainline manufacturers; then there are formulators and distributors, which would include many of the wheat pools.

Mr. Howard Hilstrom: Okay. The dollar volume of your trade, you figured, was at approximately $1 billion?

• 0930

Mr. Charles Milne: It is $1.43 billion. That is shipments from manufacturers to the first step of the distribution channel. That's not at retail.

Mr. Howard Hilstrom: You're going with the basic concept in North America of a harmonization of products in the North American market for use in that market.

Mr. Charles Milne: Certainly that's a major priority, given that the bulk of our trade is to have a level playing field between the two major trading partners, yes.

Mr. Howard Hilstrom: On page 2 of your brief you indicate it's a concern that Agriculture and Agri-Food Canada and the Department of Foreign Affairs and International Trade are not taking higher profiles and leading on this issue. That's dealing with the FQPA. How long has the industry been trying to get action out of these ministries in the government?

Mr. Charles Milne: We made some formal requests last summer. One thing you have to appreciate is that this issue even sneaked up on the Americans to some extent. It was passed into law in the States in the summer of 1996.

There were some groundswells of concern there, but it wasn't until they began to implement the first phases of the FQPA that the international aspects became apparent. Last spring a number of grower groups who were adversely affected came together and got the ball rolling. This summer the PMRA held an information session, which was quite helpful. Our concern was that the representation from the agriculture department and the trade department was not as strong nor with as high a profile as what we would have expected.

Mr. Howard Hilstrom: The reason why I'm bringing it up is because we did have a timeliness issue dealing with the trade dispute with the U.S. this summer in South Dakota. We have to move quickly on these things, and that should be something that goes into our trade negotiations.

Along the lines of the non-tariff barriers, and of course the Europeans and the U.S. have been fairly good at greening up all their subsidies.... In the area of canola and certainly beef, the Europeans have been ruled against under various tribunals for the growth hormone for beef. I don't believe they allow our canola in there.

What can we do in our trade negotiations to make them abide by these? What stand should the government be taking in these trade negotiations to try to move Europe along from these non-tariff barriers, as I call them?

Mr. Charles Milne: Certainly public acceptance is a big driver there, and that's going to take time and a certain comfort level to accept.

However, simultaneously there is this biosafety protocol negotiation under way. Whether it is successful in reaching some conclusion in a reasonable period of time remains to be seen. The levels of abstract discussion are quite stunning.

We have to recognize that we can't have two tracks of negotiation going on here. Somehow there has to be a provision at the WTO level recognizing that there are these other negotiations going on with the biosafety protocol, which deal with things such as the escape of genetically modified material. This is one of the concerns Europe has put forward.

So whether I have the magic bullet for the solution, I don't think so, but someone has to effectively bell the cat at the WTO so that there is this issue. Sooner or later we're going to be dealing with it, whether through a trade dispute...so let's get it on the table now. Let's get some balanced thought so that we don't have to negotiate something that is inconsistent with the overall direction of the WTO.

The Chairman: Mr. Dempster wanted to wedge in an answer.

Mr. Danny Dempster: I won't speak as an authority on the biosafety. It comes back to some of our key concerns relative to the phytosanitary or sanitary rules. Some of the language negotiated under the WTO, and I think Canada had a large part in it and should take credit for that type of language.... It's not that easy to get all of these countries to agree on the acceptance of international standards and everything else. However, once you get an agreement, it's the action the governments take.

Everybody has to run home to their own constituency and then they have to explain why they signed this agreement, whether it's in Geneva, Brussels, or elsewhere. That's where we come back to this effective binding dispute resolution through the WTO. If all countries are signatories to WTO and you negotiate some principles, whether it's on biosafety or pesticide registration or whatever, it seems to me it's a responsibility of those governments to make sure their systems are in place, to make sure they're consistent with the agreements they've signed.

• 0935

Part of it is that it's difficult, when governments go home—and we see that whether it's the United States or anywhere else—to accept that there is an agreement they signed in Geneva that they have to live with. Well, that's the reality, or don't sign the agreement. You need this effective binding dispute resolution where, if there is a concern, your government would have to come and give some scientific justification for why they would have a different game plan in their country when they've signed agreements suggesting they're willing to live with international standards.

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

The Chairman: Half a minute.

Mr. Howard Hilstrom: Could you just put into context here what the annual value of the horticulture industry is in Canada and the percentage of those exports that go outside the country? I guess that would be good enough for right now—in thirty seconds.

Mr. Danny Dempster: In terms of the farm gate value, it's $2.7 billion approximately. About 75% to 80% of the exports would go to the United States and the balance would go offshore.

Mr. Howard Hilstrom: What percentage of that $2.7 billion is exported, though?

Mr. Danny Dempster: For primary horticulture products, about 20% to 25%, I would say.

Mr. Howard Hilstrom: Yes. I appreciate you're probably doing rough figures. Thanks.

The Chairman: Thank you.

Now we'll go to Madame Alarie for seven minutes.

[Translation]

Mrs. Hélène Alarie (Louis-Hébert, BQ): Good morning.

Last year, we welcomed to the committee representatives of the Pest Management Regulatory Agency. I recall that committee members were concerned about the time it was taking to approve products already in use in the United States. In any event, we could harmonize to some extent our exports to the United States. That's what we heard a number of months ago.

Today, you're telling us that the ministers of Foreign Affairs, Agriculture and International Trade urgently need to come to an agreement and to take a stand on crop protection measures. Why, I wonder, is it taking so long? Are they not sufficiently aware of this issue or have they been misinformed as to the urgent nature of the situation? Or is that producers don't have the necessary training or information? The clock is ticking and not much progress is being made.

[English]

Mr. Charles Milne: I would suggest that progress is occurring, probably not at the rate that we'd like to have.

I think the dilemma here for the agriculture minister and the trade minister is that several years ago the responsibility for registering these products went out of the purview of the agriculture minister and on to that of the health minister, so there is that delicate situation in which, while the effect of the slowness of registering technologies impacts on the farming community, which are purely the constituents of the agriculture minister, the responsibility for that process belongs to the health ministers. And while it is frustrating, I'm sure, for the agriculture minister to constantly be hearing this, and I would say he's well aware of the situation, it gets into the protocols within government as to whose responsibility it really is.

Now, certainly the types of products we have present some consideration for health, and we were part of a process to see it moved to health. We're a bit concerned that agriculture's voice and the trade implications of agriculture don't seem to have much play at the health ministry.

Mr. Danny Dempster: If I could add further, I think Charlie spoke on the difficulty of one jurisdiction of government dealing with another. I think another complicating factor is that this whole debate on the FQPA was evolving in the United States. Someone has to say “What is the Canadian government's stake or interest in the outcome?” Well, the point that I think Charlie's group and our group and other agricultural groups have been trying to make is that this has a great potential to really send a major problem of trade between both countries, and part of it is an education job on our part to explain the significance of what this might mean.

• 0940

We took a first kick at the cat from our sector. Had the products that were proposed for revocation in the United States occurred within our sector, that would have been 90% of the technology that's used in the production of fruits and vegetables. So basically if any of those technologies used on Canadian fruit and vegetable products had been revoked, it would have shut off the whole market of the United States just like that. If the manufacturers, for whatever reasons, withdrew their registration in Canada, we wouldn't have the tools available to produce in Canada. So much for trying to get people to eat more fruits and vegetables so they'll be healthier.

This was one of the dilemmas. I think what made it difficult, of course, is that it was an action that was taking place in the United States.

A further complicating factor—and I'm not trying to make excuses, because I've been working on some of this stuff for 22 years—is that while it's important to the agricultural community, and to trade, and to the country as a whole, not everyone shares our view of the importance of this issue. There are other special interest groups, if that's what we want to call ourselves—we're a special interest group representing an industry—who may not share the enthusiasm of joint registration with the United States, for whatever reason.

I would suspect that in the United States, and I think for sure in the United States, right now the debate on this by some of those activist groups is far more intense than it is here in Canada, and that's complicating the American agenda. They're having so much trouble dealing with their own internal problem; why would they reach out and embrace their good friends north of the border to say we have a joint problem? Well, it is a joint problem, because if you move on that action, all of that $1.6 billion worth of fresh fruits and vegetables we import into Canada—and the United States has about 80% of that market—is at risk. Is that important to you? We think it is. Let's start working to eliminate these problems.

The Chairman: Two minutes, Madame Alarie.

[Translation]

Mrs. Hélène Alarie: You made it quite clear that the horticultural industry is a vulnerable sector. To address this problem, Mr. Milne has concluded that the government must develop a Canadian agri-food strategy. I thought such a strategy already existed, given that we have set pretty high export targets.

However, I fail to understand why this strategy does not take into account the harmonization of rules respecting pesticides and a bio-safety protocol. This is rather odd. We have set very high export targets and we continually refer to them. Basically, we need a strategy containing very clear rules governing biodiversity and harmonization.

I'd be interested in hearing your views on this subject.

[English]

Mr. Danny Dempster: I think if we are ever to achieve solutions to the issues we've talked about, and I think they're broader than just the horticultural sector, then we need to get this binding cooperation under the WTO. But as part of our strategy to get export growth, we need to pay a lot more attention to these issues. I think that's the point we're coming consistently forth with, as the Canadian Horticultural Council, with the Canadian horticultural sector, and I believe that's what Charlie's alluding to. If we don't pay attention to some of these issues, all of our export objectives are going to come falling down around our shoulders.

We're particularly well poised at this point in time because of the value of the dollar, although I know there are people who argue about that, which provides us with a cushion right now for our exports, but also from import competition. I guess we should be seizing on that opportunity, as governments, to start addressing these issues in a meaningful fashion. I really fear that if we don't, we'll miss the opportunity and our great export growth could come tumbling down. If we do not have these tools available to the agrifood sector, then I think we're going to see our great export objectives, quite honestly, cut off at the knees.

The Chairman: Thank you.

Mr. Calder, seven minutes.

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

I want to go back, Danny and Charles, to this idea of international standards. When we get into the negotiations next year, when they start, and when it really gets hot in the year 2000, this obviously is one issue we're going to have to talk about a lot. Now, I feel we have one of the highest standards in the world here for our products that we're putting out. In the United States right now, we see them saying with the FQPA that if you don't grow it exactly the way they grow it, it isn't coming in.

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So how do we start working toward international standards? This basically kind of deals with the health issue here. How do we get other countries to agree to take these international standards? Do we have to drop our standards down to theirs, or do they raise their standards up to ours? Do we create an international tribunal on standards? I'd like your comments on that. How do we get into this process?

Mr. Danny Dempster: If you look at the language of the last GATT or WTO, I think countries did sign on to the acceptance of international standards. I think the day after they signed, they went home and dealt with their own domestic realities. Honestly, I believe there is some language there that suggests they all signed on to them. But again, when we all come back to our own countries, we have to deal with our own domestic political realities. I come back to having a more time-effective binding dispute resolution system, because I believe the United States did sign on to those. But then when they retreat home, they're under attack, and they say they've got the safest food in the world.

I happen to think that a lot of Canadians eat in the United States every winter, and a lot of Americans eat in Canada. We're eating the same products. I think it's safe in both countries.

We can always do better, don't get me wrong, but I think it's this question of getting governments to sign on to the fact that if they're going to sign these international agreements, they will be binding. If the science is good and there's acceptance that this is the standard for the world as a whole, then why can't governments live with those agreements? Otherwise, they shouldn't be signing them. That's where I come back to this binding dispute resolution.

Here's one of the interesting things with the United States. I think there's an acceptance for the international standard for a pesticide residue default tolerance of 0.1 parts per million. To put it in perspective, this is about four feet of the distance from here to the moon. But while 0.1 parts per million is an international standard, the U.S. has a standard of zero parts per million.

So if you're a Canadian exporter, you've got to meet zero parts per million—there's no such thing as absolute zero with the science available today—yet we import fruits and vegetables into Canada that meet the 0.1 standard.

I'm thinking, well, okay, do you want us to accept the zero standard? If we accept zero, everything they've got is illegal. I didn't say anything about unsafe. That's the fundamental frustration for the horticultural sector. So if zero is the right number, then maybe we need to engage our good friends south of the border and say that if zero is good for you, then it's good for us. And by the way, you just lost your whole export market into Canada.

Maybe then we could engage in a more intelligent discussion on the cooperation between both countries. They're exporting $1.3 billion of fresh fruits and vegetables, and we have the 0.1 standard here. Every time we export into the United States, it's the zero standard. Does something not work in your brain on that? They're both safe. It's just that the systems aren't working in sync.

So sometimes it's a little bit of tough love. I'm not encouraging this, because I know it's a real major problem. But maybe we need to engage them by saying that if zero is good for you, it's good for us. And by the way, you can't export any more products to Canada. Holy jumpin', can you imagine what would happen to us all?

I know I've gone around it, but we have to find strategic ways to engage countries to live with these agreements they sign. That's where I come back to the binding.... Even for us, it's not easy sometimes to accept that some group in Geneva is setting standards that we have to live with as Canadians.

Well, that's reality. If it's good science, good health, and good for the environment, shouldn't that be our fundamental concern? In a lot of ways, it would take a lot of the heat out of the political kitchen in all of the countries.

Mr. Murray Calder: You're saying then that our negotiators right now should be a little bit more sensitive to what's going on. In fact, should they be so sensitive that if we see something like what you already explained and described, we should be taking them back to the tribunal as quickly as possible?

Mr. Danny Dempster: Well, that's what I think. But it's hard to remember when you're up to your behind in alligators that you came here to drain the swamp. I'm here to talk about ways of draining the swamp. Unfortunately, we all get caught up in the irritants that come up because we haven't resolved these fundamental issues. But I would agree with you.

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It's my concern for the next WTO, or even with our current NAFTA agreement, that part of the problem with the seed potatoes—I'm sure there are people who know about seed potatoes a little bit—is that we signed these agreements, and we keep coming back and saying the latest regime doesn't want to do it because of some other interests. It has nothing to do with good science. At what point does science prevail over these other things? You can't ask an industry to live with it here and not be prepared to live with it there. It becomes a political problem for the Mexican government—binding dispute.

The Chairman: One minute.

Mr. Charles Milne: I'd just like to add my support to what Danny said and point out that I don't think anybody is talking about lowering standards or what have you. Certainly we've done well with the reputation Canada has as a country of high standards. I think the concern is that we don't paint ourselves into a corner where we're sort of the odd person out in the global scheme.

The other thing we have to recognize is the reality of critical mass coming out of the U.S. and Europe. They may have the luxury of being the odd person out because they've got that critical mass to have their way. We don't, and that's part of the difficulty we're dealing with here.

Mr. Danny Dempster: I think Charlie raises a very good point, and maybe that's why it's critical at the start of negotiations and why Canada would need to get very quickly on some of these files, because at the end of the day, governments, notably the EC and the United States, will start negotiating the final deal. If we can get the buy-in on the principles early in the game, we eliminate that as an issue. At the end of the day, that's what it is—a trade deal. There's no way any government is going to be able to negotiate total free trade, whatever that means—I like to call it freer trade, not free trade. That's my economic background. There is a use for economists, but I'm trying hard to think of one.

The Chairman: Mr. Borotsik, five minutes.

Mr. Rick Borotsik (Brandon—Souris, PC): Thank you, Mr. Chairman.

On the horticultural side, Danny, you indicated that $1.6 billion is imported from the United States. What is our export level? Eighty percent of what we produce in the horticultural side goes to the Americans. What dollar value do we place on that?

Mr. Danny Dempster: Ever since we converted to the Brussels system of nomenclature in 1988, I've had trouble tracking the statistics. Quite honestly, we don't do a very—

Mr. Rick Borotsik: In lay terms, Danny.

Mr. Danny Dempster: In lay terms? Simply, we import about $1.6 million of fresh fruits and vegetables only. Eight-five percent of fresh vegetables come from the United States. Two-thirds of all fresh fruits come from the United States. So you're looking at about $1.2 billion in imports. As for exports, we would export probably approaching around $400 million to $500 million.

Mr. Rick Borotsik: So there's a net trade deficit there, obviously, import to export.

Charlie, I'm getting to you; don't worry. I want to talk PMRA with you, but I want to talk right now about the zero tolerance you talked about. Needless to say, as Howard indicated, we had some really serious problems with some blockades just recently with Canadian agriculture going into South Dakota. Totally fictitious issues were being thrown at us with respect to drugs and phytosanitary.

On this zero tolerance, do you have in your industry any examples of having trade affected going into the United States on that zero tolerance?

Mr. Danny Dempster: Yes, we've had potatoes. We have a product...they have, what is it, acephate? They have a zero parts per million tolerance on potatoes whereas we have 0.1 or 0.5, so that can become a problem. We've had carrots—

Mr. Rick Borotsik: It can become a problem?

Mr. Danny Dempster: It has become a problem.

We've had carrots from Manitoba seized going into the United States. They have a hold and test that is totally different from the way we do it.

Mr. Rick Borotsik: Do you see this zero tolerance as a non-tariff barrier? Is there legitimacy in what they're trying to achieve here?

Mr. Danny Dempster: I see it as a non-tariff barrier.

Mr. Rick Borotsik: Totally non-tariff?

Mr. Danny Dempster: Sure.

Mr. Rick Borotsik: You've just told me we have $400 million or $500 million going in. They have $1.6 billion coming back. You indicated somewhat, and I know you're suggesting that we not have a trade war in that fashion—

Mr. Danny Dempster: No, I don't want that.

Mr. Rick Borotsik: Your opinion is that there has to be a binding arbitration dispute mechanism set out so that we can resolve these issues with a zero percent....

Mr. Danny Dempster: Yes. And one of the reasons you haven't had some problems with horticultural products...if the manufacturer has a registration in Canada and the United States, then we have the same residue standards, so it doesn't become a problem.

Mr. Rick Borotsik: So just on product that's used in Canada and not used in the United States—

Mr. Danny Dempster: It could be used, but they may not have a residue tolerance established for that product, like the acephate on potatoes. We have residue standards on lettuce, but we don't have them on potatoes. So automatically, if you have zero parts per million, you have a technical barrier to trade.

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Mr. Rick Borotsik: Let's go back to some of your recent comments about joint registrations and harmonization, because those are terms that are used quite commonly. In a perfect world, it would be wonderful if we had those. Can we ever achieve that perfect world, in your opinion?

Mr. Danny Dempster: I think we certainly can with the United States. No one should really have too much concern, because the U.S. and Canada are doing a pretty good job on safe food.

Mr. Rick Borotsik: As a trading partner, they're 80% of our trade, so the U.S. is the one we should concentrate on, right?

Mr. Danny Dempster: Yes, and we are. As a matter of fact, we've formed a coalition between U.S. industry people and Canadian industry people in order to find a way to get out of this box, as I call it. We've had our first meeting, and we have found three issues on which the industry in both countries agree. They don't always agree on everything within a country, as you can appreciate, let alone between them. We agree, however, that it's in the best interests of both industries and both countries to resolve these things, pesticide registration being one of them.

Mr. Rick Borotsik: It's probably a key one.

Have our exports grown quite dramatically over the past?

Mr. Danny Dempster: They've grown quite significantly, and certainly a lot of the—

Mr. Rick Borotsik: It's $500 million now in horticulture.

Mr. Danny Dempster: It was probably $75 million to $80 million at one point in time.

Mr. Rick Borotsik: What are the goals in your industry?

Mr. Danny Dempster: I guess you'd have to go to each commodity group and ask them.

Mr. Rick Borotsik: Hey, you represent all the commodities.

Mr. Danny Dempster: They don't always tell me everything.

Mr. Rick Borotsik: I'm being facetious.

Are we looking at double that in the next three years? Is that where we're heading?

Mr. Danny Dempster: One of the concerns is the dollar. A lot of it will have to do with the dollar's value. If the value of the dollar were to reverse itself and rise to the 85¢ or 90¢ it was before the trade agreements, you might see some problems in exporting.

Mr. Rick Borotsik: Charlie, you mentioned the FQPA. There's obviously a very serious concern with the act that's now in place in the United States. Do you believe the FQPA was put in as a regulatory tariff barrier for Canada, or is it there for other commodities coming into the United States from other countries, particularly Europe?

The Chairman: Time.

Mr. Charles Milne: I don't think it was necessarily put in for that purpose, although perhaps there were some devious souls who saw it like that, and it's certainly turning out to be like that. All of the background material I have researched on it would suggest it was more of a stop-gap measure to fix what they thought was a problem in the United States.

The Americans had this thing called the Delaney clause, and they thought it was going to be a quick fix. As I said in my statement, it was passed in a bit of a frenzy of activity, with no review. I think it was subsequent to that when people began to realize the far-reaching implications of it, trade being among them. Being the significant trader with the U.S. that we are, we're the first ones affected. It doesn't matter whether it's Canada or anybody else trying to trade with the United States, though, because it will affect them in the same way. It's just became obvious to us first. I do believe it was domestically driven, and it remains to be seen whether or not they can get out of this international box they've created, given the unanimous support that it got in the dark of night two years ago.

Mr. Rick Borotsik: Thank you.

The Chairman: I'm going to ask you something, and I hope both of you can answer in a very short fashion. Is a seamless continental market in this area coming some day? Is that realistic, and would you welcome that?

Mr. Danny Dempster: I probably would have some constituents who would not share that with enthusiasm and others who would.

Increasingly, when you get into total tariff-free trade, that's exactly the direction in which you see things going. Provided that some of our regulatory regimes we talked about are in sync, I think that's what you're eventually going to see. Right now, even within our industry, you see Canadians investing in Mexico and in the United States and Americans investing in Canada and Mexico.

I didn't create this. I think global economics have had something to do with it. When you get into freer trades you send the philosophy that business can locate anywhere, and I think you're going to see that.

The Chairman: Do you agree, Mr. Milne?

Mr. Charles Milne: I would just add that members of the industry that I represent have already made some very major moves towards organizing themselves as a NAFTA company. Many North American divisions of the companies I represent have called themselves NAFTA companies, and there is no America-Canada distinction made.

The Chairman: Thank you.

Mr. McCormick, you have five minutes.

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

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Charles, I have a question about your membership. Biotech has been very successful in Canada, although there is always room for improvement, of course. The major companies are your major players and your funders. Are most of the smaller companies in this field also representatives of your membership?

Mr. Charles Milne: In the biotech field or in the crop protection field?

Mr. Larry McCormick: In both, if you would.

Mr. Charles Milne: In the crop protection field, yes, definitely. We do have what is, in trade association terms, referred to as high density. We probably represent in excess of 95% of the manufacturers and formulators of crop protection materials in Canada.

Again, the entry into new technologies requires fairly deep pockets, so it's not surprising that it tends to be our members who are leading in that direction. They have the expertise at the scientific bench, as well as the more patient timelines that allow them to see evolving technologies mature.

Mr. Larry McCormick: You say in your brief:

The Crop Protection Institute requests the Committee to support BIOTECanada's funding request for assisting in the Bio-safety Protocol negotiations.

Perhaps I should know this, but I'm wondering about the cost of that funding request and the partnership involved in it. It's the major players that are involved that you're representing.

Mr. Charles Milne: BIOTECanada is in itself a trade association, as you may be aware. As I mentioned in my opening statement, our institute is evolving into biotech because our members are changing that way. Given the steep learning curve we have, we are in the process of building an alliance with BIOTECanada. There are certain pieces of this puzzle that are theirs and some that are ours. They are quite advanced in their understanding and knowledge of the biosafety protocol. In that regard, we're saying there is no need to duplicate effort.

We support what they've done, and they have the acumen to play in that field. Therefore, we understand that if they haven't already done it, they are in the process of making a request to the agriculture department for some funding to support them when they go to the various negotiating sessions, input into the Canadian position on-site, and to act as a little bit of a sounding board. All we're requesting there is that this be considered favourably.

Mr. Larry McCormick: Thank you.

Mr. Dempster, our exports are great, and we've gained significantly. Of course, the dollar has helped, as has all of the excellent work by your membership. Often, the exports are increasing because of the value-added aspect of all of this. That's good, and we hope it will always be a win-win for the producers and the processors. But does this normally benefit the the producers as much as it does the processors in your realm?

Mr. Danny Dempster: There is an interesting thing going on. To really understand what is happening in the sector, you have to take a look at the changes in who producers sell to and the structures that currently exist with producers in terms of the way they market their products. I'm not so sure the mergers that are taking place in the industry are going to stand them in good stead for the future.

Your point is a very good one. I think it depends on which producer group you talk to and on the type of relationship they have with their value-added customers—and I guess that's a commercial reaction. It's not necessarily translating itself into returns for the producers that are as great as the trade statistics would suggest. At least, this is what I'm hearing from some of them, and this is what's causing some of the debate with some of our constituents. We hear about the value of value-added exports. Supposedly, if it's a good deal, there should be a trickle-down effect that sees everyone making money. I can't speak with authority because I'm not making the deals, but I'm not so sure it's translating down as good economic returns for some of the producers. I wouldn't want to generalize that it's like that in every situation, though.

The Chairman: One minute, Mr. McCormick.

Mr. Larry McCormick: On the import of fruits and vegetables into this country from around the globe, I know we have great safety standards and inspect all those imports. However, what percentage of those products would be treated by pesticides that would be allowed in the United States and not allowed in Canada?

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Mr. Danny Dempster: Generally speaking, there is a system that the government uses on a fairly solid statistical basis for monitoring products to find out if they are in violation, and there haven't been many. I think some of the studies have concluded that 99%-plus of the products that are sampled meet our residue standards, whether they are the ones defined by product or by the 0.1 parts per million default tolerance. A very high percentage of them would meet those two factors. And I'm sorry, but the residue tolerances for some of the new technology is falling even below 0.1 parts per million, so it would not be a problem.

The Chairman: Thank you.

Sorry, Larry.

Mr. Hoeppner, five minutes.

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

Mr. Dempster, I was surprised when you said you were against green box support for your producers. Isn't it a fact that we will never get away from that type of subsidy as long as we have human beings around?

Mr. Danny Dempster: When I said I was against the green box, I was against the green environment idea of using subsidies under environmental auspices to sustain and support an industry. I meant it more from that green part of it.

I think there needs to be a great definition, acceptance, and refinement of what is acceptable under the green box. That is the key thing on which governments need to get some clarity: what they are all going to agree on. Again, I think that was what the last GATT round was about. Of course, we have now had ten years or so to work with that and with people adjusting what is in the green box. We need to revisit the issue, as countries that signed these WTO agreements, in order to get some greater acceptance of what legitimately falls under it. My observation is that if you are Canadian and you have something in a green box, everybody says it's unfair, yet other countries have stuff in a green box and say that stuff is legitimate. I say it may be time to revisit the whole issue.

Mr. Jake Hoeppner: I agree with you totally.

The other thing you mentioned was alligators in the swamp. I think we have lots of alligators in our own swamp. They may not be as big as the American or European ones, but....

I'd like to ask Mr. Milne something. Do you also work with grains, or is it just horticulture that you work with?

Mr. Charles Milne: While we've made some references to the horticulture industry here—and certainly when I was speaking about the FQPA, because they are suffering severely under the potential impact of the FQPA—our industry deals with all agriculture, forestry, and urban use.

Mr. Jake Hoeppner: I want to give you an example of what we have run into on our farm this year. We grow a lot of durum, and we have fusarium in it that has been a problem, as you know. This year, because there is a lot of pressure on government, the fusarium is not that big an issue. When we took the crop in originally, it was a number 3CWDur, which we thought wasn't that bad a price. We then hauled in the first couple of loads, and when they found a few pieces of ergot, they graded it down to a 5. It became the lowest grade durum we have—and you know what the prices are for that.

We took it across into the U.S. to get a price on this durum and to see what value it would have over there. We found out that they have no problem with the ergot, and they're willing to pay us $3.05 U.S., which is about $4.50 Canadian a bushel. The initial price we're getting here is $1.57, so we went to the Canadian Wheat Board to get a buy-back. I couldn't believe my eyes when I saw what they wanted. They wanted $5.12 a bushel—and I have the document here, because I testified with this in Regina last Monday. Now, I would really love to drag this alligator out of the swamp and tickle his toes for awhile. We can live with $4.50 a bushel on durum and break even, but $1.57? And we've never had a double increase from the initial price. Good God, what is going on here?

I get a feeling sometimes that wholesalers—and maybe even some of your bosses—use all these deterrents, as I would call them—the pest management, the grading system—to their advantage. The producer suffers for it, and you ain't going to have very many left if things don't turn around.

Mr. Charles Milne: I appreciate your raising that point. I would say that while we certainly have a lot of grain people as our industry's customers, debating the Canadian Wheat Board has not been something the Crop Protection Institute has had on its board agenda. I also question whether or not our voice on that issue would be something a committee like this would consider to be an appropriate one. What I can say is that in our industry we are very sensitive to the very situation you're talking about, because if farmers are not making money, we're not making money. It gets back to the trickle-down that Danny was referencing.

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So we are very concerned about $1.57 wheat. In terms of what we can do about it, I'm open to suggestions, but I would—

Mr. Jake Hoeppner: I'm asking why is this $4.50 Canadian in the U.S. as close to an elevator as it is in Canada? Something is wrong here.

Mr. Charles Milne: I'm afraid that perhaps I'm not the right person to be answering this question. While we do have a number of grain companies in our membership, they are members from the standpoint that they sell inputs. They're not members of our institute for the purpose of selling grain, and I must say I'm not qualified to really answer that.

The Chairman: We have an alligator right here that is both omnipresent and ubiquitous. It's called time.

Ms. Ur for five minutes.

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

Mr. Milne, in your presentation you said the FQPA instantly became law two years ago. Do you know what kind of information is shared with our negotiators prior to legislation? Are we informed about what's happening in the U.S.? Did we know this was coming down the tubes?

Mr. Charles Milne: I don't think it was well-known. There may have been some in Canada who had some inkling it was coming, but my sense is, as I said earlier, that it literally passed in the dark of night without any debate. In fact, I have been told anecdotal stories about some members of Congress going to the EPA a week or two later saying, what was it we passed the other day?

Mrs. Rose-Marie Ur: Do you believe that after this election, or whatever, there's room for change, that there can be possible changes made? You're saying this is the first phase we see, the brunt of this proposed legislation. Can you see that we as a government can work with some effort to make changes to this?

Mr. Charles Milne: I think what we have to do is raise it to a higher forum and create some greater awareness that it's not just a Canada-U.S. debate. After the next election, who knows? It's Vice-President Gore who has been a great proponent of this. Having said that, there has been a little bit of slippage on the very hard position he's taken. And perhaps Danny can add on this, because I know some from his industry have been in Washington frequently on this issue.

Mr. Danny Dempster: Yes. As a matter of fact, we're going to Washington tomorrow night to meet with our U.S. friends and start to engage with some from their bureaucratic and political arms to explain exactly what we talked about here.

I think it came as a great surprise. We knew there was something, but we didn't assume anybody would pass something like that. Never assume anything, I guess. It was passed, and I think it was quite a shock to the agricultural community in the United States. Everybody woke up with a hangover, saying, my goodness, what did we do? Charlie's quite right.

I think when we met with the U.S. fruit and vegetable industry in Canada last year, with some of our government people, they were almost asking us to bring the Canadian scientific argument from our PMRA. As much as we can get cranky at the PMRA for some legitimate reasons, they're not all bad or wrong in every situation. What they were saying is let's bring some of the scientific argumentation from Canada before the U.S. government, because the potent politics of the situation aren't even allowing for reasonable science to come forward in the argument. Surely a country like Canada could provide, with good capable scientists, some counterbalance and explain the trade issue to the U.S. government. They have not allowed that to come forward, and it's what we're trying to pursue.

Mrs. Rose-Marie Ur: So this is what you're looking at, a strong effort to expose this particular legislation.

Mr. Danny Dempster: Sure. I think we can help them in that debate, but we have to get in there.

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Mrs. Rose-Marie Ur: Right.

Mr. Dempster, you stated in your opening remarks—maybe I misinterpreted them—that you had a concern regarding setting standards in Geneva. You alluded to the fact that you weren't comfortable with what was happening there. I was under the impression that we sent our negotiators with what the commodities people wanted to have stressed at those hearings and negotiations. Do you feel you weren't well represented last time?

Mr. Danny Dempster: I don't know if it was necessarily that. Again, I tend to go on very quickly, and I do confuse people, including my wife. What I was saying is that the principles Canada put forward on this area of phytosanitary and sanitary issues—I think Canada took a leadership role on this—were agreed to by the signatories of the GATT or the WTO.

Here's where we have a concern. We had the agreement, then everybody went home and forgot we signed it. So that's where I have the concern. We should have these standards that we all agree to. It's very important for Canada as a trading nation for us all to have a responsibility to live with those standards, or we should never sign onto them. I guess that's the frustration I have with the WTO. I believe Canada did do a good job, then we all came away and forgot about it.

We're here 10 years later to tell you we need to re-engage that process to get governments to sign on to them or else Canada is going to get it every which way but loose. When we export something, somebody's going to throw a biotech problem at us and say they're sorry or whatever.

The Chairman: Thank you very much.

Mr. Borotsik, you have five minutes.

Mr. Rick Borotsik: I won't need necessarily five minutes. I guess I'm trying in my own mind to figure out the negotiators going to the WTO tables. They have a number of agricultural issues. Obviously, we talked to a number of organizations that have their concerns with trade, most particularly with the United States. Needless to say, they're trying to get into the European markets as well.

This is going both to Charlie and Danny. With respect to your industries right now, what's the best thing we could do for the start of negotiations in agriculture? Remember, there are issues other than agriculture. This is the big, big picture, okay? We sit here and concentrate on what we consider to be the most important issue, which is agriculture. What would our opening gambit be—I would like both of your opinions—with respect to the big issue I see right now, which is biotech and the non-tariff barriers being thrown up?

We can negotiate tariffs. We've done that. We've done very well in negotiating tariffs out that I think are beneficial to us.

In your opinion, how would we start the opening gambit with the negotiators when they sit at that table? Please help me on this one. What do we use as a bargaining chip? What do we go there with for agriculture? Quite frankly, agriculture is our lifeblood. Let's say it's the priority right now.

Mr. Danny Dempster: I think horticulture's key interests would be in this whole area of the standards and acceptance of the international rules. I don't think you have to trade one for the other. It's just getting a commitment from governments to live with it.

I know it's tough, but let's be quite honest. The way our sector looks at it, with a lot of these tariff deals, we eased tariffs and access into Canada, yet we've been denied the tools to be competitive in the world market. So for our sector, don't bother to try to tinker with the tariffs if we don't have the technology or rules in place to make the other countries live with these international rules. It's kind of like not spending the money on the arena so we can fix the roads and the washrooms. I call those the roads and the washrooms for our sector.

Mr. Rick Borotsik: We should set the standards and a dispute mechanism that we can go and fight for when those standards are being—

Mr. Danny Dempster: Yes, absolutely. This is to make sure the political vagaries in all of these other countries, for whatever reason, don't suddenly foist themselves like South Dakota—that's just one example—so that we then find ourselves in this alligator issue.

Mr. Rick Borotsik: Charlie.

Mr. Charles Milne: I would concur with Danny, but I would add that I think we have to establish the fact that science is science. There are only so many places you can go for good science. Some of the things that are coming up on the horizon these days are what might be commonly called junk science.

We have to point out to people that, particularly in OECD countries, there are only so many places one can go to become an expert in toxicology or phytosanitary issues. We should put an end to some of the smokescreens coming forward under what we would call science that's less than strong. Let science speak for itself. Have scientific agencies recognized for the acumen they have within them.

• 1020

Mr. Rick Borotsik: Outside of the trade aspects of it, Charlie, I have just a simple question. I won't get into too much detail, and I think Danny said it best, that even though we might harangue about PMRA, sometimes they provide some fairly reasonable service. In your opinion and in your industry's opinion, where should PMRA be located? Should it be located under the department of health where it is now or should it go back to the department of agriculture?

Mr. Charles Milne: We were supportive of the move to the health department; however, we had a fear when that occurred that the agriculture perspective would be lost. Our experience since the move to the health department in 1995 would suggest our fears have been substantiated.

Mr. Rick Borotsik: Okay, now an answer....

Mr. Charles Milne: It would be nice to see some agriculture orientation reintroduced to the PMRA.

Mr. Rick Borotsik: You should have been a politician, Charlie. In the answer to Jake's question, I noticed that and said, “You should run for politics”. You didn't tell him exactly what should have been told.

Danny.

Mr. Danny Dempster: We too supported it going to Health, because fundamentally at the end of the day they were the ones who were saying yes or no. If you're going to have the yes or no, you might as well have the responsibility. Notwithstanding the concerns we talked about, maybe we need to find a way to engage that in the current regulatory system. But if we were to move it away we'd lose another five years and we would be back here in five years' time just saying, “Why did we do that?”

Mr. Rick Borotsik: So fix it where it is.

Mr. Danny Dempster: Fix it.

The Chairman: Just before we go to Mr. Calder, we always have a tendency to paint ourselves as the good guys in the piece and blame other countries for erecting barriers of one kind or another to our exports. Do we have any skeletons in our own closet that we're prepared to admit to?

Mr. Danny Dempster: Never.

The Chairman: Never.

Mr. Danny Dempster: I can only give you my perspective on where we were before the Canada-United States trade agreement and where we are today. We've seen the tariffs go in the horticultural sector; we've seen all of the regulations adjusted to give our exporting nations national treatment. That's a heck of a commitment by our government and our industry to adjust.

I'm sitting here watching plant health rules that deny us access into other countries. I see import licensing regimes denying us. I see other countries using regulations and not giving our exporters national treatment. I think we've been pretty good up to now. To say we're pure—no one is totally pure. But we're about as pure as we can be in our sector, and we'd like to see some purity in other countries before we get even more pure.

The Chairman: I will go to a purist over here. Mr. Calder, for five minutes.

Mr. Murray Calder: Thank you very much, Mr. Chairman.

I want to go back to what Rick was talking about and that's PMRA. We've been at this job for five years and this is something that's stuck with us for five years. When you talk about this being in two departments or affecting two departments—health and agriculture—it's almost a little bit of the left hand not knowing what the right hand is doing and so on and so forth.

How do we get better communication if this is going to exist, and it seems it will? I'd like to get your comments on the issue of minor use and how far we've moved on that; transparency of the budgeting of PMRA; the cost of recovery for the farmer, because that is obviously going to be an issue, and with the low commodity prices we're experiencing right now it will be that much more of an issue; and finally, the advisory committee itself, which is basically monitoring how this is working and what improvements should be made. What kind of movement are we making within PMRA?

Mr. Charles Milne: I'd like to take the lead on that answer and perhaps ask Danny to address the minor-use aspect, because his constituency is very close to that. Maybe I'll start with the last point first. On the advisory committee, I presume you're making reference to the new pest management advisory committee as opposed to the Economic Management Advisory Committee or council, or whatever it's called.

Mr. Murray Calder: That's right.

Mr. Charles Milne: The first meeting of that new advisory committee is not to occur until next Monday. There is some question as to what they're going to accomplish. We have a concern that that broadly based advisory committee is going to get into the operational aspects of the PMRA as opposed to the policy aspects that were originally put out. We are somewhat fearful that some of the hard-won gains we've made at the economic management committee may be diluted by the broadness of the perspective of some of the people who are coming in at that advisory level. A number of the people at that table have not been involved in the EMAC activities, are not registrants, are not users of the products, and therefore may not appreciate some of the operational improvements that have occurred through EMAC. So that's a concern. We recognize the need for a broader group, we applaud the initiative, but we think the roles of the two committees have to be respected.

• 1025

On cost recovery we have a concern. As many of you know, out of the review of the PMRA that came out there was a recommendation that the cost fee schedule be changed. We have been quite strident in suggesting that it not be changed currently, because the independent review also suggested there was a latitude for 40% improvement in efficiencies. We feel we should wrestle those efficiencies out of the system and then look at what the world looks like. With regard to budgeting, you may be aware that the PMRA has a shortfall again this year of approximately $4 million. Health Canada came in with $2 million to reduce that shortfall to just slightly under $2 million, but effectively it's in about the same position. Its target of collecting $11.6 million was missed again this year; they collected $7.5 million, which is the same as what they were able to drive out of industry last year. So I think there's a message there.

We have said there's one way they can fix that very quickly. They have a high amount of emphasis on re-evaluation. They say it's work that's not being done. There's a big part of their budget that's allocated to it. We think re-evaluation could benefit from some of the harmonization advances that the registration of new products have enjoyed, and that might balance their budget and put things back into some type of synchrony.

Are things getting better? Yes, some things have improved. I think I said earlier that we're happy for those improvements; we don't think it's going as quickly or as far as it should. We're also very concerned about the PMRA picking up new issues, which is diverting its focus from becoming the renowned and respected organization it might be globally. If we were known for having the most efficient and expeditious regulatory system in the world, that could be a lever for attracting investment in Canada.

We're fearful that with things like the FQPA, they're becoming more involved in that than they need to be. Certainly we need them to provide that scientific background; whether we need them out there negotiating the trade aspect of it is a big question.

I hope that answers the question. Perhaps Danny can address where we are in minor use.

The Chairman: We're out of time. It's five minutes.

Mr. Charles Milne: I'm sorry.

The Chairman: Thank you.

Mr. Hilstrom.

Mr. Howard Hilstrom: Mr. Dempster, you spoke of a zero on imports and residues. In the American market, do they have zero residues for their domestic consumption down there?

Mr. Danny Dempster: Yes, that's correct. The difference is they have a wider array of technology available to their producers than we would have here in Canada because of the way their registration system works. To give you an example, if you register a product in the United States...you might have thousands of acres of spinach, so you have some potential to recapture your product over the sale of this product. If you have 200 acres of spinach in Canada, what is the incentive for a manufacturer to go through and do the research in Canada to register for maybe two bags of fungicide, or whatever the problem is? It's not going to happen.

That's where the cost recovery has had an impact on our people. That's why one-third of all the resolutions the Horticultural Council got at its annual meeting in 1997 were on minor-use pesticides. One-third of all the resolutions in 1997 or 1998 at our annual meeting were on pesticides in minor use. So there is movement happening, but as my president said to me, try harder.

I believe the PMRA and the concept of putting everybody under one roof is excellent, but the Skydome does open up to the sun every once in a while...to let people in. I don't see the problem with having a significant input from the Department of Foreign Affairs or Agriculture Canada in their process to bring those parameters into the discussion, because whatever they do is going to have a negative impact perhaps on agricultural producers or our foreign relations. So let's incorporate it. I believe we're all on the same team, Team Government, to do the right thing. So I don't see the problem; you have to open the windows.

• 1030

Mr. Howard Hilstrom: On good pure science, in regard to determining trade issues, that would be the ideal, and I'm certainly all for that. We saw good pure science or fairly good science in the fisheries and oceans area being filtered through a department that ended up not being in the best interests of the industry.

In regard to freer trade, which is a good term, is there anything in the horticultural industry or in your area, Mr. Milne, that you are concerned about that may be traded off in favour of some other economic sector or other area of agriculture of these broad WTO talks? Are there just one or two key things?

Mr. Danny Dempster: If you go back to the principles of the Canada-United States agreement, it was an agreement that the sector globally...even though there were some sectors that favoured that deal, overall it said, we're not interested. So you could go back to this agreement and say we gave away tariffs in that round, so that was the first indication that we're moving to freer trade.

At this stage, if you look at the tariffs on fresh products and even on semi-processed or processed products, there's really not a lot out there that you can trade away. We are basically in a free trade world, at least in Canada. That's where we come back to the rules. Let's fix the rules so we don't have our hands tied.

There are some import-sensitive products, and of course our producers or industry would not want to see them traded away for somebody else. We would like to see the access within the sector. Overall, it's to get these rules and resolve some of these other impediments to our industry's ability to have the technology to be competitive in the world today. We have to find these trade remedies so that if there is a situation where we get injured domestically, we're not arguing whether a producer has standing and things like that. So we're very rules-oriented.

I commend our government for making sure our industry lives with the international rules. I'd like to see that same enthusiasm used by other governments for our exporters.

Mr. Howard Hilstrom: Mr. Milne.

Mr. Charles Milne: I would like to come back to the issue of critical mass. It's great that we're the global boy scout, but we're not the whole troop. That seems to be the problem. Perhaps if we had that greater critical mass our moves would have a little more influence globally.

Mr. Howard Hilstrom: That's fine, Mr. Chairman. We'll try to get everything in.

The Chairman: Our final questioner will be Madam Alarie.

[Translation]

Mrs. Hélène Alarie: I'll start with a comment. Apparently, the Food Quality Protection Act, or FQPA, was brought in quickly. I sometimes get the impression that the financing of the PMRA was also hastily arranged. Yet, this is a key tool for the horticultural industry.

My question is as follows. You're suggesting or asking us to urge the Department of International Trade to view the FQPA as a non-tariff barrier. Has this been the focus of any discussions? Your council is well-positioned to discuss this matter with the Minister of International Trade or with the Minister of Agriculture. Have you initiated any discussions?

[English]

Mr. Charles Milne: To some extent, yes, they have begun to work on it. Back in July, when the PMRA had a session on the FQPA, there were two trade representatives there. Unfortunately, they weren't there for the whole session. I'm sure the issue does have a home somewhere in the trade department. We have written to the minister and we have yet to get a response. There seems to be some reluctance on the part of the department to move forward until they have been asked to do so by Health, because they've viewed it as very much a scientific issue.

Again, there is certainly science involved, but we would like to see it dealt with more from a standpoint of its trade implications. We fear it is being almost treated in the PMRA as if it was Canadian legislation. How do we accommodate this as opposed to saying, just a second, what is this doing to the economic viability of the people who use these products in Canada? That's where we feel something is out of line.

• 1035

We're not suggesting the PRMA not be involved, but we feel the advisory capacity on the science is appropriate. We should look at the broader implications first, and therefore it should not be a decision of Health as to whether or not it's a trade barrier. It would be a decision of the people who deal with trade issues on a daily basis. That's where we're coming from on this.

[Translation]

Mrs. Hélène Alarie: Thank you.

[English]

The Chairman: Finally, Mr. Dempster, if we were to have what I call a seamless continental market for your products, in other words, the rules would be the same wherever you go in North America, would there be some edge under that scenario given to producers in the southern states where the climate is so much warmer, the growing season much longer? Do we just simply do our own thing on this side of the border where we can maintain, if not an advantage, at least an equal chance with our competitors across the line?

Mr. Danny Dempster: It's going to be interesting because the scenario in the United States and the southern states is changing, too, because of water availability issues, because of labour-related issues down there. Their game plan will be changed a lot. Increasingly, you will see companies involved in the fresh fruit and vegetable industry, from production to shipping, that will say in order to supply our customer...whether it's a U.S. retailer or a Canadian retailer. They're going to be looking to people who can supply them with a certain quality product on a year-round basis. For part of the year that could be from Mexico, the southern United States, or from Canada.

The way that business is changing in terms of their customer base, they won't deal with thousands of producers any more. So you're going to see this seamless type of marketing and distribution. You may very well have a firm that could be based in Canada or the United States that will say for this part of the year they're going to do the best possible job with lettuce from California, then complement it with lettuce from Quebec. They will supply that to their customers whether they're in Montreal, Toronto, or in New York City. That's the direction it's going in. Whether we like it or not, this is the reality that's taking place in the marketplace.

It is going to change the traditional way producers have thought of marketing their product. After all, it's an industry that started by selling it at roadside stands or in their orchards, and now it's on the international scene. That's the way the competition is moving, and that's going to force these changes.

When these changes take place, with producers doing a better job in marketing, it may very well provide them with a better return for all of their efforts. Playing one against the other isn't going to do it into the future.

The Chairman: Thank you very much. On behalf of all the members, I want to say thank you both to Mr. Dempster and Mr. Milne. We appreciated your answers.

Thanks to the members for sticking within the time limits. By following this practice we all get a kick at the cat and a chance to interrogate witnesses.

This meeting is adjourned.