AGRI Committee Meeting

37th PARLIAMENT, 2nd SESSION

Standing Committee on Agriculture and Agri-Food

EVIDENCE

CONTENTS

Thursday, February 20, 2003

Á

1115

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

Mr. David Anderson (Cypress Hills—Grasslands, Canadian Alliance)

The Chair

Mr. Marcel Gagnon (Champlain, BQ)

The Chair

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

Á

1120

Á

1125

The Chair

Mr. Bob Friesen

Á

1130

The Chair

Mr. Bill Mailloux (Co-Chair, Safety Nets Committee, Canadian Federation of Agriculture)

Á

1135

The Chair

Mr. Ken Bee (President, Grain Growers of Canada)

Á

1140

Á

1145

Á

1150

The Chair

Mr. David Anderson

Mr. Ken Bee

Á

1155

Mr. David Anderson

Mr. Ken Bee

Mr. Cam Dahl (Executive Director, Grain Growers of Canada)

Mr. Bob Friesen

Mr. David Anderson

Mr. Ken Bee

Mr. David Anderson

Mr. Bob Friesen

Mr. David Anderson

Mr. Bob Friesen

Â

1200

The Chair

Mr. Marcel Gagnon

Mr. Bill Mailloux

Â

1205

Mr. Bob Friesen

Mr. Ken Bee

The Chair

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

Mr. Ken Bee

Mrs. Rose-Marie Ur

Mr. Bill Mailloux

Â

1210

Mr. Bob Friesen

Mrs. Rose-Marie Ur

Mr. Bob Friesen

Mrs. Rose-Marie Ur

Mr. Bob Friesen

Mrs. Rose-Marie Ur

Mr. Bob Friesen

Mrs. Rose-Marie Ur

Mr. Bob Friesen

Mrs. Rose-Marie Ur

The Chair

Mr. Dick Proctor (Palliser, NDP)

Â

1215

Mr. Ken Bee

Mr. Bob Friesen

Mr. Bill Mailloux

Mr. Dick Proctor

Mr. Bob Friesen

Mr. Dick Proctor

Mr. Ken Bee

Â

1220

Mr. Dick Proctor

Mr. Ken Bee

Mr. Dick Proctor

Mr. Ken Bee

Mr. Bob Friesen

The Chair

Mr. Dick Proctor

The Chair

Mr. David Anderson

Mr. Bob Friesen

Mr. David Anderson

Mr. Ken Bee

Mr. Cam Dahl

Mr. David Anderson

Mr. Cam Dahl

The Chair

Mr. Bill Mailloux

Mr. David Anderson

Â

1225

Mr. Ken Bee

Mr. Bob Friesen

The Chair

Mr. John Maloney (Erie—Lincoln, Lib.)

Mr. Ken Bee

Mr. John Maloney

Mr. Ken Bee

Mr. Bob Friesen

Mr. John Maloney

Â

1230

Mr. Bob Friesen

Mr. John Maloney

Mr. Bob Friesen

Mr. Ken Bee

Mr. John Maloney

Mr. Bob Friesen

The Chair

Mr. Bill Mailloux

The Chair

Mr. Ken Bee

The Chair

Mr. Marcel Gagnon

Â

1235

Mr. Bob Friesen

Mr. Marcel Gagnon

The Chair

Mr. Marcel Gagnon

The Chair

Mr. Bob Friesen

The Chair

Mr. Dick Proctor

Mr. Bob Friesen

Â

1240

Mr. Dick Proctor

Mr. Cam Dahl

The Chair

Mrs. Rose-Marie Ur

Mr. Ken Bee

Mrs. Rose-Marie Ur

Mr. Ken Bee

Mrs. Rose-Marie Ur

Mr. Ken Bee

Mrs. Rose-Marie Ur

Mr. Bill Mailloux

Mr. Bob Friesen

Â

1245

The Chair

Mr. Bill Mailloux

The Chair

Mr. David Anderson

Mr. Ken Bee

Mr. David Anderson

Mr. Ken Bee

The Chair

Mr. Marcel Gagnon

The Chair

Mr. Bob Friesen

Mr. Ken Bee

Â

1250

The Chair

Mr. Bob Friesen

The Chair

Mr. David Anderson

The Chair

Mr. David Anderson

The Chair

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CANADA

Standing Committee on Agriculture and Agri-Food

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NUMBER 016

l

2nd SESSION

l

37th PARLIAMENT

---

EVIDENCE

Thursday, February 20, 2003

[Recorded by Electronic Apparatus]

Á  (1115)  

[English]

    The Chair (Mr. Paul Steckle (Huron—Bruce, Lib.)): I see quorum.

    I want to thank the witnesses for coming here this morning. Pursuant to Standing Order 108(2), we're going to be considering the agricultural policy framework, that is, the long-term effects of the new NISA, the net income stabilization account program.

    Before we begin hearing our witnesses, I want to entertain a motion of intervention.

    Mr. David Anderson (Cypress Hills—Grasslands, Canadian Alliance): Mr. Chair, I just wanted to bring up the fact that Mr. Richardson and Mr. Kennedy, in their presentation on February 6, promised us a number of documents, two in particular. They were asked for Simon Kennedy's detailed presentation document. I'm just wondering if we've received that, and if not, when we will. The other document promised to us was a detailed list of the criteria for the production margin. As far as I know, the safety net advisory committee has that and I don't think we do.

    I'm wondering if we can count on the government to deliver that very quickly. Last time, apparently, their response took almost six weeks. It would be good to see a quicker response than that.

    The Chair: Thank you, Mr. Anderson. I've asked for them to be delivered to the table. I understand they are not yet delivered, but upon your request, I will further examine that.

    We have with us Marc, sitting in for our regular clerk, who is travelling with another committee this morning. I want to say that we have a big subject before us this morning. There are a lot of questions and I would ask that our witnesses keep their remarks as brief as possible. We quite understand the subject matter. I think that this morning we want to feel at the conclusion of this meeting as though we have made some strides towards accomplishing what we hope to do: putting together a framework agreement that can be signed by the provinces, that we can all live with, and that not only will please farmers but will certainly achieve the end result, which we all want, including all of us around this table.

    I apologize to Mr. Gagnon this morning, because a document prepared by the Grain Growers of Canada was not received in time to be translated. I apologize for that. I didn't know that when I spoke to you earlier.

    I would say to all the witnesses, to all those people who make presentations, try to get your presentations in early so we can have them translated. We're having too many presentations coming before us in only one language. In fairness to our French people from Quebec and those who understand the French language, it is an obligation I have. I'm not going to ask for it to be distributed this morning. I feel that would be out of character.

    Yes, Mr. Gagnon.

[Translation]

    Mr. Marcel Gagnon (Champlain, BQ): It's not only the fact that this puts me at a disadvantage; here we speak both official languages. I have been a member of this Committee for three years and the same comment is made each time. I really don't understand. It's clear that appropriate instructions are not being given. If we invite people to appear before the Committee, it should be understood that documents have to be tabled in both languages. I am at an extreme disadvantage in that I understand very little English. While I readily accept your apology, I think things have to change.

[English]

    The Chair: Thank you very much.

    The chair will, on your behalf, make some interventions. I may find that the document arrived here early enough for that to be done, and perhaps it's at our end where we're not getting the translating done. If that's the case, then we will take the responsibility for that. But I am simply putting witnesses on notice to, from now on, please have these documents here early enough so we can have them translated. Thank you very much.

    We will proceed with our agenda this morning, first with the Canadian Federation of Agriculture.

    Welcome back, Mr. Friesen. You're no stranger to this group.

    With Mr. Friesen this morning is Mr. Mailloux, who is no stranger and of course is just coming back, well rested and prepared to engage, I'm sure, in some pretty friendly and informative dialogue this morning.

    Thank you, gentlemen.

    Then we will meet with the Grain Growers of Canada in what will be the second part of our presentation, with Mr. Bee and Mr. Dahl.

    Thank you.

    You may begin, Mr. Friesen.

    Mr. Bob Friesen (President, Canadian Federation of Agriculture): Thank you very much, Mr. Chair.

    It certainly is a pleasure for me to be here, and to be here with my colleague Bill Mailloux, who co-chairs the CFA safety net committee. Mr. Trefiak, who is from Saskatchewan, couldn't make it for this morning. He is also one of the co-chairs of our safety net committee. I'm also pleased to have Jennifer Fellows with us, who handles the safety net file in our office.

    It's also a great pleasure for me to present together with the Grain Growers of Canada. As all of you know, we've worked very hard together on the business risk management file and see eye to eye on, I would say, certainly most of the issues. It's only when we work collaboratively that we can get the most done.

    As far as the translation of our document is concerned, we did provide a French summary of our document. We didn't have the time to interpret the entire document, but we do have a summary in French. At CFA, as you know, we have to translate all of our documents and certainly we will continue to be vigilant in doing so.

    I would like to say that one of the reasons it's very important we speak to the committee is that I know all of you worked on behalf of farmers over the last couple of years in trying to make sure that the challenges farmers face and the needs they have are dealt with. I believe everybody around this table will not be satisfied if we drop the ball and in fact implement business risk management programs that don't do justice to the commitment that was made and to the work that was undertaken to get that commitment. That is why we're very happy to be here.

    But I have to start out by saying that the industry currently is very frustrated. The reason we're frustrated is that it seems as if a lot of our fundamental concerns have not been dealt with.

    What I'm going to do today is briefly talk about the process leading up to where we are today. I would like to talk about some specific concerns, and Mr. Mailloux is going to mention a few specific concerns. I want to show you several examples of where the presentation that you heard here a few weeks ago from the department is misleading and false and in fact makes wrong assumptions; we will go there as well. Then at the end of our presentation, I will give a suggestion for where we go from here and how we deal with the whole issue of implementation and the deadline on April 1.

    Very quickly, let me begin, then, by saying the industry is frustrated because it feels that the process has been deeply unsatisfactory. The current NISA proposal is flawed and implementation will lead to a lot of confusion. We will make that point later.

    Basically it all started in Whitehorse. The Canadian Federation of Agriculture and its members were very supportive of the concept of Whitehorse. I've said this around this table before. We liked the elements of the Whitehorse agreement. We liked this whole idea of a collaborative approach to dealing with industry challenge. We liked the idea of making sure we don't develop policy in silos, that we make sure we build strong crosswalks between the policies we develop for agriculture, so we were 100% in support of the concept of Whitehorse and the agricultural policy framework.

    However, it saddens me to say that we can no longer support where the business risk management sits currently. The reason for that will become very clear as we continue, but one of the biggest problems with the process leading up to this was that the Whitehorse agreement talked very clearly and explicitly about partnerships with the industry, and we believed that the ministers were dedicated and committed to that partnership.

    The problem was in the fact that as we started working on business risk management, we suddenly found out that there were many things written in stone that we could no longer change. While many of our concerns have been listened to and certainly they've tried to work out some of the concerns we have inside the broad parameters, it was the constraints we had because of what was written in stone that the industry found very difficult to deal with.

    Some of those constraints deal with the very tenets of what we have tried to make principles in the development of business risk management, such as, for example, eliminating companion programs, which Bill will address later, and the concept of entitlement. There were several others where we just had no wiggle room.

Á  (1120)  

    In fact, it was in Halifax where we found out that there was no longer a desire to have a strong “green” income disaster program. We did receive the flexibility to include an income disaster component within the bigger NISA program, but these were some of the areas where we were told, well, sorry, we can't move away from that.

    So right from the start we were left with already the major design of the program, when in fact we'd been told there would be full partnership with the industry. That's why the industry is so frustrated and that's why I should refer you to the cover letter from the Prime Minister's task force report, which said that there is a real danger that the relationship between governments and the industry will be jeopardized and will be undermined irreparably. That's of course why we're also very happy that you are here to listen to some of the concerns we have.

    Let's start, then, on some of the specific concerns, and let's go back to where this started about a year and a half or two years ago. You will recall that the industry finally had had enough of trying to compete against government treasuries in other countries. The industry could no longer survive what that did to our competitive ability, especially in the U.S.

    In fact, our own department calculated that at least 25% of the price deterioration between 1995 and the year 2001 was as a direct result of high subsidies in other countries, but we were told that the concept of trade injury wasn't a principle in our current government's policy. They could not flow money to producers to directly deal with trade injury, so the industry acknowledged that we wouldn't receive trade injury, but we thought that at the very least there would be a real will and commitment to at least develop programs that would help mitigate the effects of subsidies. Well, we have been told very articulately by the department that there is nothing in their current proposal that will help mitigate the effects of a long period of low prices.

    Further to that, not only did they turn us down on trade injury, they are now proposing a set of programs that in fact will cost producers more to get the same stability. It will be a higher cost to producers with no more, and in some cases less, coverage than what we had before. Instead of at least saying to the industry, well, we can't pay trade injury, but we will at least keep current compensation at the level that's been provided for you over the past years, instead of doing that, they moved us even further down the path of less compensation and the lack of competitiveness due to high subsidies in other countries.

    What has happened to exacerbate that problem is that not only is it now going to be a higher cost to producers, but the program proposal has desensitized triggers. You will recall that one of the problems we had with CFIP and NISA was that we couldn't seem to make the triggers work right. Everybody was at least relatively happy with NISA because it contributed money into producers' accounts and then they could flow it based on their own individual needs on the farm. But they are now suggesting that we go to production margins and that will desensitize the trigger. In other words, it will be harder to trigger the program at the top, because, for example, they want to take machinery repair out of eligible expenses. I can tell you, ladies and gentlemen, that machinery repair can be a huge cost on a grains and oilseeds farm, yet it will no longer be an eligible expense to trigger the program at the top. It will be tougher to trigger.

    Not only that, but under the current NISA program, there at least was a way to trigger NISA if, because of a long period of low prices, your reference margin was so low that you couldn't really trigger NISA anymore. They had a minimum income trigger, so that if in your claim year you made perhaps one dollar more than you had over the last four years of very low prices, you couldn't trigger NISA, but at least your minimum income trigger then triggered some money for you to flow out of your account. That's gone.

    So we've removed two very important aspects of how money would trigger, which becomes even more important when you go to the concept of entitlement, and I'll let Bill address that later on as well.

    There was a third way to trigger NISA. If you couldn't trigger a sufficient amount of money to fill the hole that had been dug for you because of low prices over four or five years, you could just simply collapse your account and then use that money on your farm if there was no other way to survive.

Á  (1125)  

    So there are three very important components that we will no longer have to make this program trigger. Then to add to that, they further are suggesting now that there should be a 5% sleeve at the top. In other words, you will now have to drop more than 5% before you can trigger at all. So you have production margins that make it almost impossible to trigger right at the top, then they further have suggested putting a 5% sleeve at the top, which is also unacceptable.

    Not only that, at the initial stages of this discussion, when they talked about production margins they said, okay, if we go to production margins, if you fall very deep, it provides better coverage. That is true, because it's a larger number. Now they're scrambling to make sure this program will be acceptable at the WTO. As recent as two weeks ago, they said, well, we can't cover you all the way to the bottom because that will make the entire program, even the income disaster component of it, amber. What happened in that one week was that we lost the top 5% and we lost 5% at the bottom, so it's moving further and further away from being compensation at least equal to what current programs provide for us.

    Then of course there is the concern of trade. I have to tell you that the industry has always been very concerned about trade. I don't have to go into all the examples where we see that it cost the industry a lot of money when we have a trade challenge--countervail and cattle, anti-dumping and cattle.

    The Chair: Mr. Friesen, can I ask you to be brief, because I want Mr. Mailloux in right away and we're going to be running out of time. I know the time is short, but we started late, and I apologize for that.

    Mr. Bob Friesen: I will be as brief as I possibly can.

    The whole idea of being trade sensitive or sensitive to trade challenges is of great concern to the industry. On December 13, at an industry round table with the minister, we pointed out to the department that its domestic policy contradicted its WTO policy. They find themselves looking for ways of making sure that this program would not be amber. What has happened as a result of that, again, is that we're going to less coverage. We've been told that part of the program could be notified as amber and part could be notified as green. There are no rules in the WTO to allow countries to do that. There is some precedent set where several countries have done it, but they've never been challenged and they also don't border the U.S. We simply can't accept it based on the trade.

    Very quickly, before I show you two tables, I want to also point out that one area where they have not listened to us is in the area of supply management. While they identify supply management as a business risk management policy, we have said time and time again that they need to include the three pillars that are needed to maintain supply management; that is, border measures, the ability to set price, and the ability to set supply. Without those three pillars, supply management is nothing.

    Very quickly before I go to Bill--and then we will cover implementation later--I also have two positive components that are in the current program proposal and I'm sure we'll get into them as well. If you heard two weeks ago when the department made its presentation, it showed you this table, and it's attached to your document, because it wanted to prove to you that the current proposal would stabilize margins more than the programs that we currently had. I draw your attention to that table, very quickly.

    At the top are the farmers' margins without the programs. In the next one are the stabilized margins with current programs. I refer you to the year 1998-99, where it shows that under current programs they got much less stabilization money than they got in the next line, where they applied the proposed programs. The one thing they didn't tell you is that in the middle line of margins, that farmer had around $100,000 in his NISA account, so his income, his equity on the farm, was every bit as stable with current programs as it was when they applied the program proposal components to that farmer's margin. The only thing they did was that in the last line they forced the farmer to take it out, and in the line above it the farmer was able to make that decision himself.

    Very quickly, the other thing they did to make this table look right was, under the stabilized margin under current programs, change them to production margins. In other words, they already applied part of the program proposal to current programs to make it look like they were closer together. Chances are that if you had applied the gross margin calculation to the example of current programs, it would have stabilized the margin even more. That's just an example of where we believe they are using misleading information to do a sales job on the program proposal in front of us.

    Mr. Chair, later on I would love to go into the positive things that are in the program proposal and how we suggest to deal with them.

Á  (1130)  

    The Chair: We have to move on. We're way over time.

    Mr. Mailloux, can you keep it short and only on those issues that you feel are grievances. We need not to go over those issues we agree upon.

    Mr. Bill Mailloux (Co-Chair, Safety Nets Committee, Canadian Federation of Agriculture): Thank you, Mr. Chair.

    I would like to point out that Mr. Friesen certainly shows the frustration that is true to our members. They are very frustrated with the process so far, and I will go to those points.

    I'm going to back up to a meeting we had back in July in Windsor with the CFA. As co-chair of the Safety Nets Advisory Committee, I have to say that it is not an easy process to get a national consensus on some issues in agriculture, and I'm sure you all are aware of that because of our regional differences. There are a few things we have done as the CFA and the national organization. We did get consensus from organizations across Canada on a few issues.

    The first one that made us very frustrated was that we were asked last summer to decide how we would best flow the transition dollars that were announced. We very much appreciate those dollars, we've made that very clear, and we've been supportive of this whole process. We came to a consensus, after about three days of safety net meetings in Windsor that week in July, on how we would like the dollars delivered, and we were completely ignored by the department after we made that decision.

    I think they probably thought, when we were asked to come to a consensus, that we couldn't come to a consensus, but we did, and those dollars weren't delivered in a way that we thought was proper. Our biggest concern was that we were always told the NISA account balances were too large, yet the federal department decided to deliver those dollars into the NISA accounts and that didn't put the dollars necessarily into the hands of producers because they couldn't trigger them. That's where the frustration started, at least as co-chair of the Safety Nets Advisory Committee.

    I'll make a couple of points. They're all in the brief, and we have a national consensus in CFA on these points. We agreed at the start of this on some things, and flexibility with program designs was one of them.

    There are regional differences across Canada that had to be recognized, and we were assured that there was flexibility in the business risk management program so that provinces would be allowed to design programs that would meet the needs of the regional differences. A Saskatchewan grain farmer doesn't have the same problem as a fruit producer in B.C. or a vegetable producer in Ontario. In Ontario we've had programs that have dealt with all the different commodities, and those are going to be gone. We don't see where there's enough flexibility to address those companion programs that need to be in place for different provinces. That's a big concern.

    On affordability of programs, when we started on this we agreed, and we thought that the federal department and provinces agreed as well, that programs would have to be affordable so that producers would buy into the programs. We don't think this is any better than what we had, and that's a concern. We want producers to participate in programs, and I don't see where there are incentives with the current program designs to do that, and that's a big concern for us.

    We don't want producers seeing a bad program, not participating, and later on finding out that they should have participated even if it was a bad one. The more producers that participate in programs, the better off the program will be. That's been with crop insurance and NISA currently. I don't know how we're going to talk producers into a bad program, so it's a big concern.

    All along and right from the start, when the consultation started across Canada, producers said they didn't want investment triggers involved in a NISA program or a NISA-like program. Months later we still hear there are going to be triggers for investment on the farm. We don't know exactly what we can invest in, but we're still hearing there are investment triggers to do other things than stabilize income. We want stabilization dollars to do exactly that--stabilize farm income.

    They're still talking about possibly 2006 being when they'll introduce an investment trigger for other things such as environment or food safety, and that is totally unacceptable. There is not a member of CFA who supports that whatsoever, yet it still comes up in the documents. I have no idea why, and that is a frustration of all our members.

    I talked about participation. They're calling it a new NISA program. When you go from paying on the way out of a program compared to the NISA program now, which governments and producers put dollars in, it's their accounts; they control it the way they want. As Bob said, we had the triggers, different options, so that we had flexibility on how we used that program.

    When we move to an entitlement where the government moneys are paid on the way out, that is not a NISA program, yet we're calling it a NISA program. That's a completely different program. I would like the department to start making that very clear, that it is not the same program.

Á  (1135)  

    Entitlement may not be a bad thing if we get some other things right, and that's to trigger those dollars when we need them and be able to draw those dollars down. As Mr. Friesen pointed out, currently that's not possible. When we take out that top 5%, it limits the amount you can trigger out. Entitlement has to have a lot of other factors built in to make it work properly, but it is a completely different program.

    I think I'll leave it with that. I probably missed some points but they're in the draft. Please read them. I'd like to point out again that we have national consensus at the CFA on these issues that are in the document, and I was very proud to be part of a committee that could make that happen. I don't understand why we would miss out on some of these points when that's what producers are saying they want.

    The Chair: Thank you very much, Mr. Mailloux.

    I'm going to now go to Mr. Bee. I've been very generous, I guess I could almost say liberal, with my time with you this morning. I'm going to be the same with you, Mr. Bee, and I'm going to give your group 15 minutes. Now, you divide it up, but at 15 minutes we must move on, because that will only give us one hour for questioning and we need that.

    Mr. Ken Bee (President, Grain Growers of Canada): Thank you, Mr. Chair, Madam Vice-Chair, and committee members. On behalf of Grain Growers of Canada, I want to thank you for the opportunity to meet with you today to discuss the business risk management pillar of the agricultural policy framework.

    I have with me today Cam Dahl, our executive director here in Ottawa, and Don Kenny, a member of our executive committee. He farms just outside the city of Ottawa.

    The Grain Growers of Canada represent 80,000 grains and oilseeds producers from all across Canada. Our production is worth about $10 billion per year. We want to reiterate our appreciation for the Prime Minister's announcement for funding under the APF and for the two years of transition funding. Those dollars are greatly appreciated by our producers.

    The commitment to long-term policies in funding, including the continuation of safety nets, will help grains and oilseeds producers fight the impact of some of the factors outside their control. Although the Grain Growers of Canada remain supportive of the broad goals of the APF, it's important to note that our support for the principles of the APF has most definitely not translated into support for the detailed program proposals currently being discussed.

    Just as Mr. Friesen and Mr. Mailloux have outlined many of CFA's concerns, we have significant concerns as well regarding the business risk management pillar of the APF. These concerns centre on the details of the proposed changes, as well as the tight implementation timeframe.

    We strongly believe that adequate progress has not been made to allow for significant changes to income safety net programs for the coming year. There are too many questions left unanswered and to be resolved before the March 31 deadline. We believe that by giving additional time to work through additional proposals and developing further details, we can arrive at programs that meet both farmers' needs and government needs.

    There are several key areas that remain unresolved.

    Regional flexibility: Agricultural operations differ from region to region across Canada. As a result, the risks facing farmers in each region of the country differ, and similarly, risks differ from sector to sector. For these two reasons, no single safety net program can meet the needs of every farmer in every region of the country. This was the reason behind the development of provincially administered companion programs. These programs allow each province to tailor individual programs to meet the specific needs of the producers operating in their region. Jointly funded, companion programs have worked well, and that concept should not be abandoned.

    Mitigation of foreign market interference: Grains and oilseeds farmers continue to absorb the cost of foreign interference in world markets. This has been calculated to be approximately $1.3 billion a year. The negative impact of artificial world prices continues to grow as the domestic support paid out by our trading partners continues to rise. You just have to witness the U.S. Farm Bill.

    Canada's risk management programs must mitigate the negative effects of foreign interference in the international marketplace. I'd also like to note that the U.S. Congress is about to unleash an additional $3.1 billion in disaster assistance.

    The impact of foreign interference is also reducing the effectiveness of safety net programs here. Because Canada's principal safety net programs are based on historical revenues, which in the case of grains and oilseeds producers are falling, Canadian safety net spending would decline at a time when it is needed most--when the negative impact of foreign subsidies on world markets is increasing.

    Farmers are concerned that this issue will be exacerbated and not improved by the programs proposed under the APF. This is partially due to the proposed elimination of provincially administered, jointly funded companion programs that have helped to offset some of the impact of foreign interference, as well as some of the details in the current program proposals.

Á  (1140)  

    A key unanswered question surrounding the new safety net program remains. What aspect of the APF will mitigate the impact of foreign interference--in other words, trade- and production-distorting subsidies--in the world market?

    We have serious trade concerns with the current proposals. We remain concerned that combining the disaster assistance program with NISA will make both a disaster as well as stabilization spending amber under WTO and thus subject to significant reductions.

    Officials have told you that these trade concerns have been addressed within the current proposals. We have very serious reservations regarding the explanations given. Officials have indicated that they will be able to report that part of the NISA program is green and part of the new program is amber. This concept has never been clarified at the WTO.

    Officials have also told you that the new NISA program will survive a countervail challenge by the United States. Again, we do not believe this issue has been adequately addressed. We are concerned that formally combining stabilization and disaster components will simply create a bigger target for those in the U.S. who want to block Canadian exports.

    Moving to a combined program for disaster mitigation and stabilization will also increase the risk that the new NISA will disproportionately deliver safety net assistance to one sector, and this is a key determining factor in any U.S. countervail challenge.

    We want to note that the Grain Growers of Canada remains committed to real gains at the WTO. This is why we must ensure that our new programs fit the trade rules that are in place today as well as meeting the needs of a trading environment that will exist after the Doha round.

    Affordability: The proposals that have been examined to date all would require significant increases in after-tax contributions by farmers. In many cases this will make the new programs unaffordable, rendering them ineffective. Initial calculations show that the total deposit required by farmers to ensure full coverage is in the range of $3 billion in after-tax dollars. While the Grain Growers of Canada accepts the principle that farmers must be participants in business risk management programs, additional work is required to ensure this participation is not onerous.

    Coverage levels in the current proposals: We have a number of concerns with the income loss coverage that will be given by the current proposals. We are concerned that over time the 5% deductible at the top of the program will result in significant erosion of coverage for the grains and oilseeds sector. We are concerned regarding the sensitivity of the trigger in the new program. This is largely due to the production margin proposal versus the current gross margin trigger. The use of the production margin will make it more difficult to trigger the stabilization component, and this is especially worrisome to the grains and oilseeds sector, which has been impacted by gradual price declines in the world. Again, this highlights the concerns that moving to a new system will exacerbate the impact of foreign interference in world markets.

    The costs that are currently excluded from the production margin proposal are also cause for concern--the exclusion of legitimate costs that may prevent farmers from triggering the program when needed.

    The agriculture sector has come forward with industry proposals that would address many of the concerns that have been outlined today. This industry proposal would build on existing programs while making changes that would meet the needs of governments. For example, our proposal would integrate the trigger between disaster and stabilization funding to remove the concern that the separate programs can deliver more than 100% of a farmer's loss. However, the WTO reporting of the stabilization and disaster components would still be done separately in order to maintain the green status of disaster assistance.

Á  (1145)  

    Again, additional time is required to adequately evaluate the options that are currently on the table. We should not move forward and endorse wholesale change until we are certain that new programs will be better than the programs we have in place today.

    In summary, Mr. Chair, grains and oilseeds farmers are concerned they will be paying out more for a program that will deliver less. Federal and provincial officials have not addressed affordability concerns. In order to get full coverage, it is estimated that farmers will need to deposit in the range of $3 billion after-tax dollars.

    Trade concerns with the new programs have not been addressed. We remain concerned that the new program will be vulnerable to U.S. countervail, and the risk of countervail action from the U.S. may be increasing, as are the consequences as a result of the proposed changes.

    We remain concerned that no part of the new program will fit the definition of “green”. This could result in dramatic cuts to programs after the Doha round.

    We are concerned that the design of the new programs will result in lower and diminishing coverage for grains and oilseeds. Zero coverage for the 100% to 95% tier would result in significant coverage loss in the periods of steady decline in world prices.

    The program design, especially the move to production margin, will make it more difficult to trigger stabilization funds. The move to production margin will make it more difficult to trigger disaster assistance in times of need because of the exclusion of legitimate expenses.

    No aspect of program design or any other part of the APF deals with the ongoing impact of foreign interference in world markets.

    Companion programs have allowed each province to tailor individual programs to meet the specific needs of the producers in their region. This concept has worked well and should not be abandoned.

    There are too many questions outstanding to be resolved before the March 31 deadline. Additional time is needed to work through a program design that will meet the needs of both farmers and governments.

    Mr. Chair, the House of Commons Standing Committee on Agriculture and Agri-Food has a very important role to play in ensuring that whatever program is implemented meets the needs of producers and that the goals and the principles of the APF are not compromised by an ineffective program design.

    Let me thank you for the opportunity to appear here today. We look forward to your questions.

Á  (1150)  

    The Chair: Thank you very much, Mr. Bee. I think you've concluded the remarks on behalf of the Grain Growers.

    We will proceed to questioning. We will begin with the Alliance and turn to Mr. Anderson for seven minutes. I would ask that our questioners put their names forward so we have them quickly. We'll try to stay succinct with both our questions and our responses so we can accommodate this. We want to do something this morning so that when we leave we'll feel as though we've made some progress toward reaching a mutual goal that can be achieved.

    Mr. Anderson.

    Mr. David Anderson: Thank you, Mr. Chair.

    This is rapidly turning into a business mismanagement program, not a business risk management program, but the key to it, really, is the trigger and the production margin. I want to talk a little bit about that and just ask you a couple of questions.

    We had a couple of bureaucrats in here on February 6 who talked about this a bit. One of the things Mr. Richardson told us was that the production margin would be roughly 50% larger than the gross margin, leaving the impression that farmers would be better served by that. I'd like you to address that, if you can.

    My second question has to do with your reaction to a couple of comments about negative margins. I'm not sure we're all going to be on the same page as the bureaucrats were here. Mr. Kennedy said that if you were to take the same farm with the same revenues and compare gross margin to production margin, the production margin would actually be a lot bigger. So the producer, if he were to fall down further, would be falling into what would be, under the current program, negative margin territory. One of the things about the production margin is that you're going to be able to provide support to the producer for what previously would have been in the negative margin zone.

    Mr. Richardson actually repeated much of the same thing when he said, “We've been looking at a number of farm types, and the data we've presented to the National Safety Nets Advisory Committee certainly indicates that the incidence of negative margin decreases significantly with the production margin.”

    Do you have any comments on those two?

    Mr. Ken Bee: Just a point of clarification. It's our understanding that the production margin is about twice the size of the gross margin, not 50%.

Á  (1155)  

    Mr. David Anderson: Okay, not just 50%.

    Mr. Ken Bee: With regard to covering the negative margin, sure, the production margin is going to be bigger. The difficulty is that having a bigger production margin is of absolutely no value to our producers if they can't trigger the dollars when they're needed, and that's the key problem with the production margin. There is so little variability in the production margin calculation that it becomes very difficult to trigger, so it becomes an ineffective program.

    Cam, you might have further comments.

    Mr. Cam Dahl (Executive Director, Grain Growers of Canada): The only thing I would add, David, has to do with comments on the negative margins. If the costs are excluded from the production margin that pushed a farmer into a negative position in the first place, the wider coverage doesn't do them a whole lot of good. I think the example of machinery repairs was brought up, but that is only one example.

    So, yes, on paper it would look like it would have a wider coverage, but if the costs that are pushing farmers into that negative position are excluded from the calculations, the additional coverage again doesn't do them a whole lot of good.

    Mr. Bob Friesen: Yes, and as for the statement that it will eliminate negative margins, the farmers will still lose just as much money. Just to reiterate, it takes a lot longer to trigger, and then when you do trigger it, it is a bigger number. But let's not forget that they've also now removed coverage at the bottom to try to cover the trade concern. So it can't fall all the way to zero.

    Mr. David Anderson: I have another question, which Ken addressed a bit. Our figures were pretty much the same as yours, that it's going to require a $2 billion to $3 billion deposit by the agricultural community to make this program work. Do you see that being a burden on farmers? Do you see the agricultural community right now being able to handle that? Do you think they will expect that the money will be crossed over from the current NISA? How do you see that working?

    Mr. Ken Bee: I'm not sure our growers at the grassroots levels fully understand the implications of the program's design so far. It has changed weekly.

    As for having to put up $3 billion to $4 billion in after-tax money to have on deposit, it's a huge burden to all producers. Not only that, I have to question how good a use that is of producers' money when they could have those dollars in their own operations, trying to make improvements to their operations to make themselves more competitive and more efficient, and yet the government is asking that they put these dollars on deposit in case they might trigger a payment. I think it's a huge burden.

    Mr. David Anderson: Looking at the examples that the government has used here, to expect that producers would be able to put $40,000 down to try to get $200,000 coverage, which isn't unreasonable, is just too much to be looking at.

    Mr. Bob Friesen: I guess one of the positive things about the program proposal is the immediate coverage up front, putting down 30% of your ultimate requirement and having that immediate coverage. But I hasten to add that that is something that for several years the advisory committee has suggested we should build into current NISA. We don't have to make wholesale changes to add that component to our current NISA, and it would be just as effective. Also, there is the rollover that the federal government is committed to. Again, that's a positive, but that as well could be built into current programs.

    Mr. David Anderson: Both your organizations have called for a delay of the implementation of this new program. Would you like that delay to be one year? Do you think it's possible to have a transition program over the next year? Do you want it to be delayed and brought in in a year? How would you like to see that carried out?

    Mr. Bob Friesen: I think Ken mentioned that in his presentation. We certainly agree 100% on going for another year with current programs. The fact of the matter is that the industry has been told several times that in order to ensure funding we had to implement by April 1. I think Mr. Manley made it very clear the other day that the federal government is committed to the investment in the APF and the transition money. That's in the budget. I don't think April 1 is a requirement any longer to flow that money.

    Secondly, farmers are already going to their bankers, doing their cashflow projections, making their commitments and signing their covenants. To suddenly implement a program in midstream would certainly result in a change of rules. They would suddenly have to go back to the banks.

    The other confusion it would raise is that to go from current programs to the proposed programs, they would have to convert all of the participants' margins from gross margin calculations to production margin calculations, plus they would have to change all the cashflow accounting and modified accrual accounting to accrual accounting. That in itself would create a lot of confusion.

    We see absolutely no reason why we can't carry on with current programs for another year and do exactly what Mr. Bee suggested. Let's take a real objective look at this. He suggested some of the things that could be done rather than make wholesale changes. We've supported that in principle. I think we can get to a place where the industry at least has a level of comfort, so the governments would have confidence in rolling.... That's the other thing. We need time to roll this out to the grassroots as well.

  (1200)  

    The Chair: Mr. Anderson, your time has expired.

    Mr. Gagnon, for seven minutes.

[Translation]

    Mr. Marcel Gagnon: Thank you, Mr. Chairman.

    You said earlier that you hoped we would make some progress by the end of this meeting. However, after listening to our witnesses talk about the program, one has to wonder whether, in order for that to happen, it might not be better for the Minister simply to withdraw this proposal.

    This is not the first time we have heard criticism about the new program which, in the end, doesn't seem to satisfy anyone. I'm wondering how many complaints will be needed before we reach the conclusion that it is pretty well impossible to improve it. If worst comes to worst, we will need some time: at least a year.

    My question is for the witnesses who are with us today. You have reviewed this program and you also have a thorough understanding of the previous programs. Would it be possible for you to do the reverse--in other words, try to understand what the Minister is attempting to achieve with this? Are you able to tell us which specific improvements you would like to see made to the program and then recommend those to the Minister? So far, you have been consulted, but your views have been ignored.

    It was stated at the outset that it would cost more for less protection. Towards the end of your presentation, you made reference to the banks. You may recall that we heard from senior officials of the Department last week, who told us they had no idea how the banks would react to these new programs.

    I don't know exactly how to formulate my question, but it seems to me it might be easier to say to the government that the best thing would be to propose a new program, rather than trying to improve this one. What are your views on that?

[English]

    Mr. Bill Mailloux: We've made many recommendations over the last few years as the CFA Safety Nets Committee, or the National Safety Nets Advisory Committee as well, which has many participants here. We've made many suggestions to change programs a little bit here and a little bit there to make improvements that we thought would work. Industry actually agreed to these, and yet they were ignored.

    We asked for some changes to NISA. We actually asked the department to consider mandatory withdrawals of triggers, because they were saying that accounts were too large and that people weren't using them. We looked at dealing with that problem, but it was ignored. We were constantly told by the department that if we were to touch NISA at all it would have big trade concerns. It's not a big trade concern all of a sudden when they want to drastically change the program, which isn't really an improvement so far.

    So we have made recommendations on that. I know provinces have increased.... In Ontario we've increased the level of coverage in market revenue in the past, and that was an improvement. Quebec had programs that it worked on, that fit its needs, and made improvements. But a lot of the improvements that we asked for were ignored, which was very concerning.

    I think I might have missed part of your question. But as for whether we made a suggestion, yes, we have.

    In the current discussions, we have a proposal that came out of Manitoba, the Keystone Agricultural Producers, on how to fit a disaster component within a current NISA, just harmonize some filing, have current NISA fund one and fund two and build in a disaster component of pooled money within that. That didn't get rave reviews from the department, but we've kept pushing at it and we've done some work. We modified things a little bit.

    The National Safety Nets Advisory Committee, just two weeks ago I guess it was, asked to have more analysis done on that proposal. As far as I know--and Jennifer may know more on this--they've agreed to look at that. I'm not really confident that they're putting a lot of time and resources to it, but we would like them to.

    So we've made positive proposals and suggestions to them. We put that proposal to them months ago them and we haven't made progress on that. We've done our work well, we think, and we have made suggestions that haven't had a lot of work done on them from the department.

  (1205)  

    Mr. Bob Friesen: There are a couple of positives in what Ag Canada is trying to do. To integrate the program triggers between NISA and the disaster component, I think, is a positive step if we can get it right. The five-year funding commitment is definitely a positive step.

    But the elimination of the flexibility in companion programs is a backward step and the inability to trigger the program is a backward step. The trade concerns are absolutely huge if we make these changes as suggested. Our industry cannot afford to be wrong in designing a program that is going to attract countervail action from our neighbours to the south. We cannot afford it.

    As for banker acceptance, I have been informed that bankers at this stage are extremely reluctant to lend money for this new proposed program. We would much rather take our existing NISA program, which growers have generally received well, the old NISA, and make changes to it so we can make it better, so we can meet the needs of both government and producers, and let's get on with it.

    Mr. Ken Bee: I just want to add to the trade thing. The other thing we have to remember is that we're right in the middle of a WTO negotiation now where they are looking at green box definitions. It makes no sense to change programs in midstream of that negotiation when what we currently have has in fact been accepted by the U.S.

    The Chair: We must move on to our next questioner.

    Ms. Ur.

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

    I just want to go on with the bankers' interpretation of this proposed new safety net program. Do you think they don't appreciate it only because the proposals aren't concrete there and no one really knows what is going to be forthcoming? Do you think that is part of the problem with the bankers' acceptance of this program?

    Mr. Ken Bee: Rose-Marie, I think part of the problem is lack of understanding, to start with. It's a wholesale change in how the program works.

    Under the previous program the banker knew that the producer would access those dollars at some point in time. Under this new program there is no assurance that the producer is going to access dollars, and yet he is being asked to go to his bank and borrow funds to put on deposit in case he might trigger the program at some later date. There has been no assurance that some of those program payments, if he qualifies, won't be pro-rated, and that's a concern. I think it's one of lack of communication and understanding, and I think it's a legitimate concern from the banking community that it may not be a good way to lend money or a good use of the bank's money.

    Mrs. Rose-Marie Ur: Ken, you made the statement, and I can't agree with you more, that we can't afford to come out with something totally unacceptable. It is vital that we get this thing done right and get it done quickly.

    I was interested in what you said, Bill, about the mandatory withdrawals. Can you tell me why that was not listened to, or what reasoning they gave to you on that? We've heard time and time again from the department that it's hard for the minister to go to the table because we have all these dollars and it's hard to sell to the other cabinet ministers who aren't as versed in agricultural matters. If it's so bad out there, why are farmers not taking this money out?

    Your statement was most interesting. Why didn't we support something like that?

    Mr. Bill Mailloux: I think there were probably a lot of reasons. It was a definite change to what the NISA was originally intended for, which was that producers could have control over the dollars themselves. I think farm groups made some leaps and bounds when they suggested that, because they did change it a bit.

    I think there were a fair number of bureaucrats who didn't want the change. They felt the program was designed right, that people were participating, and that it might be too big a change. We heard that if there were any changes to the program, then the U.S. would look at the program again, and it may have a challenge in front of it. That was the excuse we heard.

    Bob has been around the NISA longer than I and may have some other comments, but we were making some suggestions to change the political concerns, to help address those political concerns, that there were too many dollars in the program. It's not that we agreed that there were too many dollars in the program, but that it looked like a lot of dollars there. Half was producer money and half was government money. Those changes just didn't come about.

  (1210)  

    Mr. Bob Friesen: One of the reasons they did suggest is that if they forced farmers to take money out of their accounts and then they ran out of money if they had a disaster on their farm, they would blame the government for making them take the money out, which is rather ironic in that they are still pushing for an investment component in the year 2006, because that would do exactly that as well. It would encourage farmers to use safety net money for other purposes, and then if they didn't have enough money to address their income problem on the farm, they would blame the government as well.

    Mrs. Rose-Marie Ur: I agree. I think there's a lot to be said and done before 2006 on investment. There are many more critical issues to come forth.

    Bob, you being the head of CFA--and maybe I'm putting you on the spot--are there some groups in agriculture that are more embracing of this new program than others? Are there some segments of the sector that feel it's A-OK?

    Mr. Bob Friesen: There's no one who feels it's A-OK. But for the same reason that CFIP worked better for some commodities than for other commodities, this proposal would do exactly the same thing. And as both Ken and I have mentioned, it does nothing for a long period of low prices. My guess is that this proposal again would work better for very short, very deep spikes, but it would not serve the grains and oilseeds sector well because they are more vulnerable to the long periods of low prices.

    But, no, none of our membership has blessed the proposal. I do know, though, that we have had this discussion on how it would work for different commodities, and parts of it would work better for some than for others.

    Mrs. Rose-Marie Ur: Many of you have suggested here this morning that there's a real concern with the farming sector because they don't have the flexibility to work within the program, for companion programs and such. The federal government is still going to continue that over the next three years, I believe, or proposes to. Do you think that's sufficient time to work something out? The provinces still can continue with whatever they want to do, but do you think that's sufficient time to work something out? I know I don't like to buy a pig in a poke either and I suppose that's what I'm trying to circumvent. Do you think there's room for change within that timeframe?

    Mr. Bob Friesen: I'll make a brief comment and then Ken and Bill should speak to that as well, because they come from a province with a very strong companion program.

    The problem is that the concept of companion programs is a strong one because of what was mentioned. We do have regional-specific problems and they can't be addressed with one simple national program. So what we're saying is they should leave a sliver of money to do exactly that.

    In Quebec's case, they just recently redesigned their programs to better fit our current programs, and just after that redesign, suddenly they're supposed to look at a totally new design to try to match their program with. So there too, it's unacceptable that there can't be at least enough companion money so that Quebec can continue to use their companion program, Ontario can continue to use their companion program, and other provinces, if they don't want to design a separate companion program, can always top up what's--

    Mrs. Rose-Marie Ur: With all due respect, Mr. Friesen, Quebec certainly supports a greater number of dollars for their farming community than some other provinces.

    Mr. Bob Friesen: I recognize that, except--

    Mrs. Rose-Marie Ur: So they're very fortunate there.

    Mr. Bob Friesen: Yes, exactly.

    That's part of the other problem. We've been told that provinces can do whatever they want as far as companion programs are concerned. The fact is we know that there are many provinces that won't be able to afford to put in more money above what they've committed to the APF.

    Mrs. Rose-Marie Ur: Yes.

    The Chair: Time has expired. We must move on.

    Mr. Proctor, for seven minutes.

    Mr. Dick Proctor (Palliser, NDP): Thanks very much, Mr. Chair. And thanks to both the organizations and the folks here.

    I believe, as I listened to both of your messages or your interventions, you're both saying very loudly and clearly that more time is required, that we can't go ahead and sign this on April 1, 2003. And yet, at the same time, it seems to me that I'm also hearing a couple of things that you agree with on this policy framework, but an awful lot of things that you don't agree with.

    My question to you both is why do you think more time will solve this? It seems to me that you and the government are at almost a total impasse, so why would more time be helpful to resolve that? Can you bridge the differences that you have with time or are they just fundamentally in opposition, one to the other?

  (1215)  

    Mr. Ken Bee: Dick, to start off with, by March 31 we just don't have enough time, period, no matter what we do. But really I think we do need to have more time so we can discuss and explore other options so that we understand what the implications would be, how they will affect programs, and how they will affect producers' bottom lines, so that we have a legitimate, unbiased comparison between what we have now and what we think we should go to, and it is going to take more time. I'm extremely hopeful that if we demonstrate to the government people that we are serious--and we are--about trying to arrive at program design that meets the needs of both our producers and the government, they will at least listen to us and seriously sit down with us to come up with parameters that will work for both of us.

    Mr. Bob Friesen: I think something that would help, and which really helped programs in the past that did work.... Not all programs were losers; there were programs that worked. There were crop insurance programs in Ontario that were fantastic, and NISA programs that participated well. Part of the reason those programs worked well is that producer groups helped to promote them. We don't have time to design a program for which we don't have enough analysis on how it's going to work, and to go out and sell it when we're going to be planting in April and May.

    So it really has to have producer group buy-in, and we'll help sell it to our members if it's a program we believe in. That has been the success of a lot of these programs. It's not that government said, here's a program, sign up, boys; it's that producer groups supported them.

    Mr. Bill Mailloux: We wasted a lot of time last year negotiating on program components, and finally late at the end of the year we heard that they were bottom lines and there was no point in even talking about them. Why weren't we told this a year ago, that these are the parameters within which we will negotiate, that's it, end of story?

    As far as implementation is concerned, regardless of what program is implemented, there needs to be time to give farmers the opportunity to look at what that will do as far as a change of rules is concerned so they can prepare themselves for it. And so if we had a program and we developed it over the next months, they would know that by April 1, 2004, these are the rules we would be working within, and that would make the acceptability much better.

    Mr. Dick Proctor: How did we arrive at this situation where we have governments on one side, if you will, the federal government and the provinces, saying, we're ready to sign on, and you have the folks who actually work in those provinces, the producers and the farmers, who are saying, hold on, we're just not ready? What's the rationale for what has occurred there? How has this come about?

    Mr. Bob Friesen: I've spoken to several provincial agriculture ministers who are afraid not to sign even though they don't understand it, because they've been threatened with not receiving funding if they don't sign.

    Mr. Dick Proctor: So that's the overriding reason. Is it the same, Ken, from your experience?

    Mr. Ken Bee: From discussions I've had with my provincial minister, it's obvious the government wants to get something out of these programs, and one of those things is knowing exactly, or as near as possible, what the programs are going to cost. And we can do that by just modifying our existing programs. We don't have to do this wholesale change.

    I think there's a normal amount of friction between the feds, the provinces, and producers, but if we're ever really going to solve the problem, we have to put those differences aside and figure out how we can come up with programs that are going to meet the needs of everybody. I think there are certain parties that haven't been willing to do that up to this stage.

  (1220)  

    Mr. Dick Proctor: Is there also a reality here that by looking at the program as it's designed now, governments know where their last dollar is, but it's the farmers and the producers who may fall below that? They know what their exposure threshold or exposure limit is. Is this something that's at play in all of this as well?

    Mr. Ken Bee: From the program details we've seen so far, I don't know how our producers could possibly know what it's going to cost them or how they're going to get the dollars out of it when they need it. We just haven't seen enough concrete details, enough analysis, to fully understand it.

    Mr. Dick Proctor: That's what I'm saying. I think the governments may know what their last dollar commitment is, but the industry doesn't know itself.

    Mr. Ken Bee: I would say that's probably a correct assumption.

    Mr. Bob Friesen: The governments know how much they want to spend, but the producers have no idea what that program might cost because they don't know what challenges they'll have to face.

    The Chair: Are you finished, Mr. Proctor?

    Mr. Dick Proctor: Yes.

    The Chair: We'll move to Mr. Anderson for five minutes.

    Mr. David Anderson: I wondered, in practical terms, as I was thinking about this, what's the incentive for producers to even participate in this program, particularly those people who have been stable enough that they haven't had to rely on NISA. Is it the matching money on withdrawal, which they're not likely going to use, that's going to be the attraction to them? Only having to put one-third of the deposit down, is that going to be enough of an attraction?

    You have a program with no interest bonus, no withdrawal without the trigger. You have, from all evidence, a terrible trigger. On a practical level for farmers, what's going to encourage people to participate, or is that what they're looking for?

    Mr. Bob Friesen: I think part of the answer was in your question. That is, unless we get some of those components changed, why would they subscribe to the program?

    As I said earlier, one of the strong points of this proposal is that if I have absolutely no money in my account, I can have immediate 70% coverage if I go all the way to the bottom. That's a positive, but that's a positive we suggested we should build into the current NISA several years ago, and we suggested how to do it. But at that time it was rejected.

    So you're right, unless there's confidence that the trigger will work--and three of the ways we triggered it are being taken away--there isn't assurance that it will be very sensitive at the top.

    Mr. David Anderson: Mr. Bee, do you have any response?

    Mr. Ken Bee: The current proposal on the table provides very little in the way of reasons for grains and oilseeds producers to want to participate in the program. If they're going to deduct off the top 5%--which really equates to 10% in our old program, because the production margin is larger, so it's roughly equal to 10% of our old gross margin calculation--and if you can't trigger it in the first place, or it would be very difficult to trigger it, our producers are going to seriously question what the value of the program is. And that's the stage we're at right now, I think.

    Mr. Cam Dahl: The other portion of your question is the affordability half of the issue. There may be producers who would like to participate at 100% coverage but, because of multiple years of reduced prices or for whatever reason, simply can't afford to.

    Mr. David Anderson: It's good to have that one-third amount allowed, but you can't continue to do that, and you make your one-third and take your deposit out and try to keep that cycle. The long-term viability of an operation that's doing this isn't going to be very high, I don't think.

    Mr. Cam Dahl: And, in fact, the proposal on the table, as I understand it, would require producers to deposit the other two-thirds before they access any other dollars.

    The Chair: Mr. Mailloux.

    Mr. Bill Mailloux: To attract people to participate, we also have to figure out what the links to other programs are going to be. How do we link crop insurance to this program so that it's a positive link and producers participate in both programs, when we don't know how this one is designed yet? It's going to take time to work that stuff out, but those links being positive links to encourage producers is part of what would make them successful.

    Mr. David Anderson: We certainly got mixed messages on February 6 as to whether they were going to decouple those programs or require you to be in the whole package. They seemed to be giving both messages in one meeting there.

    I have one last question, and I'll let someone else have some time here. Specifically, what needs to be done to the trigger to make it work?

  (1225)  

    Mr. Ken Bee: In general, from the triggering side, there has to be sufficient variability with respect to actual costs incurred in operations, so that if you do incur additional costs, legitimate costs, and you incur lower prices...and there has to be enough variability in that so that it can trigger. Now, to get into exactly how we do that, I'm not about to do that today, but it's a mathematical challenge.

    The other comment is that part of the problem with the current proposal is they're trying to use the same calculation on the deposit side as they are on the triggering side, and mathematically they can't work for both. They have to make their mind up about how we're going to have good coverage on the deposit side and then figure out a proper trigger mechanism so that it actually triggers when producers need it.

    Mr. Bob Friesen: The other thing we need to look at is what we can replace the minimum income trigger with. The minimum income trigger with the concept of entitlement would probably not be very equitable, because it would create a fair bit of moral hazard. But I think we need to figure out something we can replace the minimum income trigger with so that when, because of a very low reference margin, you can't trigger, this secondary trigger kicks in.

    The Chair: Okay, we'll move over to the government side. Mr. Maloney.

    Mr. John Maloney (Erie—Lincoln, Lib.): If I can understand your presentation, you have some serious concerns in some areas, some parts are okay, and some with a little tinkering may be acceptable. You perhaps haven't had enough time to really think all the variables through. How much time do you think you'd require?

    Mr. Ken Bee: That's a difficult question, because it depends on how receptive the people we talk to are to making some changes that can better address our needs. If they aren't receptive to making changes, then I guess all the time in the world may not matter. On the other hand, if they are receptive, I think we can sit down and come up with a more acceptable and more effective program probably in several months. That's just a guess.

    Mr. John Maloney: Several months is two months, three months or whatever. Has the department said it is not prepared to negotiate on any of these items?

    Mr. Ken Bee: You have to understand that we are not negotiating with them. We are consulting them. It's really a negotiation between the federal governments and the provincial governments. As for our actually being negotiators, we are not that. We give our advice and they choose to take it or not take it.

    Mr. Bob Friesen: I don't know if I'd call it negotiation, but certainly there has been a fair bit of debate on some of these issues in the minister's advisory committee. I have given you an example of the rhetoric that we very often get in response. They make assumptions based on a certain table, yet when we dig a little deeper we realize that these assumptions are simply inaccurate.

    As for delaying, we've asked to carry on with current programs for another year. That's for two reasons. Number one, we're certainly not ready to implement on April 1. Again, we have a very good industry proposal that builds on current programs, on some of what the department has proposed, and we feel it could have a lot of potential. But then, regardless of when that program is ready, you can't just drop new programs on farmers midstream. First of all, you need time for them to roll it out. Secondly, you need time for them to learn the ropes and then that they have some heads up about when the program will be implemented.

    Mr. John Maloney: Do you feel that even a year is going to be sufficient for the transition period?

  (1230)  

    Mr. Bob Friesen: Yes, I would say it should be.

    Mr. John Maloney: Then they're talking about a two-year transition. This would be a further year on top of the two-year transition they're talking about?

    Mr. Bob Friesen: When they talk about transition, they're not talking about slowly bringing in the rules. They're talking about immediate implementation of the rules on April 1. The transition has to do with how the money would flow based on demand programs and slowly taking more money out of companion money and moving it into this national program. That's a transition. The rules themselves would change April 1, if they were implemented April 1.

    Mr. Ken Bee: I have just one final comment. Basically the proposed program that sits on the table today is unacceptable to the grains and oilseeds sector because it will not work. It's as simple as that.

    Mr. John Maloney: Why can't they appreciate your position that it will not work?

    Mr. Bob Friesen: If both levels of government want to implement programs that the industry is dead set against after they were promised that there would be partnership, then the governments will wear it.

    The Chair: I'm going to go Mr. Gagnon, but before I do, because there's about a minute left here, I want to put a question.

    It's not a question of money. I think we've accepted the fact that there are so many dollars in the pot. The question becomes how is that money appropriated in such ways that it addresses need and so that the appropriate amount of money can be received from that pot of money for those who are in that period of need? I think that's what we're really trying to do. Why is there such a resistance for the department, the bureaucrats, the deputy ministers, or whoever might be involved, and the farm community, the farm leaders who represent those primary producers, to come together and find some common ground where we can agree?

    I know that's a difficult question, but I think we have to find a place where we can come together and find that common meeting place.

    Mr. Bill Mailloux: I'm sure we could all lock ourselves in a room and get this done. I'm confident that we could get the program in place, but it takes some time. I would think you people could answer the question better than we can. Why is it we have a stalemate here? I don't know. I can assure you it's not from a lack of trying on the industry side. We've made commitments.

    As Bob pointed out, we get five months down the road and then find out that some details and promises were made within cabinet and that what we talked about for the five months isn't doable. It's not fair ball when we find out the rules that late in the game. We've planted a crop and harvested a crop all the way through the discussions here. We're certainly willing to keep at it, but April 1 just isn't going to work.

    The Chair: Mr. Bee.

    Mr. Ken Bee: Mr. Chairman, I think a big part of the challenge is that the program proposal is designed to meet government needs, but there has not been enough thought, enough time, and enough analysis to design it so it meets producers' needs in an effective way. I think that's really the major problem.

    The Chair: We'll move on to Mr. Gagnon for five minutes, please.

[Translation]

    Mr. Marcel Gagnon: Thank you, Mr. Chairman. I would also like to respond to your question. Earlier it was mentioned that there is not much enthusiasm out there; I believe it was Mr. Bee who said that he was not particularly enthusiastic. It's difficult to ask producers to be enthusiastic about a new program when they know they will be relinquishing some of the gains they made previously. I don't know how you can possibly sell a program like that or generate any kind of enthusiasm for it.

    As regards Quebec, I would like to get some confirmation of the information I have. I asked the Minister of Agriculture and Agri-Food whether it would be possible to respect the specificity of the provinces by keeping those programs that are already in place, because the new program represents a rollback for Quebec. And based on what I have seen, Quebec is not the only province to be in that position. The Minister's answer was yes.

    And yet we don't seem to be speaking the same language on this, because this morning I did some checking and discovered that they can indeed remain in place, except that we have to invest our money in the new program, even though the Department will no longer be investing in our former companion programs. If Quebec were to decide to do that, it would cost $100 million a year. I would like to know whether the information I've been given is accurate or whether I am misinterpreting it.

  (1235)  

[English]

    Mr. Bob Friesen: It's our understanding that out of the $1.60 that the Quebec government now puts into provincial safety nets, 16¢ of that is already going towards crop insurance and it would require a further 24¢ to complement this program. So the Province of Quebec would be out the 24¢ to continue with their companion programs.

[Translation]

    Mr. Marcel Gagnon: I would like to get an additional piece of information from you as regards our work here in the Committee. Based on our analysis, could we present a motion asking the Minister to review the timelines and give us an answer on that? We could probably do that almost unanimously. It seems to me that if we ever want this program to be implemented, we're going to have to give people the time they are demanding to carry out a proper analysis and adjust to the new conditions being introduced. So, here is my question: is it within the powers of the Committee to do that?

[English]

    The Chair: The table has been turned on the chair now. I would suggest that we leave that question to the minister. The minister will appear before this committee. He is out of the country now. That would be an appropriate question to ask.

[Translation]

    Mr. Marcel Gagnon: To conclude, I, too, would like to thank our witnesses. This is not the first time we have met; we were abroad together last week along with the Chairman. I believe that your views on this issue are extremely important, and that we have to find some way of driving home the points you have made, so that this program that we've been discussing for such a long time and that is supposed to revolutionize agriculture, can truly meet its stated objective. Thank you.

[English]

    The Chair: Does anyone want to respond?

    Mr. Bob Friesen: I would certainly encourage this committee look at a motion to carry on with current programs for another year. We're committed to making this work. We do know there are some changes that have to be made and that we will have to accept them.

    As for Mr. Gagnon, yes, we had the pleasure of spending a few days together in Japan, with Mr. Proctor as well. I can tell you that what we learned in Japan is another huge problem and certainly discussion for another day. We look forward to that discussion as well.

    The Chair: We'll move to Mr. Proctor, for five minutes.

    Mr. Dick Proctor: Thanks very much.

    Not necessarily to pick up on exactly that, but because you were in Tokyo, in the event of a trade challenge, Mr. Friesen.... You've mentioned the amber-green and the sliding back and forth between those two boxes. What do you perceive would happen with what we have before us today if there were a trade challenge?

    Mr. Bob Friesen: The concern we have, of course, is trying to notify part of a program as amber and part as green. That has never been challenged at the WTO, so we have no confidence that in fact that would work.

    If it is challenged, as Mr. Bee said earlier, and even if we win, it ends up costing not just the government but the industry millions of dollars. If we lose, as we've said before, the only way we could then respond to that is either to change the triggers to decrease compensation or spend less money, and you know that they're now proposing going down to 2.5% for a de minimis at the WTO, which cuts our spending by more than half.

    The other concern we have is in making some small changes to the current set of programs or current NISA when--and I know it's a day-to-day basis--we know that at least the U.S. is leaving it alone. If we make some small changes, it is different from totally redesigning the program, knowing full well that's just going to beg scrutiny by the Americans. That's why we're nervous. As Ken said, we just cannot afford to pay for a trade challenge.

  (1240)  

    Mr. Dick Proctor: I have one question for Ken. I think you mentioned in your presentation the additional $3.1 billion that the Americans are putting in on subsidies. I've seen that figure before, and I don't know whether you know the answer. Do you know where it's going, where it's targeted? What's the information on that, Cam?

    Mr. Cam Dahl: It's being targeted to livestock and grains and oilseeds producers that were affected by the drought. It's my understanding that this has moved through the discussions between the two houses of Congress, and so that will be going ahead.

    Perhaps I could quickly add a couple of comments on the trade challenge idea. If you considered all of the NISA crop insurance and CFIP spending as amber, it is in fact over our 5% de minimis amount, so even Canada's own proposal at the WTO would require those programs to be cut. So those are serious concerns.

    The other aspect of the trade challenge is the U.S. countervail action. One of the triggers that the U.S. looks at is the idea of specificity of payments, and it begins to look seriously at a program if it delivers 10% more to a single program. I think that's something for the officials: would this program have done that in past severe downturns?

    The Chair: Thank you, Mr. Proctor.

    We're moving to Mrs. Ur.

    Mrs. Rose-Marie Ur: Thank you, Mr. Chair.

    I had great expectations with APF. Finally we would be proactive with our farming community instead of being reactive with ad hoc programs out there. I thought this would really be something where we could work together with our agricultural sector and our provincial counterparts and come to a positive resolution. For once farmers could count on something being out there for a five-year span and know what they were getting. The dollars are there. I can't believe it's taking us so long to get our act together.

    Maybe one of the things wrong with the program is that we need to have some of the people who are working to put this program together come and spend a year of their life on a farm to see what farming is all about. Sometimes it's good to be an academic or an economist, but it's a little bit different when you can get out on the farm and understand what the real life of a farmer is. I've been there, got the hat, and I understand where you're coming from.

    I find it very frustrating to sit here and have to listen. It's not that I don't want to see you, but it is very frustrating to hear that this still going on at this late time, because with all due respect, I want this to work and I know the minister wants it to work. So somehow, as big boys and girls here, we have to come to a decision as to what we're going to do on this.

    As you said, Bob, small changes are all we need to the current program. I'd love to see your statement on that and I'd love to take it to the department or the bureaucrats, whoever is in charge of this, and say, okay, this is all these people are asking for, so can we not make these changes right now? I'd love to see that and I'm sure the committee would also love to see that. We want to make a difference. We want this to happen for the government, but as much for the producers out there.

    Ken, did you say that if we were to eliminate the top 5%, that would be a real benefit for the grains and oilseeds?

    Mr. Ken Bee: No, it would be a real detriment to the grains and oilseeds.

    Mrs. Rose-Marie Ur: Detriment, that's what I thought. But I thought I had heard you say it would be a benefit.

    Mr. Ken Bee: No, I hope I didn't say that.

    Mrs. Rose-Marie Ur: I must not have been listening with both ears.

    Mr. Ken Bee: Thanks for clarifying it. I could have had a slip of the tongue there.

    Mrs. Rose-Marie Ur: Okay. Yes, Bill.

    Mr. Bill Mailloux: I completely understand your frustration on this. I remember when the announcement was made in Spencerville. We were there on the farm when the Prime Minister and some others were there and they made the announcement. I remember saying to Bob, finally, this is a good thing; we've got a five-year commitment that we've been asking for. I think it was Bob who said we could now move on to something else, because we felt we had accomplished something, but little did we know we were going to run into this just a few months down the road.

    It really is frustrating for us as well because we remain committed to that announcement. We really appreciated the long-term commitment, but that long term has to have the right programs in it or it is a big disappointment. But I understand the frustration greatly.

    Mr. Bob Friesen: And it was Mr. Steckle who made the point: you know, we're not sitting here asking for more money; we're saying we're going to work with the money that's been committed to us. Again, that's why it's so frustrating. If it isn't about more spending, then why don't we make sure farmers can work with the programs?

  (1245)  

    The Chair: Your point is well made, Mr. Friesen. It's certainly this committee's wish, from all sides, that we find a program, because if we live with the wrong program we're going to live with it for a long time. We want to make sure the program is right going forward, and if an extension of time is what it takes to do this, then we should look toward doing that. If it is a case of playing brinkmanship, then at some point in time you either have to fish or cut bait. I think we're starting to come to that point.

    Mr. Bill Mailloux: Just back to Rose-Marie's point, I guess what we could do, Bob, is send some of the recommendations that the National Safety Nets Advisory Committee and the CFA have made in the past to this committee so you're aware that we have made suggestions in the past.

    The Chair: Okay, let's then move to our next line of questioning from Mr. Anderson, if you have some more questions.

    Mr. David Anderson: I just have one, and the answer may be affirmative here. When the bureaucrats from the department were here, they said their long-term funding ideal was that they wanted 36¢ of every dollar federal, 24¢ provincial, and 40¢ producer-funded. Is that viable in the long term? Is that what it has been, and is it okay to continue at that level, or is it unreasonable for producers, as far as you're concerned?

    Mr. Ken Bee: That sounds a lot like what they were suggesting just for the crop insurance program, unless those were also their overall figures.

    Mr. David Anderson: They were talking crop insurance, but the answer made it sound like it was overall. That's what they would like to see across the country. Within the different programs the premiums may vary a bit, but overall that's what they'd like to see.

    Mr. Ken Bee: I think you always have to take into consideration what our competitors in the international marketplace have to deal with. To give you a definite answer, yes, that should be good. It's a constantly changing environment with regard to how Europe and the United States support their producers and what impact that has on prices. I don't think we can give you an exact answer, yes or no. For the crop insurance program our initial reaction is that it sounds reasonable, but for the overall program I don't think we could be that definite.

    The Chair: Thank you.

    Mr. Proctor, do you have anything?

    Mr. Gagnon, do you have any more questions?

[Translation]

    Mr. Marcel Gagnon: I do have some other questions, but I think the end result is going to be the same. It is quite clear that no one finds this program satisfactory. I think that what this Committee should do, based on your suggestion, is work towards getting some additional time and ensuring that this program will not be forced on producers as quickly as what is planned, in order that a satisfactory consensus can be reached. That is also what Rose-Marie seems to be saying. So, as far as I am concerned, there really is no point in asking any more questions. We are clearly at an impasse now as far as this program is concerned.

[English]

    The Chair: Thank you, Mr. Gagnon.

    Does anyone on the government side wish to put forward any more questions?

    Maybe I will ask a question. I don't think it has received an answer yet. I think it has an answer, but I don't think we like the answer.

    Do you think we will ever come to a point where we will not be challenged, whether we're green, amber, or any other colour, for that matter? Regardless of how well designed the programs may be and how well we think we have framed those designs so that we come in where we want to be, can we ever come to a point where we will not be challenged? Do you think we will ever reach that point?

    Mr. Bob Friesen: CFIP was unchallengeable and strictly designed based on the rules at the WTO. Now, they are talking about doing away with the peace clause at the WTO so that green programs could also be countervailed, but I don't think there's a lot of appetite from some of the countries to get rid of that peace clause. So CFIP was unchallengeable. We've now had NISA for 10 years, and the Americans decided to back off on it.

    We don't necessarily insist that a program has to be totally green. What we're saying is we need to weigh the risks against the benefits. In NISA we did that and it worked. That's why we also say we need to be careful not to raise a red flag.

    Mr. Ken Bee: I think, Mr. Chairman, if we make every effort to design a program that meets the requirements of U.S. countervail law, we will minimize the risk of countervail. Similarly, we still have to have different programs in different categories so we aren't subject to major reductions at the WTO. It's a combination of factors that we have to look at.

  (1250)  

    The Chair: Okay, we have concluded our line of questioning unless, Mr. Anderson, you have something.

    Yes, Mr. Friesen, very quickly.

    Mr. Bob Friesen: I was encouraged by what was talked about as far as going at least another year with the current program is concerned.

    The other point I wanted to make is that I believe a successful outcome of designing a program is contingent upon agreeing to revisit all the parameters, even those that we have been told are written in stone. That includes the elimination of companion money, having to have a single program, etc. That's the real potential for success, if we can do that.

    The Chair: Thank you very much.

    For those who've come to present this morning, this is a very big subject. Of course, it has serious ramifications if we do it wrong. It has a tremendous positive impact on this country in terms of our rural communities and farmers if we do it right, and I think it's our intention to do it right.

    We thank you for your patience. As for how we fully resolve this as quickly as we'd like, I'm not sure there's a real answer to that. Many of us have been in farm circles and worked in that field for a long time, so we know how difficult it is. We're dealing with independent business people across this country, and we've always enjoyed that kind of freedom in the farm community. Then to be found in a situation in which we're competing for programs where I would think it would be better designed to suit my purposes and someone else finds it better designed for their purposes.... That's very difficult.

    At some point we're going to have to find compromises. We're going to have to come together. The time of brinkmanship will have to come to an end and we will have to get this thing onward and forward.

    Thank you very much for your presence here this morning, and thank you for your line of questioning both ways. Thank you very much.

    Mr. David Anderson: Thank you for the opportunity, Mr. Chairman.

    The Chair: Before we adjourn, I want to give the committee notice of the future business for next week. On Tuesday of next week we're going to be looking at the meat inspection codes for interprovincial trade. We've talked about that before. The CFA is going to be with us and we're going to have the Manitoba Department of Agriculture and Food with us as well.

    On Thursday of next week we're going to have Parks Canada and Gary Wobeser from the Department of Veterinary Pathology, University of Saskatchewan, here with us. This has to do with the bison issue. These people are in town, and we want to conclude for the purpose of reporting our work on the issue of TB.

    That is the order of business for next week.

    Mr. David Anderson: I have one question. I believe you had received written correspondence from Mr. John Morrison, and I'm wondering if you have followed up on that and on what we're going to do with that issue.

    The Chair: I have to refer back to that, yes.

    Thank you very much for your attention this morning and thank you for being here.

    The meeting stands adjourned.