[Recorded by Electronic Apparatus]

Thursday, June 1, 1995

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[English]

The Chairman: Colleagues, we can begin. We don't have very many in the opposition today, but I guess they'll show up in a few minutes.

We welcome Michelle Comeau, Assistant Deputy Minister for the Market and Industry Services Branch. I understand you have an opening statement and would be willing to take questions.

[Translation]

Ms Michelle Comeau (Assistant Deputy Minister, Market and Industry Services Branch, Department of Agriculture): Thank you, Mr. Chairman. I would first like to introduce to you the members of my team who are with me today and who will help me answer your questions.

Gordon McGregor, Acting Director General of the Food Bureau, Suzanne Vinet, who is Acting Director General of our International Trade Policy Directorate and who is replacing Mike Gifford, who is in the United States with the Minister; Bill Ross, Director General, International Markets Bureau; Gilles Lavoie, Director General of Agricultural Industry Services; and Phil Jensen, whom you may have met, who is in charge of our National Marketing Programs.

We are happy to be here today. My presentation should not last more than 10 or 12 minutes. It is divided equally into French and English. We distributed texts of the transparencies which will give you an overview of what I intend to cover today. We also gave you a brief information pamphlet on our branch and, I think, an information bulletin on our exports for 1994.

[English]

The Market and Industry Services Branch was created in 1993 when the previous government streamlined the public service and realigned the different government departments. At that time, our departmental mandate was expanded to include responsibility for agrifood components that were previously with Consumer and Corporate Affairs and Industry Canada. As a result of these changes, the departmental structure was realigned and streamlined and the Market and Industry Services Branch was created.

MISB, as we're commonly called, brings together a number of functions that were previously in either different departments or in different structures. It brought together all of the international functions of the department, from trade negotiation to export and market development. It also brought together all of the food processing and retailing responsibilities currently within our department as well as within Industry Canada.

Our mandate and our objectives were developed in the fall of 1993 in light of this current government's priorities relating to economic growth and job creation. The first two pages of the overheads you have in front of you relate to our mandate and our objectives.

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When Mr. Goodale was appointed Minister of Agriculture and Agri-Food, he asked that we prepare a set of objectives in light of the government's red book, that we validate these with industry, and that we prepare a business plan for the next three to four years to facilitate achieving the commitments contained in the red book.

This process of preparing our business plan involved discussions with approximately 150 different groups during a period of six to eight months in 1994. The result is contained in that first few pages of the hand-out in front of you, but this is also the thrust of what is in the main estimates, starting on page 105.

These consultations resulted in our focusing most of our efforts on the first three priorities that are identified. These were the areas most frequently identified by our clients and stakeholders as our core lines of business. Those top three priorities are market access; information, intelligence and analysis; and industry-sensitive programs and policies. They are reflected in the main estimates, starting on page 107 in the English version,

[Translation]

and in French, starting on page 117.

[English]

Market access involves increasing and securing market access for Canadian agrifood products by using existing trading rules to overcome barriers to trade, by negotiating new trading rules through trade agreements, by ensuring Canada and its trading partners abide by those trading rules and commitments outlined in the agreements, by fostering positive international relations, and finally by reducing interprovincial trade barriers.

The area of information, intelligence, and analysis involves providing market and sector information, intelligence and analysis to industry to assist it in its marketing activities. It includes helping clients develop strategic approaches to market development, providing them with this intelligence and analysis on the opportunities and developments, undertaking analysis on longer-term prospects in both the domestic and international markets, providing information on and access to different government programs, and disseminating a variety of information on commodity prices and volumes.

As part of our objectives, we had been asked to place special emphasis on providing this information, intelligence, and analysis through a focal point by using a partnership approach with other federal government departments, with provincial governments and with industry.

Our third core line of business, industry-sensitive programs and policies, was the result of industry and other levels of government telling us we had to ensure that all of industry's needs and perspectives were reflected when government develops policies, programs, and regulations. In other words, we are to act as a sort of a broker for their needs, to be able to ensure that their requests were taken into account and also to feed back to industry the decisions government makes. We've identified a number of areas such as trade policy priorities and direction, regulation and inspection, research and development, innovation and commercialization of technologies.

There were three other priorities industry had identified, but there was not as much of a consensus in relation to those and there was a joint responsibility with the provincial governments. The three other priorities are to encourage production of more higher-value products both at the farm and at the processor level, to encourage strategic alliances among members of the agrifood industry, to facilitate expansion of our market share and to assist industry in the areas of research, development, technological adaptation and human resources development.

I'd like to refer to page 2 and our six objectives we focused on. You'll see that the next overheads relate to those six objectives.

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Our first objective is to increase our total exports to $20 billion by 2000. The ministers of agriculture endorsed this industry recommendation in July 1993, and in 1994 they went for a 3.5% share of the world markets, which would represent a target of $23 billion in exports by 2000.

Trade, as you know, is particularly important for Canada because we derive at least 25% of our GDP from exports. OECD projects that the new GATT agreement will boost Canadian economic output by $8 billion by 2002, so the Canadian agrifood industry is aggressively positioning itself to benefit from these expanded trade opportunities, and has established those goals I previously mentioned.

The $20 billion goal is an ambitious one because it will require our exports to increase by about one-third from our 1993 levels. However, we are achieving significant progress toward realizing this goal, as our exports rose from $13.3 billion in 1992 to $15.2 billion in 1994. Our mandate and our principal objectives are clearly aimed at ensuring that this goal is achieved, and this was an important commitment in the red book.

Some of our key initiatives over the next three years in the export market access area include, as I said previously, using existing trade rules to overcome barriers to trade; negotiating new trading rules through bilateral trade agreements with Israel, for example; ensuring NAFTA accession of Chile; ensuring WTO accession for other countries, such as the People's Republic of China and Taiwan; ensuring that Canada and its trading partners abide by these trade rules and commitments; and continuing to foster our bilateral negotiations or bilateral relationships.

With GATT and NAFTA we are no longer able to rely only on the domestic market. It's necessary for us to compete effectively worldwide. As I've said in the past few months on a frequent basis, Canada is part of a world market. It's no longer insulated. The document we've distributed called ``Agri-Food Export Highlights'' will give you a detailed explanation of our results in 1994.

Our second objective, obviously, was to increase our benefits from the $80 billion domestic market. Although so far I've talked primarily of the export markets and international trade, we do want to increase our current market share in this domestic market. While the domestic market is not growing in overall terms, especially in light of world trends, it is still the most significant market for our goods and services.

As a developed market, Canadian consumers demand high quality and considerable value added; therefore, there are considerable challenges in the domestic market. As Canada reduces its tariff as a result of GATT and NAFTA and other trade obligations, the Canadian agriculture and agrifood sector will need to remain competitive in order to maintain its market share against imports. Our agreement on internal trade barriers will reduce and eliminate certain interprovincial trade barriers, and this should improve the marketing of our agrifood products within Canada.

The two areas in our branch that focus mostly on the domestic market are the Agricultural Industry Services Directorate, headed by Gilles Lavoie, and the National Marketing Programs Directorate, chaired by Phil Jensen.

[Translation]

Our third objective is divided into two components: firstly, diversifying the markets served and, secondly, diversifying the marketed products.

The American market will continue to be an important one for a large part of our trade given the geographical proximity of the United States. NAFTA forced our industry to restructure itself so as to take advantage of the opening of markets, which has led to an increase in exchanges.

In 1988, 35.6% of our exports were to the American market. In 1994, that percentage went up to 53%.

Our branch therefore hopes to focus on the diversification of export markets for our agrifood products, taking advantage of the new markets resulting from multilateral and bilateral trade agreements as well as the globalization of economies.

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Moreover, the number of countries we export to has started to go up. In 1994, we exported to 164 countries as opposed to 148 in 1991. That figure may be slightly exaggerated, because it includes the former Soviet republics. However, even after that rectification, we still exported to 160 countries in 1994.

As to those countries where we have exported more than a million dollars' worth of goods, their number has gone from 98 in 1988 to 108 in 1994. Other markets will open up when other countries gain access to NAFTA, starting with Chile this year.

The international commitments that Minister MacLaren made in Miami in December last, in order to establish a free trade zone in the Americas by the year 2005, and between the countries of the ANASE by the year 2010, will provide new opportunities to diversify exports to both South American and Asian markets.

But we are also diversifying the kinds of goods we export. In 1988, bulk, intermediary and consumer products made up 54%, 20% and 25% respectively of our overall agrifood product exports. In 1994, this proportion was changed because bulk exports went down to 41% while intermediary and consumer products increased to 24.7% and 33.8% respectively.

These figures reflect the world-wide trend towards a growth in demand and a trade in products that are processed and ready for consumption.

As was mentioned previously, one of the priorities of our branch is to help industry to increase the added value of its agrifood products, because this leads to job creation and will allow the industry to adapt to the changes which will occur in the market, which is ever more competitive.

Our fourth objective is to encourage the participation of small and medium-sized businesses. An important aspect of the government's election platform was helping small and medium-sized businesses and recognizing their relevance as generators of jobs.

Our branch's goal is to ensure the success of these businesses, and I think that our activities in this respect speak for themselves.

As you can see on the chart, it is the agrifood businesses with 100 to 500 employees who have the highest level of employment, 47%, and the highest level of exports, 42%. Those with less than 100 employees represent 85% of all Canadian agrifood businesses, 36% of all jobs and 33% of our exports.

Increased participation of SMBs is therefore a prerequisite if we want to reach the goal set at 20 billion dollars' worth of exports by the year 2000.

Our branch has two unique roles to play in helping those business: firstly, ensuring that businesses, specialized producer groups and processors are interested in exploiting these export markets; secondly, helping these businesses to prepare for the exporting of products.

To fulfill this mandate, our branch emphasizes market information and analysis. Our human resources division co-operates directly with industry, to collect information of use in the markets and interpret it.

We're already using the latest technology to do so. For instance, the Agro-Export Info Network will help employees to transmit the right information to SMBs at the right time, and our branch will continue to help the Canadian Food Institute to develop and launch FoodNet, which will help businesses to use the Internet to get the most recent technical information on markets throughout the world.

We will also emphasize the setting up of strategic alliances. Our branch has encouraged the creation of trade alliances. Often, groups of processors can settle their mutual problems and discuss certain matters; this is not possible for an isolated processor. Members of a group can share their experiences and abilities, and together use technologies whose initial cost would be too steep for a single small business and therefore save money thanks to economies of scale.

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Here are a few examples of strategic alliances that our branch encouraged: the creation of Club Export in Quebec, an alliance of SMBs who want to penetrate the new export market in Mexico; the Soy Food Alliance, whose mission is to cause an increase in the value added of Canadian soya; and the Frozen Food Alliance, which brings in new Canadian trademarks to regional American supermarket chains.

The third part of our involvement is the preparation of businesses for exporting, through the development and adoption of new technologies and new trade practices. A few of the examples our branch helped to set up include the improvement of slaughter technologies in the red meat sector, particularly in Quebec, the adoption of a critical analysis method called the HACCP in the processing sectors, and training projects in the context of our ``Getting Ready for Globalization'' campaign.

Lastly, we are working closely with regional development agencies to aid in the development of new agrifood companies. This year, after consultations with the processing sector, our branch hopes to develop an agrifood strategy whose aim will be to define and eliminate obstacles to a greater SMB presence in export markets.

The fifth objective of our plan is to work as a team to increase foreign trade and markets. The responsibility for this is shared between a number of federal departments, particularly the Department of Foreign Affairs and International Trade; we are therefore co-operating with these departments in order to set up a concerted approach to client services.

We are also co-ordinating our efforts with the provincial governments through different councils, including the Federal-Provincial Council on Market Development and the Federal-Provincial Council on International Trade Relations.

We are also ensuring co-ordination and consultations with the industry thanks to a series of consultation groups, such as the Sectoral Advisory Groups on International Trade, better known as the``SAGIT'', the Strategy Committee on market takeovers, industry associations who handle trade development, for example Club Export, Canada Porc International, the Canada Beef Export Federation and, lastly, our participation in assorted industrial associations such as the Grain Council of Canada, the Canola Council of Canada and the Flax Council of Canada.

[English]

I would just like to touch on the two last points, which include some of our new initiatives in the areas of trade and market development that were directly extracted from the government's red book.

First is the agrifood trade service. We hope the minister will be able to officially launch this program in June 1995. This is in keeping with the government's vision to assist the industry in achieving jobs and growth by capturing market opportunities, both at home and abroad.

ATS is a partnership agreement between our department and the Department of Foreign Affairs and International Trade, designed to improve co-ordination among federal government departments responsible for international market development. It will be achieved by providing an improved focus for existing government resources to better support industry efforts to increase its exports.

Amongst some of the specific initiatives that will comprise this agrifood trade service is Agri-food Trade 2000, which is a new streamlined contribution program to deliver existing and new cost-shared initiatives with industry. We hope this program will simplify procedures and reduce time for associations and companies to access a broader range of government support for their generic or brand-specific trade development efforts. We hope this will respond to one of industry's requests - that we match the U.S.'s market promotion program, MPP.

Second is the agrifood trade network, or ATM, which is a computer-based information system that provides a gateway to customised global market information. It's being pilot-tested in cooperation with other federal departments, provincial governments and trade associations. With trained operators, ATM will be able to serve the agrifood industry with customised information designed to meet its specific needs.

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Third, the Canadian Agri-Food Marketing Council, CAMC, with its primary task of building a ``Team Canada'' approach, will provide Canada's agrifood industry with a high-level consultative mechanism to foster industry collaboration. It will also advise the government on the most appropriate focus for its national efforts to promote export-led growth of our agrifood industries. CAMC will probably consist of 15 to 20 people drawn from elected executives of leading industry associations, and it should assume the role and replace the current TOSC committee.

We have also developed, as part of the last budget, a series of initiatives, including enhanced credit facilities, which will be put in place to facilitate the export of Canadian grain and oilseed products to key markets, as well as other agrifood products.

We are also reviewing a number of our marketing programs. This last budget confirmed the intention of the federal government to implement a federally run, interest-free, cash advance program. The interest-free portion of this program is going to be funded from the safety net envelope to a maximum of $40 million a year. Implementation of the changes is to be in place for the 1996-97 crop year. This review is developing recommendations for change to the Advance Payments for Crops Act, the Prairie Grain Advance Payments Act, and the Agricultural Products Cooperative Marketing Act.

We have established a process to determine how this recent budget decision should be implemented. It involves an advisory group, the cash advance working group, and consultations in the major provinces with farm organizations and provincial governments, which have just been finalized. I think the report will be going out at the end of this week in its first draft for comments.

A study is to be undertaken and conducted by academics to examine some of the implications of the various options. Provincial consultations have been completed and approximately 84 groups have made submissions. The study is under way and should be completed by the end of July. We hope to table legislation by December 1, getting cabinet approval around the end of August.

I'll stop my remarks here and I'm more than willing to answer questions.

Mr. Easter (Malpeque): First the objective was $20 billion for agrifood exports and now it's $23 billion. What analysis have you based that on? I've heard varying viewpoints, such as the figure was pulled out of the air; it is based on concrete analysis; it isn't based on concrete analysis. In terms of that analysis, if there is one, have you done any analysis of what it means back to the primary producer itself?

Ms Comeau: This objective of $20 billion was set by some advisory committees of the Canadian agrifood industry; it wasn't set by government. But governments, both federal and provincial, accepted it because at the time it was agreed upon it represented an increase of approximately 50% to our exports between 1992 and 2000. It was felt that if industry gave itself this kind of target or objective, it would be able to rise to the challenge.

There was a lot of debate at the time between having a nominal target like $20 billion or a percentage of market share. In 1994 Mr. Goodale and his provincial colleagues elected to add to that challenge by saying Canada should have 3.5% of the world market share, which is something we used to have, if you look at the graph on page 4.

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In the early 1980s our market share went up by close to 4%. In 1993, however, it had fallen to approximately 3%. Although our exports are increasing, achieving the $20 billion by the year 2000 would not mean that we have recaptured past market share. This $20 billion by the year 2000 would represent approximately a 3% market share. If you want to recapture some of the market share you've lost, and you give yourself that 3.5%, then your exports would have to increase to $23 billion. We've asked the industry if they think this is a valid target in terms of market share. They think it is, given the progress we've made in the last two years.

So that's the first part.

Mr. Easter: Who do you mean by ``the industry''?

Ms Comeau: This $20 billion target was recommended at the time by the Agri-Food Competitiveness Council, which had about 25 members and represented producer organizations all the way to the Canadian Council of Grocery Distributors. Their mandate was to provide government with advice, but their mandate was terminated last year because their three years were up. But that's where the $20 billion target came from. The chair of the council was Professor Larry Martin from Guelph University.

Mr. Easter: Yes, I know him well.

Ms Comeau: For the second part of your question, Mr. Easter, it's been said that for every billion dollars of exports, 15,000 jobs are generated in Canada. Obviously, the majority of the jobs would not be created at the production level, especially if you're thinking in terms of value added, in terms of cash receipts - I know I've seen numbers, which I don't have with me today, but I could send them to you - and in terms of acreage production, for example.

Today I met with the Food Institute of Canada to talk to some exporters of frozen fried potatoes, Cavendish Farms and Maple Leaf Foods. They said that every million dollars in increased exports of frozen potatoes represents the creation of 12.4 new jobs. I asked them how many jobs that represents at the production level, but they weren't sure. They did say, however, that with an increase in acreage from 20,000 hectares to about 30,000 hectares, there's a 50% increase in production at that level. So that's the analysis one group has done in one specific area.

Mr. Easter: I'm well aware of Cavendish Farms, as well as their expansion. I'm from where there main production base is located. Just because they increase their exports and there's more economy, it does not mean that the driving wheels of this industry, the primary producers, are any better off. In terms of our initiative towards $23 billion, what policies are we implementing to ensure that the interests of the people farming the land are in fact protected and enhanced - and again, in terms of export, that this economy isn't at the exploitation of the primary producers, which is what we have seen throughout history?

Your department is an extremely important area and important to the future of the industry. I will admit that before I came here as an MP, I had a concern that very often international trade, or external pressure from a country, is used by governments to pressure internal change. Since I've come here my position hasn't changed. In fact, it's deepened. So I question, in all sincerity, whether or not the bureaucracy within the department is on a different wavelength than I am as a Liberal politician and as a member of the government, and from what I run on in terms of the Liberal platform, especially as it relates to supply management.

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Supply management is an extremely important industry for this country. I'm sure you're aware of ``DECK'' from Supply Management 1994, which you signed off in terms of access to information documents. I want to get into it because it relates to whether your department's interest is in the interests of primary producers, or in industry to the exclusion of primary producers.

Although there's a lot of this document that I didn't get, some of it rightly so and some not - I do have the original document marked ``Secret'', so I can't talk about it. I will note that what was whited out and was signed off by you related to primary producers' concerns specifically.

But I want to mention one point from this. It says in here that ``supply management has proven useful in stabilizing farm income, but has generated costs to consumers and to the economy in general''. That's one of the statements I got. I remember ten years ago fighting vividly and refuting a study that talked about those costs to consumers. The entire dairy industry refuted it. Ever since that time I've seen it appear again and again in department documents. I'm wondering whether the department is at odds with us in terms of supply management. What do you base the information on, or what does the department base this statement on - that it has generated costs to consumers?

Ms Comeau: Is that it?

Mr. Easter: Yes, that's it for the moment.

Ms Comeau: I had four different types of questions not necessarily relating to supply management. Dr. Doug Hedley is here and I'll let him answer the supply management questions specifically related to cost.

How does government or this department ensure an appropriate return to producers? We have a number of tools, including specifically those in Phil Jensen's areas, by which we provide advance payments for different commodity groups at the cooperative level or at the association level. When a crop or a product is harvested, producers are able to get advance payments or initial payments in order to not have to sell the crop at a lower price. This allows them to get either loan guarantees, on which an interest payment is provided, or to be able to manage as a cooperative the marketing of that product to get a better return for their product.

Secondly, I assume you've met with Mr. Claydon. His branch will have gone through the numerous safety net programs that exist to help ensure that farmers receive an appropriate return and that their incomes are stabilized through a variety of programs over a longer-term period.

You have to realize the department is not trying to protect one group against another. Rather, our mandate is to assist all of the agrifood industry, from the producer to the further processor, to try to maximize everyone's return. That's our ultimate objective.

Is the bureaucracy's approach different from that of government? No, because we have based our priorities as a branch on the government's commitments and we've followed what our minister has asked us to do.

I guess supply management.... I'm glad you mentioned that I had signed off on the access to information request, Mr. Easter, because I didn't necessarily sign off all of those documents. I'd like to clarify that. Perhaps if I had not been away on annual leave for three weeks, I might have responded to that article in The Western Producer.

That being said, though, if you examine the facts behind what this government has taken, far from trying to diminish our commitment to supply management, the government has made extreme efforts to preserve and promote supply management. We strongly believe supply management has been beneficial to producers. If we say in the text that it has ensured better returns for the farmers, then we know it's true. That was one of the reasons it was set up. Supply management, as far as I've understood from the text I've been able to read, was set up to ensure that producers would not be subject to dramatic shifts in returns, which is what was happening in the late 1960s and early 1970s. In that sense, supply management has served the farmers well.

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It is true that this means government itself has instituted mechanisms to ensure there is a fixed price. Is there a cost to the consumers? I would say yes, since it's government tax dollars that helped set it up. Is that bad? No. Is that good? Yes, for the producers.

Mr. Easter: I guess what I'm saying, Ms Comeau, is that in this document - and I'll sit down and compare notes with you sometime, because there's no sense in getting into an argument here - it clearly pushes us. This is advice to a new minister coming in and it is clearly pushing him or her, from memos within the department, to move to the second generation of supply management, but not to a supply management that is necessarily basing its input on the needs of the primary producer. I think their ability could be undermined by what's being suggested in these particular documents, and that's my concern.

Somewhere within the department there is a push at odds with what I certainly campaigned on during elections in terms of strong support for supply management. I don't mind admitting it. If those people exist and they're working against what I campaigned on, I want them gone. It's as simple as that.

Ms Comeau: Just to remind you what was happening in the fall of 1993, Mr. Easter, we'd been negotiating a new GATT agreement. For the first time since GATT was instituted in 1948, we were discussing agricultural trade. It took eight years to negotiate an agreement amongst 147 member countries. Obviously, agricultural trade was a very difficult issue to resolve, not only for Canada but for all the member countries.

For seven years we had successfully been able to have allies to strengthen and clarify article 11. The GATT agreement is not there to restrict trade; it's there to expand trade. Article 11 provides an exception - where you control production, as with supply management, you are allowed to protect your domestic industry and therefore limit imports into your country, because you are not de facto exporting and you're not dumping your products on another country. But it is an exception.

What we wanted to be able to do as a country was to clarify that article, that exception, expand it and ensure that certain specific products, like dairy and ice cream, would be protected. We were not successful. By the fall of 1993 it was very clear that the allies we had until then - Japan included, because they had supply management in rice - were saying we would not be able to clarify that.

When we became aware of that, we would have been remiss in our duties if we had not prepared different scenarios for our minister. We had to prepare the ground and state some of the alternatives, some of the possibilities, and had to make him aware of some of the consequences. If we had not done that, our minister would have been right to say we were not doing our jobs correctly.

The Chairman: This is the final question.

Mr. Easter: I guess that's it, Mr. Chairman. There'll be time later.

But on that point, yes, you would have been remiss. I'll grant you that much.

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I am deeply suspicious. I was in Geneva too and I met with some of those other countries we were negotiating with. I know how tough they were to negotiate with, but I know as well that the previous government never went to other countries around the world that were not in that group. We got ourselves tied in with the Cairns Group. We didn't go to the other countries and talk to them about how supply management could be used in their country to their producers' advantage.

What we did is what I said in the beginning. I find that external pressure was used at the end of the day to force that internal change, when maybe one of the best models the world has ever seen is the supply management model for development of rural areas. I'm still highly suspicious that we may have, in some sectors, negotiated to lose. I hope I'm wrong, but that's my suspicion and I might as well lay it on the table. And I guess I'm dissatisfied with that.

Ms Comeau: It's unfortunate, Mr. Easter, that you think that, because it's definitely not what we were trying to do and it's not what we did for eight years.

To answer the last part of one of your questions about the second generation of supply management and what we're doing now, you might want to ask Dr. Hedley to comment on that because he has been working on it. Some of the changes we're making now are at industry's request, the producers' request - not at our request.

Mr. Easter: Concerning those requests coming from producers, though, Lyle and I had a discussion the other day on Bill C-86. I know as a former farm leader that sometimes you're put in a situation in which you see that's the only option you have. Have producers been given other options, or are we tied down to just the one? As a producer organization, you base your decisions to a certain extent on what the department tells you, what you think you're up against, what the consequences are. You are in fact sometimes led down that line because you see no other choices.

The Chairman: Dr. Hedley.

Dr. Douglas Hedley (Director General, Industry, Performance and Analysis Directorate, Department of Agriculture and Agri-Food): Thank you, Chairman.

Mr. Easter, if we examine the record over the last three or four years, what I think you saw in the dairy industry in Canada is in preparation for the end of the GATT round and exploring alternatives.

As I recall, during the last half of 1992 a group of four people went across this country: Bill Sherwood, former chairman of Dairy Farmers of Canada; Louis Balcaen, again, a former chairman of the Dairy Farmers of Canada; Kempton Matte from the National Dairy Council of Canada; and Roch Morin, chairman of the Canadian Dairy Commission. They were exploring options and ideas on where we should take domestic policy.

That was reported here in Ottawa at the end of 1992. It was reported in the Calgary meeting of January 1993, prior to the end of the GATT round. That has led, on a completely industry-led and industry-driven basis, to the kind of pooling system that I think industry is beginning to agree on and that will be implemented on August 1, 1995. That is industry-driven; it wasn't government doing that.

The Chairman: Thank you. Mr. Laurin.

[Translation]

Mr. Laurin (Joliette): Ms Comeau, I would like to reiterate the concerns expressed by Mr. Easter. First of all, in the leaflet on the highlights published by the Federal Department of Agriculture and Agri-Food, it says that if you take only exports to countries other than the United States, the total figure for all of Canada is 2 billion dollars just for the first quarter of 1995. The Prairies export 1.56 billion of that amount. That must mean there's a lot of grain in there.

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Given the fact that western grain exports make up the vast majority of our exports to countries other than the United States, your priority in the 1995 budget is to encourage exports of agricultural products.

Given those figures, how do you believe these priorities will reinforce the supply management systems we have in Quebec, for example for milk?

Ms Comeau: It is true that historically, a large proportion of our exports were always in bulk trades. In 1988, the grain sector accounted for approximately 40% of our exports. Now it is approximately 28%. That's on an annual basis. Obviously, in the first quarter, it depends on shipments from various sectors of the industry.

This year, there was a high demand for our grain exports in the first quarter of 1995. Will that trend continue throughout the year? We'd be glad if it did, but at some point, we'll run out of grain. We won't have any to export. Our reserves are down substantially.

On the supply management side, I would allude to what Mr. Hedley mentioned concerning the new decisions that the industry asked us to make, among other things with regard to the pooling of industrial milk and fluid milk on the one hand. Secondly, the determination of a new category of further processed milk for export purposes, which will be paid on a voluntary basis, and which of course will be sold at a world price. This indicates that the dairy processing sector, with Agropur and Groupe Lactel in Quebec among others, has markets for further processed products and intends to exploit them. People from the industry and producers are the ones who asked us to create this new category of milk.

What is the level of export in the dairy sector? I will ask Mr. Ross to provide you with last year's figures in order to give you some idea of the exports we've had over a period of two or three years, for instance. There are exports of further processed products in the dairy sector just as there are in the poultry sector.

Mr. Laurin: Yes, but we are well aware that because of the supply management system, milk produced in Quebec has not been destined for a foreign market up until now. Since your priority is to increase exports abroad, what do you intend to do to reinforce the supply management system?

In May 1995, you undoubtedly were aware of a publication, The Western Producer, which informed us that in 1993, you yourself had written a memo to your superior at the time, Mr. Rob Wright, who was Deputy Minister of Agriculture. In that memo, you indicated that Agriculture Canada considers that supply management unduly protects the interests of producers. You wrote that. Therefore, supply management policy should be reformed in depth in order to reduce the power of the producers. This was in a memo written to your superior.

Curiously enough, this memo was written at the same time that Canada was theoretically defending the importance of the supply management system before other GATT member countries. And also curiously enough, after having theoretically done everything possible to protect the supply management system, Canada lost article XI which authorized us to limit the import of dairy products, among others, through import quotas.

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How can you explain that the Minister of Agriculture publicly lauded Canada's efforts to protect the supply management system while at that very same time, you, the senior officials, were indicating through memos that you no longer believed that the system was relevant because it distributes too much power to producers?

I'm really worried if that's the view of officials. Officials think and make recommendations to Cabinet; the Minister says one thing publicly while behind the scenes, it seems that different action is taken. I'm really worried. That's why I'm asking you what you intend to do, from a practical standpoint, to protect this system for Quebec producers.

Ms Comeau: I will repeat what I said earlier to Mr. Easter. First of all, I did not sign the articles that you mentioned earlier.

Mr. Laurin: A memo...

Ms Comeau: The Western Producer took a series of files. What I signed is the access to information request on behalf of the department. Somebody had to sign it and I did. Secondly, when these memos were prepared, they were evaluations of what could happen if we didn't manage to reinforce and preserve article XI. I mentioned earlier to Mr. Easter that in the fall of 1993, after seven or eight years of arduous negotiations, most countries of the world were negotiating and the allies that we had during the previous seven years abandoned us. We knew they were no longer interested in clarifying and reinforcing article XI.

Japan, which had been one of our strongest allies, decided to drop this requirement and not insist on reinforcing article XI in order to obtain rather high tariffs for its rice production; the same thing happened with Switzerland regarding certain dairy products.

We officials prepared analyses for the new government explaining the consequences that would ensue if we did not manage to maintain and reinforce article XI. The result of these discussions was that the government, through Mr. Goodale, went to Geneva; he fought and we obtained very high tariffs.

All signing members of GATT agreed that import controls, as they existed for certain quota commodities in various countries, would be replaced by tariffs. To compensate, the value of these import controls was evaluated. This was taken into account in the calculation of the tariffs.

We can provide you with the details of these calculations. That's why with regard to certain products such as milk, there is a 280% tariff; in the poultry sector, it's 225% or 150% according to the product. That's the guarantee that governments of countries that had quota commodities managed to obtain.

We are not alone in this area. The United States impose quotas on their production in certain areas: sugar and peanuts; Japan and Korea do the same for rice. That's the compromise arrived at by various countries. The department had impact studies done to determine the consequences of this.

Having said that, what are we doing now to ensure continued supply management? Dr. Hedley is in charge of this and I would ask him to explain what the industry asked us to do and what the department is implementing right now.

[English]

Dr. Hedley: Mr. Chairman, if I might continue that, first, Canada exports around 3% to 5% of its dairy products that come out of the industrial milk market. This industrial milk market is approximately 60% of our total milk in Canada. What remains is fluid. That 5% goes into a range of markets around the world that we have established through previous GATT agreements, such as cheddar cheese for the United States or Europe. There is a range of products and countries. I don't have the list with me. We can share that with you if you wish.

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The way it's arranged in the current system in Canada is that farmers agree to pay levies on all milk to be able to pay the difference between the domestic price of that product and the international price. Those levies are established through the Canadian Milk Supply Management Committee.

[Translation]

Mr. Laurin: I'm sorry, Mr. Chairman. I don't want an explanation of the operating structure. I only have 10 minutes and I would like real answers to my questions. I would like to be told what's being done...

[English]

The Acting Chairman (Mr. Easter): I think, Doug, we dealt with that when we were dealing with Bill C-86. I think Mr. Vanclief talked about how the system currently works and how it will work under the new regime.

[Translation]

Mr. Laurin: I would like to specify what I want my interlocutor to tell me. What concrete things are being done to help the dairy industry adapt to international agreements and changes in the markets? What's being done right now?

[English]

Dr. Hedley: Consider the industry and the recognition of those changes, both on the export subsidy side and in terms of the current levy system that they have, which was challenged at GATT. They are working on a pooling system across Canada for themselves that the federal government is enabling through a bill that is currently in front of the House. That bill enables, but does not require or force.

At the request of industry, we're enabling two things. First, this is to legally empower, through the Canadian Milk Supply Management Committee, the pooling of milk across Canada. Second, we are enabling the federal government to serve as a banker in that system if the industry wishes. Those are the things we're doing to allow that industry to adapt to the current trade agreements and to look for the ways it adjusts within Canada.

The Acting Chairman (Mr. Easter): The key provinces of Quebec and Ontario, in terms of the producers, are on-side in that legislation. Is that correct?

Dr. Hedley: All of the producers in the six provinces east of Manitoba, excluding Newfoundland, are not part of the upcoming agreement as yet. British Columbia is considering entry into the full agreement over time. Alberta and Saskatchewan are only part of the agreement in special classes.

[Translation]

Mr. Laurin: Mr. Chairman, the first questioner was given 30 minutes where as I only had barely 10.

[English]

The Chairman: We'll come back to you in the second round.

Mr. Calder (Wellington - Grey - Dufferin - Simcoe): I would like to follow along too. In my other life I was a chicken farmer, and I go back to that every weekend. So as a primary producer I am still very concerned, because I have an investment in that.

I refer to page 111 in the estimates. The ATN is founded on seven guiding principles, and the primary client is the Canadian agrifood industry. Also, on the seventh one, you're going to network with existing systems, federal, provincial and others.

I would like a good, hard, and firm definition as to the input the primary producer is going to have into this agrifood industry. Quite frankly, I am concerned at the present time that the agrifood primary producer and the marketing board don't have a fair representation into this. On top of that, we're seeing your own marketing strategy, with departmental commodity strategies being developed. In particular, look at my situation for eggs and poultry. Improving the communication of the government perspective to producers like this is a two-way street, and for the record, I want to hear how this is going to be accomplished.

Ms Comeau: I would like to provide a few examples. The agrifood trade network right now is working on a pilot basis. We have five pilots that are being tested. One of these is in Grand Falls, New Brunswick. It is being done in cooperation with the community college and the Co-operative Association of Seed Potato Growers, which also exports those potatoes.

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They indicated to us that they needed information of a research nature as well as what the prices are domestically and internationally. So we are setting up the databases we had and we're downloading that to that computer. We are training the operators so that they can answer the requests of those potato growers. If that pilot is successful, we hope to expand it afterwards to other commodity groups and to other associations across Canada. It started late last fall.

Secondly, from an export perspective, we have a process to help facilitate international marketing strategies called AIMS. We ask national associations to come in with a strategic plan to see how they want to increase their exports, because we know there's a flow-through back at the production level.

Right now, the associations that have received funding through this process - and I can leave you this list, if you wish - are the Canadian Dehydrators Association; the Special Crops Association, which is coordinating for six different groups; the Canadian Dairy Genetics Exporters Group, the Canadian Swine Breeders, the Ontario Soybean Growers Marketing Board, the Majestic Fur Association, the Wild Boar Federation of Canada, the Wild Blueberry Association of North America, and as I mentioned earlier, the Canola Council of Canada and Canada Pork International.

These are all associations that are chaired and managed by producers. In some cases, like Canada Pork International, you also have processors and exporters. But they were started and they are managed by producers, and that's because they recognize that there's a strong payback in increasing your exports; it's obvious.

A number of associations have also asked to participate in this, but they have not yet completed their strategy. In that group we have the B.C. Blueberry Council, the B.C. Raspberry Growers' Association, a Quebec group in maple syrup, the Canadian Venison Council, the Canadian Seed Trade Association, Food Beverage Canada, the Canadian Forage Council, and the Pet Food Association of Canada. Again, most of these are at the primary production level. We've been trying to build that from what we've called from the farm gate to the retail level, to help all of the food chain increase its returns.

We've also set up a farm business network, which Mr. Hedley has just written me about, that has 7,000 farmers on-line. They can help to exchange information on market prices and returns so they can best decide, based on what the market is asking, when they should sell their products and so on.

Mr. Calder: I'd like to now move up to the next level. We've taken care of the primary producers.

I'll give you an example. As a chicken farmer, I can make my operation as efficient and as effective as possible, but if the processors and the further processors are not effective, it doesn't matter what I do at home. They're still more expensive and therefore are probably going to come back to me and say, you have to take less at the farm gate because of our inefficiency. They're not going to come out and say that, but that's exactly the reason. In fact, if I wanted to match the price of chicken to the price in the United States, I could give them my chickens and it would still be more expensive than what it is in the United States system.

My question to you, then, is how we make the industry itself and processing and further processing responsible.

Ms Comeau: I'd be lying if I said that I'm going to do that, because the best people to do that are the processors' customers. If no one wants to buy their products, they won't be in business. So you may need to find new customers for your chickens. But the best incentive for a processor to be responsible is to make sure that he or she knows exactly what the customer wants now.

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It's not true to say they're not competitive and they're not responsible. Especially in the chicken or feathers industry, quite a number of further poultry processors are making substantial gains in exports, in further processing of poultry products especially to the United States.

If La Coop. fédérée and its members in Quebec and Ontario - that's where the majority of the feathers industry is located - weren't competitive, they would not be able to export those products to the United States. They are competitive, and the fact that we have supply management in the feathers industry is not a deterrent. Now they want to increase that even more. That's a fact of life. When you're making a good return in a given area, you don't want to reduce it; you want to keep increasing it. They would like to expand their market shares in those countries, and in our minds that's good, because production is based on demand. If they need more chicken, it should be good for everybody along the food chain.

The Acting Chairman (Mr. Easter): Thank you, Mr. Calder. That was a good question.

I think you've hit on the nub of the problem in terms of my earlier questions and probably those of Mr. Laurin as well. With all due respect - because we in supply management have fought with what we consider to be industry - when I hear you talk about that, what little hair I have on the top of my head stands straight up. We find ourselves in a position where we could be exploited rather than working together, and I think that's what Mr. Calder is coming to. We want some assurances that we can't be exploited to the benefit of the further processors.

Ms Comeau: Mr. Easter, first of all, when I speak of the industry, in my mind it includes all those from the farmers to the retailers. You're in business. If you're a farmer, you have an agribusiness in the same way as if you're a further processor. We're all part of the same food chain. At the end of the day it's what the Canadian consumers - you and I included - want to eat that will determine ultimately what goes back up the food chain. That's a fact of life.

How am I going to ensure that a farmer does not get robbed or taken to the cleaners by the further processors? I think you, as an individual, are much better equipped to do that than I am. If the price the processor offers for your products is not good, you're not going to sell to them. You'd be crazy to sell to them if you're not making a fair return. Over the years farmers have been excellent at getting together and setting up cooperatives to maximize their returns and make sure they get the best returns for their products. I don't see why that would change.

The Acting Chairman (Mr. Easter): One short question, Mr. Calder.

Mr. Calder: In essence that's exactly what I'm concerned about. What do we have in place to make sure that doesn't happen and that the primary processor is protected? As it stands right now, we're the ones who take the heat if the processor and the further processor are not, for instance, ISO 9000 effective, because they're going into the international trade.

Ms Comeau: I guess you have a number of tools that already exist, from marketing boards to cooperative associations that farmers have set up over a number of years, which can ensure it, whether it's in dairy, in beef or in pork. I think that's one of your guarantees.

The others are some of the tools I mentioned earlier, from the marketing perspective, to provide what I call either credit guarantees or advance payments. So when your crop or product is ready to go to market, you don't have to sell at a rebate but are able to stock it and to sell it when the market provides you with a good return.

Some of those programs are listed in our main estimates, starting on page 128. We call those legislated marketing programs because they have a legislative base, and they provide a number of tools or assistances to the farmers to help them maximize their returns from the marketplace. Those are not going to disappear. It's quite the opposite. Government has made a commitment to maintain those, starting with the interest-free rebate program.

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That's one of the things I was mentioning in my opening remarks. We've had consultations so as to be able to integrate what is called the cashflow enhancement program into our Advance Payments for Crops Act, the Prairie Grain Advance Payments Act, the Agricultural Products Cooperative Marketing Act, or APCMA, and others. That becomes a statutory instrument as opposed to a discretionary one. That's specifically at the request of the government. These are some of the tools.

We also have the Farm Improvement and Marketing Cooperatives Loans Act, which provides guarantees through the banking and lending institutions. So when a producer or farmer or cooperative wants to improve their infrastructures or equipment, they can access at a reasonable rate.

You also have other institutions that are not directly under my branch's mandate but that are part of the department, including the safety net programs to help stabilize income when there is either a drought or other events outside the farmers' control that have an impact on their production and on prices. That's Mr. Claydon's responsibility. They're spelled out in the book later on. The Farm Credit Corporation also has that.

Mr. Calder: I agree that all these programs protect the gross income, if in fact the gross income is there.

The Chairman: Or the net.

Mr. Calder: Or net.

The Chairman: Mr. Vanclief.

Mr. Vanclief (Prince Edward - Hastings): Thank you very much, Mr. Chairman. I have a couple of comments and then I have a question or two for Ms Comeau.

I want to direct the first one to our colleague from the Bloc Québécois. It follows up on what Mr. Hedley said.

As at least some of you are aware, I've been fairly close to what has been going on in supply management with the task force, and I continue to be at the present time. I want to stress that in the dairy industry, the volume of milk and the price at which the farmers - the primary producers - are prepared to sell is determined by the producers. They make the decision. No one is telling them. Certainly people are saying to them that maybe they would buy more if it cost less, but that happens no matter what we're selling, whether it's milk or whether we're in the area of agriculture or not. I want to assure you, as a colleague, that it is the producers who are making that decision.

Over the last number of months in the task force, we went through the discussions in all the different sectors - the dairy, egg and poultry sectors. I remind my colleagues that I don't think we should underestimate the effectiveness of our primary producers who are involved in there. I can tell you that in the process we ensured that people like these gentlemen Mr. Calder knows - Bill Doyle and Ed Benjamin - and who Mr. Easter knows - Louis Balcaen - are key primary producers in the dairy industry. Those people were around the table, and I can tell you their voices were heard and respected.

Ms Comeau, the biggest part of our market is domestic. There's no question of that. We know that we are unfortunately not gaining ground, especially in the further processing part of our domestic market. We are losing ground on further processed product.

I guess Mr. Easter was saying this, and it's a primary concern. It's nice to talk about sales, and Mr. Calder referred to it as well. But sales don't mean a thing if there isn't black ink in the bottom right-hand corner of my farm balance sheet. Do you feel, with all the programs and the availability of primary producers and with the combination and the involvement of everybody there, that we can get both?

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You've referred to the fact that there are a lot of stakeholders, and we've all said that every link in the chain has to be economically viable. That's the real concern that's coming through, not only to you people today but to some other people from the department who are here. It's nice to talk about sales, but if you have to sell at $5 and it costs you $5.50 to produce...that's the nervousness that's there, and that's the continued challenge.

It's a vague question, and I don't know whether there really is an answer to it, but that's the nub of where we're at on this thing, both on domestic markets and export markets. Somebody can always sell something if they can buy the raw product cheaply enough. It doesn't matter whether it's neckties, cheese, chicken, wheat or whatever. They can always make a sale. If in doing that in the short run the primary producer is out of business in the long run, then there isn't anything there for the whole industry.

Ms Comeau: I'm an optimist, so I would say yes, there's room for everybody. But in any type of business there are changes. What's important is that from the primary producer to the retailer we strike alliances, as I call them, so that we all come out winners instead of having a winner and a loser.

I submit that on world markets - because Canada is part of a world market - if we don't pull together, then we will all probably lose, including our further processing industries. I submit that by striking alliances and working together, everybody will come out a winner. Now, that doesn't mean you can come out a winner in everything, because there are some areas where we would never be competitive. I don't see Canada growing bananas. There's no way we will ever be able to do that, unless -

Mr. Vanclief: Global warming.

Ms Comeau: We can try.

Mr. Vanclief: In Newfoundland, there are all those greenhouses.

Some hon. members: Oh, oh!

Ms Comeau: What's important for us as a country is to build on the advantages we have, and we have a lot of advantages that most countries do not have. One of those is geography. We have the land, which most countries around the world do not have. We have so much of it that we've tended sometimes to neglect it or take it for granted.

The other thing we have to our advantage from a production side is the climate. A lot of countries would love to have our winters, because it kills just about every single pest that's around. That's a natural advantage. If you have to shovel it, maybe not. So those are some of the things.

We also have a very highly skilled and very highly educated workforce at the farming level, which a lot of countries do not have. We have access to research and technology transfers, and we've given ourselves organizations that help to maintain that and to pursue those things. Most countries are envious because they do not have that.

If we identify areas where we have these advantages and pursue them, we know we have markets for those products, because our reputation worldwide is for quality products, safety, environmental safety and security. They want to buy those products, and there is a huge and growing market for those products, whether they're processed or not. If we're all moving in the same direction, there are advantages for everybody.

Gilles Lavoie had some comments to add.

Mr. Gilles Lavoie (Director General, Agricultural Industry Services Directorate, Department of Agriculture and Agri-Food): I would add that the statistics released recently by Statistics Canada indicate that farm income, the gross income in 1994, did reach a historic high of $25.6 billion, with a net of $5.9 billion - 11% more than in 1993. For the first quarter of 1995, the estimate is for $7.3 billion, which indicates an increase of 7.4% over the same period of 1994. This is some indication that the farmers are doing relatively well even in the difficult circumstances we have.

.1700

The Chairman: I would like to follow up on Lyle's question and your answer to him, in terms of the strategic alliances between the primary producers and the processors and all those entailed in the export of products. How is Agriculture Canada working to create those alliances with the different commodity groups and processors and actually do that?

Ms Comeau: We have tried to set up advisory committees from the primary producer to the retail end when developing programs or policies that included everybody, so the different groups would get to know the requirements and needs of the person next in the chain or before them. We've had different rates of success. In some cases it has worked very well and in others it has been a bit more difficult because historically, these groups did not necessarily talk to each other. We hope to continue to promote that.

The minister has asked us to use Gordon's group, the Food Bureau, and Gilles' group, which is the primary producer, the Agricultural Industry Services, to help bring these two different elements of the food chain more actively together. It's the minister's hope as well that the advisory council he hopes to set up for marketing purposes will include all representatives from the food chain. I must say it hasn't gone ahead yet, but we hope to do it this year.

We would like to have the comments from the standing committee on how we could best achieve that, because we are learning in this area of strategic alliances and fostering what the minister calls a ``Team Canada'' approach. We're learning as we go. We've made some mistakes, but we hope we won't repeat the same ones and that as we go along we'll get better at it. If this committee were able to give us some recommendations or perhaps meet with these different groups and provide us with some alternatives, I know we would appreciate that. The minister would appreciate that as well.

The Chairman: Certainly we, as a committee, haven't taken a strong enough look at the processor side of things. I think we tried to do that in our previous hearings before Christmas, leading up to our interim report on the future of agriculture. We can certainly do the same thing. I'm sure we'd be pleased to look at that issue.

Mr. Collins (Souris - Moose Mountain): I must say I find it frustrating that with the talented people we have here, I have only heard from one. No reflection on you, Ms Comeau, but that's one of the things that disturbs me. Rather than sit in this formal kind of arrangement, I think the committee and I would like to meet with each of you at some other time and enhance where we're going, because we lose something in that.

In your target 2000, forgetting that you work for Agriculture, I would like to ask each of you whether you think our target too high or too low. We have lost something. If we shoot low we arrive low. You have set a target and I don't know whether each of you is comfortable with the target. Just think about it for a minute, because I want to come back to it.

You talked about a report, Ms Comeau, and I apologize because I didn't hear what report we were talking about. But you said academics were going to review the report.

Ms Comeau: For cashflow enhancement.

Mr. Collins: Let me just make one observation. I have found that when academics make a review, they're generally damned good in theory and of very little good in practice. I hope you aren't academics. I'm just saying I have seen over time that academics write tremendous books, but when they have to carry them out in practice it doesn't really filter out that way. I think that's true. Structurally it's a little weak.

I was happy to hear you say that you look to the comments of the committee, because we're always ready to criticize. But I want to commend you. I do think that overall you have a plan and an approach.

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It's easy for us to crystal gaze and throw stones, but the proof in the pudding will be where we are three and five years down the road. We've set the targets together. When I sit on committees and hear guys who are disgruntled and the other way, I don't want to hear from them. If you stick your bloody head in the sand, you'll be in the sand three years from now. The reality is that things are going to change.

From that standpoint I want to know whether you think the target is on line, too high, too low, or even in the ballpark.

Ms Comeau: I'll ask Mr. Ross, who has more than 25 years of experience in the trade area, to tell you what he thinks of it.

Mr. William C. Ross (Director General, International Markets Bureau, Department of Agriculture and Agri-Food): And two years in the agricultural area.

I should say I'm on loan from Foreign Affairs so I'm not an agriculture expert, but I do have a background in trade development. I would say from what I've learned over the last couple of years that $20 billion is probably a modest target.

But we at this table have nothing to sell. It's really going to be up to the marketplace and our ability to supply a competitive product into that marketplace. From our perspective the challenge is not only market access and ensuring that those markets are open, but a competitive quality product with which you can make a dollar; there's a bottom line on it.

The Ontario government has suggested to us that it is probably too modest, too low, and so has the Alberta government. That's why last year when federal and provincial ministers met, we put on the table, through the Federal-Provincial Market Development Council, a suggestion that we should try to seek a return to those levels of 3.5%.

So it's probably modest and it makes my job easier, but I can assure you we are shooting for the $23.5 billion. The industry committee advising us is hoping to get that higher level.

Since you said you wanted to hear from some other people, I don't have a lot of experience in the agriculture side, but I can say that in the agriculture and food side in terms of trade development, this sector benefits from some very unique institutions and processes that other sectors do not have. Indeed, the government and the industries are trying to emulate them. Specifically, they have the Federal-Provincial Market Development Council, which seeks to avoid duplication and bring some synergies to federal-provincial efforts. In fact, it's trying to look at one now on the forestry side. But this is a working one and endorsed by federal and provincial ministers.

It has the Trade Opportunities Strategy Committee, which Ms Comeau has informed will evolve into the red book agriculture marketing council, where we have a regular advisory committee to Minister Goodale and indeed to Minister MacLaren. We have AIMS, which is probably unique in the government in terms of providing an interdepartmental committee that will scrutinize and recommend funding for trade development efforts to clients.

Ms Comeau: Gordon McGregor has about that many years in the processed area, but was also in the trade business before.

Mr. Gordon McGregor (Acting Director General, Food Bureau, Department of Agriculture and Agri-Food): I had the good fortune to serve abroad when I was in the trade commissioner service. That means I'd like to flag the fact that other countries don't stand still.

I was in Australia for four years in the late 1970s. If you look at the way its industries are going right now, you can see they have changed enormously. They never used to feed cattle there, but they do now. In a report made to the Canada Grains Council recently there was a little one-liner about how they're using PST to raise lean hogs in Australia. That would have been unheard of 20 years ago, but they're now very aggressively trying to add value. I think that's something that makes our task of reaching $23 billion that much harder, because many of our competitors out there are moving very rapidly. Sometimes they can move more quickly than we can.

In terms of the food industry, where most of my experience has been, I think we have to keep in mind that traditionally it did not export very much at all until quite recently. They did live in a domestic market. For many of them, it's an educational phase they're going through. Some of the big companies, of course, have always exported through product mandating, but basically, for a lot of them, the Canadian market was it. They didn't have an export department. They didn't have people who were trained.

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We're having to live with that at the same time. So part of our attempts to work out these alliances is trying to bring together two groups that traditionally did not talk to one another very well.

Ms Comeau: Finally, I'll ask Mr. Jensen to talk about the academic studies.

Mr. Phil Jensen (Director General, National Marketing Programs Directorate, Department of Agriculture and Agri-Food): I should say that it's academic in nature; it's not being done by academics. Price Waterhouse is doing it. We gave some thought to whether we wanted to actually have a study or not, but we decided in the interests of completeness that we probably should. As Michelle mentioned, we have this cash advance working group, which is an umbrella organization. We have the provincial consultations. Then we decided to have a study as well.

Price Waterhouse is going to look at some of the related issued to cash advances. It's to give us a slightly different perspective to see if there is a new way to do some things. I'm not even sure, to be honest, that we'll be able to use much of anything out of there. We won't use it if it doesn't make sense. But we thought that this particular time would be a good opportunity to look at possible options to the cash advances. That's why we've done it.

The Chairman: Thank you very much.

Mr. Ross, I agree with you that $20 billion or $23 billion is modest. I suspect all members here would probably challenge you to make it $25 billion or $30 billion by 2000. We'll come back here in 2000 and check you on that one.

[Translation]

Mr. Laurin: Ms Comeau, in the memo I mentioned earlier, the one you wrote in 1993 and a copy of which we received under the Access to Information Act, you say provincial authority should be reduced. What do you mean by that?

Ms Comeau: Mr. Laurin, I must reiterate that I do not know exactly which memo you are referring to because I did not write it. Various people in our department did some analysis of the results of the GATT negotiations.

Mr. Laurin: We will show you a copy, Ms Comeau.

Ms Comeau: The document I signed, at least of those published under the Access to Information Act, was a communications strategy.

Secondly, I signed the documents to have them published. That does not mean I was the one who wrote them.

That said, I am not aware of anything saying we wanted to restrict the provinces' rights, but Ms Vinet, who works on trade negotiations, could explain what impact the GATT negotiations would have on member country's rights and obligations and, de facto, on the rights and obligations of the provinces that are part of the signatories. The GATT agreement applies to a member country, but also impacts on the provinces that make up that country. The same applies to France, Brazil, Canada and the United States.

Ms Vinet could give you a more detailed explanation.

Ms Suzanne Vinet (Acting Director General, International Trade Policy Directorate, Agriculture and Agri-Food Canada): Mr. Laurin, could you tell me exactly what you are referring to?

Mr. Laurin: At one point in her memo, on «trade and agriculture», Ms Comeau says the provinces have too much power.

[English]

The Chairman: Order.

[Translation]

Ms Vinet: That the provinces are not doing...

[English]

The Chairman: I think maybe through the interpretation you didn't hear the answer from Ms Comeau. She said that she had nothing to do with writing that memo, but signed off in terms of the request for access to information. Do you understand that?

[Translation]

Mr. Laurin: Yes, I understood that well.

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[English]

The Chairman: Okay, because you keep referring to her memo and to Madam Comeau saying something -

[Translation]

Mr. Laurin: Look, I have a document entitled Supply Management. It has the Game Plan Management. There's reference to Ms Comeau's memo. Unfortunately, I do not have it with me, but I could get you a copy. In this document, where it says ``Ms Comeau'' and ``Classifed'', the date has been erased.

Ms Comeau: I must explain why my signature is at the top of the page. Those documents were classified. They could not be publicly disclosed. I was asked to sign every document since we had accepted to disclose them to the public. That is why my name appears at the top. I signed about a dozen documents under similar circumstances. That does not mean that I wrote them. The documents were written by various people at the department in the fall of 1993, just as the GATT negotiations were winding down. We were analyzing different scenarios for the government. To be very honest with you, I do not recall saying the provinces had too much power, since agriculture is a shared jurisdiction.

Mr. Laurin: It is also possible you do not remember.

[English]

The Chairman: Mr. Laurin, order please.

You had a point of order?

Mr. Easter: I had a point of information. Just let me quote, because I think there's some confusion on the access to information and on the memo referred to in the documents Mr. Laurin is talking about. It's just one line, and I'll read what it says. ``Proposed Plan of Action: In the very short term the department will need to adopt a communication strategy regarding the new GATT agreement.'' That's the statement. That's the access to information. Your name is on the top of it, but you didn't write it. Then it says in brackets to see M. Comeau's memo to the deputy minister, so I think that's probably what he's referring to.

The Chairman: That's what he's referring to.

Ms Comeau: That's what I was trying to explain. I remember that in these responsibilities I did in fact prepare a communication strategy. That was our responsibility in light of different scenarios, different outcomes. There are supply management experts who prepared the decks and so on. As I said earlier, we would have been remiss if we had not prepared those different scenarios and those different outcomes.

[Translation]

Mr. Laurin, to get back to your question, we never said the provinces had too much jurisdiction over agriculture. In Canada, agriculture is a shared jurisdiction between the federal government and provincial governments. When a GATT member country signs a GATT agreement, it means the country, as well as its provinces, must meet certain obligations.

You automatically have to follow certain rules, such as the national treatment rule. You cannot exclude some geographic zones from trade. Interprovincial barriers must be abolished. That does not apply just to Canada; the same applies to the United States, France and any other GATT member country, including Brazil.

Ms Vinet can explain that further. That is the only place that provincial rights under GATT could have been mentioned because as we already knew, the GATT agreement was to have some impact on provincial obligations in world trade.

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Ms Vinet: In fact, there is a federal-provincial committee dealing with the provinces on a continuous basis so that as negotiations progress, we can determine our final negotiating position for the signing of agreements. It is quite likely that in any communication document we would have spoken about how the federal government and the provinces would have implemented a negotiation agreement. We did indeed work very closely with the provinces. So this is not a question of finding a balance between the federal and provincial levels. Quite the opposite!

Mr. Laurin: Ms Comeau, how much money do you plan to set aside to support the development of the most promising domestic markets, at least as far as Quebec dairy products are concerned? How much do you plan on spending on that market's development?

Ms Comeau: We did not break it down that way because our programs apply both to the domestic market and to the international market.

The prepayment programs apply both to domestic marketing and international marketing. When a producer gets an advance payment for his apple production, it does not matter where the apples are sold. He gets that payment based on his production and not based on the products' final destination.

Mr. Laurin: But let's deal more specifically with milk, because that is a local market.

Ms Comeau: The assistance provided to producers here in Canada is provided through milk subsidies, which are calculated based on production cost and control. There is no marketing assistance per se because milk is not marketed. There is marketing of processed product or further processed products containing milk.

Various programs do exist, not only in our department, but in others as well such as External Affairs, where marketing assistance is available to market cheese or pizza, for instance. The milk component is not necessarily the highest in those products.

[English]

Mr. Vanclief: Mr. Chairman, I'd just like to try to clarify for Mr. Laurin again. As Dr. Hedley said a few minutes ago, the major role the federal government plays in the dairy industry is to provide legislation that allows for the marketing system of milk and dairy products in Canada and outside of Canada. So it has tried to put a number on the money the federal government puts in.

The federal government puts very little, if any, money. There's still money there in the industrial support program, but the role the federal government plays is to provide and to protect the system that is there to allow for the supply management system to continue in Canada.

[Translation]

Mr. Laurin: But a lot is spent on western wheat.

[English]

Mr. Collins: Mr. Chairman, I just want a point of clarification. Ms Comeau has come here. She has explained, in a very clear and explicit fashion, that she's signed off on documents and that she wasn't the author of them. I think it should be recorded so that we don't have any bloody confusion between us sitting here as to what she may or may not have done. I think it's very unfair for us to attribute to her something that she's been kind enough to explain over and over again. There seems to be missing whatever level we have to go to at the water level for some of us, but I think it should be there, in all fairness to her, that she did not write those documents. All she did was access material for someone else.

The Chairman: Thank you. Mr. Easter.

Mr. Easter: I have two questions. They're to two different people, so I'll ask them at once.

One is to Mr. Ross. As you know, in terms of our international trade initiative, I've been promoting with you and a number of others that in terms of some of the international organizations, we need to be getting people involved in them. We contribute to the Interamerican Institute for Cooperation on Agriculture, for instance. We contribute millions of dollars, $5 or $6 million. Are we getting good investment in return? I know we were trying to get agriculture people from Canada involved in that organization to foster our trade initiatives. I wonder whether we were successful in that. If not, why not?

The second question is to Ms Comeau. In the beginning you talked about market information and analysis, which is extremely important. But with the privatization of the economics branch - and I question that decision of my own government - how are you going to gain that market information and at what cost?

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Mr. Ross: Mr. Easter, as you know, we have been putting our contributions to the Interamerican Institute for Cooperation on Agriculture under some scrutiny. The bill is paid by Foreign Affairs. It's $3 million U.S. and a bit per year.

Yesterday I lunched with the outgoing IICA representative and the new incoming IICA representative, and we discussed with them very clearly that Canada has some very strong views on the fact that these institutions must bring some return to Canada. So far one of our objectives, as you know very well, has been to place Canadians at IICA. At the moment I think we have five in position, and we hope to get it up to eight or nine.

Unfortunately, the new secretary general of IICA hasn't been able to move as quickly as he had hoped, and he has placed only one or two people. I can tell you, sir, that two offers were made to Canadians for jobs in Haiti and both of the Canadians turned them down.

We have turned up the heat on IICA. The new IICA representative here, who happens to be a fellow I knew in Brazil, assures us he will be doing whatever he can to pressure IICA to hire more Canadians, to contract more with Canada, and to adopt a priority agenda that reflects trade initiatives more. In that vein, at the executive committee at which I was supposed to lead the Canadian delegation later this month - now one of my directors will be doing it - we will be leaving these messages with IICA.

Mr. Easter: Either produce or pull the money, as far as I'm concerned.

Ms Comeau: As for the market information, I guess we use different sources. I have one page here of source material and I'll just give you some examples.

From a statistics perspective, we use Statistics Canada data; we use FAO data, AGROSTAT and their world trade database. We use USDA information; the European Union's statistical server, called Eurostatistics; the International Wheat Council database; Oil World Annual; and other statistics we can get from other countries, such as Japan.

As for other sources from a text perspective, which we use and which aren't just databases, we have access to the USDA's foreign agricultural service reports. We have an export hotline from Peat Marwick in the United States, at no cost. We have the EDC assessments on country risks and opportunities. We have access to Reuters, the Royal Bank's Country Strategies, Business Monitor International, and of course now the Internet resources are accessible.

From an internal perspective, we use DFAIT's databases. They have embassy reports and WIN Exports. We also prepare text sources or assessments out of these ourselves. Mr. Ross has brought a few examples we can leave with you.

What we've committed ourselves to, though, through this budget exercise, is reviewing our different sources of material, to reviewing how we generate that information and how we disseminate it, with a view to reducing the cost. Our target is to reduce the cost by $700,000 without reducing the quality of the output or the services being given. Mr. Lavoie is responsible for that on our behalf. He has a working group and he will be able to provide you with more detailed information.

As for the privatization of the economics function, we are involved in that and we're being consulted because we do not want it to increase our costs. We won't be able to afford to. We hope that will be taken into account.

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In our case, we chose not to go the route of privatization but to try to minimize our costs and to rationalize first. It may be that we will have to have user fees for some of what I would call more detailed analyses or when we add value to different reports. If we have to generate specific things for specific users, we may have to institute user fees, but that will be the result of the discussions we're carrying out with industry groups and with other federal departments and provincial departments. I'll let Mr. Lavoie give you more detail on that.

Mr. Easter: I'll talk to him later.

The Chairman: That's fine.

Ms Comeau, I want to thank you and your colleagues for appearing before our committee today.

I have one question for clarification, because I keep looking at this Western Producer article that says the Grits didn't support supply management, and it goes on with a bunch of gibberish. About one of the things it says here, you indicated earlier you didn't have an opportunity to respond to it, but if asked you might respond to it. I might want to give you an opportunity here.

Down here it says that according to a memo written in 1993 by yourself to the then deputy minister Rob Wright, you said the system was too rigid and too farmer-dominated. It's here on page 1 of this game plan for supply management that Mr. Laurin was talking about. In talking about a background, it says that it's managed too rigidly and with undue producer influence. Of course, you didn't write this because you just signed off on it and...access to information. So you didn't write it at all.

Ms Comeau: But regardless, we are all public servants in the same department.

The Chairman: Who wrote this?

Ms Comeau: At the time, we had a special section, and it was someone on loan from a provincial government who was in charge of following up on the 1992 recommendations that Mr. Hedley was talking about, when Mr. Morin, Mr. Balcaen and others had toured the country to review the supply management sector and to prepare a follow-up and recommendations.

The Chairman: I hope you sent him back. Did you?

Ms Comeau: Yes, that person has since gone back to the provincial government.

The Chairman: You might want to warn the province. It goes on with -

Mr. Laurin: Which province?

[Translation]

Ms Comeau: From the government. Someone from Quebec, Mr. Laurin.

[English]

The Chairman: I take it that you have taken the opportunity to express to the western producers that those political masters at the time - we got elected in 1993 - had nothing to do with that memo and, in fact, were very strongly behind supply management and continue to be behind not only orderly marketing but supply management.

Again, thank you very much.

Colleagues, I might point out some of our future business. On Tuesday, June 6, we'll be dealing with Bill C-92. On Thursday, June 8, we'll be dealing with Bill C-86, and we'll have the dairy farmers of Fédération des producteurs de lait du Québec, and the Canadian Chicken Marketing Agency.

On Tuesday, June 13, we'll be doing a clause-by-clause of Bill C-86, and we'll also be looking at the rBST task force. On Thursday, June 15, we'll be talking with officials from Health Canada in regard to rBST. If we need a further meeting on Bill C-92, which I rather doubt, we will be doing it later that week.

Thank you. The meeting is adjourned.