Proceedings of the Standing Senate Committee on
Agriculture and
Forestry
Issue 9 - Evidence
OTTAWA, Thursday, February 13, 1997
The Standing Senate Committee on Agriculture and Forestry met this day at 9:20 a.m. to continue its order of reference to study the present state and future of agriculture in Canada.
Senator Leonard J. Gustafson (Chairman) in the Chair.
[English]
The Chairman: Honourable senators, I call the Standing Committee on Agricultural and Forestry to order.
We have on the agenda a work plan for the boreal forest study and a work plan for a fact-finding mission to Washington. Under "Other Business", I have included a couple of items. The grain movement situation in Western Canada is of concern. Many farm groups have been raising the issue of price gouging on fertilizer sprays and input costs.
One projection I saw showed that the net profits to grain farmers have dropped to 7 per cent from about 11 per cent, even with grain prices going up. There is a great deal of concern about that. The price of fertilizer has actually doubled in the last year and a half. The same price increases are happening with sprays, et cetera. I am not sure that all farmers have yet realized that when they sell their grain they will not have much profit. Seven per cent is pretty low. Of course, there is the cost of machinery as well. I have included that issue under "Other Business".
Has anyone any other issue to add?
Senator St. Germain: I would like to talk about lumber quotas and the actions of American firms, but that issue is tied in to the study of the boreal forest. I do not know if it is appropriate to bring this up. Would the committee allow a discussion on this?
Senator Spivak: I support that, Mr. Chairman. It is a very relevant point.
The Chairman: We will put that item on the agenda.
The first item on our agenda is the work plan for the boreal forest study. We seem to be acquiring a very heavy workload, and there have been discussions to the effect that we might appoint a subcommittee to deal with the forest work.
Senator Rossiter: We do have a couple of pieces of legislation coming up, so that might be a good idea.
The Chairman: As well, there might be an election soon and we may have more on our plate than we can handle properly without appointing a subcommittee, at least to hear witnesses. A suggestion that was made to me is that the subcommittee would bring back to the main committee a general report before any action is taken. They would hear the witnesses and report on what they have heard.
Senator Spivak: I move that we establish a subcommittee which would be responsible for handling the business of the forestry study.
Senator Taylor: I second that motion. We have done our study in Western Canada, and although the boreal forest is very similar on both sides, it is important that we talk to many witnesses, mostly here in Ottawa, and also some in Eastern Canada. A small committee is more manageable. The report of the subcommittee will then come back to the whole committee.
Senator Rossiter: Should the motion include a date for reporting?
The Chairman: It is probably premature for that.
All we all in favour of Senator Spivak's motion?
Hon. Senators: Agreed.
The Chairman: Carried.
Senator Spivak: Could I suggest that we leave the work plan for this study to the subcommittee to discuss, and go on to Senator St. Germain's issue?
The Chairman: We only have two small items to take care of in terms of the subcommittee. We must determine who will sit on the subcommittee and give the subcommittee spending authority. Let us deal with the first part.
The suggestion was that Senators Spivak, Taylor and Anderson sit on the committee. Does any other senator wish to be a member of that subcommittee, keeping in mind that we must keep the agricultural committee large enough to meet with the witnesses we call here?
Senator Taylor: I recommend Senators Anderson, Spivak and myself, with Senator Anderson as chair. I pick the three of us not because we like trees any more, but because we seem to attend all the meetings that deal with trees and forestry. We would have two western tree-huggers chaired by an eastern potato grower.
Senator Anderson: Mr. Chair, would you not be on this committee?
The Chairman: No. I felt it would be better if I were not on the subcommittee because you will be bringing a report back to the committee.
Senator Spivak: The chair is always an ex officio member.
The Chairman: Any senator would be welcome. If you decided that you would go to the maritimes, a senator from the maritimes would be welcome to sit in. If it were convenient in Quebec or Ontario, why not?
Do you agree with at that, Senator Anderson? Would you be willing to take on the chairmanship of this subcommittee?
Senator Anderson: I would prefer that Senator Taylor be the chairman.
Senator Taylor: I suggested Senator Anderson as chair because, in this day and age of gender politics, you cannot have one male chairman with two female members. As well, we need someone who can keep control of Senator Spivak.
There is an election in Alberta on now. I will probably be participating in that, to a certain extent.
Senator St. Germain: Do you think Ralph Klein really needs help?
Senator Taylor: Senator Anderson listens very well, makes good notes and summarizes things well.
The Chairman: I would not doubt that Senator Anderson gives the best account of anyone.
Senator Taylor: I am making excuses why I cannot serve as chair, but the point is we do this on talent.
Senator Rossiter: By the time we get arrangements made and witnesses contacted, if we are not here the last week in February, the Alberta election will be over and done with.
Senator Taylor: That is true.
The Chairman: Will someone move a motion?
Senator St. Germain: I so move.
The Chairman: All in favour?
Hon. Senators: Agreed.
The Chairman: The motion is carried.
We need a motion that the same powers and obligations as decided for the full committee at its organizational meeting be granted to the subcommittee.
Senator St. Germain: I so move.
The Chairman: It is seconded by Senator Spivak.
Is it agreed, honourable senators?
Hon. Senators: Agreed.
The Chairman: The motion carries.
As well, we need financial authority given to the co-chair.
Senator St. Germain: I so move.
The Chairman: Is it agreed, honourable senators?
Hon. Senators: Agreed.
The Chairman: The motion is carried.
I thought there might be some discussion on whether we should have an interim report to the Senate. I do not know how many of you have seen this report on the work that has been done already.
Senator Spivak: I suggest that we look at this, because it will take some time to digest it. I do not know if we want to get into that at the moment. My own view is that it is quite a lot of work, and it is too early. This will not be an easy thing.
I was wondering whether Dan Shaw would be here today.
Mr. Armitage: I will talk to you about that afterwards.
The Chairman: Do you suggest we just table that for now?
Senator Spivak: This requires quite a thorough examination. It might take a while. I thought perhaps we could leave this to be discussed, as well as the whole issue of the report and the editing of it and so forth. Everyone is welcome to participate in that discussion, but I think this will require some time to go through and decide.
The Chairman: Are there any other views on that?
Senator Taylor: This is a very short draft. It is only two-and-a-half pages long. It might be wise to present it to the Senate just to show that we are doing something. This is just an interim report.
The Chairman: Would it be wise for the subcommittee to meet and prepare an interim report on what has been done?
Senator Spivak: I think we should do that.
The Chairman: Or an interim statement made in the Senate?
Senator Spivak: Yes. A statement is fine.
Senator Taylor: I look at it as a statement.
We did not mention any alternative fibre sources. Who is the writer of the report?
Mr. Armitage: I am not the writer, but if we had discussed the work plan this morning, I would have mentioned that you had called to make that suggestion.
Senator Taylor: It is just a question of plantations -- one line, perhaps.
The Chairman: I do not think we need a motion on that; however, it is a given that you would probably consider that.
That covers the boreal forest for now.
Perhaps Senator St. Germain could bring the committee up to date on what he has in mind.
Senator St. Germain: The issue I wish to mention deals with two things: the coalition in the United States, and the lumber quota.
In theory and in reality, the have established a quota for exports of lumber to the United States. I believe it is 14.3 billion board feet. It concerns the provinces of Ontario, Alberta, British Columbia, and Quebec. I believe the Atlantic provinces are excluded from this quota regime.
I do not know if you are aware of this, but several huge organizations in the United States, such as International Paper, Louisiana-Pacific, Georgia-Pacific and others, have joined together again and are lobbying and pressuring the Government of the United States in regard to what they claim is unfair stumpage and unfair logging and forestry practices in Canada. Twice this issue has gone to the ITC, the International Trade Commission, in the United States, and twice we have won.
What happened on the last go round, from what I can gather, having spoken to some of the people who were on the negotiation teams for Canada, was that they felt that if they went to a tribunal again, they may lose, so they agreed on a quota.
This has all been brought about by the companies that are cleaning out our forests in Manitoba and Saskatchewan, namely Louisiana-Pacific and others. They have been very vocal about this and have been putting pressure on us. They have forced the Government of Canada and the industries in Canada to go to a quota system. In essence, this does not allow any expansion of existing forestry operations. As well, it virtually obliterates the opportunity for anybody to start up. Unless you have a quota, you cannot ship to the United States, and the quota has all been distributed.
There is a positive side to this. There will not be as much cutting done. However, it will eliminate many jobs. There are many places where forestry could be taking place and is not. It has allowed the province of British Columbia to raise stumpage to an unrealistic level. B.C. will pay a price for that because their forest industry levels are down to nothing. It has stifled the ability for anybody to start up in the forest industry and to expand and create jobs.
It also is causing a loss of jobs because the moment a major saw mill meets its quota, it shuts down. So we are stuck at 14.3 billion board feet. It is also forcing some lumber companies to go offshore and sell for less. We are not getting top value for the trees which are being cut down because we are having to ship to other parts of the world, whereas traditionally we could have received a better price in the U.S. for our lumber and value-added products.
What concerns me is that Louisiana-Pacific and these other large companies are playing games. They are forcing us into an untenable situation, and yet they are operating in Manitoba and Saskatchewan and indiscriminately doing exactly what they want. We should be looking at that aspect of their operation and returning the pressure.
I will give you an example. Wynn Walker owns a shake and shingle mill in Ruskin, B.C. He decided that with the price of western red cedar logs, which are used to make the shakes and shingles, he was not making optimum use of the log. When a log comes into a shake and shingle mill, it has generally been considered to be a scrap log which is not good for lumber. However, if you look at the logs carefully, there is always a portion of the log that can be utilized for lumber. He set up a sawmill so he would get better utilization of the log. In his mill, they go along and cut out the short blocks to make their shakes and shingles, and when they come to a good piece of wood, they take it out and make lumber out of it and get higher value for that portion of the log. So he set up a $5 million saw mill. He is a small businessman. The only place that you will get a reasonable return for that material is in the U.S. market because it has been a tradition. However, he cannot get any quota to ship to the United States to maximize on that fibre that is coming out of our forests.
The big players, such as MacMillan Bloedel and others, have their quota. They actually like the deal because they have driven the price of a 2-by-4 from about $250 per thousand to $475 per thousand. It was close to $500, but it has backed off now. They have cut fewer 2-by-4s and they are making the same money. However, the situation is causing mills to be shut down and inhibiting or preventing people like Mr. Walker from developing his operation.
I am not saying that anybody should be going out and raping and pillaging our forests. They should all be using sustainable logging practices. All I am saying is opportunities are being denied. They are being denied because the coalition against us has been relentless.
To be fair to the federal government, they were forced into a situation because industry, the Council of Forest Industries and the big players, decided they would not fight this time through the binational panels and the dispute settlement mechanisms under the Free Trade Agreement. They said, "No, we want it make a deal." So they made a sweetheart deal for the big companies, and it is literally killing many small operators.
The Chairman: Are the provincial governments supporting this as well? They have a vested interest.
Senator St. Germain: Yes, they are.
The U.S. uses the argument that stumpage rates in British Columbia, for instance, should be the same as they are in Washington State because they are virtually in the same area. This is a total fallacy. There is not a place in the State of Washington that you cannot drive to with a truck in order to log. The road systems are already developed, in most cases. However, many places in B.C. are so steep that you cannot drive to them, and if you want to log and have sustainable growth, you will have to use helicopters. You do not want to be building roads.
While the Americans say the rate in B.C. should be the same as it is in Washington, it is a totally different kettle of fish because of the terrain and the requirements put on our logging operations in British Columbia.
This has been their argument. They have a sweetheart deal for themselves in the U.S. now. They are virtually controlling our resources.
In essence, by capitulating to the United States, we have given them control over our resources. They tell us what stumpage we will charge and what we will do. This is totally wrong.
My view is the only way we will put pressure on the coalition is by looking at what some of their operations are doing in Saskatchewan. If they are not toeing the line and paying proper stumpage, this is where we should be going after them. That may relieve some of the concerns you have regarding the boreal forest.
I make this suggestion to you. This is a subject with which I am fairly familiar, although I am not an expert. There is information available. I am prepared to work with other committee members on this. We hear a lot of talk about free trade and global trade, but when the pressure is put on by greedy, huge conglomerates in the United States, such as Louisiana-Pacific and International Paper, the rules seem to change. If we are going to have free trade with the U.S, I believe we should stand and fight. I do not know why we capitulated. It is really bad.
In British Columbia and Alberta, there are small entrepreneurs who want to start up new operations. Mr. Walker's operation is a good example. Here is someone who wants to get better use out of a piece of fibre rather than cutting it up into shakes and shingles, and he is denied the opportunity. Everyone is trying to get more efficient and make certain that they get the optimum use out of every piece of fibre coming out of our forests. This denies them the opportunity to optimize.
If you have any questions, I will try to answer them.
If Louisiana-Pacific and these other giant corporations want to play games, that is fine, but I think we have to learn to play their game. If we do not learn to play it, they will keep pushing us back into a corner.
Senator Anderson: When you say "they" are doing this, are you talking about the coalition or the U.S. government?
Senator St. Germain: The U.S. government ties into this, but it is really the coalition that is applying the pressure. There are various senators, one in particular from Montana, and other congressmen who have been involved in this and who are supporting the coalition.
It is strictly based on the fact that they are not competitive with us in certain areas. They do not have as good a product. Our spruce, pine and fir are some of the best products in the world. They are trying to replace with it their loblolly pine, which is basically like comparing chewing gum and steel.
Senator Spivak: That product comes from plantations?
Senator St. Germain: Yes, they have plantations down there, some covering millions of acres in various parts of Georgia and Alabama. The only thing I am really upset about is that they are operating in parts of our forests and yet taking issue with us in other areas. If we have an opportunity to retaliate, we should not pass it up.
The fact remains that this is a complex issue because governments are involved. Yet it is actually the coalition that is really organized. They do not present themselves as the victims. They will fund small operators in Texas or in Georgia. They make it look as if the small operator is the victim of this low stumpage and this dumping of Canadian lumber into their market. They are part of the coalition, but they will generally use a small operator in a small town.
They are shrewd in their tactics. They make a hue and cry about the small operator losing his business in Alabama or Georgia; they get the senators screaming and hollering. They have been very effective. They have brought pressure to bear to the point that the government has accepted this quota system.
They did not want me to mention any names, but I spoke to one organization that was applying for a quota. I asked whether they still wanted me to talk to External Affairs on their behalf. The answer was no, that they had bought some quota on the black market for "X" number of dollars per thousand. It was easier than getting involved with the bureaucracy.
Some people had nothing more than a telephone, but they had a historical track record of shipping lumber to the United States, and so they got quota in hundreds of thousands, even millions of board feet. Now they are trading this to people who do not have quota. There is a black market set up in the selling of this quota.
Senator Taylor: The quota was negotiated by the federal government for 14.3 billion. Is that dollars or board feet?
Senator St. Germain: It is dollars.
Senator Taylor: I understood the federal government met with the provinces. Of course, the Ontario government maintains they got too little and B.C. got too much. They divided it up, but the dividing-up within the province is a provincial matter. It is not federal. I think you have two questions here.
Senator St. Germain: I think you will find that the allocation of quota comes out of Ottawa.
Senator Taylor: It allocates quota to the provinces but not within the province. Timber is a provincial right, like oil and gas. The federal government would be in a ticklish position here if it attempted to make any laws on the development of this. They are responsible for international trade but they cannot go into Manitoba and get tough with Louisiana-Pacific, or into B.C. and get tough with MacMillan Bloedel, any more than they could with an oil company, because those are provincial rights and provincial quotas. That is one argument.
The second question is why Ottawa knuckled under and went to quotas. I do not know. We have just finished a tour of the west. There is not much question that the western governments are not getting anywhere close to the royalty from timber cutters in a free enterprise as we see it.
Senator Spivak: They are giving it away.
Senator Taylor: Yes. In Alberta, for instance, timber permits run alongside a privately owned lot. The privately owned royalties are something like eight to ten times what the Crown is making. The federal government was really in a bad position to try to argue there was no indirect subsidy as a result. When you compare B.C., not with Washington but with a private owner right beside the Alberta government, there is a 10-time difference.
Senator St. Germain: You will find that the allocation of quota comes out of here.
Senator Taylor: Is that right?
Senator Spivak: What, to individual companies?
Senator St. Germain: To individual companies, that is right. The criteria were set by the provinces but the allocation is done out of here.
Senator Spivak: Are you sure?
Senator St. Germain: A woman by the name of Marilyn Friesen, I believe, is designated to look after that.
As far as the stumpage is concerned, if we are not charging enough, that is all right. You may like the Americans telling you what to do; I do not. Where I come from, we want to control our own destiny.
Senator Taylor: The last time I looked, it was your government who put in free trade. Mind you, we jumped on your back and went along with it.
Senator Spivak: Surely the problem is bigger than that, Senator St. Germain. You will have a shortage of supply. You are saying it is the federal government, but the same thing happened in Manitoba. Instead of giving the lease rights to smaller logging companies, they just gave them away to Louisiana-Pacific or Repap. They gave away one-fifth of the province. The problem here is really governmental.
Senator Taylor: You have a bunch of johns wanting to get the prostitutes arrested. We are the ones who did the business.
Senator Spivak: Why are they cutting trees like crazy in Alberta? British Columbia is running short of accessible supplies, unless they are going to cut down Clayoquot Sound and places like that.
Senator St. Germain: It is gone. They cut it down.
Senator Spivak: You are dealing with trees worth $40,000. They are giving it away.
Senator St. Germain: I have no problem with what you are saying, senator. All I am saying is that I do not want the Americans telling us what we should be doing.
Senator Spivak: Yes. Why are the provincial governments knuckling under and letting this happen? Every provincial premier is busy giving away the natural resources as fast as they can to international companies, to Japanese companies.
The Chairman: Order. Senator St. Germain has given us a very good report on that problem. The question is: How should the committee handle it? I suggest we call the officials to a meeting and ask for some clarification on just exactly how this happens, and possibly even the Minister of Trade, if he would be available to appear before the committee. This could be done in a two-hour meeting one morning.
Senator St. Germain: Senator Taylor and Senator Spivak are bringing this up, but I am not interested in the legitimacy of the premiers. The issue I want to deal with is that of a coalition, formed in the United States, forcing us to act in a certain way with their political pressure.
I do not want to be harsh on the federal government. They were forced into a situation by the provinces that were affected and by the big players in the industry in Canada. They were forced into this situation because the industry and the provinces said, "Let us make a deal; we will not take the risk of going back to the International Trade Commission and fighting them again, even though we have won twice." That is the issue I am fighting.
Whatever the premiers are doing, if they are making mistakes and giving away to Repap or the Japanese or whomever, is another problem. I want to look at what Louisiana-Pacific and the other large corporations are doing in this country. Do they have sweetheart deals? If they have, why are they forming a coalition to work against us on one angle and yet have a licence to operate freely in another part of our country? That is what I am after. I want to find out what these coalition players are doing up here, because I am not happy with what they have been doing down there. They forced us into a quota situation. You know what quotas do in agriculture. They will do the same in forestry. We already have a black market in lumber quota in Canada as a result of all of this.
I do not believe that we should just sit back and let Louisiana-Pacific and the other big guys in the United States run us around.
The Chairman: Senator St. Germain, whom do you think the committee should call?
Senator Taylor: I think the senator just put out a recipe to have me hanged in effigy when I go back to Alberta. I can just imagine the reaction if a Senate committee were to be investigating whether the big companies that are cutting Alberta bald should be discriminated against in getting quotas. The provincial premiers would be as touchy as a cowboy about his horse if you started mentioning the federal government sticking its nose into who can and who cannot cut. They believe they can sort out the good ones from the bad ones and they do not need any help from the federal government or the Senate to do it. I think we would be in completely over our heads if we were to start talking about who should or who should not cut provincial trees. We have other methods -- environmental and so on.
Senator St. Germain: If you want to investigate Louisiana-Pacific from an environmental point of view, God bless you.
Senator Taylor: Are we going to shut down General Motors in Ontario because we do not like what they are doing?
Senator Spivak: It is not the same thing. This is crazy. This is a natural resource being destroyed.
Senator Taylor: I do not think we have the authority to go in and investigate corporations which have made contracts with provincial governments, except in a round-about way using the environment and biodiversity. We do not have the authority to have a person go in and say, "Look, we think you are one of the fellows stirring up trouble in the United States, and therefore we are going to kick you out of here."
Senator Rossiter: I think what Senator St. Germain is saying is that we should get the facts.
Senator St. Germain: If they are good corporate citizens, we have to live with it.
Senator Rossiter: Is that not right? What you want to do is get the facts down straight? It is not necessarily at this stage placing blame on anybody or bickering about contracts.
Senator Taylor: He is always suspicious.
Senator St. Germain: They have forced us into an untenable, undesirable position. All I am saying is if they want to form a bloc down there to attack us indiscriminately and unfairly, I think we have a right to look at every one of their operations here in Canada. You may not think so, but I do. I am not saying we should be infringing on provincial jurisdiction, but if those companies have a right to form a coalition and take a run at us, why do we not have a right to take a look at what they are doing up here?
Senator Spivak: Mr. Chairman, part of the mandate of the committee is to look at what the facts are on the ground. I agree with Senator Rossiter, we should do that. The only problem is that this will take some doing. We have to determine how the committee could do that. We have part of the information already but we have not had a thorough look.
The first thing you must know about the forestry industry is what is going on. To know what is going on, you have to know what these companies are doing. Otherwise you do not know what is going on. That is part of the mandate.
Senator St. Germain: These companies have never been fair down there. The coalition in the United States has been totally unfair, as far as I am concerned. If you talk to anyone in our forest industry, they will tell you it is pure pressure. It was the fear of losing the case that was the reason we settled for a quota system. Why should we have a quota system if we have free trade?
Senator Taylor: Except the provincial governments will argue that the quota system raises the price of timber and gives an orderly form of marketing in the provinces. I think it has been found that in Canada about 80 per cent of the timber resources benefit directly from higher stumpage rates if they keep the price up.
Senator St. Germain: Why do we not put quotas on everything, then?
Senator Taylor: There are quotas on eggs and butter and chickens, as you know, even on MPs.
The Chairman: It would probably be in the best interests of the committee to hear from the department on this subject, if for no other reason than to clarify what really does happen and what the rules are as they pertain to federal-provincial relations. That is not going too far.
Senator Spivak: If no one else makes that motion, I will.
The Chairman: Is that fair, Senator St. Germain?
Senator St. Germain: Fine, I am open to any suggestion. I will even come back with a paper of some kind on my own.
Senator Taylor: Conspiracy theory.
Senator St. Germain: It is an open conspiracy. They have attacked our industry.
Senator Spivak: Are you thinking of the Department of International Trade, Mr. Chair, or the Department of Natural Resources?
Senator Taylor: We should be able to call witnesses from whichever department we want.
Senator Spivak: What is the appropriate department?
The Chairman: I think we should perhaps hear from officials of the Department of International Trade. If the minister could appear with them, fine, but if he cannot, we could hear from the officials.
Senator Spivak: Perhaps also the Department of Natural Resources.
Senator Anderson: I was wondering about Ms Friesen that Senator St. Germain mentioned. I think she would be the knowledgeable person from the department. Was her name Friesen?
Senator St. Germain: Yes. In the Department of External Affairs, there is a section that looks after this. I believe it is a Mr. Dowswell who is the person responsible.
Senator Taylor: Finding that the Yankees gang up on us is like finding that the banks charge interest. That is the name of the game.
Senator St. Germain: I have no problem with the banks because I saw Northland go broke.
I am a free trader. However --
Senator Taylor: You do not like it when they get the best of us.
Senator St. Germain: That is right, and I will not sit down for it. I do not think we should. If there are any openings, it is our responsibility to make darn certain that they do not run roughshod over top of us.
The congressmen and the senators in the United States are not shrinking violets. I am telling you, I will take the Yanks on. I flew with them in the air force and I will do whatever I have to do here today or anywhere.
Senator Taylor: I hope you drop the bombs in the right places. I am a little bothered by this.
The Chairman: There is a parallel here which was reported in the Financial Post in regards to western wheat. We know that we are having congestion problems with the wheat but it was reported from the United States that they intend to restrict the movement of wheat into the U.S. That was just a week ago. When they need our high-protein wheat to make better bread, and demand it, we ship it with a furore, and when things get a little tight, they use the political squeeze to say that they want this and that and if we do not comply, they will do such and such. There is a parallel here and I think it would be good to hear from the officials what their view is on this issue, if for no other reason than clarification.
Senator Taylor: I am a little bothered by this. This committee was set up to study the boreal forest because it is a distinct forest. We must remember that pulp is an even bigger product of the boreal forest than wood. We are worried about climate change and everything else. Now we are getting into a trade war on lumber. This could go on forever. Would it not be better for the Banking, Trade and Commerce Committee of the Senate to deal with this?
Senator St. Germain: This impacts our forests. I think you are getting nervous because there is an election coming. This is not a partisan issue. This is a Canadian issue. Regardless of my party affiliation, I would fight this, because it is wrong.
Senator Taylor: I am just worried about whether I will still be a senator by the time we do our final report if we keep adding on issues.
Senator Spivak: Senator St. Germain is not suggesting this for the subcommittee. He is suggesting it for the whole committee.
Senator Taylor: I am sorry. In that case, I fully retreat.
The Chairman: I will entertain a motion that the full committee hear the officials from the department.
Senator Rossiter: I so move.
Senator Anderson: I second the motion, Mr. Chairman.
The Chairman: Is that agreed?
Hon. Senators: Agreed.
The Chairman: That is carried.
The next item on our agenda is the work plan for the fact-finding mission to Washington D.C. Senator Hays suggested that there be some discussion there about the cattle industry. The markets there have plummeted. Senator Hays is much more informed on that industry than I.
Senator Taylor: It has turned around in the last 30 days.
The Chairman: It is starting to turn around; there is no question about that.
Senator St. Germain: But will it hold?
The Chairman: Feeder cattle have dropped from $1.05 a pound to the mid-seventies. There were good, fleshy cows in Estevan, Saskatchewan selling for 33 cents a pound and we have not seen a move in the marketplace for the consumer. Someone is making literally millions of dollars. One of the Reform members from B.C. said he sold Semmintal breeding stock for that kind of price. It was a crying shame, but he could not afford to buy the feed to keep those animals alive.
Senator St. Germain: What is causing this? Are there too many cows in the system?
The Chairman: I am not sure exactly what point Senator Hays wants to discuss with the Washington people. As I said, he is much more informed than I on the cattle industry. However, that was one item he mentioned.
The other is the grain movement, and the Export Enhancement Program, with which you are all familiar. We know before we go there that they will challenge our marketing boards.
The Chairman: We know that the Wheat Board issue will come up. It is important that the committee members who travel be as informed as possible in terms of research. There are other issues which should be included.
Do we raise the lumber issue?
Senator St. Germain: I do not think there would be any point in it. It has sort of been resolved as far as they are concerned. We have to find ways to retaliate with pressure, and that is what I am looking for.
They are very shrewd down there. Georgia Pacific and Louisiana-Pacific are funding the coalition, but you never see them up front. They put forward the little operators from the little, backwater places where the entire mill supports the town. In that way they get a hue and cry from their senators and congressmen. That is how they have effectively forced our hand in this quota situation.
This may be a non-starter, to be honest. Perhaps Louisiana-Pacific and others like them which are operating in Saskatchewan and Manitoba, outside of the provinces affected by this quota, are wonderful corporate citizens and not taking advantage of our forests at all. However, if they are not wonderful citizens, it is our responsibility, as guardians of our interests, to do everything we can to bring pressure to bear on them.
The Chairman: Senator St. Germain, do you not think it would be advisable for the committee to have some discussion with them? My thinking on the trade issue relates to the grain industry, because that is the area I know. In many cases, the Canadians and Americans have underbid each other in the global market, and that has hurt both the American and the Canadian farmers. If the politicians cannot discuss this and work it out in a reasonable way, we have problems. It is better to work it out around a table. They will get us on something. Someone will pay the price. At least we have an opportunity to put forth our position in a reasonable way.
Senator Taylor: I agree that we should talk about timber. Another issue we should discuss is sugar. The beet sugar industry in southern Ontario, Manitoba and Alberta is being crucified by what the Americans are doing with their offshore bonuses to sugar.
Senator St. Germain: In 1985, the Americans put a 35 per cent tariff on shakes and shingles. At that time, I represented the riding of Mission Port Moody which produced, as a conservative estimate, 75 per cent of all shakes and shingles in Canada, so I was very involved in this issue. The Americans said that we were killing their industry, that we were dumping product on them, and that it was unfair competition, so they imposed the 35 per cent tariff and we had to live with it.
I got government support to put a ban on the export of western red cedar logs, bolts, blanks and blocks. Bolts, blanks and blocks are a cut of a piece of wood which is not finished for a shake and shingle. As a result there are only one or two shake and shingle operations in the United States of America. We shut them down. We killed their industry completely. We were able to do that because we have the right to prohibit the export of certain commodities.
I believe that to this day there is still a prohibition. That is the way we have to handle them. They pulled the tariff off and we have not heard from them on that issue since. You have to fight fire with fire with these guys. If you do not, if you just lay down, they will walk all over you.
Senator Spivak: We understand that Senator St. Germain would like us to nail Louisiana-Pacific for their environmental practices in Manitoba and Saskatchewan and get back at them in that way. I am very happy to cooperate. However, in Washington, what we could get is information. You get a lot of information when you go down there.
We could gather information on the practices of the Louisiana-Pacific, and others. Louisiana-Pacific received the highest fine ever in the United States, apparently for their environmental practices, as well as other things. We should certainly have that on the agenda.
The Chairman: Sugar was mentioned. Are there other items? How about the potato industry in the maritimes? How is it faring? A few years ago, there were major problems. They are doing quite well, are they?
Senator Anderson: Yes.
Senator Taylor: Senators are supposed to represent regions a bit better than MPs. I would ask you and your clerk to call the agricultural ministers of the ten provinces and tell them we are taking a trip down there. You could ask if there is anything high on their agenda that should be discussed, although we cannot promise anything.
Ms June Dewetering, Researcher, Library of Parliament: Depending on when the committee goes to Washington, there may not be sufficient time to contact them and get a response.
Senator Taylor: I was thinking about talking to them on the phone. It should not be a big, bureaucratic report. You could just ask what is bothering them the most.
The Chairman: You are suggesting that we contact the provinces and see if there is anything specific that they wish to raise. It would have to be done by telephone because I believe our trip is scheduled for February 26 and 27.
Mr. Armitage: I have asked the embassy to give me a list of the issues that have been brought up with them. I assume they would be aware of the provincial issues as well.
The Chairman: Officials tell me that they have asked the embassy about issues from the provinces which have been brought up with them. That information will be available for us. We will have a briefing on that. One of the first things that will happen when we get to Washington is we will be briefed by our embassy as to what the issues are. I am sure they will be there on the table.
Is there anything further?
Senator St. Germain: I would like to thank members for putting up with me and my campaign. If we can do something, I will do what I can to support the initiative. If it is in the wisdom of this committee not to pursue this issue, I can respect that.
I have been here before on this issue. We may be able to position ourselves for the future, if nothing else.
Senator Taylor: We may have planned this trip backwards. The way the whips are so worried about votes in the House, do you think we will get permission to leave town?
Senator St. Germain: When are we going to Washington?
Mr. Armitage: February 25 to 27, the week we are off.
The Chairman: We need a motion for final authority to organize the travel plans.
Senator Spivak: I so move.
The Chairman: Is it agreed, honourable senators?
Hon. Senators: Agreed.
The Chairman: The motion is carried.
Perhaps we should have a little discussion while we are here on the price gouging situation. The farm groups are really quite concerned, particularly with respect to fertilizers, sprays and input costs in general. Fuel costs are going up. Machine costs are inflated.
My view is that I do not think farmers are being realistic. They were all enthusiastic because they received an increase in the price of grain. I have talked to bankers who are concerned that there will not be sufficient cash flow to deal with the input costs. As I said earlier, there are projections now that the net return will be as low as 7 per cent, as opposed to what it has been, which is about 11 per cent.
In the prairies, farmers have changed their operations. Where there had been a lot of fallow ground, there is now continuous cropping. That causes a demand for fertilizer. Once you go to that type of operation and move away from summer fallow where no fertilizer is used, the demand for fertilizer increases.
With respect to grain movement, there are no boats waiting for coal or fertilizer. They are all gone. They are loading them as fast as they come in. The whole fertilizer industry has been a very lucrative business. A lot of it comes out of the province of Saskatchewan. There is a scarcity on the prairies because export prices are so high and because there is such a demand for it. As I said, prices have doubled in the last couple of years.
Senator Spivak: If you recall, I asked a question about a commission of inquiry regarding price gouging. I received an answer to the question. The Director of Investigation and Research, who is responsible for the Competition Act, is supposed to look at price gouging. That is where the question stands. The director can do that when he believes there are reasonable grounds, or when he is required to commence an inquiry upon receipt of a properly documented application by six Canadian residents, or when directed to do so by the Minister of Industry. The Minister of Industry has already said he would not do so.
There is work under way, it says here, by a federal-provincial subcommittee on examining farm input prices, as agreed to at last summer's federal-provincial meeting. The subcommittee is headed up by Hal Cushon of Saskatchewan and a representative from Agriculture and Agri-Food Canada has been appointed.
The Chairman: I know the Province of Saskatchewan is calling for an inquiry into this whole area.
Senator Spivak: We should examine the issue, at least briefly. We should call the Director of Investigation and Research of the Competition Bureau of Industry Canada. He has the authority to investigate price fixing and other anticompetitive behaviour.
This is a problem that has been around for years. I cannot understand why the producer is not getting a fair shake. Why is no one doing anything?
The Chairman: I am biased on this issue because farming is my background, but you need only look at the financial statements of the processors in the food industry to see that the large conglomerates have made a fortune.
Senator Spivak: That is right, and the farmers are making nothing.
The Chairman: All that would have to be done is to give a fair price for the product and the commodity.
Senator Taylor: There is no question that governments have become soft on combines laws and restraint-to-trade laws in the last 10 to 20 years, under the excuse of creating jobs. These big corporations come in, they buy out other ones and merge them. They say they are creating so many jobs.
The government turns a blind eye because part of the argument is that the big corporations are making money off the foreign consumer. They are exporting. That is true to a certain extent, and it does run up the price at home.
For instance, there is concentrated ownership in the nitrate fertilizer industry, which is what we use in the west. We dig potash out of the ground and sell it to Southeast Asia. There used to be competition between Esso and the co-ops, and now Sherritt Gordon controls nearly all nitrate manufacture in that huge industrial complex around Edmonton which processes natural gas. There is no particular trade. They are tied in with the U.S.
The government should take a close look at that. In their mad desire to create jobs, they are letting the combines legislation fall apart. We are seeing that in lumber and pulp, where there is heavier concentration all the time and the government is sitting back and turning a blind eye. Our little producers and farmers are paying the price.
I am a fairly new senator. I do not know how this process started. If jobs are the be-all and end-all, let us not create a thousand new jobs and lose a thousand old ones because we are reducing competition.
Senator St. Germain: Mr. Chairman, with respect to equipment, there are enough dealers around that farmers have a choice. In the areas of fertilizers and sprays, is there a particular organization which controls this? If one or two companies theoretically control all the fertilizer industry, then you can ask for a study. However, if there are 20 companies out there, it is a different story.
Senator Taylor: Nitrate fertilizer is a classic example. I am sure there are fewer than I can count on my hand. When you consider volumes, only one counts any more.
The Chairman: The farmers are concerned they do not have much choice in terms of competition. I talked to one of the directors of a fertilizer company and asked, "How high are you going to push the price on this fertilizer?" He said, "As high as the market can bear." That is what is happening out there, without a question.
Would it be reasonable to have the Department of Agriculture appear before us? I think that should be done anyway in regard to other items as well. Some of the officials from agriculture must be looking at this. I cannot believe that they are not looking at this whole area of input costs.
I will give you an example which concerns me in the machinery line. I will use John Deere and International as examples. They are now leasing their machines to farmers because the farmers do not have the money to buy them, especially the custom combines. It now costs $250,000 for one of the better combines. Custom combiners are going down and taking eight combines across the line. They are owned by John Deere. They are not even owned by the farmers any more.
We will have farmers living on the farm and other people owning the machinery and doing custom work. That has been the situation in the United States for a long time. Many farmers never combine their own crops. Some do not seed their own crops. The same thing has happened in the car industry. Car dealers tell me that 75 per cent of cars are leased. My feeling is that those people will never own cars again. They will never again get enough capital together. It will be $350 a month for the rest of their lives to drive a car. At the same time, General Motors, in the Financial Post, indicated clearly that they have $15 billion cash on hand. They have never had this much money.
I do not want to cry poor; farmers are criticized that we are crying poor all the time. However, when you see these things happening, it is a serious situation, and there is no limit to the price. At the same time, these companies are making enormous profits. Certainly the Department of Agriculture should be aware of these things and be concerned about them, as farms groups and others are.
Senator Taylor: I have a volunteer researcher coming in. Perhaps I will put her to work studying the fertilizer market.
The Chairman: I know it is a major concern for farmers who are looking forward to planting a crop this spring. They are concerned about where they will get the working capital to even seed their crops. The myth that we will have very high prices in wheat is gone. I talked to an American farmer who, at the beginning of harvest, was delivering his durum wheat at $6.50 U.S., and he is now getting as little as $3, which is a major drop in price. I am not sure that we in Canada are fully aware of what that international price will mean to us.
The other issue, of course, is freight rates, especially in Manitoba and eastern Saskatchewan. I am told that the freight rate increase will be as high as 300 per cent. That was the word I received from the Minister of Agriculture of Manitoba when I spoke with him.
Senator Spivak: It means more hogs in Manitoba.
The Chairman: Prairie Pools will put a million production hogs into Saskatchewan. These are some of things we are facing.
Senator St. Germain: The problem, as Senator Taylor mentioned, is that we may not have bite in our combines and antitrust laws in this country. In the United States, if you violate, you are in the crowbar hotel; you never hear of that happening up here. Perhaps it is not as blatant as price fixing. Cartels often pay a high price in the U.S. for violations. The executives and the chairmen of the board end up with huge fines and prison time.
The Chairman: I firmly believe that, as Canadians, and I am talking about the whole population, not just those involved in agriculture, we must keep agriculture strong. It is one of the areas which has made North America strong, both the U.S. and Canada. If we neglect this area, the whole country will pay a price. The world will pay a price. Our young farmers will be hurting the most. There is no question about that. I am sure you will all find that.
I previously made the point that our Department of Finance and our Income Tax Act have been very good to farmers in the rollover provision from the family farm to even the third generation, which provision other industries do not enjoy. If that were to be removed or changed, it would be very detrimental to the whole agricultural industry. We must keep that before the authorities, especially in Finance and in Revenue. There would be no way that the young people would be able to amass the amount of capital it would take to buy back a farm and operate it. These are important issues that we are not going to solve overnight. It is the responsibility of this committee to keep these issues before the authorities and the departmental officials.
As was mentioned, we do represent all regions of the country. I am sure there are areas of agriculture from the maritimes and the throughout Canada that I do not understand, such as the sugar industry, but it is our responsibility to bring those concerns before the department.
In this area of price gouging and price fixing, would someone make a motion that we call officials from the Department of Agriculture to a committee hearing on this issue? We could begin there. Would another approach be better?
Senator Spivak: What about the study that Competition Bureau is supposedly doing? We should attempt to find out which subcommittee is supposed to be doing this study and what mandate it has. Is this under agriculture, or a federal-provincial subcommittee? Which council of ministers is responsible? Do you know anything about it?
The Chairman: I am in the hands of the committee.
Senator Spivak: Could we at least find out about this subcommittee? What is it doing? Is it just shoved into a dark corner? This is not a minor issue.
Senator Taylor: Let us find out if there are any investigations ongoing in the combines areas for our next meeting, and we can go from there. We can do it one bite at a time.
Senator Spivak: It would be useful to get the departmental officials here prior to our visit to Washington so we get an overview. Next week would be a good time, if we could.
Mr. Armitage: I learned last night that Bill C-60, regarding the single food inspection agency, was passed by the House of Commons. It will be read for the first time in the Senate this afternoon and could possibly be in the hands of the committee next Thursday, if that is the wish of the Senate. We have Tuesday afternoon available. However, it is during a time when the Senate may be sitting. Given the conditions in the Senate right now, we may not be given permission to sit.
The Chairman: You are saying the officials will be appearing before us anyway, so we can ask other questions.
Mr. Armitage: It would be outside the scope of the meeting.
The Chairman: I am in the hands of the committee. Perhaps we should delay consideration of the price gouging issue until after Washington and hearing officials on Bill C-60.
Senator Spivak: In the meantime, I would ask the researchers to get some information on this inquiry.
The Chairman: If there are no other items to be dealt with, we will adjourn.
The committee adjourned.