Proceedings of the Standing Senate Committee on
Agriculture and
Forestry
Issue 13 - Evidence
OTTAWA, Thursday, April 30, 1998
The Standing Senate Committee on Agriculture and Forestry, to which was referred Bill C-4, to amend the Canadian Wheat Board Act and to make consequential amendments to other Acts, met this day at 8:36 a.m. to give consideration to the bill.
Senator Leonard J. Gustafson (Chairman) in the Chair.
[English]
The Chairman: Honourable senators, we bring our meeting to order on the consideration of Bill C-4, an act to amend the Wheat Board Act.
We have before us the Honourable Minister, Ralph Goodale, and his advisors, Frank Claydon and Howard Migie. I understand that this morning the minister will give a brief statement and then the honourable senators will have the opportunity to communicate to the minister some of the findings of the study of the committee out west.
Welcome, Mr. Minister, and if you will, begin, please.
The Honourable Ralph E. Goodale, Minister of Natural Resources and Federal Interlocutor for Metis and Non-Status Indians, and Minister Responsible for the Canadian Wheat Board: Mr. Chairman, since we last got together, I know you have been very busy on Bill C-4, both in Ottawa and across Western Canada, and I wish to congratulate you on your hearings in Western Canada. The Senate has obviously put a very sincere effort into this piece of legislation, and it is welcome. It will certainly add to the reputation of this bill as being the most consulted about piece of legislation in modern living memory.
That is probably as it should be because it is an important piece of legislation. It will, in fact, bring about the biggest set of changes in the Wheat Board and in much of grain marketing that we have seen in more than half a century. It will have a profound influence on what the Wheat Board does, and how it does it, as it heads into the new millennium, so it is important for the legislation to be very carefully analyzed.
When I last appeared, Mr. Chairman, I mentioned and discussed in some detail the four principal objectives of the legislation, those being: the democratization of the system of governance for the Canadian Wheat Board; the creation of new forms and new lines of accountability for the Canadian Wheat Board; the introduction of a number of flexibility tools to allow the Canadian Wheat Board to be more modern and agile in the market-place -- the extent to which those tools are used, of course, is a discretionary matter for the new board of directors to decide, and two-thirds of that board will be duly elected by farmers themselves; and, the empowerment of producers to take greater control and to exercise more authority over what the Wheat Board does and does not do and to give producers the authority to shape this marketing instrument as they would want to see it for the future.
Since we had the opportunity to discuss those four concepts in considerable detail last time, I will not plough that ground again.
I followed your hearings very closely to monitor what various groups and organizations were saying. You heard a great deal about the issue of inclusion and exclusion and, as usual on that topic, opinions were vigorously held and were often unfortunately quite polarized in terms of their perspective. That is a subject I would imagine the Senate will want to consider.
I would draw to your attention, as I did the last time, the amendment that was proposed in the House of Commons just shortly before the bill was finished in the House of Commons and just before it was sent to the Senate for deliberation. That amendment would have removed from Bill C-4 the provisions relating to inclusion and exclusion and would have provided in another section of the bill the guarantee to producers that the mandate of the Canadian Wheat Board in future, if it were to be changed in any way, would be subject to a vote among producers.
I would again make the point that I made in that previous discussion about that proposed amendment. All of the precise detail about inclusion and exclusion is not considered, at least by me, to be a fundamental matter of policy. The important point is that farmers should have the ultimate say. It should be their decision -- not a government, Wheat Board, nor a bureaucratic decision. It should be the producers' decision. Therefore, if the inclusion and exclusion clauses are to be withdrawn or modified, I would be anxious to ensure that that principle of producer control is the principle that is enshrined in the legislation.
The issue of power among the directors and accountability was also a matter on which you heard some testimony. It may be useful during the course of your deliberations to look carefully at the clauses in the legislation that empower the directors and give them the authority, among other things, to create by-laws, as any modern-day board of directors in a corporation would do. A number of by-law-making powers are routine and what you would find in relation to any commercial enterprise. Some are unique to an operation like the Wheat Board. One of those is a by-law-making power that is already in the draft legislation. It would invite the directors to make by-laws about all the various manners and means by which they can demonstrate their accountability to producers. I consider that to be a flexible provision and one that invites the directors to be open, transparent, and creative in devising their own ways by which they would be accountable to the producers who elected them. The ultimate accountability, of course, is the fact that two-thirds of them are elected, and if producers are not happy with what they see, they have the ultimate authority to change those directors in a subsequent election.
However, this by-law-making power on accountability is an important tool in the hands of the directors. Through it, they can zero in on that issue of accountability and turn their minds to how they not only establish it but demonstrate that they have established the forms of accountability that would be satisfactory from the point of view of producers. Under that by-law-making authority, for example, if the directors concluded that it would be useful from time to time to have a special audit of the affairs of the Canadian Wheat Board, they would have the authority to do that. It would, of course, be up to them to decide who would conduct that audit. They could choose any outside consultant, any independent accounting firm. They could select their existing accounting firm, which is the distinguished international firm of Deloitte & Touche. They could, if they thought it the right thing to do, select a service or agency of the Government of Canada, including potentially the Auditor General, if they thought that was appropriate. That flexibility and accountability is already provided for in the legislation.
During the course of your hearings, I sent to members of the committee a number of papers by way of background information, but two in particular invited the Senate's consideration and advice about matters for which it may be appropriate in due course for regulations to be drafted and issued. One of those has to do with the electoral procedure for selecting directors. That is a complex matter when you try to get a system right that will choose, by election, 10 individuals from across the entire Prairie basin to come together to operate a $6-billion enterprise. It is obviously important that this procedure be as good, impartial and effective as it can be.
I have invited farm organizations and the House of Commons committee to offer advice on the matter of how to do the elections right, and I have extended that offer to the Senate.
Whether that matter is included in your final report on this bill or whether you choose to do a separate report with respect to the electoral procedure, I would very sincerely appreciate your comments and recommendations about all of the fine points that need to go into this electoral process. This is the heart and soul of the legislation: the democratization of the Canadian Wheat Board. For the first time in history, two-thirds of the board of directors will be elected by farmers. This is the pivot around which everything else turns. Your considered advice on the electoral procedure and any formal regulations that are needed to govern that electoral procedure would be most welcome.
The other potential regulatory matter deals with the contingency fund. I know that you heard a good deal of testimony about the fund during the course of your hearings out west. The fund is there, as it needs to be, to back-stop some of those new flexibility tools that the board of directors may choose to employ, including cash trading, early pool cash-outs and the expedited adjustment payments.
I know that there is some concern among some groups and organizations in Western Canada about the contingency fund potentially becoming too large. They sometimes look at the Australian experience and hope that that unfortunate experience will not be copied here. They are worried about the size of the fund. They are worried about the purposes to which the fund could be dedicated. They are worried about the fund in some way undermining the Government of Canada guarantee, in terms of the financial position of the Canadian Wheat Board.
On the issue of the fund's size, it may well be appropriate to establish regulations that would put a cap on the amount of money that could be sitting there. That seems to be an appropriate matter to be dealt with by regulations. If the Senate has advice on the nature of those regulations or the size of the cap that might be appropriate to relieve the concern about that issue, I would be very pleased to have your advice.
With respect to the purposes to which the contingency fund could be dedicated and the possibility of undermining the financial guarantee, I would point out that those two matters are very expressly dealt with in the draft legislation. Some farmers have expressed worries on these issues. For these worries to materialize, the legislation would have to be changed by some future Parliament. The proposed legislation is clear that the contingency fund can be used only to back-stop cash trading, early pool cash-outs and expedited adjustment payments. It would not be open to the board of directors or the Canadian Wheat Board itself, to reach beyond those three purposes. To go beyond those three purposes, the issue would have to be brought back to Parliament for consideration.
The concern that this fund could be used in some way to undermine other competitors in the marketplace is simply not a real concern because the purposes for which the fund may be used are carefully circumscribed in the legislation to those three purposes that I have mentioned.
On the other side, a worry has been expressed about undermining the guarantee. Again, for that worry to materialize, some future Parliament would have to amend the legislation because the proposed legislation is clear that the government guarantee is expressly provided for, with respect to the ongoing day-to-day borrowings of the Canadian Wheat Board, with respect to the initial payment set at the beginning of the crop year, and with respect to the credit sales program. The government could not withdraw those guarantees without returning to Parliament to obtain that authority.
Therefore, those points are covered effectively in the legislation as it presently stands. However, on the regulatory issues surrounding the use of the contingency fund, and on the matter of its size, I would welcome your advice. I would also welcome it on the matter of how the fund should be appropriately structured. Careful attention needs to be given as to whether there should be one account in the fund or three, because the fund may be used for three purposes.
I know there is some concern that farmers would be anxious to see no cross-subsidization among purposes. It may be wise to have three separate accounts within the fund so that the cost is connected to the risk that is being undertaken and you do not have cross-subsidization within the source of the funds and for the purpose to which the funds may be dedicated.
Mr. Chairman, I will conclude at this stage. Thank you for your attention this morning and thank you to you and all of your colleagues on all sides for the conscientious way that you have attended to this legislation.
The Chairman: Thank you, Mr. Minister. On the inclusion-exclusion clause, it came through clearly that the farmers who have considered canola as a cash crop -- and that is what they call it on the Prairies, a cash crop -- are very concerned that they should lose the importance of that cash crop by allowing it to come under the purview of the Canadian Wheat Board. That came through very clearly. I understand your amendment. However, it appears that the farmers want to have that part completely removed from the bill. This has been a consistent concern throughout the hearings.
In my own experience of talking to farmers whose crops consist of canola, flax and other crops, even rye, there is a great deal of concern about that issue. The industry as well was very concerned about upsetting any equilibrium in the industry as regards to markets and so on. Supply was raised with the committee as a major concern.
The other issues of choice and the monopoly of the Wheat Board were discussed in some depth as well.
Mr. Goodale: On the point that you have raised, if I could just raise one factor that I would ask the Senate to consider, I know you have heard the representations about inclusion-exclusion. The amendment that I have described today only briefly and on previous occasions will completely address that concern.
I do hope you will take into account the fundamental importance of farmers having the ultimate say if the mandate of the Canadian Wheat Board is ever to be changed.
I do not make the argument, and this legislation does not make the argument, for a change in the mandate either bigger or smaller. The legislation simply provides for a procedure to change the mandate if that is what farmers want to do. Those provisions, in the excruciating detail in which they appear in the legislation, have provoked the concern to which you referred. We can address that concern by eliminating those provisions that have raised that angst.
It is important to have that fundamental principle in the legislation that if the mandate is ever adjusted either way, the farmers hold the whip by means of a democratic vote.
Let me show you how that is relevant. Some of the evidence that you heard made reference to the pilot project, if I can call it that, that is about to be undertaken in Ontario, under the Ontario Wheat Producers' Marketing Board. It will test a form of voluntary marketing or dual marketing within the Ontario context. I invite you to ask yourselves how that came about in Ontario.
It came about in Ontario because, under the provincial legislation creating the Ontario Wheat Producers' Marketing Board, the producers in that province have the right to vote. That right is not presently in the Canadian Wheat Board legislation. Bill C-4 enshrines the right to vote in the legislation and, therefore, Bill C-4, either as it is presently drafted or as it would be amended as I have described it, would contain that right to vote so that farmers in the west would have the same decision-making authority that farmers in Ontario presently have under the Ontario Wheat Producers' Marketing Board.
The Chairman: I would just emphasize again that I do not feel the bill is at all enhanced by leaving the inclusion-exclusion clause in because there is tremendous nervousness and there is a polarization of the camps on this issue. That is not good for the Canadian Wheat Board or for the industry. That is very important and I will leave it at that.
Senator Stratton: As you are aware, we spent two weeks travelling to six different locations across the Prairies, and the divergence of opinion was quite remarkable. It was really quite interesting to watch the play of opinions and emotions as we travelled. The one thing that came through abundantly clearly, at least to me, was that while the Wheat Board has done a remarkable job over the years, that indeed it is now time for a change. I admire you for taking on the challenge because I do not know how you satisfy anyone in this particular instance. I defy you to try to satisfy everyone. It is just not possible, so you try to do the best job you can. I understand that.
However, I saw consistently that the Wheat Board today is not held in very high esteem insofar as trust is concerned. It is deemed to be inward-looking, highly bureaucratic and not open to adaptability and change, which are required in today's world. That really was consistent as we went across the west.
That is not to say that some folks did not have total faith in the Wheat Board. But everyone would say that there are problems and that is why we had discussions over five issues: the CEO and the board; the contingency fund; the exclusion-inclusion clause; the choice, as the Ontario Wheat Producers' Marketing Board has just done; and, the Auditor General.
Before I get into the trust issue, I wish to say that no one around this table, at least from what I have been able to see, has disagreed with your mix of the board: that is, the five appointed and the ten elected. I believe we all recognize the need for that to be there at this time, in my opinion, anyway. It is this trust issue that really is fundamentally at the root of this whole thing. That is why we have had a great deal of trouble trying to wrestle with this, as I know you have.
There are three or four items that could help immensely with this trust. I know and understand that you have covered off most of them already. But in my opinion, just for that sake of trust, the Auditor General should be instructed by the board to come in and do a performance audit; not at the choice of the board but at the choice of the farmers themselves. In so doing, the board will be off on the right foot. If you give the board the choice and they choose not to do it, then the board will have trouble with trust within the farming community. If the Auditor General comes in and does a performance audit, then that trust would grow immensely because at least the Auditor General is deemed to be an independent observer of what transpires in the Wheat Board.
Second, there is the CEO issue. I know and understand that the CEO would be selected by you and that the board would need to agree with your selection of the CEO, but again, it is this matter of trust that must be there. The CEO cannot operate without the trust of the board. I believe that firmly, but once having lost that trust, does the board have the power to recommend to you? Would you remove that CEO at the recommendation of the board? That is a clear trust issue again. If it is implied in the bill, it should be clearly stated and understood in the bill so that farmers know and understand that that power is there. That is the second item.
Item number three is the contingency fund. While I agree with your purpose for it, I believe that the contingency fund should have a cap because, once again, we are dipping into the pockets of the farmer. We must limit the amount that the contingency fund has, again, for the purpose of trust. You are saying you will only dip so much and then stop and clearly state why you are doing it.
I will now address the exclusion-inclusion clause. We are getting down to the two tough issues now. Inclusion-exclusion, again, is simple trust. I understand completely why you are doing it. However, a canola grower or an oats grower has a real problem with the thought that he could be included under the single-desk selling of the Wheat Board. For that reason alone, I would like to see the exclusion-inclusion clause gone. I feel that if the board changes, then that can be remedied in the future quite easily. But fundamentally right now, this whole issue boils down to a question of trust. That is the critical element in this.
Lastly, there is this issue of choice. This is the most difficult one of all. It may have been able to be handled had the Ontario Wheat Producers' Marketing Board not made the decision, at the recommendation of the delegates, to allow this opting out or exporting choice. Again, farmers' perception is the problem. The farmers, while deep down they understand why this is occurring in Ontario, will still say to you that if it can happen in Ontario, it must be able to happen out west. They demand that we give them that choice to decide for themselves. I think that if you do not do that now, we will indeed have a lot of trouble as a result of that decision of the Ontario Wheat Producers' Marketing Board. I cannot see winning on this issue. My fear is that we are looking at a great deal of trouble if we do not allow this.
You can say that the board itself can make that decision and that the permit holder will vote on it. We have seen the folks in northern Saskatchewan who are in favour of single-desk and the folks in southern Alberta who say, "No way. We want that choice." We are pitting, within the Prairies, one region against the other. I fear that, in doing so, we will have problems. Saskatchewan, which produces the majority of the wheat, will control what occurs in Alberta and Manitoba, just because of the sheer dominance of the number of seats they will have on, and the makeup of, the board. That fundamentally bothers me. If our role is to represent our region and to protect the rights of minorities, I cannot see how we can allow no choice and feel we have done our job.
I have gone on for quite a bit and covered all my topics, but perhaps you would like to respond to what I have said.
Mr. Goodale: Senator Stratton, you are certainly correct when you say that some of these issues are very difficult circles to square, given the sharply polarized opinions among different groups of farmers. They hold their perspectives on these issues deeply, and there often appears to be very little room in which to find some common ground. I appreciate your acknowledgement that these are particularly difficult issues.
I believe it is possible to accommodate your point about some participation by the Auditor General within the by-law-making authority that already exists, specifically the one that refers to demonstrating accountability. It seems to me that that would be the point of some kind of performance examination by the Auditor General. The board of directors would be perfectly open to seek that external, professional expertise, or any other.
The principal issue with respect to audit matters, it seems to me, is ensuring that, in its legitimate activities on behalf of farmers, the Canadian Wheat Board is not in some way put at a competitive disadvantage vis-à-vis its international competition. It is important for that competitive point to be borne in mind.
The whole idea of much of this legislation is to ensure that farmers are, if you will, getting value for money in the way the Wheat Board performs. That is what accountability is all about. The board of directors would, under this legislation, have that flexibility to exercise.
On the issue of the power to recommend the removal of the president, perhaps the point in the legislation is not sufficiently clear. Those matters are dealt with in the section on the by-laws and not in the section dealing with the appointment of the president. Perhaps some way could be found to draw that linkage more clearly. Clause 3.09 talks about how the president is appointed only after consultation with the board of directors, but it is under the by-law-making power that the directors are given the authority to perform a periodic review of the performance of the president and to determine the manner in which the board may recommend to the minister the removal of the president. The by-laws establish the authority to pay the salary. Perhaps we should print it in bold print or something to make it abundantly clear that it is there.
Senator Stratton: The perception is that it is not there. That needs to be clarified.
Mr. Goodale: As for placing some kind of cap on the contingency fund, that recommendation is virtually universal. Again, the appropriate vehicle to do that would be the regulatory power, and your advice on the number would be helpful. Some farm organizations have talked in terms of perhaps $30 million. Others have suggested something in the order of $50 million. Perhaps that is too high or too low, but your thoughts on the best number to choose, by way of regulation, would be helpful.
On inclusion-exclusion, senator, I think my proposed amendment deals with the point. It would remove the clause on inclusion; it would remove the clause on exclusion; and, it would enshrine the democratic right of farmers to vote if ever anyone proposes to tinker with the mandate. That accomplishes two things. It removes any explicit procedure on inclusion-exclusion. In other words, it leaves the law unchanged on inclusion-exclusion. It adds an additional test about the democratic vote, if ever anyone in future proposes to do something. I think it deals effectively with the angst to which you referred.
The matter of choice is a difficult conundrum. For some, marketing choices, the voluntary Wheat Board, the dual market, as they describe it, is simply the achievement of a quite normal freedom or flexibility that anyone would like to have. Others see it as a major loss, a constraint, a straitjacket. Accommodating both those perspectives is a real challenge.
I believe the appropriate way to do this is to leave that matter for the two-thirds elected board of directors to determine. It seems to me that it would be a bit pre-emptory, on the eve of a major renovation of the Canadian Wheat Board, which will democratize the governance, establish new lines of accountability, provide new flexibility tools, and give farmers more empowerment over the mandate of the board, for the minister to say, "But just before we get to that democracy stuff, I will make a last-minute, fundamental change."
It would be most appropriate to invite the new board of directors, duly installed in office, to consider those issues related to longer-term choices. After all, they will be elected to make those sorts of decisions.
Senator Spivak: Mr. Minister, I should like to ask you to begin with a rather broad question. One of the things that has been pointed out to us is the issue of the continued Canadian presence in grain marketing. Certainly the chairman is aware of it, and I happened to see a program on television last night that addressed this subject.
The program seemed to suggest that we have had a dramatic influx of companies, ADM and Cargill, for instance, and that they are coming here under the assumption that the Wheat Board will not be a major factor.
I know that you have introduced this bill to enhance and sustain the Canadian Wheat Board. I also assume that the basic reason for that is to ensure that producers' incomes are what they should be. I have a further question about that. However, are you confident that, with this piece of legislation, the Canadian Wheat Board will be maintained in the face of what is an increasingly dominant market share by these companies, in view of the state trading agencies at the WTO? We know the lobbying power of those people with dominant market share in the world markets. Is this area being addressed?
I am curious as to why it is that net income has not risen at all, while producers' gross income has risen substantially since 1971. Why would we want the source of the contingency fund to come from the farmers' check-off? This is indeed a political situation. Why would you want to give the people who oppose the Wheat Board, for valid or ideological reasons, another stick with which to beat it in terms of public relations? However, the question is really one of income. Why should farmers be burdened in a situation where the producers' incomes are certainly not rising at the same level as all of the other people in the industry? Why should they be faced with a check-off?
My other concern is the question of choice. I know there are people who think that this is a very important issue. I believe this is an issue where you are either pregnant or you are not; you cannot be a little bit pregnant. At what point does the question of choice mean that the three pillars upon which the Canadian Wheat Board is based will fall and the choice is not to have a Wheat Board? The people who speak about choice say they still want to maintain the Wheat Board. However, is this really ingenuous? Could you comment on those three issues?
Mr. Goodale: On the matter of Canadian competition with major international grain companies, that has always been a major challenge for Canadian farmers. It was one of the reasons why the Canadian Wheat Board was created in the first place. Over the course of the last 50 years, much has changed in Canadian, North American and international markets. Clearly, there is an increasing presence in the Canadian market-place of new international companies. Cargill has been here for quite a while, but more recently ADM and ConAgra have established a presence. As you point out, Cargill has expanded.
All of that notwithstanding, I am confident about the future. I look at what the Canadian Wheat Board has accomplished over the years in the face of that very intense and intensifying global competition. In Canada, we produce 6 or 7 per cent of the world's supply of wheat and barley, yet we occupy an international market share in the order of 20 per cent. A number of factors contribute to that, not the least of which is the quality of the farmer's product, which the Canadian Grain Commission polices. However, part of the reason why we are successful in occupying market share relates to the effective work of the Canadian Wheat Board, internationally and consistently over time.
I believe this proposed legislation will equip the Wheat Board with the governance, accountability, flexibility and market innovation tools that will allow it to continue to succeed in the international marketplace in the face of the tough international competition that will undoubtedly continue.
You quite rightly point out that there is a major challenge on the horizon in terms of the next round of international trade negotiations. The United States will no doubt be going after state trading agencies. I would not want anyone to think I am saying something about them behind their backs, because I say it very directly to their face. I say two things to the Americans: First, if we are going to talk about state trading agencies, let us talk about theirs, too, not just ours. It calls them by other names, disguises them in very fanciful ways, but the United States, bless its heart, also has state trading agencies. Let us have a full discussion of the whole scope of this matter and not just point the finger at Canada. Second, I want the U.S. to give me a documented case where it can demonstrate that the Canadian Wheat Board has been unfair in the international marketplace. I want it to give me one shred of evidence, not rumour, innuendo, anecdote, guesses, hopes, fears nor wishes. I have been saying that since 1993 and I have not received one documented case from anyone in the United States to prove the argument that they try to make.
I make the point that they will raise the argument. You may bet your boots that I will be defending the Canadian side of this case with every ounce of effort that I can muster. I believe we have truth on our side.
On the source of the contingency fund, any form of check-off is bound to be unpopular. I refer to the Western Grains Research Foundation. It is a very modest check-off for a very laudable purpose, the research of wheat and barley, that has the potential over the next 10 years to have a payback in terms of better returns to producers in the order of hundreds of millions of dollars. This body is endorsed by every conceivable farm organization in Western Canada from the wheat and barley growers on one extreme to the NFU on the other extreme and every farm organization in between: all 15 of them that form the coalition that supports the Western Grains Research Foundation. Even that check-off is enormously controversial. I understand your point about how delicate a matter this is.
That really speaks to Senator Stratton's point about some form of cap, so that farmers will know the outside limit of their exposure. I should also make the point that the legislation does not insist that the contingency fund be funded by a check-off.
The Canadian Wheat Board may decide to move gradually toward the establishment of a contingency fund and search for other sources of revenue. For example, as it does have a fundamental guarantee provided by the Government of Canada on its day-to-day operations, it is able to obtain in the marketplace a significant rate of earnings on its interest rate exchanges.
That is revenue that comes from prudent money management, not directly from the sale of a commodity. There is a rate of return, in effect a profit, on the money exchanges. It might be that the Canadian Wheat Board would say that they will choose this source of revenue to accumulate over a period of time a contingency fund that would be significant, without having any form of check-off. However, I am sure 10 elected directors will be acutely aware of the sensitivity that you have just referred to because it is a sensitivity that is shared by all farmers.
On the issue of choice, you put it pretty dramatically and probably accurately. Can you have a little bit of both? As you put it, can you be a little bit pregnant or is it fundamental that you must be one or the other? I personally believe there is considerable force in the argument that you have raised. I know other farmers disagree with my point of view. I am simply saying, in dealing with that issue of choice, that the appropriate place for the discussion to be resolved is among the board of directors and not among politicians, as well-meaning as we may be. It is really not our choice to make. That should be the farmers' decision through the board of directors.
Senator Fairbairn: I have a short supplementary question. Mr. Goodale, would you either elaborate or underline the point regarding the contingency fund and the three areas in which it is to be used. There are only three, as I understand it. Only the board of directors of the Wheat Board decides whether it will be used at all. Is that not correct?
Mr. Goodale: That is correct. Yes, that is a board decision and this is interconnected to the contingency fund issue. The contingency fund is there for those three flexibility purposes. The existence of the contingency fund depends upon whether or not the Wheat Board's directors decide to make use of those flexibility tools. They may decide that for some period of time they either do not need them or do not want them or would prefer not to exercise them. If they make that choice, then there is no need for the contingency fund to back up something that is not happening. Very clearly, the law says there are three purposes and three purposes only for the contingency fund: cash trading, early pool cash-outs and expedited adjustment payments. If the Wheat Board decides to exercise those tools -- and when I say Wheat Board, I mean the board of directors -- they would need to have the appropriate back-stop in the contingency fund. If they choose not to exercise those tools, then they would not need any contingency fund.
In fact with one of those tools, expedited adjustment payments, I would be inclined to think that only a very small contingency fund is necessary because never once in its history has the Canadian Wheat Board made a mistake on an adjustment payment. The risk is virtually nil on that one.
Senator Fairbairn: Is it valid, when forming such a fund under the control of the Wheat Board, to possibly use sources other than a check-off with farmers?
Mr. Goodale: Yes, I believe that is completely valid, senator.
Mr. Chairman, the Canadian Wheat Board's annual report was published two or three weeks ago for the last crop year. It might be a good thing, once you are through with this legislation, to invite the board and its auditor to appear before your committee to go through its existing accounts, to examine not only how well it has performed in the last crop year but where it may have flexibility in making future decisions within its present structure.
Senator Spivak: I would just like to get this clear. Does that mean that it is perfectly legal for them to use the money they make on their borrowing power to set up a contingency fund? It seems to me that Mr. Hehn told us they returned $80 million to farmers last year. Is that correct? Is that legal?
Mr. Goodale: Under Bill C-4, it would be. The clauses that create the contingency fund would provide that flexibility.
Senator Hays: I have three questions. I will ask them quickly because I know others have questions. One is a request for an elaboration on what you were referring to when you indicated that the board might enhance its accountability. It is, after all, accountable in that ten of them are elected, but some are not. I am not sure what you were getting at there. I feel it would be helpful if we could have an elaboration on that.
I will speak of the issue of the contingency fund and the things that it can be used for. The other side of that question is that when I hear people support the board and dual marketing at the same time, I hear a group of people who think that the board will evolve into a grain company. Without saying that that would be good or bad, it seems to me that is one of the things that the board might evolve into. I know how strongly roughly half the people we heard would feel about that as being bad, in terms of losing the monopoly, the single-desk aspect of the board. The other half would not care. If they got more money from them, then that would be good. If they did not, they would go to someone else.
In terms of the other side of the cash trading question, I would appreciate a comment on that, in terms of how the board would evolve. After all, this bill, which I think is a good bill, although it is not necessarily a perfect bill, is a way of seeing that happen in a way that is responsive to the people that the board serves, namely the producers.
The last and most important question to me is on the board elections and the place from which the elected board members come. You have given us a proposal. You have constituencies of roughly equal size and you have given us two options by way of the drawings used for the advisory committee. When I look at these two options I see, in option one, three of the ten board members being elected from constituencies exclusively in Saskatchewan. In option one, two more will be elected from constituencies that have a majority of farmers in Saskatchewan. That is, if I read these little dots correctly, which I assume are an indication of population. I could be wrong on that. Option two has three board members elected from constituencies wholly within Saskatchewan. There are other constituencies which, by my reading of the map, would have a majority of farmers in Saskatchewan.
You have already commented on this issue to us. You have said that because these constituencies cross borders and because the people are elected to serve farmers' interests, not the interest of their province, that this is probably not something I should be concerned about. Perhaps you can give me some additional comfort in terms of this not becoming an aggravating problem for the board in its very difficult task of taking it into the future and probably into something different than it is now.
Mr. Goodale: On the issue of accountability, clause 3.05(b) is worded in such a way as to encourage this new board of directors to be creative and innovative in thinking through and implementing all of the various ways by which they can be not only accountable but also ways in which they can demonstrate their accountability. It gets back not only to your point but also the trust argument that Senator Stratton made at the beginning, which is a very important point.
There are the traditional ways by which directors deal with accountability: annual reports, audit procedures, annual meetings. It may be that the Canadian Wheat Board would need to have more than one annual meeting, or perhaps a virtual annual meeting, where the modern technology of the Internet is used to make the annual meeting accessible to any farmer who wants to tune in to the information highway. Annual reports and audit procedures are already there. It would be possible, under these accountability provisions, for the board to commission external examinations of its operation -- performance appraisals by either government agencies or non-governmental agencies. It could, for example, have a by-law, presuming Parliament would agree, specifying that, on an annual basis, the commissioners and the executive officers and the auditors of the Canadian Wheat Board would appear before this committee or the corresponding committee in the House of Commons, or both, to demonstrate accountability. That power exists right at the very moment. It strikes me as a bit odd that, as far as I know, never in the history of the Canadian Wheat Board has its auditor been called to appear before a parliamentary committee. Perhaps if that had happened on a regular basis over the last 50 years, there would not be the kind of angst that exists today. Who knows?
The ultimate accountability, senator, is the electoral process, obviously. However, a variety of other instruments exist that we are inviting the new board of directors to consider and implement so that farmers can have the satisfaction of seeing that accountability in action. We have deliberately not circumscribed that section by any limitations. It is very broadly worded:
the holding of annual meetings and any other method by which the board may demonstrate its accountability to producers;
On your point about the gradual transformation of the Canadian Wheat Board for the future, fundamental differences exist between an ordinary grain company and a single-desk marketer. In some of the debate about dual marketing, those fundamental distinctions get a bit blurred. This relates back to Senator Spivak's point about being a little bit of both: Can you be a little bit pregnant, or must you be one or the other?
There are a number of practical difficulties in contemplating the transformation of the Wheat Board gradually over time into an ordinary grain company. One of those is physical infrastructure. In terms of the Wheat Board assets, it essentially owns its building in Winnipeg, and that is about it. It does not have a rural infrastructure, so you are immediately presented with the problem of how it would collect grain. Could it lease facilities presently owned by what would become its competition? That becomes a little problematic. If you are a Sask Pool elevator manager and have the new ConAgra facility right across the road and must decide today whether to buy grain on account of the Wheat Board or to compete with ConAgra and buy grain for Sask Pool, I think that elevator manager would buy grain for Sask Pool and compete with ConAgra rather than trying to do a favour for the Canadian Wheat Board.
I do not see that transformation immediately on the horizon, senator. However, I say again, in terms of the long-term future, that is something that farmers should contemplate together. It is not a future that should be forced upon them by politicians or by the bureaucracy.
With respect to the map and the electoral process, nothing is written in stone about that draft map that has been circulated for discussion. It is very much a work in progress. If the Senate has some advice to offer on how best to structure this to get 10 electoral districts properly distributed across the Prairies in a way that will be respected as fair and impartial from the farmers' point of view, I would be grateful to have your technical advice. The map that you are looking at is generated by a computer, starting at one corner of the Prairies and working across the basin, trying to get roughly the same number of producers within each zone -- in the neighbourhood of 11,000 to 12,000 -- and taking into account the changes between different soil zones so there is some commonality of producer interest. A manual adjustment was made to the Peace River area of the map -- a departure from the computer model was made simply to make the Peace River area somewhat smaller and more manageable physically, because it is a huge area to try to represent. However, I am wide open to your advice on how best to draw this map.
Senator Hays: Four directors will be appointed by the minister. I imagine they are order-in-council appointments at pleasure. Could you give us some indication of the criteria to be used in selecting candidates to fill those positions? Will they represent other stakeholders in the grain sector -- such as consumers, transportation, and so on?
Mr. Goodale: Senator, I presume that the good judgment of farmers through the electoral process will provide the breadth and depth of producer representation that would be required by the new board of directors, including the geographic distribution issue. It may be that the Canadian Wheat Board and farmers could benefit from additional expertise being a part of the directors' deliberations. I have in mind searching for board members with financial expertise, legal expertise, international trade expertise, and marketing expertise. I will be looking for that kind of criteria. I would think that one could expect the producer representation to be adequately dealt with by election, and then it is the value-added to ensure that, around that table, there is a good, solid, knowledgeable group of people who can conduct a $6-billion business and do it successfully on behalf of Western Canada and Canada as a whole.
The Chairman: Before I go to Senator Ghitter, I would like to make one brief statement. From my understanding, the greatest concern of the farmers is that while the grain companies are making record profits under single-desk selling they are getting less for their product, and they cannot understand why. When they compare what is happening in the U.S., they cannot reconcile why they are receiving less, to the point where it does not pay them to produce wheat. They cannot recoup their input costs when they are looking at a wheat price of less than $3 a bushel. The Americans are getting much more for their grain, and our farmers simply cannot reconcile that. I would suggest that this is a critical situation that is facing the Canadian Wheat Board today.
Mr. Goodale: Mr. Chairman, there is no question that the cost-price squeeze issue is very much a reality in agriculture on the Prairies. Farmers are right to be both concerned and agitated about that situation.
The Chairman: At the same time, Mr. Minister, the Saskatchewan Wheat Pool is showing record profits. In response to the question, "Why are the grain companies coming in?", the answer is that they are making big money in Canada. The farmers can tell you they are not making a profit. That is a major concern.
Mr. Goodale: Mr. Chairman, I see how that very real problem and concern leads to a very animated debate about marketing systems. I can certainly understand how that flows one to the next, but the conclusion is not necessarily true that if grain companies are profitable, therefore farmers will be profitable. That is a non-sequitor and perhaps may be contradictory.
I see the source of the problem. I am not sure that I would necessarily agree that a non-board system is the solution to the problem. Again, that is a personal opinion. For the future, that judgment should be made by farmers, not the political process.
The Chairman: That is the reason that I think this bill is very important, to deal with some of these problems before the situation explodes.
Senator Ghitter: Minister Goodale, I should like you to respond to the position -- which impressed me -- taken by the Government of Alberta when their provincial minister came to the committee. It has to do with accountability and your use of the term "democratization."
The Alberta government would take the position that there is little democratization in this bill. There is more accountability, but the accountability is to the federal government not to the producer. As an example, in a particular region, the person who is elected to the board theoretically represents the producers who elected them. However, in terms of the board -- meetings, et cetera -- the board member must comply with the act. Therefore, that board member is hand-cuffed in terms of what he or she can do, how much flexibility there is, in representing the producers. For example, the producers may wish them to speak in terms of alternatives for marketing of wheat and barley. However, under the act they cannot do that; all they can do is pass by-laws and do regulatory things. We are so limited by the act that to call this bill a democratization is hardly realistic.
I would like your comments on that because it seems to me that you are putting your directors in a position of conflict. The conflict lies in the fact that they cannot really represent the people who elected them, who may want something very different than the act allows. I have trouble with terms like "accountability" and "democratization," and I know the Government of Alberta does as well. I should like you to respond to those questions.
Mr. Goodale: Senator Ghitter, I understand the point you are making. However, with the greatest of respect, the Government of Alberta is just dead wrong on that point.
Senator Ghitter: That has never happened before.
Mr. Goodale: Some of us could think of an example or two, but let us not saw that log too deeply.
Never before in history has there been any opportunity to elect anyone to anything in the Canadian Wheat Board. This legislation provides for that for the first time. It is not one, two or three members, but two-thirds of a board of directors -- which is obviously a controlling position.
In addition to that, all of the powers of the Canadian Wheat Board are vested in those directors. The legislation is very clear: In empowering the directors with the power and authority of the Canadian Wheat Board, that authority is vested in those directors.
This legislation provides more democratization and more authority in the hands of farmers than has ever existed. It escapes me how the Government of Alberta can characterize this as more power in the hands of the federal government. It is a very significant divestiture of power and, in some cases, a very major sharing of decision-making authority. The directors will be able to give consideration to any matter that they consider to be legitimate. Their agenda will be determined as a result of their judgment, not the judgment of the government.
Senator Ghitter: Mr. Minister, that is not quite true, because the bill does say in proposed subsection 3.12(2) that they shall comply with the act.
It is not like a regular corporation. In a regular corporation, the board of directors has the power to do whatever it wishes, in the interests of the company.
Mr. Goodale: They must comply with the Canada Business Corporations Act.
Senator Ghitter: That is very broad. Bill C-4 is much more specific than just general powers of governance within the legislation.
Mr. Goodale: The authority of the directors is to exercise every power of the Wheat Board. If an argument is to be made that a fundamental power, such as what the Wheat Board markets, for example, should be changed, as the law presently stands there would need to be an amendment to the act.
I am proposing, in the way Bill C-4 is presently drafted, to let farmers decide that for themselves under the inclusion-exclusion clause. Alberta comes right back and says, "Well, take out the exclusion and inclusion clause." That is removing power from the board of directors and putting power back in the hands of the government. Alberta should decide which one it wants. Does it want power in the hands of farmers? If so, then have the inclusion and exclusion authority there and farmers will decide. If it wants inclusion and exclusion out, then power is being vested in the hands of the government. It is one or the other; either you have power or you do not.
The Chairman: In fairness, Mr. Minister, is it not true that the courts did not allow Alberta to opt out?
Mr. Goodale: That matter is still before the courts.
The Chairman: It is still before the courts, but the indication is that, as a province, they do not have the authority to opt out.
Mr. Goodale: The Government of Alberta does not, no.
Senator Taylor: What kind of confederation do we have, then?
Mr. Goodale: If you are proceeding to constitutional authorities, could I beg to go to the cabinet meeting? It is just about ten o'clock; I am afraid I am running out of time.
Senator Whelan: Does the minister have to leave?
Mr. Goodale: Unfortunately, I do. There is a cabinet meeting that I am expected at in about two minutes.
Senator Whelan: Are you going to come back someday soon? I have 40 questions for you. I mentioned to some of my colleagues that the Manitoba Pool's presentation -- and I am just reviewing it again. The biggest concern that farmers have -- and they are blaming the Wheat Board for this -- is the low return they receive for their product. It is an international thing. The subsidies that American farmers are still receiving, to which Mr. Hehn alluded, the subsidies that the farmers are still receiving in Europe, et cetera, they are increasing their production but they have not stabilized their production.
When I read more of the Manitoba Wheat Pool brief, I read their suggestions about accountability, about electing the directors and making sure that the elections are staggered so that not all 12 are elected at one time. For example, have the board draw numbers so that it is broken up into thirds for the first appointment. If I were the minister in charge of the Wheat Board, I would recommend to the committee to accept this recommendation and forget all about the rest because they have done a tremendous job. I suggest that the members of the press who are here today read the Manitoba brief too, because they represent 16,000 people. The Minister of Agriculture from Saskatchewan, for example, who has come out in support of the bill, has made minor suggestions for change, but urged passing of the legislation.
I said it out west, I say it here: I am for single-desk selling; I am not for dual options. The Ontario plan will be a complete failure.
Mr. Goodale: Let me say, on the initial points that Senator Whelan was making about the Manitoba pool recommendations on staggered terms for directors and so forth, that we intend to accommodate all of that within the regulations governing the electoral procedure. If Senate were to make a recommendation about how to properly stagger the terms, and so forth, to make sure that representation was proper, I would be more than happy to have that advice.
Senator Andreychuk: Mr. Minister, I believe the questions have been fairly put about the immediate difficulties and the conundrum that you face, and that Canadians face, between two opposing views of the direction in which the grain industry and its marketing internationally should go. I believe we have talked about the question of choice. My dilemma is that you could not solve this issue, I do not think this Senate can solve this issue, as you can see, and you are now pushing this onto the Canadian Wheat Board. Not only do they have a massive task of selling, but they now must have all the politics, and you say that it is rightly in the Canadian Wheat Board's hands.
My concern is that while they are grappling with this difficulty of where the Canadian Wheat Board should go vis-à-vis inclusion, exclusion, the options, the directions they should take, and so on, the election of the board members, particularly as it relates to farmers, will be skewed to where they stand on those issues. As a result, the Canadian Wheat Board will be politicized on an issue that perhaps should be resolved. Much of it is trapped in the transportation issue.
I wonder why some of the directions were not set by the government in an agricultural policy, why they were not wrestled down. Bill C-4 has the potential of either destroying the Wheat Board, if one camp wins, or not giving the options and the choices that the other farmers want. It must make a choice. The bill does not make the choice and the issues are still left open. This is making the Western Canadian issue more divisive; it is not facilitating it. I wondered if you could comment briefly, as to how we get ourselves out of this bind and how we reinforce the Canadian Wheat Board to perform its legitimate role.
Finally, by bringing this proposed legislation forward at this time, with all the question marks that you say will sort themselves out, we are approaching the World Trade Organization and we did not do very well in the past in putting agriculture where we could. We simply do not have a good bargaining position against the Europeans and the Americans, but we could defend at least the Canadian Wheat Board's record, as you have pointed out, and it is an excellent record. How will we be able to defend something that has not even started yet but has all these question marks in it? Will we not lose ground in our next round at WTO?
Mr. Goodale: In terms of the transportation-related issues that you referred to, all of those are, quite frankly, properly at the moment before Mr. Justice Estey for his review from farm gate to port. Every element of transportation, including the Wheat Board's role in transportation, is within Mr. Justice Estey's purview. I believe that we are all hopeful that by the end of this year he will make some recommendations that will help to unsnarl some of this system that has been so problematic in the past. He is not examining grain marketing, he is examining grain handling and transportation.
Senator Andreychuk: They go hand in hand.
Mr. Goodale: His mandate clearly draws the distinction between the two. He will take a look at any administrative function of the Canadian Wheat Board that relates to transportation, which is quite a different issue from marketing systems. You make the point, quite rightly, that these are divisive issues. Unfortunately, that just seems to be the nature of the beast and has been so for at least the last 25 or 30 years that this debate has been going on across Western Canada. There probably is no perfect forum within which to resolve this kind of a controversy.
Getting back to Senator Stratton's original point about trust, where can these issues be resolved in a way that farmers can trust? Is it in a political arena like the House of Commons or the Senate? Probably not. Is it within or among some of the farm organizations? Given the bitter disputes between some of the farm organizations, that may not be the best forum. It seems to me that the greatest likelihood of success is to be found around the board table, where people are conscientiously trying to discharge their fiduciary responsibilities as directors of a $6-billion enterprise, with two-thirds of those positions occupied by elected farmers.
Senator Andreychuk: My concern is that while they are solving that -- and they may be better and more skilled than you and I in solving that -- it will deflect them from their mandate -- that is, marketing. I had hoped to bring farming expertise to that area. I would ask you to reflect on that.
Mr. Goodale: I understand your point, that we are asking these directors to do a great deal, no question. They are assuming an enormous responsibility for ordinary, routine administrative matters and for broader questions of jurisdiction and so forth. That burden on those directors will be significant. There is absolutely no question about that. That is why I have emphasized the importance of getting the electoral process right so that people can have confidence in the format by which these people get chosen.
It is also important, in response to Senator Hays earlier, that when the government selects its directors, the ones that it would appoint, that political considerations go to the bottom of the pile and that competence, expertise, and ability to function on the board of a $6-billion enterprise come to the surface.
It will be very much that kind of attitude that I take into the selection process for those additional directors. At the end of the day, we will have a solid core of 15 people who can run the Wheat Board successfully.
On your final point about the WTO, quite frankly, the last round in 1993, and in the seven and a half years leading up to 1993, it was a difficult process. I do believe that, at the end of the day, it was a successful process for Canada, including agriculture. When I look at the statistics today, from 1993 to the present time, our agriculture and agri-food sales around the world have increased by more than 50 per cent. In 1993, they were $13.5 billion; in the last year for which statistics are available, they had increased to more than $20 billion. We have done very well under these trade agreements. That is not to say that they are problem-free; they are not. Flare-ups in relation to issues like grain are particularly problematic -- which all goes to show that we do well under multilateral arrangements, but we must be vigilant, stay on the edge of our chairs and take nothing for granted, and concede not one inch to the competition.
Senator Andreychuk: My final point would be that we have a real problem with your new concept of a mixed corporation. I raised that with your officials, as to where the accountability will lie. What is this new creature that you have created? There will be a field day, as well as a deflection of attention, when it comes to determining where the accountability rests and where the legal redresses lie in this process. It is somewhat a government structure and somewhat a private corporation. Much energy will be required in the determination of the reality of this new corporation.
Mr. Goodale: Senator, I do not deny for one moment the difficulty of some of these new challenges. That is the nature of making change.
We have had a situation that has been more or less the same for the better part of 50 years. It is obvious that the status quo is a situation with which a number of farmers are uncomfortable and dissatisfied. In these circumstances, it is not an adequate response on the part of government to say that we are nervous about change therefore we will not make any change and just go back and make the status quo work. Clearly, farmers are not prepared to do that.
I believe the majority of farmers wish to retain the strengths and advantages that a wheat board system provides. At the same time, they want that system to be more democratic, accountable, flexible and agile with greater authority in their hands to shape it the way they want it to be for the future. That is change, it is unsettling. The future is not entirely predictable, however, facing that era of change with creativity and innovation and a real determination to do the right thing is far better than resisting change. The absolute resistance of change would result in the crumbling of the institution that those who oppose change seek to defend. We must manage it very carefully.
Senator Andreychuk: I would support making change and that is being addressed in this bill. However, we are also making change to the fundamental lives of individuals in Canada. Therefore, I do not think we should be taking calculated risks; we should be taking very reasoned risks.
I hope your officials will begin to address where this corporation fits in. Under which act will it be governed? It will no longer be the old Wheat Board. Where will the redress lie? The unknown makes farming difficult. In farming, the unknowns used to be: When will it rain? When can I take the crop off? The interpretation of a section or an act was not one of the unknowns.
I laud you for the changes. I am just sharing a worry: that we are not only instituting change but an awful lot of untested new ventures; and that there is no comfort zone in going to the law or to past practice to give us some assurance that we are headed in the right direction.
Mr. Goodale: In a new area like the ones into which this new legislation ventures, it is difficult to try to anticipate and cover off every eventuality.
You are right to flag some of the uncertainties that come with change. As much as possible, we have tried to provide a framework of certainty. The best example of that relates to the government guarantees that are provided for in this legislation. When directors to the Canadian Wheat Board become elected, and their commissioner predecessors are no longer entirely appointed by government, the Wheat Board's status within the various agencies of the Government of Canada changes. It will no longer be a Crown corporation with the status of an agency of Her Majesty; it will be this new creature called a mixed enterprise. We had to deal with how do you provide the same level of guarantee to a mixed enterprise that the former Canadian Wheat Board would have automatically, by being an agency of Her Majesty. We decided that the only way to do it is to write the provision into the law.
You will find in Bill C-4 the explicit provisions of how the guarantee would work. That is an area that was previously largely covered off by precedent and practice in relation to an agent of Her Majesty. Since the Wheat Board is no longer an agent of Her Majesty under this legislation, we had to deal very explicitly in the law with that uncertainty or unknown element for the future so that it is clear. The initial payment guarantee, the general borrowings guarantee and the credit sales guarantee are there. That is a unique provision among federal statutes. I do not know if you will find a precedent for that. Why it is there is to directly address the question that you have just raised, covering off, as well as we can anticipate them, all of those uncertainties that change necessarily entails.
The Chairman: I wish to thank the minister for appearing this morning. As you can see, there are still many unanswered questions.
Senator Whelan: I just want to say that I think what has happened here is very unfair -- that 20 minutes have been spent in answering one question. Mr. Minister, you were scheduled to leave at 10:00 o'clock. I am not going to be easy to get along with on this piece of legislation.
Mr. Goodale: May I come back to specifically answer Senator Whelan's questions?
Senator Spivak: Sure.
Senator Fairbairn: Yes.
Senator Whelan: I have spent my whole career in agriculture. I have also spent a significant amount of time in Western Canada. I have some strong feelings about what has been said before this committee. I would like if the minister could come back for an hour.
Mr. Goodale: Mr. Chairman, I would ask my office in consultation with you or the clerk to see if we can find perhaps at the beginning of next week an hour where I could come back to try to finish the conversation. I would be happy to try to do that. I know time is a problem, however, I would be pleased to try to accommodate another hour on the schedule, if we can find it.
The Chairman: We will be going in camera immediately following this meeting; we can discuss that possibility and get back to you.
Mr. Goodale: I would like to ensure that all senators, and especially Senator Whelan, will have an opportunity to ask questions.
The Chairman: Thank you, Mr. Minister.
Honourable senators, I require a motion that the committee proceed in camera for the purpose of discussing the draft report on Bill C-4.
Senator Stratton: I so move.
The committee proceeded in camera.