Proceedings of the Standing Senate Committee on
Agriculture and
Forestry
Issue 15 - Evidence
OTTAWA, Tuesday, May 7, 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 9:05 a.m. to give consideration to the bill, and to consider a draft budget for the Subcommittee on the Boreal Forest.
Senator Leonard J. Gustafson (Chairman) in the Chair.
[English]
The Chairman: Honourable senators, our first order of business is the draft budget of the Subcommittee on the Boreal Forest.
Senator Nicholas W. Taylor, Chairman, Subcommittee on the Boreal Forest: The draft budget has been circulated. The subcommittee is asking for professional services of $25,000.
For reporting and transcribing, we feel that $10,400 is a fair amount.
As we will be travelling to Quebec and the Miramichi, bilingual interpretation is necessary.
The total for Professional and Other Services is $49,100.
Travel expenses will run around $74,700. We intend to do field trips because many of the forestry problems involve individuals and small companies. We plan to travel to Thunder Bay, the Saguenay and Lac St-Jean area of Quebec, as well as the Miramichi in New Brunswick.
The draft budget total is $125,700. I would ask for the approval of the committee to submit this budget to Internal Economy.
The Chairman: There was some question about the fact that the committee was too small.
Senator Taylor: We enlarged it. It used to be comprised of three members, and it has now been expanded to five.
Senator Hays: I have a question on interpretation services. You mentioned that you will be travelling to New Brunswick and will need interpretation, but if you are holding public meetings, they must all be interpreted.
Senator Taylor: Last year when we toured the west we did not have interpretation.
Senator Spivak: That is because we conducted field trips.
The Chairman: Is it your pleasure, honourable senators, to adopt the draft budget of the Subcommittee on the Boreal Forest?
Hon. Senators: Agreed.
The Chairman: We wish to welcome Mr. Howard Migie, Mr. Marc Bonneau and Mr. Donald Adnam from Agriculture and Agri-Food Canada. We are here this morning to discuss the contingency fund in Bill C-4.
Please proceed.
Mr. Howard Migie, Director General, Adaptation and Grain Policy Directorate, Policy Branch, Agriculture and Agri-Food Canada: Good morning. We plan to cover two topics this morning. The first is the contingency fund, with particular reference to what options are available to the Wheat Board to build up that fund, other than a check-off. The second is with regard to the electoral map. Questions were asked earlier about that map and the provincial boundaries.
In terms of the contingency fund, there are a number of sources from which the board of directors of the Wheat Board can choose to build up the fund. It will be their choice. First, when you have cash trading, you can have gains and you can have losses. In most cases where it has been tried, there has been a slight profit from cash trading operations. In fact, Ontario did that last year when they tried forward contracting. If there are any gains from cash trading, that could go into the contingency fund.
Similarly, if there are any gains from the early pool cash-out program, which the Wheat Board has as an option, they could go into the contingency fund as well.
As a third option, if the Wheat Board were ever to sell assets such as their hopper cars, they could choose to put those moneys into a contingency fund.
The fourth option, which is the most promising, is the one to which Mr. Goodale referred; that is, the interest earnings of the Canadian Wheat Board. In the last annual report, the profits from interest earnings were $85 million. Most of that comes from credit grain sales. In fact, the Wheat Board tells us that over 70 per cent of the interest earnings come from grain sale deliveries made in previous years. Over $60 million was available in the last crop year from interest on previous years' deliveries.
On Tuesday, Mr. Goodale suggested that one option for the board of directors would be to take $10 million or $15 million from that for their contingency fund. There are other ways in which those interest earnings could be used. They could just be a backstop that the board of directors would have during the crop year. If there were no losses, as we expect would be the case, they could pay it out as part of the final payment to those who delivered that year. If there were a loss, they could use some of that to cover the losses.
The wording in the bill leaves it strictly up to the board of directors to decide how big a fund they want to have and which source of funds they want to use. As Mr. Goodale indicated, the main item that has potential for a significant loss is an adjustment. However, we have never had an adjustment. If the board of directors were to give an instruction such as, "Continue with the same risk that you used in the past when you recommended adjustments", there would be need for a very small fund. If the board of directors were to decide that they would like to take a lot more risk and authorize the Wheat Board to put money out faster and take a chance, they would need a larger contingency fund.
Interest earnings is only one option. Its appeal is that it is not taking money away from those who deliver in the current year in the sense that it is not earnings from that particular crop year.
Until now, the Canadian Wheat Board has passed all the money back to those who deliver. Therefore, even if they were from previous years, they have been paid out. It must come from somewhere. That option might be the most attractive to the board of directors.
The Chairman: You are saying clearly that this money still comes from the farmer's pocket, but that it merely comes in a different way.
Mr. Migie: The way in which the bill is drafted leaves no alternative if there is to be a fund. However, if the interest earnings are used as a backstop, when they are not needed they could be paid out as part of the final payment. Therefore, it is not necessary to have a large amount of money just sitting there throughout the crop year. That may have some appeal to the board of directors.
It is still the case that this is at the risk of the farmer, but it would not be a direct check-off on delivery. They could choose a check-off on delivery, but there are alternatives in the bill.
Senator Spivak: Does anything in the bill prevent the government from giving the Wheat Board a one-time grant?
Mr. Migie: I do not think so.
Senator Spivak: Let us say they wanted to do that. They could simply transfer those funds to the Wheat Board as it changes its status. After all, look at the things that were done when CN and other corporations were privatized. All kinds of assets went with them.
Mr. Migie: There is a provision in the bill for assets held by the Wheat Board as a Crown corporation continuing to be assets of the Wheat Board, such as hopper cars.
Senator Spivak: I understand that. However, we are talking about lots of money. There are no physical assets worth many millions of dollars.
Nothing in the bill precludes the government making a one-time grant or establishing a one-time endowment fund which, in fact, may not even be used.
Mr. Migie: However, under the bill, the Wheat Board will retain its current assets, even though it will not be a Crown corporation. That would include assets that are part of the credit grain sales which, in part, allow the board to earn interest.
Senator Spivak: Yes, which are part of the government guarantee.
Mr. Migie: That is right. There is nothing in the bill to prevent it.
Senator Stratton: I wish to refer specifically to the bill. There are two references to "contingency" in it -- clause 7(2), profits that are credited to the contingency fund, and clause 8(1). Are those the clauses which cover the ability to take profits that accrue to the contingency fund?
Mr. Migie: On page 8 of the bill there are two references to the contingency fund. One is to establish it. It says "may make regulations authorizing". In the draft regulations we provided to the committee, we did include a listing of all the sources of funds included in the bill.
You have raised clause 7(2). One change which was put in this bill specifies that if the Wheat Board makes profits from these new tools, they can put them in the contingency fund, rather than having them go to the Receiver General.
Senator Stratton: That is exactly my point. Where does it say the board can do that? I am referring to the bill to try to find the source for that.
Mr. Migie: That is one source. There is another source.
Senator Stratton: That refers to clauses 7(2) and 8(1), as I understand it.
Mr. Migie: There is also a provision in the regulations where we will clarify that they can use really any source of revenue.
Senator Spivak: One of the arguments against a government grant is that it might be viewed as a subsidy by the World Trade Organization. However, it is right in the act here. The relinquishing of that money by Revenue Canada is right in the bill. Is there a way to establish a fund that can be viewed as part of the assets of the corporation, as a one-time fund? Could not the WTO also consider these items as a subsidy?
Mr. Migie: There are no government funds involved. That is the key difference.
Senator Spivak: The practice of the Wheat Board was to turn over the interest from the government guarantee to the farmers, but actually that is government money.
Mr. Migie: Nothing on the government books would express that there is a transfer. It is really that the Wheat Board is able to borrow at a lower interest rate than the interest other companies are paying on those loans.
Senator Spivak: Is that not considered a subsidy?
Mr. Migie: No.
Senator Spivak: What would be the method of establishing a one-time fund? What would be the wording, the terminology? How would you do it? There are many ways of cooking the books so that this would not be considered a subsidy. Do you have such a idea, if it is a one-time fund?
Mr. Migie: Once there is a payment out of the fund, it would be considered a subsidy. If there never was a payment, that might be all right.
Certain types of subsidies are not a violation of the WTO. We are allowed to have certain subsidies. The Canadian Wheat Board is always under such criticism that we have tried to avoid direct transfers to the board.
Turning now to the second topic, the electoral map, several senators have raised the concern that if boundaries are crossed, perhaps some problems will arise. We have circulated the latest map that was developed.
Mr. Marc A. J. Bonneau, Program Analyst, Prairie Farm Rehabilitation Administration, Agriculture and Agri-Food Canada: To explain how we arrived at this map, the grey outline marks the extent of the agricultural zones within Western Canada where about 99 per cent of all producers reside. There are a few in the northern areas, but for all intents and purposes, that shows the main concentration of producers.
This map is actually our sixth version. It is our third option taking into account a number of concerns of producer groups and industry leaders. The benefits from this map are that the boundaries follow agriculture soil zones, and the distances within each of the districts are kept within reasonable travel distances so that the travel issues make sense. I will discuss the data that went into producing this map and the history of its development.
In total, there are about 187,000 permit book holders, of which 116,000 are primary producers. We were not able to locate 601 of those producers. We used postal codes from the mailing addresses used by the Canadian Wheat Board to mail their cheques. Some of the postal codes were either outside the western provinces or could not be located, probably because there was an error in them.
If we divide the 116,000 into the ten electoral districts, we end up with 11,600 producers per electoral district.
This slide shows the provincial splits. We took the primary producers -- PPBH stands for primary permit book holders -- and split them by province. You can see that Alberta and BC have about 31 per cent, Saskatchewan 53 per cent and Manitoba 16 per cent. If we did a direct provincial count, Alberta would have about 3, Saskatchewan 5 and Manitoba would round 2. This would mean that there would be about 12,000 producers in both Alberta and Saskatchewan, but in Manitoba, the figure would be down to 9,000 producers per electoral district.
From our conversations at different meetings, that roughly 25 per cent difference between provinces was outside the comfort range for producers and industry leaders. They were happy with about 10 per cent.
I will explain how we assigned the primary permit book holders to RMs and counties, the political boundaries. As mentioned earlier, we used postal codes from the CWB mailing list. We did not use the producers' home quarter because it is not readily identified anywhere electronically. The Wheat Board does not have that data. We cannot get the records from any of the more common sources.
We assumed the producer would live reasonably close to where they would pick up their mail and receive their cheques. We felt the use of postal codes was reasonable, but there is one problem. Postal codes can refer to more than one town. There are five or six towns with the same postal code affecting almost 85 per cent of all the primary permit book holders.
I will give you a demonstration of what we did to place the permit book holders in their current position. If you assume that the small red X's are the five towns under one postal code, we assigned that centre to the RM and the primary permit book holders from those five towns to that point.
There are three towns outside the RM to which they are assigned. There are two towns outside the dark red indicator, which is the electoral boundary. That adjustment does occur within this map.
We did an analysis. Half of the people are on the correct side and half of the people are on the wrong side. Essentially it is a wash; the numbers are basically correct.
The next stage I should like to show you is the number of iterations we went through to produce the third map, which I showed you previously. The process we followed was an iterative one. We came up with this map where we tried to get as close to 11,600 people per block as we could. We grouped them together in rectangles, starting from the east and working our way west.
The problem that occurred is that in northern Alberta, the districts are huge. The districts in southern Alberta are rather odd-shaped and quite large. However, the numbers were very close to 11,600 per district.
We did some consultation and came up with a second map. What we were asked to do was keep the travel distances down. We tried to follow agricultural soil zones so that at least the agricultural practices within each of the electoral districts would be similar. The farmers would have a similar concept. To ensure that the number of primary permit book holders within any district stayed reasonably close together, we were told to keep it to 5 per cent to 10 per cent.
I will now show you the second map we developed. At the January meeting, we showed this map and the first map to the industry leaders and the representative producers at that time. This map was favoured mainly because it kept the following agricultural zones and kept the travel distances similar.
That led to our third map, which is essentially the one that you have. It is almost exactly the same as the second map. Certain RMs have bulged out into others, and we swapped back and forth. You could not physically travel to certain places because there were no roads to the locations. In region 10, you can see that the area goes up much higher. We originally had that area assigned to region 9, but you could not physically get there from over here, so we cleaned that up. There were a number of idiosyncrasies in that sense.
Again, we tried to follow the agricultural soil zones. Region 3 almost perfectly follows the brown soil zone. Regions 2, 4, 6, 7 and 8 are in the dark brown, and the rest are the black soil zone.
The last slide shows the provincial splits as they exist on the borders and within each one of the districts. Two are heavily favoured in Saskatchewan's favour, and one is in Alberta's favour. The Manitoba-Saskatchewan split is in Manitoba's favour. Therefore, if they ran on political lines, they would end up with a 3, 5 and 2 split.
Senator Hays: Thank you for developing this next generation map and your explanation of it. I have not had a chance to analyze your last slide. If you could leave a copy of the slides with us, in addition to the map that has been distributed to us, it would be appreciated.
Looking at the maps, my guess is the most likely result would be that, starting in the dominant province, you would have three constituencies wholly within Saskatchewan -- 6, 7 and 8. By my rough guess -- and I did not analyze your last slide -- you would have two with a majority in Saskatchewan; is that correct? Which one does not have a majority?
Mr. Bonneau: Number 5.
Senator Hays: Conceivably, you could have 6 from Saskatchewan and 2 and 1 -- no, 2, 2, and 6. No, that would not work. Regions 5, 3 and 2 are what you say are the most likely result.
Mr. Bonneau: If you voted on provincial lines.
Senator Hays: Could you conceivably have a sixth in Saskatchewan? It might be at Manitoba's expense, or it could be at Alberta's expense.
Mr. Migie: It could be the other way around.
Senator Hays: Has consideration been given to additional rules that no one province would have a majority of the elected board?
I will tell you why I raise it. Whether we like it or not, the issue of the evolution of the Wheat Board is looked at differently in different regions. I come from a region that is not likely to be happy with anything less than what they have asked for. An aggravating factor to the healthy, future development of the board could be a distraction over where board members come from. To be frank, one way of ensuring that there would not be a problem, in my view, is if there were not a majority of the board from Saskatchewan.
Mr. Migie: When we had the meeting with industry, the original proposal we put forward was that as long as the actual producers were voting, we would not restrict the residence of those who wanted to be elected from each district. The best person should be potentially available to run as a candidate. As long as the farmers in that area were choosing, would we even require the successful candidate be a permit book holder?
It was only at that point that many groups felt they wanted the person who was elected to be an actual producer, and they introduced that restriction. However, the farm groups were fairly strong in all saying that the actual residence of the candidate was not that big a factor in areas close to the border on either side. They felt the concept of soil zones had significant merit. A few actually have property in more than one province.
To have a 30 per cent difference between the number of voters in Manitoba and the other two provinces was outside the scope of what they felt was desirable, even though there were those types of allowances for federal elections. It was decided that 10 per cent was a rough limit, and this was done mostly to accommodate the northern areas where there were large distances.
If everyone voted exactly by residence, you would end up with two from Manitoba, five from Saskatchewan, and three from Alberta, including the BC area. It is possible that Saskatchewan could have more or less.
Senator Hays: I do not wish to argue with you about it. You have given me the rationale for the current position -- that is, no restraint.
In terms of the appointees, four of whom will be active directors, one of whom will be the CEO, as the bill is currently drafted, we have absolutely no guideline to tell us what they represent or where they will come from. We have speculated with the minister that they may represent other stakeholders or the best people in the grain sector, who might make a contribution on the board.Why is that? Why is that not factored into the idea of the board being driven by the producers that it serves in terms of their being from the region in which the board does its business?
Mr. Migie: The minister has said that he felt that normally it would be very important to have outside directors on the board of directors, in some cases recommending that there even be a majority of outside directors. In this case, it was felt that there should be some expertise of this type on a board of directors and that the residency requirement, in terms of province or region, did not seem as important as getting the best expertise, such as someone with a financial background or with a legal background. There are restrictions whereby those directors must come from the Prairie region.
There have also been representations from Ontario that since Ontario grain is subject to the Wheat Board Act to some degree, in the sense of export licence provisions, there should be one representative from Ontario. However, it is left up to Governor in Council to make those four appointments strictly on their own.
Senator Hays: The Wheat Board Advisory Committee is made up of 11. Only one district crosses a provincial border, and that is district 8, the representative being Lorne Pattison. Do you know where he is from? His area code is 306.
Mr. Migie: I am not sure.
Senator Hays: The advisory board, which is made up of 11, does have six of the 11. That is interesting.
I am not here to argue with you. You have done a good job of answering the questions, in terms of the rationale behind how you wish to proceed. As the bill is drafted, this is something that will be dealt with in the regulations, and we may want to comment on them.
Mr. Migie: Mr. Goodale has invited that. No decisions have been taken at all. These are proposals in terms of maps.
Senator Stratton: If you look at the map as you currently have it structured, you could say that Saskatchewan has input into who represents them in seven of the 10 board seats. First, had you considered that? Second, did you talk about this with provincial agriculture departments? If you did, what was the result, and if you did not, why not?
Mr. Migie: On the latter question, after meeting with industry, we circulated this to each of the provincial departments and met with each of them. They favour keeping provincial lines. They would prefer to have people elected within borders, which was in contrast to industry, even outside the issue that the numbers do not quite fit for an even distribution. The farm leaders felt there was some advantage to not having delegates associated with a provincial caucus, if you will, and that they would act for the whole designated area rather than having them work as a group of three from Alberta-B.C. or a group of five from Saskatchewan.
There was a difference of view about how the board of directors should function. That was also one of the factors at play.
You are quite right that the provincial governments, especially Alberta, felt that voters in Alberta are quite different from voters in Saskatchewan and that that should be reflected. Our feeling is that you would not find a strong difference in certain areas of Saskatchewan and Alberta near the border.
Senator Stratton: One would think that a provincial government would have agricultural policies that the farmers would support, that they would vary from province to province, and that they should somehow marry with what you are proposing. That is just my opinion. Did you consider that?
Mr. Migie: In terms of the Wheat Board and marketing, we have treated the designated area as one area for so long that we did not focus on it or feel that there would be a match with other agricultural policies. I know there are farmers who operate in two provinces and take advantage of the differences in some of the programming. They can be selective in some cases. We certainly considered the option of restricting it by province, but not because of the connection with other provincial policies. For the most part, grain transportation and grain marketing have been for the designated area as a totality, and they have not made the distinction by province.
Senator Stratton: Can you answer the question regarding the seven of the 10 board seats?
Mr. Migie: Each option can be different. In this one, we were looking at the fact that there were three wholly within Saskatchewan, one only in Manitoba, and two in the Alberta area, and that would be guaranteed, if you will, for each area. Everything else could move. However, as was pointed out, when you look beyond the three districts that are solely in Saskatchewan, four cross the Saskatchewan border. Of those, two have a majority and two do not. It did not appear to be a problem in theory to have as many as seven.
Senator Stratton: I am not trying to put words in your mouth, but was the conclusion that you made purely a pragmatic approach to this, and the considerations along political lines took a back seat? I must ask that question.
Mr. Migie: These are merely options. Given the way we have treated the designated area up until now, as a whole, we did not focus on the provincial border as being a very important factor in determining the electoral map. That could certainly change, and we could have a map which respects it fully. It has not been ruled out.
Senator Stratton: Could you do me a favour? When the Minister was here on Tuesday, he said that he would ask you to examine that. Can you do that quickly with your computers?
Mr. Migie: We have the numbers in aggregate.
Senator Stratton: Even if it is rough, it would help us to know how it breaks up.
Mr. Bonneau: It takes about a day to generate the map.
Senator Stratton: We would like that, just for the record.
The Chairman: I should like to make one point here on behalf of the committee. We heard very strong representations from areas and regions having different issues, and I wish to emphasize to Agriculture Canada the importance of the differences of opinion in different regions. For instance, in Manitoba, freight rates have become a major issue, while in Alberta they are not a major issue. I think we would be remiss to underestimate the importance of doing this job properly.
Senator Whelan: Mr. Migie, do you have a list of all the people whom you contacted and questioned before drafting your map?
Mr. Migie: We could get that to you. We had a meeting with most of them in January to review the first two maps. We received some comments after the meeting from different people. Then I visited with a number of groups, including the provincial governments. We could provide the list of organizations to the committee.
Senator Whalen: There appears to be some controversy about choosing the members of this new elected board based on residence and regarding the different programs between provinces. Do you have a list of the different programs that would affect wheat producers and barley producers in the different provinces?
Mr. Migie: That is something the department could get in a short period of time.
I know of some examples of NISA programs. Each province has some flexibility. You can find out about those differences. For example, crop insurance is run differently. There are times when individuals can choose because they have land on both sides.
Senator Whelan: Have you made a comparison between the provinces and their agriculture authority and the border states and their agriculture authority?
Mr. Migie: No.
Senator Whelan: Do not you think that is important?
Mr. Migie: In terms of the electoral map for electing directors to the board, we did not look at these other policies.
Senator Whelan: The USDA, federally, has total authority over agriculture, and the states are nothing much more than extension services. In Canada, the provinces have 50 per cent of the authority under the Constitution. It is important to look at those states. The USDA has a dictatorship on agriculture in the United States. When the Secretary of Agriculture makes a decision there, it is put forward to the states. They make a lot of noise, like the Governor of North Dakota saying that they want to join the Canadian Wheat Board. Face the facts -- the USDA runs agriculture in that country. We do not have that control.
Mr. Migie: In the case of the Canadian Wheat Board and the Canada Grain Act, the federal government has declared elevators to be local works for the general advantage of Canada. We have legislated for the whole designated area in the case of the Canadian Wheat Board. The federal government has had a much stronger role, and the provincial governments have had virtually no role in any organized way in influencing the Canadian Wheat Board in the marketing of wheat and barley. That is one of the complaints we hear from the Alberta government in particular.
Senator Whelan: Have you considered electing a number of directors at large?
Mr. Migie: That was one option considered early on. We raised that with farm groups, and they felt it would be better to be able to talk to someone. They should all be reasonably nearby. They want to get to know them. They felt it would be difficult for someone to vote as a director who lived two provinces over. That option could come back in, but right now the proposal is that they should each have a district.
Senator Whelan: You say the actual residence does not make a difference. Did you not consider that a factor?
Mr. Migie: It will in the end. If I was not clear, at the industry meeting, the original proposal was to let the farmers choose whomever they wished and not to add too many restrictions on who could be elected to the board. Most of the industry felt they wanted farmers from their area to be elected to that board of directors. Even though they would be choosing, they felt we should make one important restriction, and that was the residence of the elected director.
Senator Whelan: You suggested there should be one director from Ontario because there are grain producers here. The history of the Wheat Board shows that at one time all wheat producers in Canada were members of the Wheat Board. There was a director on the Canadian Wheat Board from Ontario at one time. Do you know how they were removed?
Mr. Migie: No.
Senator Whelan: I know how they did it. Three farmers went to C.D. Howe. He asked them what they wanted and he listened. Then he told them they were out.
With directors at large, you may get a highly qualified, experienced agriculturist from Ontario to go and run out west. They took a poll in Alberta at one time to find out who was the most popular politician. Peter Lougheed was first; Pierre Trudeau was second; the Minister of Agriculture at the time was third, and he was from Ontario.
Senator Spivak: What objections have you heard from farmers about the electoral process for the advisory counsel? Does this bill roughly have the same principles behind it?
Mr. Migie: The same principles are behind it.
Senator Spivak: This means representation by the farmers, not considering political boundaries but considering the concentration of farmers; is that correct?
Mr. Migie: We have 11 and that makes some difference, but the numbers are not that far out.
Senator Spivak: Have you had many complaints? Has there been objection to that?
Mr. Migie: The main difference is that this is advisory. They may not have had as many people coming out to vote as they would have liked, but this is quite different because it is a much more substantive role.
Senator Spivak: My own view is that this is probably the most important part of the new act. If you go about skewing this politically, when you should be looking at a democratic system -- and this looks like a democratic system -- then you will have a continuing battle. There is an underlying current here questioning dual marketing. I would be very reluctant to reinforce that undercurrent, which basically represents the views of many establishment politicians. We are sitting around here as politicians. If the farmers are happy with the principle behind the advisory counsel, then this should be tried. In other words, I would be for more democratic representation.
Do you feel this last map fairly represents the numbers and not the political boundaries? Is this the best you could do to represent the way the producers are scattered across the Prairies?
Mr. Migie: We have not taken out this third version of the map, but it is close to the second map in terms of principles. It follows soil zones and it keeps the numbers within a 10 per cent differential.
Senator Spivak: It is not a gerrymandered map; it is a real map.
Senator Hays: A comment was made in an answer to Senator Stratton that you had considered drawing boundaries restricted by province. Could you elaborate on that?
Mr. Migie: The model would be that you would have regions 2, 5 and 3. However, the numbers give us a problem, as was pointed out in Mr. Bonneau's slide. If you were to have two in Manitoba when they are at 16 per cent, you run into a 25 per cent differential between the number of voters in the one province than in the other two. It seems the difference is too large for the comfort of the farm leaders. However, it is certainly an option.
Senator Hays: In tonnage produced, does it break out the same way as the permit book holders?
Mr. Bonneau: Produced or shipped?
Senator Hays: Produced. We are talking about a commodity.
Mr. Bonneau: There is a difference because Alberta produces a significant amount of barley but uses it all domestically. That does make a large difference.
Senator Hays: Do you know the tonnage?
Mr. Bonneau: Not off the bat.
Mr. Migie: There was discussion about rating by production rather than by the number of voters. Some groups had different views on that issue early on: Should there be some weighting for production, if not by individuals, then by districts? However, it is a slippery slope once we start moving away from one permit holder, one vote. It is difficult to know what we are doing with this largely public body, which is still largely public even though it is not a Crown corporation.
Senator Hays: The way in which wheat and barley are marketed is important not only because we have a certain numbers of producers in each province, but because it is a single-desk, monopoly seller system. We would not be sitting around this table today were it not for the fact that there are pressures for the board to change.
The key to that change will be the 10 elected board members who represent producers. They have a difficult but not impossible task ahead of them. It is not simply soil zone, tonnage or numbers of permit book holders. It is much more than that in terms of a different view, depending on how far you are from tide water now in the absence of the Western Grain Transportation Act. It is related to political bent and the provinces' desire to diversify and value add.
You inevitably run into a situation where someone is trying to force someone else to do something that they may not want to do or may be reluctant to do. To have a board with six, seven or eight members from Saskatchewan could be raised as an issue in a mischievous way by those who feel that is unfair. My sense from your answers is that the department has only considered some of those issues.
Mr. Migie: We will certainly take your concerns back to Mr. Goodale. If there are any suggestions as to how we can deal with this, even if you want to put in a limit, please so advise.
Senator Hays: My suggestion is that if there is not a majority from any one province, that should solve the problem.
Mr. Migie: You would not know until you had an election and you began to place restrictions.
Senator Hays: He could serve as the director. That could be worked out I believe. You predict three, five and two, and that is good.
Mr. Migie: It was not a prediction; it was more a statement. We do not believe that people vote strictly by their province of residence. It was only a comment that if that happened, there would be three, five and two representatives. We do not know. If there is any way to deal with that, I am sure it is something the minister would like to consider.
The Chairman: Do you have an understanding of what the Australian Wheat Board has done in regard to production and how they handled it?
Mr. Migie: Yes. In the case of Australia, they built up a very large capital base of $500 million in their contingency fund. They will be restructuring into different corporations, one of which will have shares. They are giving a weighting and will be voting for some of their directors. They will give extra weight for more shares to those who have larger production. It is not proportional by any means. However, they are giving a slight weighting to it.
One of the important differences with Australia is that they are almost developing another grain company with the potential to compete with multinationals.
Australian grain companies do not have the same history that we have. They built up a fund that has the capability of purchasing assets. However, because it is large, they have gone to shares.
The Chairman: Do you not feel that perhaps the Canadian Wheat Board is heading in that direction, given the fact that they have spent much money studying becoming either a private company or a corporation and how that would affect the whole industry? This has been done.
I do not know if I want to go on record as saying that in five years the Wheat Board may evolve into another company and at the same time give farmers a choice. That is in the works.
Returning to the contingency fund, that money is really taken out of the farmer's pocket. Whether it is interest or regardless of where the money comes from, it really comes from the farmer's pocket.
Senator Spivak: It does not have to.
Senator Stratton: With respect to the information package you have shown us with your slides this morning and the breakdown of electoral districts by province, how quickly can you get that to us?
Mr. Bonneau: It will take a couple of days. We could get that to you perhaps by the middle of next week.
Senator Sparrow: Without getting directly into the discussion, Senator Hays is asking for a review because of a perceived unfairness by producers in Alberta and perhaps Manitoba that they would not have an equal number of directors. He seems to justify this because of some perceived unfairness.
It would seem to me that if we went that route, there would be an unfairness to producers in Saskatchewan, who make up over 50 per cent of producers. We would have a backlash from them. I believe it would be dangerous for us to try to break up the regions into provinces. We are a wheat and barley producing region. Provincial policies in agriculture may in some instances be somewhat different, but methods of production are basically the same everywhere, discounting the vagaries of weather, et cetera. Apart from that, we are a production area. I would be concerned if we gave these witnesses the impression that they should try to discern whether there can be a change made to have provincial rather than regional representation.
Senator Hays: I would like to see those numbers on tonnages with regard to Senator Sparrow's point. I am not sure he is correct in what he says.
Senator Andreychuk: Has the issue of provincial boundaries been a significant issue with producers, or was that raised by provincial officials?
Mr. Migie: Provincial officials raised the issue of boundaries. The producers would prefer not to focus on provincial boundaries, even if the numbers were even. They prefer that the directors think of themselves as representing the whole designated area. It is an issue for provincial governments and their officials.
Senator Andreychuk: The issues for farmers are more to do with dual marketing or single-desk marketing, with various justifications for their arguments.
Mr. Migie: To the extent that those types of issues came up at our meeting on electoral districts, they hope that those issues will not be the determining issues when people run for a directorship, but they fear that they might be.
There was discussion with regard to whether there should be rules on funding, or third party funding, or issue candidates trying to influence things, but this was not with respect to the districts themselves.
Senator Whelan: I have very strong feelings about invisible borders. Generally you do not even know when you have crossed from one province into another. I am amazed at the suggestion that Albertans or Manitobans do not like or trust Saskatchewanians to be on the board. I am sure that the elected directors will do their very best for everyone.
I found that the attitude of the Minister of Agriculture for Alberta was close to that of a Quebec separatist, but I do not find that the people of Alberta think that way.
The Chairman: One of the problems is that the 20 per cent of producers who are producing 80 per cent of the product feel that they are not being heard. They believe there is no point in running for a directorship because they will not win it. One question we consistently asked of the witnesses we heard out west was how much grain they produced. Some of them produced very little. In fact, some were wood producers. Yet, they are controlling what is happening to the primary producer. That is a major political problem with which the Wheat Board will have to deal. I am being very frank, but that is what this committee heard.
If you want to take, as Senator Spivak does, strictly the political side of the Wheat Board, that is a different thing. The point is that any political organization could control the situation, and not in the best interests of the Wheat Board.
Senator Spivak: With all due respect, Mr. Chairman, in this country we do not let Brascan, for example, have more votes than the guy on Main Street.
The Chairman: Have you got as much control as the banks?
Senator Spivak: No, but under our democratic system it is one person, one vote. If we get into all kinds of other things, we may be starting something that we will regret. If you do that, others will say it is not fair. If you hold to a democratic principle, at least everyone thinks it is fair.
Senator Stratton: No, they do not.
Senator Spivak: People do not think that democratic principles are fair? It seems to be the position of the Reform Party that you must go to the people for everything you do.
Senator Chalifoux: On a point of order, Mr. Chairman, we have witnesses before us. We do not need a debate.
Senator Spivak: You are quite right. I apologize.
The Chairman: Thank you, senator.
Senator Fairbairn: I think we are getting into a discussion of the report. A valid request has been made of the department to fill out all options because we heard all views. It is only fair to do that and then we can wrestle it out ourselves. We have been fervently encouraged by the minister. Perhaps part of the reason is exactly the kind of discussion we have been having around the table today. This is a very difficult issue. We have been asked to give advice, and we can sort out the type of advice we want to give. This would not be a question of an amendment, as such, but of advising on the development of this very difficult issue.
Senator Rossiter: I am a bit confused by clause 7(2) in relation to expenses. Is it correct that the Government of Canada will no longer be in a guarantee position for the board when the contingency fund is in place?
Mr. Migie: The government would still guarantee the initial payments set at the beginning of the pool period.
We would still be guaranteeing credit grain sales, and we would be providing a guarantee of borrowings similar to the one that the Wheat Board has now because they are a Crown corporation and agent of Her Majesty.Three new tools will be given to the board of directors to utilize, and if they use those three tools, it would be at the risk of the farmers. If they want to be cautious on risk, they probably would need a very small fund; but, if they want to take significant risks, they might need a larger fund to be available in case they lose money.
Senator Rossiter:Is that the contingency fund?
Mr. Migie: Yes.
Senator Rossiter: But those guarantees have never cost the Government of Canada much money.
Mr. Migie: Two of the tools are new tools we have never used before -- cash trading and early pool cash-out. However, with regard to the one that we have used before -- making adjustments to the initial payments after the start of the pool period -- there has been no instance where the Wheat Board made recommendations, the government followed them, and that resulted in a loss. In that sense, you are right.
Senator Rossiter: Will the costs or the expenses incurred for the board of directors all come out of the Wheat Board's earnings?
Mr. Migie: Under the current law, that is true today as well. The government pays nothing for their administration.
Senator Rossiter: That brings me to a question regarding the contingency fund. Subclause 7(2) reads in part as follows:
...profits that are credited to the contingency fund, with respect to the disposition of which no provision is made elsewhere in this Act, shall be paid to the Receiver General for the Consolidated Revenue Fund.
It seems to me that that is the farmers' money. It represents earnings from sales of the commodity they provide.
Mr. Migie: In the last 40 years, there has never been a payment into the Consolidated Revenue Fund from the Wheat Board of which we are aware. What we are doing is changing one provision to make it clear that if there was a profit made on these new tools, it would not go into to the Consolidated Revenue Fund.
The issue was raised that perhaps there would be a way of deleting that whole provision. It was used in one instance shortly after the war where there was a change in policy and grain prices were raised because they had been restrained.The government of the day did not want the people who held the grain in storage to make the profit, so it gave instructions to the Wheat Board to buy the grain. Any profits in that instance from the lifting of a fixed price went to the Consolidated Revenue Fund.
That provision is in the bill, and it is difficult to do anything with it because it has a history and because it was there for the pool accounts. Since it has not resulted in a payment in so long, we simply wished to clarify that the contingency fund could be held, any profits the Wheat Board made could go into that fund, and it would not have to go to the Consolidated Revenue Fund. If the bill were written from scratch, I am not sure we would have found a way not to have that kind of provision.
Senator Whelan: My question is regarding financing, and I am come back again to the difference or the discrepancy that exists between the farmers in the United States, the farmers Europe and the farmers in Canada. Our chairman continually points out how the Americans have a higher return. When Mr. Hehn, the head of the Wheat Board, was here, I asked him if we as farmers and Canadians had been given a snow job by the World Trade Organization. He agreed that we had. In Europe today, the farmers are being paid approximately $420 per hectare, and they keep increasing their production. In the United States, they have a 65-cent-per-bushel -- or about a $20-per-tonne -- advantage over Canadians. In 1996, in Canada the percentage of the subsidy was 18, in the European Community it was 29, and in United States it was 24. They always have a higher subsidy than in Canada. Now we have become so harsh on cutting back our subsidies. Were you advising the minister on what to do?
Mr. Migie: In the 1995 budget, the government made a number of budget cuts, and agriculture and grain transportation were hit, on average, roughly the same. That was part of the government policy of the day. It was not only for budget reasons, in some cases, but those decisions were driven by things beyond agriculture. There was an overall concern about the budget deficit.
Senator Whelan: You and I know, Mr. Migie, that agriculture was never an overspender. We were not like those other departments.
Mr. Migie: There were several years in a row when we were spending over $1 billion per year for ad hoc programs, in part responding to the export subsidies that the U.S. and the Europeans had put in place, but the Department of Agriculture was subject to the same rules as other departments during the program review conducted by the government.
Senator Whelan: I will not belabour this very much, but I used to make a comparison to the post office. It had 5,000 employees, increased the rates, and the delivery was much worse. Agriculture Canada increased its staff by only 15 person-years and had to take the same cuts as the other departments, which I thought was very unfair, very undemocratic, very unrealistic. This measure was dictated by people from Treasury Board and Finance; is that not right?
Mr. Migie: In this case, there was no across-the-board cut. Every department was required to come forward with arguments, and there were some variations. Agriculture was treated roughly the same as other departments. However, there is a difference between Canadian subsidies and those in Europe and the United States.
Senator Whelan: We got into a discussion with the minister the other day, and a senator from Saskatchewan brought up the World Trade Organization. The answer was that we have to be involved in it and go along with it. However, I think we should be making representation to the World Trade Organization -- and maybe we are -- that these other countries did not live up to their commitments. They increased barley production by 32 per cent. They increased wheat production. It was supposed to be a program to stabilize production, but instead of that, they turned it into increased wheat production. Are we doing anything about that with the World Trade Organization?
Mr. Migie: They have to live within the rules as well. It is just that the negotiated rules do allow for a high level of spending in Europe and the United States, and for that matter in Canada. We are well below our allowable limits. We are not breaking the rules.
Senator Whelan: Do you mean we can spend more?
Mr. Migie: Under the WTO, we could.
Senator Whelan: We could help our farmers in Manitoba and so on?
Mr. Migie: Within the WTO rules, we could spend more. Within the budget rules of the government, we are limited.
The Chairman: When the minister was here, he indicated that it would probably be good to have a cap on the contingency fund. Did I hear that right? I think I did. The question is: What would that cap be?
Mr. Migie: The minister on Tuesday did indicate that the Prairie pools had proposed $30 million as a cap, in one instance. It is a judgment call as to how much a regulation should limit the board of directors from building up a contingency fund. Mr. Goodale would welcome any advice as to whether senators felt that was too high or too low.
The Australians can use their fund for investments. When the Western Grain Marketing Panel proposed particular amounts to the contingency fund, they proposed as well that the Canadian Wheat Board should be allowed at least to invest abroad in joint ventures. Canadian grain companies were quite concerned, the pools in particular, that the contingency fund not be allowed to be used for investments that they thought would be competing with their own interests. The bill does not allow the board of directors to use the contingency fund for those purposes.
The Chairman: Are you saying that there is no relationship between the contingency fund and the cash buyout? In other words, they could not use that as a backup to do international business.
Mr. Migie: They would not use it to invest in joint venture flour mills in other countries, as Australia has been doing.
The Chairman: As long as the money came back into the pool, it would be allowed; is that it?
Mr. Migie: It must go to the farmer. Under the bill, the Canadian Wheat Board would not be allowed to invest in Prince Rupert or to invest farmers' money into flour mills in other countries.
The Chairman: The money from the pooling goes back to the farmers of course.
Mr. Migie: That is right. However, Australia does allow it.
Senator Whelan: In Australia, are the directors farmers?
Mr. Migie: They are changing their legislation right now. At the present time, some farmers are put forward by the farm groups. They have a selection process, but they are not exclusively farmers.
Senator Whelan:Can they can build flour mills, grain elevators or processing facilities in any part of the world with that fund?
Mr. Migie: They have been doing joint ventures, but I do not know if they have done them on their own. In the former Soviet Union and various places in Asia, I believe they have used their contingency fund, which was over $500 million, to make those kinds of investments.
Senator Whelan: Do they participate in joint ventures with the big grain companies?
Mr. Migie: They have been with the buyer side. I do not know if they have done it with other grain companies in terms of sellers of grain. I am not aware of that.
Senator Whelan: What is the situation with regard to the flour milling industry?
Mr. Migie: It would be with customers or companies in other countries where they are selling, and they are attempting to develop relationships that will lead to Australian exports to those mills.
Senator Whelan: You do not call that a subsidy?
Mr. Migie: There is no government money in it.
Senator Whelan: Wait a minute. We had a two-price system for selling milk and dairy products, and they called that a subsidy under the GATT and that great organization called the WTO. When we organized it, it was not called a subsidy because it was producers' money for the two-price system we had.
Mr. Migie: I do not know the answer to the dairy question.
Senator Whelan: You are saying a cow is different from a bushel of wheat.
Mr. Migie: No government money from Australia is going to the board for those purchases. It is from the farmers in that case.
The Chairman: Are there any further questions?
There being none, we will now move in camera to consider a draft report.
Senator Hays: I move that we continue our meeting in camera to consider a report to the Senate on Bill C-4.
The Chairman: All in favour?
Some Hon. Senators: Agreed.
The committee continued in camera.