Proceedings of the Standing Senate Committee on
Agriculture and
Forestry
Issue 29 - Evidence
OTTAWA, Thursday, March 18, 1999
The Standing Senate Committee on Agriculture and Forestry met this day at 9:00 a.m. to consider business of the committee and to study the present state and future of agriculture in Canada, consideration of the effect of international subsidies on farm income.
Senator Leonard J. Gustafson (Chairman) in the Chair.
[English]
The Chairman: Honourable senators, before we begin our hearings today, we have some business to attend to. We have before us the proposed budget for the Subcommittee on Boreal Forest.
Senator Taylor: I move the adoption of this budget.
Senator Chalifoux: I second the motion.
The Chairman: Is it your pleasure, honourable senators, to adopt the motion?
Hon. Senators: Agreed.
The Chairman: Carried.
Honourable senators, this morning we are pleased to have with us Bob Friesen from Manitoba. Mr. Friesen is the new president of the Canadian Federation of Agriculture. With him is Mr. Jeff Atkinson, Communications Coordinator. Welcome, gentlemen. We are pleased to have you before the committee at this time.
Mr. Bob Friesen, President, Canadian Federation of Agriculture: Thank you very much, Mr. Chairman. It is a pleasure for me to be here. I see some familiar faces around this table. I have a friend here from Manitoba. We have passed each other once in a while and have not spoken, but I trust we will take the time now that we have met officially or formally.
It certainly is a pleasure for me to represent well over 200,000 farmers in Canada, although it is also somewhat humbling. We have a plethora of issues, many of which are very important. Our producers depend on the CFA to ensure that it helps with the formation of domestic as well as international agriculture policy.
I farm in Manitoba, near Wawanesa. It is approximately 50 miles from the Saskatchewan border and about 50 miles from the Peace Gardens, which is the U.S. border. I farm turkeys and hogs with my wife and two children, and with my brother, who is in charge of the hog production.
Canadian agriculture is very important to the Canadian economy. Agriculture and agri-food in Canada generate somewhere around $85 billion a year. We contribute approximately 9 per cent to the GDP and create one out of four jobs. This is why we feel so passionately about some of the things we do and some of the policies that we project.
We have an excellent cross-section of membership around the table. We recently welcomed Agricore as well as the Canadian Core Council as members. That gives us a very good balance around the table when we discuss domestic as well as international policy. We are very proud of that. We feel that we are at the point where once the CFA has reached consensus on an issue, it will be very tough to argue against it. We believe that forms a fundamental, solid basis for designing agriculture in Canada.
I am going to very quickly give an overview of trade. I am going to touch on environmental issues. I am going to touch on the safety net and income disaster. Then I will open up the floor to questions.
Going into the next WTO, we have seen that subsequent to the last round, although there were good intentions and many commitments were made by countries, we have not been able to achieve some of the things that we wanted to achieve. These are primary market access, the elimination of export subsidies, getting some type of equity in domestic support between countries, as well as trying to administrate or work our way through the maze of non-tariff trade barriers that other countries are erecting because they have to find a way of not honouring their commitments. That is a disappointment to us.
We feel that we must approach the next round in a very cautious manner and we should not volunteer too much up front, although it is very important that we decide what our objectives and goals are for Canadian agriculture vis-à-vis the trade negotiations. As we continue to understand the trade dynamics better and find out what other countries plan to do, we will get into more detail. Again, we stress that having a solid, firm position too early on in the game would give us away and would most likely result in Canada losing at the negotiations. We look forward to continuing to consult with the government and continuing to be a participant in those fora.
We have basically two main goals when it comes to trade negotiations. First, we want more market access for our export industries. I do not have to tell you how important agricultural exports are to Canada. We achieved a level of around $23 billion in agri-food exports. We only have to look at the west to see how export-dependent it is. It exports approximately $6 billion worth of grain every year. As well, our pork industry is very dependent on exports too, as is the sugar industry and the horticulture industry. Therefore, market access is very important.
One of our goals is that we need to be sensitive to those commodities that as yet cannot compete on the world market and those commodities that depend on unique, yet legislated, marketing structures in Canada. That is an important factor as well. We are not convinced by the argument that this is not a credible position.
Other countries are doing exactly the same thing. They have export interests and import-sensitive commodities as well. They will take exactly the same position. We should not get trapped into the logic or the argument that that is not a credible position. As we go into the next round within those two goals, we again have to establish our objectives and then ensure that we achieve for our agricultural economy what will best accrue benefits back to the primary producers.
I will make several very quick points. I know that you have already heard a trade presentation. In the last week of February, the CFA made some very important progress in our trade position. Our trade statement is intended to establish a position that will allow us to open up market access for export interests. At the same time, without becoming obsessive or putting other countries on the defensive, we also plan to protect our domestic interests.
One of the points is the total elimination of export subsidies. As you well know, the Europeans and the U.S. in their blue box and in their amber support retain the ability for export subsidies. At the WTO there was a commitment to decrease export subsidies by 36 per cent in value and 21 per cent in volume. Canada decided at that time that they were going to totally eliminate export subsidies. As you know, that resulted in the loss of the transportation subsidies that we had.
The Europeans and the U.S. have not gone nearly that far. We have also found that the Europeans have used the roll-over provision to extend their ability and their export subsidies. In the years when grain prices were fairly high, they did not use export subsidies. Now that the price of grain is dropping, they are using that roll-over provision. At the same time we must ensure that the definition of export subsidies is not changed to the point where it will undermine the effectiveness of our Canadian agriculture marketing bodies.
Second, we need more equity when it comes to domestic support. Canada has reduced its domestic support by 60 per cent in the last four to five years. We are currently at 15 per cent of the commitments that we made at the WTO. The U.S. is at 27 per cent. The Europeans are at 60 per cent. Although they are also well within their commitments, they have found ways to spend more money in what we call the green box, which of course is not limited and does not require any reductions. They have found unique ways of spending more money in what we call a non-trade disrupting area, and have spent tremendous amounts of money in domestic support.
We feel that there is no way that our producers can compete against the treasuries of other governments. We need to find some way of capping what is allowed in domestic support so that we do not find ourselves behind the eight ball when it comes to competing with other countries.
An interesting discussion started at the WTO regarding the analysis and information exchange process and the process of multi-functionality. The Europeans came up with the term "multi-functionality" to describe when agriculture performs more functions than that of producing food and fibre. That could include environmental sustainability, rural development and some of those more social issues. I personally feel that the Europeans may try to sneak in extra domestic support by doing it under the umbrella of multi-functionality. Therefore, we must be very aware of how they are going to approach the next round within that context.
Third, market access is very important. I know that Canada has at times been labelled a very protectionist country. Yet, if we look at the last WTO and what happened subsequent to the last agreement, we see that Canada has been very clean, first of all, in honouring its commitments when it comes to the 5 per cent access. We have an average of 85 per cent tariff rate quota fill in Canada. That compares to a mere 54 per cent in the U.S.
Out of the 1,370 tariff rate quotas (TRQs) at the WTO, Canada has only 21. As I said earlier, for many of our TRQs, there is 100 per cent fill. In fact, because of our NAFTA agreement, some of our commodities have achieved levels of market access into Canada higher than the commitments that were made at the WTO.
One of the new things that we have included in our trade statement is that Canada should be fighting for zero tariffs within TRQs. Some of the countries also retained very high tariffs inside the tariff rate quotas, and so we should push for zero tariffs within TRQs. As well, we should push for the ability to negotiate zero-for-zero in those sectors and commodities that are interested in doing that.
We also feel that we should push for the elimination of country-specific allocations under market access. The country-specific allocations allow a country to dictate which country is going to fill their market access. Using a simple example, New Zealand, which of course is the consummate free trader, depends very heavily on country-specific allocations for its dairy industry. That gives it the right to fill market access in certain countries that allow New Zealand to export a certain volume of dairy products into that country. Of course, that pushes other countries aside. That type of process is not based on competitiveness and on who can do the best job. We feel that is another very important point.
When countries want to belly up to the bar of trade negotiations and promise all types of commitments, then it is time to establish a way of ensuring that these countries honour their commitments. I can give you several examples, such as the border dispute that we have had with the U.S., where they were clearly contravening their commitments. I can give you examples of other SPS, sanitary and phyto-sanitary, examples where countries have found unique ways to impede market access. We feel that this contravenes the commitments that were made. There must be a way of ensuring that countries are not allowed to do this.
In one particular instance, after the last round, pork TRQs in the Philippines were allocated to producers. Producers were clearly not interested in allowing imports into the Philippines. Therefore, that impeded access in that country.
I should also say that the disaggregation of product when it comes to market access is very important. Again, I cite the pork industry where Europe aggregated their market access and so they allocated their market access to something like pigeon meat. That may be an exaggeration. I do not actually know if they import pigeon meat, but they used their ability within the context of the trade agreement to allocate their meat import to a commodity that they knew would not threaten their agriculture industry. That shut us out when it came to the pork industry. We thought that there would be 750,000 tonnes of access into Europe, but in fact, we only received 75,000 tonnes of access into Europe. Those are ways in which countries have impeded access.
When it comes to the grain industry, something as simple as reducing, within tariff rate quota, tariffs to zero would give our grain industry in Japan alone an added $120 million. There are many ways in which we can ensure more access for our Canadian agriculture without adopting the same formula approach that was used last time and tacking it on to this agreement.
Those are some of the important points that we have changed in our trade statement. I will not go into any more detail on that.
Environment is going to be a very important issue over the next little while. We are very concerned about the Canada Environment Protection Act that is currently before the House committee. We feel that some of the amendments that are proposed in that act will have negative implications for the agriculture industry. I can cite several examples. One example is where they talk about virtual elimination.
We all know that our ability to test for residue has increased. We believe that if the virtual elimination term stays in the act, that it may handcuff producers to a point where they will not be able to ensure good, solid production. Yet, environmental sustainability is sustained production.
We are also concerned about jurisdiction when it comes to the Environment Protection Act. We feel that other ministers should be involved. We do not feel that the environment minister should have the sole jurisdiction as to how this is implemented and how it is imposed on agriculture in Canada. We are concerned about that as well.
We are also very much concerned about the reference in the act to biotech products being defined as toxic substances. We feel that there must be scientific justification. We believe that there is merit in biotechnology, but, at the same time, we feel that Canada currently has as good a regulatory system in biotechnology as our current understanding allows.
We also feel that our producers have been extremely responsible for the most part in ensuring that they sustain the environment as they produce. They live in the same environment as urban people. They are also very concerned that we do not destroy the environment because, of course, that would be like shooting ourselves in the foot.
We believe that there needs to be much more consultation in the CEPA legislation before it is passed. We feel that the agriculture community must be very much involved in that legislation. We also need to ensure that the legislation is in some way harmonized with some of the things that are already being done in the provinces and in our rural communities. We are concerned about that as well.
I would also briefly like to talk about the safety nets issue. As you are well aware and very familiar with, we have had an incredible downturn in revenue in the farm community. We have seen commodity prices drop by as much as 60 to 70 per cent in certain commodities. It has put our producers under a tremendous amount of pressure and stress over the last little while.
We are very thankful for the money that was provided to us by the government. We felt that it was important to have that cash input. I mentioned earlier the contribution that agriculture makes to Canada. We want to increase our share of world agricultural trade to 4 per cent over the next few years, therefore it is very important that assistance and support be given when there is a downturn such as we have experienced. It happened through no fault of the agriculture community in Canada. This enables us to continue to "grow" agriculture and "grow" the reputation that we have around the world as being world-class producers providing safe, high-quality food.
Therefore, we need help. We think it is very important that we have the four pillars to our safety nets package. Two of those pillars are crop insurance and Net Income Stabilization Acccount (NISA). NISA is very important to mitigate income variations that are not too drastic. Of course, when we experience something like what we have just experienced, we need an income disaster program. We also need to provide companion programs so that the provinces themselves can participate in designing something to suit their own unique situations.
We should never accept off-farm income as part of our agriculture policy. As you know, currently only 37 per cent of farm income is actually derived from the farm itself. That is appalling. We need to ensure that our producers have the ability to make a living on the farm without having the added pressure of a full-time job off the farm so that they can buy groceries for their family. Off-farm income should never be an accepted agriculture policy.
Mr. Chairman, I have touched on a few things. I do not want to bore you with too many details. I would be more than happy to answer any questions you might have.
The Chairman: The most serious problem on the Prairies is the farm program right now. You are aware of the meeting that was held in Regina at which 1,500 farmers appeared. They voted by hand that it should be an acreage payment. The people who are assessing this are saying that many farmers who need it who will not get a cent out of this, that the amount of money is inadequate. It is dispersed over two years. If there are 50,000 farmers in Saskatchewan and Saskatchewan gets a portion, they might get $4,000 or $5,000 a farmer. Many will be left out. This is not going to meet the problem; it is not going to deal with the situation.
Just to give you a bit of an update, this week one of the fuel dealers in Weyburn, Saskatchewan, indicated that he had 10 bankruptcies already filed, for which he would lose an average of $10,000. This means the farmers are folding.
My wife called me yesterday to tell me that a young neighbour who farms about eight quarters of land is quitting. He does not have the income, nor is he able to finance the input costs to put in a crop. This is serious.
The Growth Revenue Insurance Protection (GRIP) program that existed would have been adequate because at that time when there were difficulties, we were talking about $40,000 or $50,000 that would come to farmers in need as a safety net program. Those programs have not been put into place. As one who is responsible for speaking for farmers, this is a very serious issue and I do not believe that it has been addressed. It will become more serious.
You know yourself the current price of grain. You know that the price of canola and flax has dropped severely in the last three months. If this continues, it will only compound the problem.
Mr. Friesen: There is considerable frustration in the farm community for several reasons. First, Canada's domestic support currently represents 16 per cent of the production value in Canada. In the U.S., including food aid, it is as high as 32 per cent.
In 1995, the U.S. notified at the WTO that there was around $7 billion of support in the blue box. In their 1996 notifications, they moved it out of the blue box. Guess where it landed? It landed right in the green box provision. Therefore, their domestic support has continued to increase.
Meanwhile, we were falling over backwards trying to ensure that our income disaster program would be trade-friendly. As you well know, we cannot afford to have a countervail on pork, beef or grain, so we were attempting to ensure that it was green at the WTO. We received notice a few days ago that the U.S. is now going to create for the first time a comprehensive livestock stabilization program, which will be commodity specific. This clearly is not green. Those are some of the frustrations that we have to deal with. Of course, the acreage payment would clearly not be green and yet we see the Europeans decreasing their intervention price support but increasing their compensatory support.
We heard a speaker at our annual meeting talk about Agenda 2000. They have absolutely no intention of greatly decreasing their domestic support.
The Chairman: One of the speakers at Regina was a farmer who farmed on both sides of the border. He told us how they are being paid on the U.S. side, indicating that the payments would be up to $80,000 a farmer. On durum wheat, on 70 per cent of the production, they were being paid Can$7.07 a bushel, while we are getting less than $3.00. You must be aware that a day or two ago, Mr. Greenspan blamed the Canadian farmers for the Americans' grain problems. We have some serious problems that must be ironed out with both the U.S. and the European Common Market.
Senator Stratton: Mr. Friesen, as you are aware, this committee travelled to Europe to try to find out what was happening. What you have stated this morning is clearly happening there. We talked to your counterparts in Europe in three or four countries and their attitudes are unapologetic. They simply believe that it has to take place and they are going to use whatever means they can to achieve that, including the environment.
We understand that the European Union subsidy is about $535 a hectare. In France, for example, it is $650 a hectare. They receive $600 even if they do not grow anything. We understand that the average income of a farmer in France with 40 hectares is Can$50,000. In Italy, for the same size farm, 40 hectares, it is $35,000. What is the average income in Canada on a farm ten times that size? I believe we are looking at $25,000. When you make that kind of comparison, it is a staggering number. Our farmers are trying to survive against those kinds of subsidies.
I had the good fortune of travelling out to what they call a conservation and experimental farm in rural Italy. I wanted to see what their farms looked like. In this conservation farm, they were trying to conserve indigenous breeds where they had fewer than 300 head of cattle, pigs and goats. They were looking for government money. We travelled up there with the Italian Parliament's agriculture committee. I wanted to understand their thinking in this area.
They were going after subsidies to support this farm. They were going to take a section of a farm or a part of a farm and use it for tourism, to use it for green space, and they were going to use it for subsidies. I think that we are up against some pretty hard, determined negotiation on the part of the European Union.
The one light in the window, as it were, is that the German government is now telling the European Union that it will not push for these subsidies. It wants to reduce them. As I understand it, about half of the European Union community's budget goes to agriculture and yet the GDP for agriculture in Europe is about 1.8 per cent. When you look at those kinds of numbers, the Germans who pay the majority of the contributions to the European Union budget are saying that they do not want to contribute as much as they want to reduce that contribution by reducing the subsidies to agriculture. That is the one bright light in the window.
That is a brief summary of the situation. I am speaking on behalf of the committee. If the members of this committee find my numbers to be incorrect, please correct me.
Do you have a comment on that?
Mr. Friesen: I do not other than that I agree with everything you said.
The Chairman: I think we should add one thing, Senator Stratton. The total that I have for subsidies from the European Union was $70 billion. On top of that, other subsidies came from the individual countries. The numbers are staggering.
Senator Whelan: Mr. President, I listened carefully to your presentation. As for the documents you have here, if I told you that I had absorbed them all, I would not be telling you the truth.
You have listened to what Senators Stratton and Gustafson said here about agriculture and the dire straits it is in. I am sure that you are aware of some of my philosophy. I do not believe that there is such a thing as a free trader in the world. Some of these countries have been circumventing these agreements by initiating other programs, and I have the feeling that we have been the Boy Scouts in this whole issue by going further ahead than we even had to as far as cutting subsidies to our farmers. The result is that we find many of our farmers in dire straits.
An announcement will be made tomorrow, an appeal to the WTO by New Zealand and the U.S. about the way we run our dairy pricing policy. We set up those dairy organizations, the poultry supply management system, the egg supply management system, and the production entity that you are involved in with turkeys. We organized them all under the international rules at the time under GATT.
Those started to change in 1984 in Uruguay. No farm organization or political party asked them to be changed, but they are changing them now. We seem to be going along with that. I am amazed that your organization is not saying, "To hell with that, we want what we had. You took it away from us."
I have been discussing this with some of our best lawyers. They think that there is possibly a case under our Charter of Rights. This was taken away from us without any discussion, after we had this for some 20 years in some instances.
We organized within the law. The government recently made a payment to farmers and hog producers who refused to get involved in a supply management system. I tried to encourage these producers. With all due respect, I used to tell them that they were the most pig-headed group I knew, next to the beef people, who were the most bull-headed group.
We sat in rooms something like this when we were passing that legislation for supply management in Canada, back when I was a backbencher. We sat until 2:00 or 3:00 in the morning because it was a big committee. They allowed supply management just for poultry products at that time. The dairy organization was outside of that.
I am extremely concerned that we may lose one of the best systems in the world. I do not think that you and your organization are fighting hard enough. You seem to be suggesting concessions to the WTO where I think you should be really fighting them and saying, "Look, we built this industry."
One looks at the great, globalized world. I sat on the Foreign Affairs Committee when I first came in. They were talking about APEC. Asia-Pacific was the place to be. Those bankers were considered to be marvellous bankers working in the best banking system in the world. We found out that they were the worst bankers in the world, in one of the worst economic systems.
We are producing a perishable product such as eggs, turkeys and dairy products, and there is only about one country that can really take over our market for those. You and I both know that is the country to the south of us. It is one of the most restrictive countries in the world. It always has been.
Mr. Katz has been dealing with this for 30 years. I knew him when I was minister. Before Christmas, he said that we have to have more free trade. They must get rid of their surplus. They do not care a hoot, a holler and a counterfeit dollar what you do to a producer in any other part of the world, whether it is in Canada or in a developing country that is trying to develop a production entity.
I worked hard trying to build some of these links for agriculture. You are telling me, as are Senators Stratton and Gustafson, about what the Europeans are doing. I have all kinds of documents from the European Community, although I did not go on the trip with the committee. The Europeans have devious ways of getting around the so-called cut in subsidies. Actually, some economists show us that they have not cut them one penny; they are simply utilizing other programs.
The Chairman called it "decoupling". That is like losing a railroad car on a switch. It is about the same thing. If you do not have someone riding on it to control the brakes, it can cause a lot of damage.
When I look at the WTO organization, this great world organization, I see that the EU Community pays its commissioners $381,000 a year plus all expenses. These people are running this multi-billion dollar business and the OECD, another appointed organization. I wish you luck in this.
I will do everything I can to help agriculture be successful but I do not like to see any concessions made. I am going to fight every instance, even if you concede, on supply management.
Mr. Friesen: Thank you very much, senator. First of all, I want to express my appreciation for the work you did in agricultural policy in the past.
As you know, I am a part of the supply management production, although I sometimes say that I epitomize the perfect Canadian balanced position because I produce turkeys as well as hogs. Fundamentally, my goal on the farm is exactly the same for those two commodities and yet I need different tools to achieve the goals in those respective commodities.
Second, you mentioned that we gave too much at the GATT. I believe we gave too much in many areas there. Someone mentioned export subsidies. We gave up the Crow and went down to zero when other countries only committed to decrease by 36 and 21 per cent. Yes, we gave too much there as well.
As far as our fighting for supply management, I assure you that we are fighting as hard for supply management as we are fighting for increased market access for our export interests. We clearly state that we need to retain the right to have our agricultural marketing organizations. That includes fighting the attacks that we repeatedly receive from the U.S. on our Canadian Wheat Board.
I read an address by Minister Goodale that he presented in the U.S. a while ago where he said, "We have explained it to you. We have done audits for you. Now leave us alone."
We must continue to fight to retain those organizations because they are very important to agriculture. We need them. We must have them. In terms of our trade position, while we protect those organizations, we must at the same time put forward a credible position to increase market access for our export interests. We do not think it is impossible.
I believe you attended the presentation that I gave last week. Without going into detail, certain people say that we should not be able to look in the mirror with our position. We disagree. First of all, it is identical to what other countries are doing. Second, we feel that it is a credible position and that it can achieve all the goals we have and not just a select few.
Again, I would thank you for your fight. I would also implore you for your help because, as we are all aware, your government is in power. We look to you for further work.
Senator Whelan: We were out west with the Senate Agriculture Committee looking at the Wheat Board operation. I remember your provincial Minister of Agriculture. I follow news of the new pork plant that is being built at Brandon. You talk about environmental regulations. The plant there is not equipped with enough sewage control system to handle the sewage from the plant.
Your provincial Minister of Agriculture said that we are going to be the hog capital of the world. I think we have to be very careful about encouraging producers to get in, especially when producing a perishable product with an uncertain destination. It is not like canola, lentils or sunflowers. Those are not as perishable as an egg, a chicken, a turkey or a hog.
If you follow the situation with the hog industry, you know that they did not throw away any of that pork. An enquiry is being conducted in the United States into the hog prices, what the farmer received and what the consumer paid at the end. I have documentation in my file here which shows that a hog packer and processor in the United States had their biggest quarter profit ever because they got the pork cheap and then sold it to the consumer.
I have such strong reservations about these kinds of products and hope in heaven's name that you have a market for it some place. I think they call it globalization. One hundred and thirty-two countries are against us. You and I both know that nearly 70 per cent of those countries involved in the WTO could not even export a chicken, but they are signing the WTO agreement. We keep using that.
I dealt with most of those countries as your minister. I watched their progress. Some have gone down instead of becoming more self-sufficient, mainly because a big world surplus has been just thrown on the market, without care to what effect it will have. Again, the American philosophy is that they want to rule the world's food market and they are going to do it no matter what happens.
Senator Spivak: I absolutely agree with your statement that off-farm income should not be considered as part of agricultural policy. It is ludicrous that an industry that is so basic and so essential to our food security and to our export position should be considered as a part-time job and that people have to go off the farm to make enough to live.
I seem to remember during our conversations on the future of agriculture that that was stressed as very much a part of the farm policy. I wonder if you can enlighten us as to whether the government still considers that as a cornerstone of its farm policy.
You spoke about market access. I agree with Senator Whelan that there is a great deal of hypocrisy in this talk about free trade. Maybe we need to hire some of those tax lawyers who help people avoid tax so they can manoeuvre through the intricacies of the trade agreements and figure out how to get around them.
I am wondering whether in the end the strategies are just about subsidies because the whole point is that commodity prices in the world are dropping and input prices are rising. Ever since I have been on this committee, I have not been able to figure out why there seems to be an inverse relationship between commodity prices and input prices and why that relationship is not more straightforward. Why are input prices not dropping as commodity prices drop? I have had it explained to me many times but not satisfactorily. Perhaps you could comment on that.
You were talking about market access. You mentioned two strategies: the zero tariffs and TRQs, and the country-specific allocations. I am wondering again whether that position is accepted by the Canadian government.
The United States government, under the auspices of the EPA, has said that they will not accept agriculture products that did not fall within their guidelines. Apparently, some of the other products, pesticides or herbicides -- I am not sure if I am using the correct term -- are still not approved in Canada. I have two questions. I know that they are asking for faster tracking for those. Are these herbicides and pesticides that the EPA has suggested more environmentally friendly? Do you think that this is going to constitute a huge barrier for you unless something is done quickly?
If I have a second round, Mr. Chairman, I would like to ask about hog waste.
Mr. Friesen: First of all, we use every opportunity we can to tell the government that off-farm income should not be accepted as agricultural policy. We believe that when we look at farm income, that off-farm income should not be used to tell the world that our income is going up. We try to make that point at every available opportunity.
Through trade policy, through our consultations with government on domestic policy, through everything we do in fact, we are trying to build policy so that people will be less dependent on off-farm income. If that is their choice, that is fine, but certainly we should not have to depend on off-farm income.
As far as the global trade liberalization is concerned, I believe you are right. I believe that some countries are being extremely hypocritical. I believe that they tried to detract from their hypocrisy in the last round by calling us hypocrites.
Senator Spivak: They were attacking the Wheat Board and the supply management system.
Mr. Friesen: Exactly. That is why we are now pointing out that our position is no different from that of other countries, protecting certain commodities from being taken over and yet still going for more market access.
Those are really tied into your next question as to why input costs are going up and yet world prices are going down. I believe that there are participants in agriculture around the world that are trying to harmonize down to the lowest common denominator when it comes to price. We feel that we need protection in supply management in poultry because of the extensive integration in the poultry industry in the U.S., where clearly our medium- to large-sized producers would be competing against large corporations that have only one profit centre. I believe that is part of the reason.
Farmers are not the only ones who are having that problem. The company that is building a plant almost in my backyard is paying its employees the lowest possible wage. There seems to be that incredible urge to move down to the lowest point. As producers, we say that if we want to expand exports, if we want to compete globally and increase our exports, let us make sure that some of the benefits of that growth accrue to the primary production sector.
Then as far as the SPS concern you expressed or the non-tariff trade barriers, that is a real thorn in our side right now and will continue to be. We have urged the Pest Management Regulatory Agency (PMRA) to move as quickly as it can to ensure that the processes for re-evaluating products here and in the U.S. are in some way harmonized. Thus, as we move towards using fewer and safer pesticides, we will know that we are in sync with what is done in the U.S. The U.S. will not be able to impose a non-tariff trade barrier or refuse our oats at the border because we have sown so many kernels of wild oats. That harmonization needs to be done. However, at the time of that harmonization, again, we should not harmonize down. We should harmonize up.
Senator Spivak: In other words, are you saying that the new products that they are approving are more environmentally friendly? I ask this because there is new information about frogs dying and so on, and much of it is related to the farm use of pesticides. It is just a signal that something is happening that is not correct and that is going to harm everybody, including farmers.
I want to know whether the methods being used in the new hog plants are the proper methods. Do they spread the waste in the winter so that it runs off in the spring? There are contradictory reports concerning that. I wonder if you can quickly tell us, since you are in the hog business, what those methods are.
Mr. Friesen: Let me address the first comment you made regarding whether the re-evaluation is going to result in the safer use of pesticides. I believe it will. The whole intention of re-evaluating the active ingredients at the PMRA is to ensure that our safety level goes up and at the same time that producers are more responsible.
As far as endocrine disrupters, when you talk about frogs growing an extra eye or what have you, I am not very familiar with that. If I talked about that, I would have to quote C.S. Lewis, who used to say that, "I justify my willingness to speak on subjects I know nothing about with the assurance I represent a large group of people with similar misunderstandings." I will not go there, but yes, work is being done on endocrine disrupters as well at the PMRA to ensure that we use chemicals safely.
I believe that ties in to the question you asked about hog waste. There have been efforts in many provinces to ensure that the recycling of containers is done in a responsible way so that they are not left lying all over the landscape.
Senator Spivak: It is important not to spread it in winter in our climate.
Mr. Friesen: Yes. As far as hog waste is concerned, some provinces have gone to legislation to ensure that the hog waste is spread responsibly. In fact, in Manitoba there are now certain regulations against winter spreading.
Senator Spivak: If you have information, I would be most interested in hearing exactly what methods are used in Manitoba.
Senator Hays: I think this is the first time that I have had an opportunity to congratulate you on assuming your new role. I do so. I wish you well.
There are three things I would like to touch on. First is the issue of the comparative position of the Canadian farmers to the U.S. farmers, with whom the Canadian farmers compete most directly. They also compete with some other members of the Cairns group and the European Union. Certainly on cereals, those are our competitors. My question is, do we have an adequate measure of the levels of support that Canadian farmers receive compared to those competitors? I appreciate that we have producer subsidy equivalent calculations, consumer subsidy equivalent calculations by the OECD, but can we really compare the Canadian farmer to those farmers in other countries and measure the extent to which our farmers are supported compared to the U.S., European, Australian and Argentinian farmers?
Mr. Friesen: Yes, we do have that information. In fact, we could forward that to you. Jennifer Higginson, who is in charge of the trade file in our office, has compiled several documents that offer a comparison. We do not use the producer subsidy equivalents. We use a simple dollar value as a percentage of total production value. We have very good figures on that, as well as on how other countries have honoured their commitments on reductions.
Senator Hays: Do you do that in house?
Mr. Friesen: Yes.
Senator Hays: Just briefly, how do we fare?
Mr. Friesen: We do not fare very well.
Senator Hays: Compared to the U.S., what do your figures indicate?
Mr. Friesen: We get 16 per cent of our production value in domestic support. The U.S. gets 32 per cent. The Europeans are at 60 per cent.
Senator Hays: If we were to return to 1994 and look at the agreement that Canada signed along with everyone else in what was then the GATT, what did we do wrong? What would we have had to achieve in that negotiation for us to realize our expectation going back to 1994?
Mr. Friesen: First of all, of course, we fought for the retention of Article 11 for supply management. When that was lost, there was agreement amongst all 133 countries about tariff protection.
Senator Hays: I understand what happened. Maybe it is not a fair question to just hit you with it. It seems to me that to some extent the negotiation that begins at the end of this year is really a return to 1994 in terms of our experience from 1994 to 1999. We should go back and say that we entered into this agreement with the reasonable expectation that our comparative advantage in producing cereals would work for us. Obviously, we did not worry about the blue box. Maybe that is part of the answer. Maybe that is something we should not have found acceptable at that time. I appreciate that we are one of many countries in the WTO and perhaps could not have persuaded everyone that that was a mistake.
In any event, if we were to fix up the 1994 agreement to make it work for us now and you are starting out with Article 11, sure we could go back and we could have kept that. It was not just an agricultural agreement. It covered many other things, but looking at it from an agricultural basis, what would we have had to have done to make it work for us? We could have preserved Article 11 but I guess we gave it up expecting certain other things to happen that would ease the pain of doing that. This requires us to reassess the continuation at some time in the next decade or so of supply management and also deal with the U.S. on NAFTA, and deal with the U.S. and other WTO countries that want us to expedite the reduction of tariffs in that area. That is only one example. Maybe it is a larger question than is suited to this kind of forum. I will let you react.
Mr. Friesen: I believe that the biggest discrepancy coming out of the last round is the fact that Canada tried to be as clean as it could and tried to honour its commitments as best it could. We are at 85 per cent of tariff rate fill. We have allowed in some cases 100 per cent of the commitment we made on market access. Yet, other countries found ways of preventing market access.
Let me use as an example a country like Taiwan, which wants to join the WTO. Just a while ago, we sent 20 containers of pork bones to Taiwan. When the containers were halfway there, the Taiwanese government changed the criteria on the percentage of meat that should be on the bones. That is a non-tariff barrier. We feel that if the other countries lived up to the last agreement 100 per cent, then that would get us far closer to achieving some of that parity.
I must add that part of it is domestic policy. You can never say that the Crow rate was done away with only because of the export subsidy agreement, because we went down to zero. That was clearly a domestic support policy.
As well, there is the fact that there is such inequity between domestic support in Canada and the U.S. Much of that has to do with the domestic policy decision because our commitments are at 15 per cent. We could spend another 60 or 70 per cent of what we do without jeopardizing the commitment that we made. We feel that we would clean up some of those areas. If you look at the way the Europeans interpreted the aggregation of products, the result was that we did not get the pork access that we wanted.
The border action between the U.S. and Canada was clearly a case of sub-governments running amok of the commitments made by the federal government in the U.S. There again, they were in contravention of the last agreement. I believe that is in large part the reason for the extreme discrepancy.
I forgot to answer Senator Spivak's question as to whether our government is on side with the zero within TRQ. Early indications are that it is, yes.
Senator Hays: I appreciate your answer that if everyone had done what we had done, the agreement would probably be working satisfactorily for us. Getting them to do that is going to be difficult, given your testimony today and our own fact finding during trips both to Europe and the U.S.
My last question is a question about Canadian strategy. Let us use beef as an example. In the U.S. there is currently an ITC investigation of beef imports. I guess they are considering imposing a countervail because the beef is being sold in the U.S. at less than our cost of production, which is the measure. If I am correct, that is a U.S. rule or a U.S. trade law, not NAFTA, not WTO. It may not succeed, but as a matter of strategy, the U.S. does those kinds of things. I guess from your comment a moment ago, the U.S. feels free to do it at the same time as they develop a program such as the one we abandoned in our national tripartite for the three levels of beef production.
Of course, the beef industry has been very sensitive to the open border on trade and wants to preserve it. Even with that sensitivity and even apparently playing by rules, it faces the challenge from our major export market on two fronts: that they should countervail our product; and that we will be non-competitive in terms of the program they are developing.
Should Canada do that? Could we have a strategy like that or should we have a strategy like that?
Mr. Friesen: We think we have to be as strategic as we possibly can. The problem with doing some of the things that the U.S. does is that the U.S. is a lot bigger. They can almost force us into submission on some of these issues. Our strategy must be so much smarter because we are dealing with giants. Selling in another country below the cost of production is actually in the anti-dumping and countervail agreement in the WTO, where selling below the cost of production of the exporter country can be a criterion of assessing whether an illegal action has taken place. However, they still have to prove injury to the market as well.
We are working on being as strategic as we can. That is another reason why we insist that we should not have an all-encompassing position very early on. Let us continue to build strategy as we understand better the dynamics.
The Chairman: I have one question on trade. I agree with what Minister Goodale said here about a month and a half ago or so that there had to be some serious talks with the Americans.
If you go to any farmyard, as you know, you will find John Deere machinery, Case machinery, International machinery. All of that comes from the U.S. These kinds of things are not being communicated to either the farmers who are protesting at the border or to the government in the way that I would like them to be. I do not know what percentage of the farm budget we spend on machinery, but it is most of it. This is a tremendous benefit to the American income and to American manufacturing. We have to take those things into consideration.
For instance, right from Esterhazy, Saskatchewan, truck after truck and train after train carries fertilizer into the United States and increases their production. Nothing is being said about these things.
I think Mr. Goodale was absolutely right. It may well have been a major mistake for the farmers to line up their trucks at the border because it became a political issue. On the other hand, there must be some talks on trade. In thanking you for being here today, I really hope that you would push for that for farm groups.
Do you have a chance to speak to the Americans and to the American farmers? This has become political along the border, as illustrated by the statement that the Chairman of the Federal Reserve Board, Mr. Greenspan, made yesterday.
Mr. Friesen: Mr. Chairman, we do have an opportunity to speak to the NFU and the U.S. as well as to the American Farm Bureau. We do so every opportunity we have. We also attend an annual meeting with the European farm leaders and we try to promote our position there. As well, as you recall, the past president of CFA is the second vice-president of the International Federation for Alternative Trade (IFAT) and part of the trade committee there.
We will certainly take your suggestions under advisement. I would like to thank you very much for having me here. Let us keep the doors open; let us continue to consult.
Senator Spivak: I have a suggestion, Mr. Chairman. There are some very good questions in this document that the Library of Parliament prepared for us. Many of these questions did not get asked. Could we send it so that the witnesses could respond at their leisure?
The Chairman: Yes. Thank you, Mr. Friesen and Mr. Atkinson, for being here this morning. We must have you back. We have not had enough time on some of these very serious questions. Thank you very much for appearing today. Honourable senators, is there anything that must be brought to the committee's attention at this point?
Senator Chalifoux: I will be meeting with the Kainai Agri-Business Corporation in April regarding aboriginal agriculture. If you would like me to report back to you, I would be more than happy to do so.
The Chairman: It would also be good to have them appear before the committee, if that is possible.
Senator Hays: I wonder if we could go in camera to discuss some future work. We have a report pending on trade issues. Perhaps I should be better informed but I wonder if we could go in camera to discuss our finding on that.
The Chairman: I think that would be very profitable.
The committee continued in camera.