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Proceedings of the Standing Senate Committee on
Agriculture and Forestry

Issue 37 - Evidence


OTTAWA, Tuesday, May 11, 1999

The Standing Senate Committee on Agriculture and Forestry met this day at 3:30 p.m. to study the present state and future of agriculture in Canada, consideration of the effect of international trade issues on farm income.

Senator Leonard J. Gustafson (Chairman) in the Chair.

[English]

The Chairman: Honourable senators, the Minister of Agriculture is with us today. Mr. Vanclief, please proceed.

The Honourable Lyle Vanclief, Minister of Agriculture and Agri-Food: Good afternoon. I wish to thank the committee for the invitation to join you. I look forward to making my presentation and hearing your comments and questions.

I wish to commend your committee for the considerable number of meetings you have conducted on issues of concern to the agriculture and agri-food industry in Canada. Thank you also for conducting such meetings in conjunction with the entire industry. We can collectively work to make an industry that is constantly challenged, yet has incredible opportunities available to it. We can make it a stronger industry as the months and years go by.

The subject of farm income has been a priority for myself and others, particularly over the last number of months. I have worked with my colleagues and my counter-parts in the provinces, and with the farmers to develop effective and responsible solutions to meet the needs of our sector.

International trade and the pursuit of profitable trade have also been at the top of our list as we prepare for the WTO negotiations that will begin at the end of 1999. This committee is well aware of the challenges we face as we enter the next round of the WTO negotiations.

Your recent fact-finding mission to Europe highlighted some of the difficult issues we face as we seek further reforms in international agricultural trade. I have had an opportunity to glance at the report your committee made after that visit. I will read it from cover to cover so that I can learn from your findings. I am sure we will all find the study interesting and challenging. It outlines what we face in this industry in different parts of the world.

As your study uncovered, approximately 45 to 50 per cent of the European Union budget supports agriculture, with approximately $70 billion per year spent on agriculture subsidies. It will be a challenge to bring increased discipline to the use of those subsidies in the next WTO round.

Canada's producers and processors can compete and win on the world stage against anyone. However, they cannot compete against the treasuries of other countries. We need a level playing field for freer and fairer trade. We will be ready for the WTO because, over the past two years, my officials and I have been working with the Canadian industry in preparation for these talks.

Agriculture and Agri-Food Canada recently co-hosted the Federal-Provincial Consultation Conference on the WTO agriculture negotiations here in Ottawa. A number of your Senate colleagues were present at some of those sessions. Provincial ministers of agriculture, leaders of national and regional organizations, processors, and grassroots producers also participated. I believe the participants emerged from it with a better understanding of the issues and agreeing on many of the elements of the negotiating position that they want Canada to take to the WTO.

Organizations and representatives have expressed a desire for a tough approach at the WTO during your meetings. We heard a similar message at that conference. Let me assure you that it is my personal commitment to continue to defend Canada's interests at every opportunity.

I would like to highlight the important themes heard over the two days the conference lasted. We heard that the industry from across the country agrees on the need to eliminate export subsidies. They want better definitions of what exactly is an export subsidy and what it is not. They want greater access to foreign markets, and they want the rules and allowances of access to be clearly spelled out. When it comes to state trading enterprises, we were told Canada should be willing to address any real trade problem. However, WTO negotiations should not be about our choice of marketing instruments, instead, they should be about trade impacts.

We also heard that producers want reductions in trade-distorting support that farmers in competing countries receive. We usually refer to those as "domestic subsidies," particularly in Europe and in the United States. Others suggested an overall cap on all types of domestic support to agriculture.

Many also said that Canada should continue to press for technical standards to be based on science and not emotion. I agree. We must base our decisions on science not emotion. We will be building on these and other themes as we develop Canada's initial negotiating position which will be announced later this summer.

The fact is, trade is absolutely essential to the Canadian economy, especially for agriculture and agri-food. We have a tremendous ability to produce. However, as we know, there are only 30 million Canadians and, with our tremendous ability to produce, access to profitable trade is critical to our industry.

Our industry can compete provided the rules are fair. Our recent performance in export and trade is the result of our tremendous work and our excellent reputation. These qualities of our domestic industry are being used as a springboard to market our products, services, and expertise in the agricultural industry around the world.

Even in the difficult global markets of 1998, Canada exported, in preliminary figures, $21 billion in processed and primary goods. That is very close to our record performance of 1997 of just a little over $22.2 billion dollars. I anticipate that, when the final numbers are in, we will be very close to $22 billion again. I hope that we can reach that.

The fact that we were dealing with commodity price downturns and shrinking markets shows how strong our export performance is. Canada's overall agriculture and agri-food exports have been growing at a rate consistent with the goal set by the Canadian Agri-food Marketing Council, known as CAMC. Their target, and it is an industry target, is to capture 4 per cent of the world market share in agriculture and agri-food trade by the year 2005. We are presently at approximately 3.3 per cent. I am confident, and the industry is confident, that together we can work to reach that target.

Our processed foods industry has been progressing ahead of the CAMC target since 1996. That year was the first time that Canada exported more processed food than it imported. That positive trend of exporting more processed food where the jobs and value-added are created here, is continuing. Our exports of processed goods went up 9 per cent last year. Those value-added products now represent approximately 50 per cent of total agri-food exports. Approximately $10.6 billion out of the more than $21 billion of our agri-food and agriculture exports are now value-added.

Increased trade is a way to increase business and increase farm income. We continue to expand our markets in the Americas. As you are aware, I have made a number of trips. Since Christmas of this year I have travelled twice to Asia to promote Canadian products and expertise. Japan will continue to be a growing market for Canadian food products. Last September I led the largest agriculture and agri-food trade Team Canada mission ever. We went through Brazil, Chile and Mexico. It was a very successful trip with a number of provincial ministers, provincial organizations, private companies and industry organizations.

Of course, events in Japan and other parts of Asia this past year also showed the down side of trade. Those events underline how Canada's fortunes are tied to global markets and how closely the bottom line of the family farm in Saskatchewan is linked to the economic crisis on the other side of the world. There are a number of tools to help producers manage themselves and their farms through these difficulties.

Having farmed for 25 years myself, like many of you around the table, we know that farming and all of agriculture, is an incredibly risky business. Our government, has set aside up to $900 million for the Agriculture Income Disaster Assistance program. With the provincial contribution, we have close to $1.5 billion available to assist our farmers.

I know, Mr. Chairman, that your members have heard some concerns about the AIDA program, and so have I. I had a good meeting yesterday morning with the Canadian Federation of Agriculture. I met with some colleagues this morning on this, and I am continually discussing it. The program is not perfect, but we are willing to work with the program. We will review how it worked in 1998 in order to make it better in the future, if we possibly can.

Producers have requested more than 28,000 application forms and they have been sent directly to producers. Federal cheques started to flow on April 30, 1999. Money was flowing even earlier than that under some of the provincial disaster programs.

A toll free AIDA hot line has been receiving an average of 550 calls per day. It would be appreciated if you and your colleagues would encourage the producers to send the forms back. I am disappointed that the farmers are not returning their forms, and we cannot deal with them unless they do. I have extended the deadline because I know that it is planting season. The deadline for applications is now the end of July. It will give farmers some more time to get their forms in. I will be happy to answer questions about the program in a moment.

This government wants to do the best we can for farmers, for processors and for the whole industry. There are many links in this agriculture and agri-food chain. It is a challenge and also an opportunity for us to make each one of those links as strong as we possibly can. If one link is weak, or one of them breaks, then the chain cannot pull together, and together it must pull.

Supporting our farmers through an income crisis and working to obtain the best possible deal for Canadian producers and processors at the next round of WTO negotiations are very important.

Again I thank you for the contribution that you have made in having these hearings, and for the input that you will continue to have in supporting the industry.

The Chairman: When the committee travelled to Europe, we learned collectively that there is no intention by their farm groups to get off of subsidy. That concerns me because it seems that the Americans are saying the same thing. That simply means that, if commodity prices do not go up, the farmers in the grain industry, will be in serious trouble for a long time. Something must be done. Our Canadian government must move in that area.

The AIDA program has not dealt with that issue. In the western part of the Province of Saskatchewan there has been a drought, and there is not a high three-year average. There are places where they have had hailstorms, and they have not had an average. Those situations will not be dealt with under this policy.

I am hearing from the farmers that they would prefer some type of an acreage payment, comparable to what the Americans make. I know our treasury cannot compete with the American treasury; however, we must look at the grain industry in a very serious way. We are heading into the toughest spring and summer that we have had in the history of agriculture.

Mr. Vanclief: In the many hours and weeks of discussion that we had leading up to the AIDA program, several things were made very clear by all parties, with one or two exceptions. Every province and all of the farm organizations in Canada said very clearly to us that they did not want an acreage payment. They expressed concern that we not put in place an aid program that would jeopardize the risk-management tools that were already in place. They wanted us to make sure that we did not jeopardize the value of NISA, even though we might have to take a look at whether NISA is doing the job that we hoped it would. They did not want to jeopardize crop insurance, or any other risk-management tools. Those messages were loud and clear from every provincial government and the Canadian Federation of Agriculture. I could list the others.

It was felt that it would put producers in a very dangerous situation of being countervailed. When a payment is directed to a commodity, and we are in the export business, if someone else can point out that that type of payment depresses or affects the market, then we would be countervailable. If you do not agree with me, I would ask you to reflect on the nervousness that the beef industry went through until a week ago when we received a favourable decision and a clean slate on that issue.

We must be very cognisant of international impact. The pork producers went through many years of countervail, and they have paid dearly for support that individual producers -- and I was one of them at the time -- thought was a wonderful thing. However, in the end, the industry paid dearly for it.

In the overall challenge, we are, with the provinces and industry, taking a serious look at the farm safety network we have. Are the investments we have made in the different areas giving us the results we want?

Last fall, we felt additional pressure coming from the industry. The industry felt that we needed to address the unexpected further downturn in the prices of grains, oilseeds and hogs, in particular, that were not anticipated in 1998. The short-term need was for a program to address the 1998 and 1999 situations, in conjunction with the safety net system we now have so that we have something in place over a longer period of time.

I recognize that, if someone has had difficulty in the last four or five years, this program was not put in place to address that. It will not address their situation. However, prior to this, at the federal-provincial ministers' meeting last July and before, we had already begun to look at our safety net system.

This is a tough situation. I am not saying that those people should not be farming. However, if for biological or weather reasons they cannot make ends meet, whether it is in Ameliasburg Township, where I live, or in the district of Prince -- Hastings, are we, as a government and society, prepared to guarantee those people a return per bushel or a level of income so that they can continue? I do not know the answer. I am only raising the question.

The Chairman: I have a neighbour who lives a mile and a half from us. He just threw in the towel. He is 45 years old. Two years ago his farm got hit with a hail storm, as our farm and many others did. He said he could not make it because the input costs were too high. He was a good farmer, but he is now doing accounting work.

Mr. Vanclief: Did he have hail insurance?

The Chairman: Yes.

If we do not spend exorbitant amounts spraying for wheat mites, our insurance does not cover us adequately. There are serious problems out there.

Mr. Vanclief: I am not saying there are not.

The Chairman: What must be addressed here is the need. Some older farmer who has paid for all his machinery may be the guy who ends up with the money.

As far as the acreage payment is concerned, how is it that the Americans were able to make an acreage payment?

Mr. Vanclief: They subject themselves to countervail. If they exported to countries just as Canada exports to the United States, we could challenge them on countervail.

The Chairman: On that basis, Canada has been pretty pure in dealing with world trade at our own expense. We have become vulnerable, and I have some concerns about that.

Senator Sparrow: Only 900 applications for the AIDA program came in from the Province of Saskatchewan out of a possible 50,000. There is a problem with the program if the people do not apply. We are pleading with them to apply, but they are not. Either the forms are too difficult to fill in, or they believe that there is no use in applying because there will be no funds available. Perhaps it has to do with the cost of preparing the form.

I phoned your office this morning to confirm that accountants were advertising that they will fill out the forms for $125. Someone said that they would get some confirmation of that for me. However, as far as I am aware, the regular accounting firms are not quoting that price.

Mr. Vanclief: I will get a copy of that to you, senator.

Senator Sparrow: It appears that the department thinks that we are slow learners or retarded in Saskatchewan. We may be a little slow, but we are not retarded. We can fill out forms if there is a benefit available.

An accounting firm, which told me they had between 800 to 1,000 farm clients, have had, as of this morning, only 25 requests for assistance in filling out those forms. Four of those farmers gave them the required information. Of the four, only one form was sent because only one qualified under the program. The other three said there was no sense in applying. However, they did the work on the application. There were only 21 more requests out of 800 to 1,000 farmers in that area.

The need is there for disaster relief and, as the chairman has pointed out, the disaster is happening now. The disaster will not be spread over the next two to five years.

We hear comments about the increased cost of land but I would suggest that the price of land in my part of the country is not going up. The people are trying to lease the farm land. On land where leases used to go for $30 to $40 an acre, the farmers are not being offered bids that are enough to allow them to sow a crop. Bids are coming in at $10 or $12 an acre. Perhaps the price of land has gone up for foreign producers and hog producers, but in the agricultural area I am talking about, it has not. The price has gone down.

In auction sales, the price of used farm equipment has gone down to a third of what it was. Surely that indicates that the agriculture industry is in trouble.

Farmers are not applying for the loan because the attitude is that there is no sense in doing it. It is the saddest thing I have ever seen, because I know that farmers always apply for their old age pension, whether they need it or not. It is a government program, and they apply. If 1 per cent of farmers do not apply, then I suppose there is something wrong with us or with the program.

The department must go back to the drawing board and do something. We keep arguing against an acreage payment, but there must be other ways of getting that money into the hands of those farmers now.

It is just unreasonable for us to sit back and say the problem is with inefficient farmers, because we got rid of the inefficient farmers a long time ago. They do not exist.

How can we compete with the European Community and the U.S. government? We know our farmers are efficient, but we cannot compete with a price of $2 for a bushel of wheat. We have to realize that either we are in the agriculture industry or we are not. If the government cannot help, just say so. Do not prolong the agony for us.

Mr. Vanclief: Senator Sparrow, I have gone through the forms with you before. There are seven pages, and three of them deal with listing inventory. I can read them to you again. I do not know how any responsible government would not ask for information such as purchases, expenses, accounts receivable and accounts payable. I hope you are not suggesting that we send out a one-page form to farmers.

I am not saying that there are not a lot of farmers struggling out there. From the day we announced this program, I have maintained that, when we determine what happened in 1998, we will do our best to adjust so that we do a better job in 1999.

The situation did not come upon us overnight, I agree. That is why we have been looking, in conjunction with the provincial governments and the industry, at the whole farm safety net situation and the programs we have presently.

I appreciate your comments. I will take them as advice, and we will continue to improve the situation as quickly as we can, and to whatever extent we possibly can within the financial means that we as a government have.

Senator Sparrow: Mr. Minister, the application might very well be seven pages; however, it is the lead up to the questions that must be answered that is causing problems.

Mr. Vanclief: Are you suggesting that we should have sent out the application without the explanation of how to fill it out?

Senator Sparrow: First of all, our farmers have been paying income tax for however many years as they have been farming. They make out an income tax form that shows their income. We already have that information within the public service. We are now asking them to fill out another form. If you want to know the income of the farming community, ask for their income tax returns. That is all we require. The information is there.

We are not doing that. We are introducing a whole new way of collecting that same information. It is easy for us to be critical of it. However, when the accounting firms themselves state they have difficulty with it, and they do not doubt that the farmers will have difficulty, it is difficult for me to understand why the minister and the department claim it is very simple. It is not that simple.

Mr. Vanclief: This is an important issue and I would like to have Mr. Richardson come to the table and explain the forms. He will expand on it a bit. A farm tax form includes all farm income as well, and it must be de-linked.

Mr. Tom Richardson, Acting Assistant Deputy Minister, Policy Branch, Agriculture and Agri-Food Canada: Mr. Chairman, it should be pointed out that in Saskatchewan, 80 to 85 per cent of farmers are in the NISA program. When the farmer applies to AIDA, they complete their NISA form, which is their tax return. All they must do in addition to the tax return, which they must fill in anyway, is fill in the inventory forms to which the minister already alluded. Our view is that the additional work that is required is fairly straightforward. Some of the accounting firms in Saskatchewan have figured out that the additional work is not that complicated and can be done quite simply.

As to the response, as the minister said, we have sent out approximately 28,000 forms. The committee should not be too concerned at this point about the number that have come back from Saskatchewan. In starting their programs, Alberta, B.C. and P.E.I. found that there was a learning curve for people, and because people are using their tax returns, the forms are only coming in now.

I would suggest to the committee that, if we were to come here in approximately a month, the number of applications from Saskatchewan would be more like 5,000 or 10,000 because farmers are presently filling in their tax returns. We will see them coming in. With the deadline having been extended, that is the kind of number we expect to have shortly.

Senator Stratton: Thank you for appearing before our committee today, Mr. Minister.

I would like you to come back and tell us about the response rate in a month or two.

I want to discuss the approach that the Europeans are taking. I am certainly not an expert in this issue. When the Europeans have tough times on the farm, the U.S. follows. When we were in Europe, I had the good fortune of seeing farms in rural Italy, and I have come to appreciate what they have. Their approach to farming is completely different from ours. They want to keep their farmers on the farm.

While I was there I met a New Zealand MP who had a large dairy farm. He told me he had been to Sweden where he met a dairy farmer who farmed at an elevation of 3500 feet, and whose dairy herd consisted of something like 13 to 18 cows. The community around that area paid that farmer $20,000 a year to stay. They have taken a completely different approach, a cultural and social one. They want to maintain their small farms and they want to keep their farmers on the farm.

In the next round of the WTO negotiations, we will have on our plates, as they will have, the diminishing of those kinds of farm support. If they give up that, what will we give up? Will we give up marketing boards or the Wheat Board when they diminish there their farm support and export support subsidies?

I broached the idea that we should be looking at de-coupling. If the farmers are to be supported, should we pay farmers directly as they do in Sweden? Their approach is to remove support from commodity prices entirely, give no export subsidies but pay the farmer an income for staying on the farm.

I know what the ramifications of that are to a degree; however, has Canada looked at that aspect of it or will we kill our farmers by a thousand cuts? We are driving them out of the business and we are doing it inch by inch, year after year. It is an excruciating death for most farmers.

What will we give up at the WTO negotiations? Have we examined moving to de-coupling? Are we just going to let the farms go? Will we lose a rural way of life in Canada? What will we do for those farmers in the long term? That is a crucial issue because right now I see it as a death by a thousand cuts.

Mr. Vanclief: The number of farmers in Canada has declined very little in the last 10 years. With all due respect, you underestimate the ability of the Canadian farmer when you say it is an excruciating death for most of them.

I would be the first to say that we have a number of struggling producers out there. Our son is fully indebted on the farm. He is like a lot of young people starting in any business. He works full time off the farm, and he and his wife operate 800 acres. That is a decision he has made because he wants to be in a business. I know many people in my community who own all kinds of businesses besides agriculture. Having to have an off-farm income is not unique to agriculture. I wish it did not have to happen, but it does happen all over the world.

The European Union's approach is an incredibly costly one. There have been debates and discussions in Parliament for decades about providing all Canadians in any walk of life with a guaranteed income. If that is an approach that the Government of Canada and its citizens wish to take, then that involves a large debate. However, there are opportunities for that debate to take place whenever people wish it to.

That approach and the one taken by the European Union masked market signals. In simple terms, producers do not react to the marketplace; they react to the mailbox. It is interesting to note that the Canadian Federation of Agriculture has provided me with a set of guidelines and the Canadian supply-managed sectors such as the diary, egg and poultry sectors have given myself, the Prime Minister and the Minister of International Trade a two and a half inch binder containing their suggestions on the approach that we should take at the WTO. I have not been able to find a guaranteed income or that type of approach in there. They are saying that we must reduce export subsidies and work to get other countries to reduce domestic subsidies, as I said in my opening remarks.

We do not have to follow what other countries have done. However, we have gone as far as we can and should go unless and until the others catch up to what we are doing. Part of what we did with trade was in response to the new trade rules in the world, which we did not have to deal with 10 or 15 years ago. We did not have free trade with the Americans or with the World Trade Organization or GATT -- at least, they did not concern themselves with agriculture. Finally, however, we have a new set of rules and other countries cannot get away with a number of things that they try to do. A good example is the beef situation over the last 10 days and the countervail duty that they tried to place on it. There is also the challenge that the United States directed toward our supply-managed sector a couple of years ago. We showed the WTO that we are fair traders in that sector. There were also six or seven challenges to the Canadian Wheat Board that were taken to the World Trade Organization. When everyone examines those challenges, they will realize that the Wheat Board is a fair trader. They cannot say otherwise.

Senator Stratton: I happen to agree with you that you cannot pay people directly. However, if we want the European Community to give that up, what are we prepared to give up?

Mr. Vanclief: I do not believe that we need to give up anything. We can demonstrate clearly that they are fair traders.

Senator Stratton: You will go in expecting subsidies to be diminished by the European unions and by the United States and we will not have to give up either the Wheat Board or the marketing boards. Is that what you are saying?

Mr. Vanclief: I do not see any reason why we must do so.

Senator Whelan: You keep stressing "science" and not "emotion." I hope you do not believe that this committee is running on emotion.

Mr. Vanclief: No.

Senator Whelan: We agreed to different things about science, and so on. I am sure that arguments can be made on both sides. However, in an article that recently appeared in the newspaper, two of the world's largest corn producers announced that they would reject any genetically modified corn that is not accepted in Europe. Those announcements about corn have been made in Ontario, also. Are you not concerned about exporting?

Mr. Vanclief: Senator Whelan, you are a strong promoter of the advancement of research in agriculture. We have had a tremendous amount of that in the agricultural field and it is moving faster now than it was 30 years ago. When hybrid corns were developed, they provided a fantastic advantage for all kinds of reasons. However, when we do that type of thing, we are producing products that are found in the environment and in the animal feed, which eventually ends up in the human food chain. It is imperative that we have a regulatory system in place that is based on science, safety to the environment and safety to animals and humans.

As far as canola and corn, the European Union is not yet satisfied with a couple of varieties of corn. They are not satisfied with the science of those varieties of corn, so they will not receive them. That is no different from them saying that they do not want Yukon Gold potatoes versus red potatoes, or whatever the case may be. We have said that if the science is not there, then they have the right not to buy the product. However, we told them that they must demonstrate the science on it and accept it.

There is also a similar situation involving the beef hormone. The FAO, the World Health Organization, the European Union's own scientific community, Health Canada and another large organization has said that the beef produced with the hormones that are being used in North America is safe for consumption by humans. We have trade rules. However, if someone says "No," we disregard all the science. There must be a set of rules to counteract that type of decision.

When I was growing crops, if the buyer of my crops said, "I do not want a certain variety of barley because my market is for another variety of barley," then I would not grow that variety of barley. You may be able to get a high yield for your barley, but if it is a malting barley it may not be a variety that the maltsters like. Science is the first priority and we should not allow our emotions to become involved in those kinds of decisions. The first question we must ask is: Will we base this decision on science or on emotion?

Senator Whelan: This committee has heard evidence from the WHO and from all over the world. We have some strong reservations about the procedure to prove that the scientific evidence exists. For example, with rBST, there must be more research because there has been no chronic health testing on it.

Mr. Vanclief: In Canada, rBST was not registered. Does that not show that the system works here?

Senator Spivak: Yes; thus far.

Senator Whelan: They want to register it here but they have been playing around with it since 1991, too.

We developed canola and did all kinds of things that involved good biotechnology. However, for example with canola, you may be growing the old fashioned type of canola that has been not genetically engineered.

Canola will grow in your crop whether you want it to or not. That is a dangerous thing because the bees, birds and wind will disperse seeds into your crop. Monsanto was fined <#00A3>15,000 for planting a crop adjacent to an old-fashioned type of crop in the United Kingdom.

Dr. Brian Morrissey, Assistant Deputy Minister, Agriculture and Agri-Food Canada: Senator Whelan, we have known about this information in regard to canola for some time. There are two points to bear in mind: First, most of the crops that we grow are biological weaklings. They did not come from this country, they did not adapt over thousands of years in this country. As a consequence, if we did not treat them specially, they would not survive in this country. In other words, we must prepare the soil, weed and look after these crops in special ways.

In the normal competitive process, if these crops are somehow transplanted in another field or area, the chances of them surviving are fairly slim. Even if these crops did survive, the standard procedures for control could apply to them in a following year.

As an additional point, before we can release any crops such as you are speaking of into the environment, we must go through a series of standardized tests established by the Government of Canada, not by us, to prove that these will not be dangerous to the Canadian environment, according to the current information.

Senator Whelan: Mr. Morrissey, we have several letters which say that Round-Up resistant canola, for instance, can become a weed. Are you aware of that information?

Mr. Morrissey: The point I made is based on the information we have today. I mean by that that none of these new developments is risk-free. In other words, we can never say that we are 100 per cent sure that that will not become a weed.

We are not 100 per cent sure that any of the things that humans call crops will not become weeds at some time in the future. That holds true whether we breed traditionally or through some new system.

Senator Whelan: Mr. Minister, you and I were both growers of horticultural crops in the vegetable industry. I recently met with the chairman of the Ontario Vegetable Marketing Board. They market 16 crops. None of them are in difficulty. They have increased their production this year; they are under contract; they know what they will get from the day they plant it.

For instance, the tomato contract this year is the largest it has ever been. The production was the largest in the world last year in southwestern Ontario. Tomatoes grown in your area averaged 37 tonnes per acre. That farm marketing board has been there for 55 years. You say that there will be no change. I noticed that you omitted in your presentation, perhaps not intentionally, the farmers who are not filling out these forms that Senator Sparrow mentioned, like the ones under poultry or dairy.

There is a deep concern that we give away too much at the WTO and that we will continue to give away more.

The director of the Centre for Trade Policy and Law in Ottawa predicted that the next round of talks will result in a deal to reduce import tariffs over five to six years to levels where imports are clearly possible. He says that there will be pressure to reduce these tariffs. He says that when that happens, your supply management regimes start to unravel. Do you agree?

Mr. Vanclief: I agree that there will be pressure on our supply management system. There will be pressure on the Canadian Wheat Board. There will be pressure on the level of export subsidies in the European Union and the United States. There will be pressure on the level of domestic subsidies in the United States. I could go on.

However, that is the director's personal opinion. I am not being sarcastic, but I do not believe that he will be one of our negotiators at the table. Now that you have told me what he said, I am sure of that.

Senator Whelan: I offered to be one of your negotiators if you would accept me, for $1 a year.

Mr. Vanclief: Senator Sparrow says that is too much. We will not get into the auction with Senator Sparrow. I do not have much time, only about five minutes.

Senator Taylor: I was going to tell you that you are popular in Alberta, whether that is a good sign or not.

Mr. Vanclief: Mr. Richardson spoke about the provinces and their farm-aid program. Alberta struggled to get people to understand their farms. They started farm aid a few years ago, and the farmers have no problem with that now. It is going very well.

I realize that this is the first time that Saskatchewan farmers have had to fill out a form. Previously, they simply had to tell us how many acres, head of cattle or hogs they had and we would send them a cheque. That is overly simplistic, but it is taking some time to adjust.

Senator Taylor: I did not want you to give away the secret. Maybe it is not a secret that Albertans know how to pick the pockets of the federal treasury as well as anyone else.

After some of our tours abroad and our hearings here, it is clear that we all pay lip-service to a market economy. There is no question that consumers in Europe have already shown concern and apprehension in regard to genetically modified or hormone-added products.

I was in the supermarket the other day and a litre of milk that highlighted its non-hormonal content was selling for double the price of regular milk, even though hormones are not allowed in Canada.

The consumer is king and you are speaking about science and not emotion. I have a hard time adapting to the fact that you are talking about trade restrictions against the European market because they will not take hormone-injected beef.

I am not that enthused about hormone-injected beef. What do you have against labelling? In other words, let the market decide. Instead, you sound as if you are trying to stuff down the necks of the European and Canadian public what you consider to be science, whether they like it or not.

Mr. Vanclief: No, senator I am not saying that. Using the best science we have today, the decision must be made on whether a product can be grown or whether a product can be produced or whatever the case might be. Once that decision is made, it is up to the consumer to buy the product or not.

Senator Taylor: Why do you not allow increased labelling?

Mr. Vanclief: We label in Canada today if the nutritional content has changed or if there is an allergenic change.

Ms Margaret Kenny, Associate Director, Biotechnology Strategies and Coordination Office, Canadian Food Inspection Agency: Honourable senators, labelling foods is a responsibility we share with Health Canada. We have carried out three public consultations on this subject. The results of those consultations are consistent with the laws under the Food and Drugs Act.

Briefly, Health Canada carries out a food safety assessment for any kind of new food. That includes those developed using biotechnology. In that assessment, they look at whether or not there has been a significant nutritional change, a compositional change or any change with regard to health and safety. Concern with allergens would be one of the things they would look at.

If there is one of these changes, then there would be a mandatory labelling requirement. If there is a significant change in nutrition or if it is a health matter that would affect a segment of the population, they would require labelling under the Food and Drugs Act. It would be mandatory.

Senator Taylor: You will not let the consumer decide. You decide what is good or not.

Ms Kenny: The first aspect deals with mandatory labelling. The second aspect deals with health and safety issues. If it is not a health and safety issue and a segment of the population is interested in having food not developed through biotechnology and they want that labelled, under the Food and Drugs Act, the companies can respond to that need and label their foods that way. "Organic" would be an example of where that voluntary option has been used by the food industry.

Senator Spivak: The evaluation of whether there has been a change is make by whom?

Ms Kenny: That is the responsibility of Health Canada.

Senator Spivak: Who in Health Canada does that? The Health Protection Branch no longer has what would be a real evaluating capability to evaluate the company's research. We have found evidence of that. For example, it has been claimed that rBST milk and ordinary milk are the same, but they are not. There is a difference.

There have been studies, of which we have been told by the Health Protection Branch scientists, in which Revalor-H has caused, in young calves, an increase in liver weight, differences in reproductive organs, and so on, but no one pays attention to that. More studies are required.

You talk about good science and bad science. It is no science if we do not have a way of evaluating it. I do not blame the companies or people who are selling goods for not wanting labelling. Why would they? It is a commercial enterprise. They wish to sell their products, not label them to indicate they contain GMOs, when people do not want that. Is this an issue of consumer choice? You are making a decision that this is how the labelling will appear or else it will be voluntary. Consumers do not want that. They want the labelling, and that is what this issue is all about. If you continue on this path, there will be trouble, because we now have the Internet and people can have easy access to that information.

Canadian farmers see a huge market. All kinds of store chains in the EU have now said they will not accept GMOs. Why would Canadian farmers, who see a huge market, not leap on that?

Mr. Vanclief: They are, senator.

Senator Spivak: Thank God. I am glad to hear that.

Mr. Vanclief: Farmers are very clever people, and they will react to the marketplace.

Senator Spivak: We need to have the products labelled to indicate that they are not genetically modified, do we not?

Mr. Vanclief: I am not qualified to get into this discussion, but how far removed from the original GMO product do we have to be to label other products? If a genetically enhanced corn variety has 3 per cent, 2 per cent, and 1 per cent corn in it, are you suggesting that the product be labelled "contains genetically enhanced organisms"?

Senator Spivak: Mr. Minister, the Health Protection Branch has pointed out discrepancies. If you have an evaluative capacity, it is not up to me to answer that question. You must have a good scientific basis for answering that question.

Mr. Vanclief: Are you saying that you do not trust science?

Senator Spivak: I am not saying that I do not trust science.

Mr. Vanclief: You are saying we cannot have proof of our science. As a consumer what percentage do you want? Do you want 0.5 per cent of corn that might have the BTG in it that was grown so we can have fewer pesticides in our environment?

Senator Spivak: As an ordinary consumer, I had a great deal of trust in the Health Protection Branch until I found out about what they do not have in order to ensure that there is a proper evaluative capacity. I do not have to make the decision. I trust the Health Protection Branch, but they must have that capacity. What I do not trust is a company saying, "Trust us." Why should I?

Mr. Vanclief: I understand that.

Senator Fairbairn: Last week we had witnesses before this committee who talked about the fundamental importance of the renewal of the peace clause in the trade agreement. It is only there until 2003. In a sense, it holds off issues of countervail and anti-dumping. This is critical. As you work yourself into this new trading arrangement, that clause must be extended so that protection will remain part of the transition. Will Canada play a significant role in trying to achieve that?

Mr. Vanclief: It is fair for someone more qualified than me to explain the peace clause, and I will ask Mr. Martin to do that.

Mr. Paul Martin, Director, Multilateral Trade Policy Division, International Trade Policy Directorate, Market and Industry Services Branch, Agriculture and Agri-Food Canada: The purpose of the peace clause is to restrict the ability to take actions against programs maintained within the reduction commitments that have been accepted in the agreement on agriculture. There are three parts to it. One says that programs which meet the criteria of the green box are exempt from countervail and actions under WTO rules which can be taken against subsidies that distort trade. Those are green box subsidies.

Subsidies which are admitted to be trade distorting but which conform to the blue box are also exempt from the multilateral actions under the subsidies agreement, as are export subsidies, provided they are maintained within the reduction commitments to which countries have agreed.

In the course of consultations we have had with the industry, we have heard about the importance of maintaining the freedom from countervail in the green category. We have not heard many Canadian producers speak out in favour of it, but we have heard quite a few speak out in opposition to the notion that EU blue box subsidies could continue without us being able to take action against them.

The Chairman: I realize that.

Senator Whelan: Mr. Minister, I have 33 more questions to send you by mail.

The Chairman: Before you leave, Mr. Minister, I wish to thank you. I am glad to hear that you are very closely watching this AIDA program and the farmers out there because the problem is a serious one. I am pleased that we could communicate that to you today.

The committee adjourned.


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