REPORT OF THE COMMITTEE |
WEDNESDAY, August 4, 1999 |
The Standing Senate Committee on Agriculture and Forestry has the honour to present its
Your Committee, which was authorized to examine the present state and the future of agriculture in Canada, and to present its final report no later than October 28, 1999; has in obedience to its Order of Reference of November 18, 1997 proceeded to that inquiry and now tables the report entitled, The Way Ahead: Canadian Agriculture’s Priorities in the Millennium Round.
Respectfully submitted,
Chair
LEONARD J. GUSTAFSON
THE WAY AHEAD :
Canadian Agriculture’s Priorities in the Millennium Round
STANDING COMMITTEE OF THE SENATE ON AGRICULTURE AND FORESTRY
Chair : The Honourable Leonard J. Gustafson
Deputy Chair : The Honourable Eugene Whelan
August 1999
MEMBERSHIP
The Honourable Leonard J. Gustafson, Chairman
The Honourable Eugene F. Whelan, P.C., O.C., Deputy Chairman
and
The Honourable Senators:
| Chalifoux, Thelma | Robichaud, Fernand, P.C. |
| Fairbairn, Joyce, P.C. | Rossiter, Eileen |
| *Graham, Alasdair B., P.C. (or Carstairs, Sharon) | Sparrow, Herbert |
| Hays, Daniel | Spivak, Mira |
| *Lynch-Staunton, John, P.C. (or Kinsella, Noel A.) | Stratton, Terry |
| Rivest, Jean-Claude | Taylor, Nicholas |
*Ex Officio Members
Note : The Honourable Senators Hervieux-Payette, P.C. and Tkachuk were members or present at meetings at various stages during the course of this study.
Staff from the Parliamentary Research Branch of the Library of Parliament:
June Dewetering and Jean-Denis Fréchette
Research Officers
Blair Armitage
Clerk of the Committee
ORDERS OF REFERENCE
Extract from the Journals of the Senate, Tuesday, November 18, 1997:
The Honourable Senator Gustafson moved, seconded by the Honourable Senator Stratton:
That the Standing Senate Committee on Agriculture and Forestry be authorized to examine the present state and the future of agriculture in Canada; and
That the Committee present its report no later than December 15, 1998.
The question being put on the motion, it was adopted.
Paul Bélisle
Clerk of the Senate
--------------------
Extract from the Journals of the Senate, Tuesday, November 24, 1998:
The Honourable Senator Taylor moved, seconded by the Honourable Senator Mahovlich:
That notwithstanding the Order of the Senate adopted on November 18, 1997 to examine matters relating to the present state and the future of agriculture in Canada, the Standing Senate Committee on Agriculture and Forestry be empowered to present its final report no later than June 30, 1999.
That the Committee be permitted, notwithstanding usual practices, to deposit its report with the Clerk of the Senate, if the Senate is not then sitting; and that the report be deemed to have been tabled in the Chamber.
After debate,
The question being put on the motion, it was adopted.
Paul Bélisle
Clerk of the Senate
--------------------
Extract from the Journals of the Senate, Thursday, June 17, 1999:
The Honourable Senator Gustafson moved, seconded by the Honourable Senator Cohen:
That notwithstanding the Order of the Senate adopted on November 24, 1998 to examine matters relating to the present state and the future of agriculture in Canada, the Standing Senate Committee on Agriculture and Forestry be empowered to present its final report no later than October 28, 1999.
The question being put on the motion, it was adopted.
Paul Bélisle
Clerk of the Senate
Biotechnology, and Sanitary and Phytosanitary Issues
a) A Comprehensive Versus a Sectoral Round
b) The Expected Duration of Negotiations
c) Trade Remedies
d) The Peace Clause
e) Accession to the World Trade Organization
f) Forming Alliances
g) Multifunctionality
h) Consultation
APPENDIX 1 : WITNESSES
THE STANDING SENATE COMMITTEE ON AGRICULTURE AND FORESTRY'S FACT-FINDING MISSION TO EUROPE
Canada is preparing for a crucial round of World Trade Organization (WTO) negotiations that will influence the future direction of the Canadian agriculture and agri-food industry. To date, preparations have involved government and industry stakeholder consideration of a broad range of issues involving both the preservation of the Canadian industry and opportunities for enhanced international trade. What is achieved in the upcoming round of multilateral negotiations on agriculture may be the impetus for what Canada’s agriculture and agri-food industry can accomplish in the future.
The WTO negotiations on agriculture are expected to get underway at a November Ministerial meeting in Seattle. These negotiations are required as part of the Uruguay Round, which concluded in 1994 and resulted in the Agreement on Agriculture providing WTO member countries with rules and disciplines for agricultural trade.
Federal and provincial governments are now engaged in consultations to identify Canada’s initial bargaining position in these negotiations. So far, consultations have included the conference Toward An Agricultural Trade Position: Dialogue With Canadian Industry and meetings between industry stakeholders and the House of Commons Committee on Agriculture and Agri-Food, the House of Commons Committee on Foreign Affairs and International Trade, and the Senate Committee on Agriculture and Forestry. As part of its study of international trade in agricultural and agri-food products and what is being referred to as the Millennium Round, the Senate Committee also held meetings in Europe to determine the European Union position and to help further define the opportunities and challenges facing Canada in the upcoming negotiations.
Most Canadian agriculture and agri-food industry stakeholders agree that, while much remains to be done, the existing Agreement on Agriculture has enhanced market access and improved the ways in which countries provide domestic support to their agriculture and agri-food sectors. Nevertheless, the Committee’s hearings also revealed a perception that Canada’s "boy scout" behaviour has allowed us to be exploited. While Canada has fully abided by all rules and guidelines, some other countries have not. As a result, some industry stakeholders have urged that, in the upcoming round, Canada insist that WTO member countries first live up to their Uruguay Round obligations.
A remarkable consensus has emerged within the industry on the priorities and positions that Canadian negotiators should adopt at the bargaining table. In large measure, these priorities and positions are mirrored in the Committee’s recommendations. Industry stakeholders stress that market access is a key priority, a position that the Committee supports. Consequently, we recommend that Canadian negotiators focus on "real" minimum market access equal to 5% of domestic consumption, the reduction of in-quota tariffs to zero, and the elimination of country-specific allocations. Also advocated by witnesses, and endorsed by us, are zero-for-zero agreements where sectors have indicated an interest.
Witnesses frequently mentioned the "traffic light" approach to domestic support adopted during the Uruguay Round, particularly "green" programs and "blue box" programs. Many argued for a cap on domestic support, elimination of the blue box, clarification of what constitutes a green program, and establishment of a WTO committee to determine the "green" status of newly-developed programs and initiatives. The Committee recommends that Canadian negotiators pursue these issues in the upcoming round.
Virtually all witnesses expressed the view that export subsidies are the most trade-distorting form of support, and insisted that all government export subsidies must be eliminated. Export credit, export promotion, export taxes and international food aid were issues identified as needing greater discipline. In support of these views, the Committee recommends that Canadian negotiators pursue the elimination of government export subsidies, a precise definition of "export subsidy," and the establishment of disciplines in the other areas of export competition.
Orderly marketing systems were also discussed, although in this area there was no clear consensus among witnesses. While some stressed the beneficial impacts of these systems, such as supply management, on farm incomes in Canada, others argued for changes in, or even elimination of, such systems, including Canada’s export state trading enterprise. In the Committee’s view, and the view of some witnesses, any disciplines imposed on export state trading enterprises, such as the Canadian Wheat Board, must apply equally to their commercial competitors. We endorse this position and, recognizing the comments of some witnesses, also recommend that Canadian negotiators defend the sovereign right to determine domestic marketing systems.
In their comments on biotechnology, and sanitary and phytosanitary issues, the main concern the Committee heard was that objective science be the standard. Witnesses argued that the products of biotechnology should not be subject to trade actions for other than objective scientific reasons. Similarly, sanitary and phytosanitary barriers to trade must be based on objective science. Committee members are increasingly of the opinion that greater attention must be paid to consumers’ desires. One consideration in this regard is labelling, which was also identified as an issue to be discussed.
Witnesses raised a number of other issues, including whether the upcoming round of trade negotiations should be comprehensive or limited to agriculture; the duration of negotiations; trade remedies; the peace clause; accession to the WTO by other countries; the forming of alliances to take advantage of shared interests; government support to the Canadian agriculture and agri-food industry; and the importance of ongoing consultation with stakeholders. The Committee makes recommendations in each of these areas, advocating a comprehensive round of negotiations to be concluded within a three-year period, progress in the area of trade remedies, renewal of the peace clause as it relates to green programs, and the building of alliances with other countries. Also recommended is that all WTO rules and disciplines be fully implemented by all member countries, that enhanced, non-trade-distorting support to the industry be considered, and that consultations with industry stakeholders and with Parliamentarians continue as negotiations unfold.
In spite of the considerable progress made in the last round of negotiations, much work remains to be done. Progress in the key areas of market access, domestic support and export competition are particularly important if the Canadian agriculture and agri-food industry is to meet its target of 4% of world agricultural trade by the year 2005. Many Canadian farmers are facing major financial difficulties at this time, and help is needed now. Many in the agriculture and agri-food industry are looking to the Millennium Round as a means of raising farm incomes through improved agricultural trade. The Committee recognizes the formidable challenges that lie ahead for Canadian negotiators, but is nevertheless confident that the Millennium Round negotiations will lead to positive changes, and enhanced trade opportunities, for Canada’s agriculture and agri-food industry. They must do so if the industry is to survive and prosper.
The Committee recommends that:
- in the upcoming round of multilateral trade negotiations, Canadian negotiators establish mechanisms to ensure that the minimum access equal to 5% of domestic consumption negotiated during the Uruguay Round is respected. As well, the tariffs applied to imports within the limits of the commitment access should be reduced to zero and country-specific allocations should be eliminated. Finally, the "zero-for-zero" option should be contemplated for those sectors of the agriculture and agri-food industry that have indicated an interest.
- in the upcoming round of trade negotiations, Canadian negotiators pursue a cap on domestic support, the elimination of the blue box as quickly as possible and in a shorter implementation period than that of the Uruguay Round, and clarification of what constitutes a green program.
- Canadian negotiators pursue the establishment of a committee that would examine newly-developed programs and initiatives to ensure they meet green criteria. This committee should be part of the World Trade Organization.
- in the upcoming round of negotiations, Canadian negotiators pursue the elimination of government export subsidies and the establishment of disciplines on export credit, export promotion, export taxes and international food aid. The elimination of export subsidies must occur within clearly-established time limits. Moreover, a clear definition of what constitutes an export subsidy must be determined.
- in the upcoming trade negotiations, Canadian negotiators insist that any disciplines imposed on export state trading enterprises apply equally to commercial operations with which they compete.
- in the upcoming round of negotiations, Canadian negotiators vigorously defend the sovereign right to determine domestic marketing systems.
- in the upcoming round of negotiations, Canadian negotiators ensure that objective, science-based reasons are used to develop sanitary and phytosanitary measures. Moreover, given the increasing number of foods that are the product of modern biotechnology and recognizing the great difficulties associated with identity preservation, labelling should also be discussed in order that consumers can make informed choices about what they are consuming.
- in the upcoming round of trade negotiations, Canadian negotiators pursue a comprehensive round of negotiations in order to secure sufficient flexibility to make trade-offs at the bargaining table. Moreover, Canadian negotiators must bargain for the benefit of all Canadian interests.
- Canadian negotiators bargain with a view to concluding the upcoming round of multilateral trade negotiations within a period not to exceed three years. Moreover, commitments made with the objective of reducing trade-distorting subsidies should be realized in the early part of an implementation period that is shorter than that of the Uruguay Round.
- in the upcoming round of negotiations, Canadian negotiators pursue progress in the area of trade remedies, particularly with respect to measures that would curtail the use of such remedies to harass, rather than address legitimate disputes with, World Trade Organization member countries.
- Canadian negotiators pursue renewal of the peace clause.
- all countries that are members of the World Trade Organization fully respect all rules and disciplines.
- the Canadian government continue to pursue alliances with other countries to take full advantage of shared mutual interests.
- federal and provincial governments consider providing enhanced support to the agriculture and agri-food industry, in a non-trade-distorting manner and consistent with international trading obligations.
- throughout the upcoming multilateral trade negotiations, the federal government continue the consultation process with agriculture and agri-food industry stakeholders that has occurred to date. In particular, stakeholders should be consulted as long as is practicable and prior to any significant trade-offs being made during negotiations. As well, Parliamentarians should be consulted on an ongoing basis and prior to substantive changes in strategies or priorities at the bargaining table, and should be participants at the Ministerial meeting in November 1999 and beyond.
During the fall of 1998 and the spring of 1999, the Standing Senate Committee on Agriculture and Forestry held hearings on international trade in agricultural and agri-food products, and the approach and priorities that Canada should adopt in November 1999 as the next round of World Trade Organization (WTO) negotiations on agriculture begins. This report summarizes the testimony received by the Committee on these issues.
The themes that emerged were the same as had emerged during the examination of the upcoming round of multilateral negotiations by the House of Commons Agriculture and Agri-Food Committee and the House of Commons Committee on Foreign Affairs and International Trade and during the conference Toward An Agricultural Trade Position: Dialogue With Canadian Industry held in Ottawa in April 1999. Five key areas have been identified: market access; export subsidies; domestic support; state trading enterprises; and biotechnology, including sanitary and phytosanitary issues. In general, the recommendations in this report reflect the majority views of witnesses. The Committee believes that their adoption will lead Canada away from its "boy scout" image and toward recognition as a major force in world agricultural and agri-food trade.
The importance of international trade to the Canadian agriculture and agri-food industry, as well as to Canada generally, cannot be denied. Nor can the importance of an international trading regime based on rules and enforcement mechanisms. A significant step toward such a regime was taken with the 1994 Agreement on Agriculture concluded as part of the Uruguay Round of international trade negotiations. The agreed upon long-term objective is a fair and market-oriented agricultural trading system.
To achieve this objective, the Agreement provides specific commitments to reduce support and protection in the areas of domestic support, export subsidies and market access, and introduces strengthened and more effective rules and disciplines. Disciplines now exist in the areas of: tariff rate quotas, which replaced import quotas; the aggregate measure of support (AMS), which is often discussed in the context of domestic support; and export subsidies. Each WTO member country has a schedule of tariff concessions and commitments limiting subsidization whereby it is committed to tariff and subsidy reductions over a six-year period for developed countries, or a ten-year period for developing countries. Each schedule specifies the maximum tariff that can be applied on imports of agricultural products, with the schedules of 36 member countries listing tariff quota commitments, or obligations to provide market access at a low tariff for a specified quantity of imports.
As well, the Agreement on Sanitary and Phytosanitary Measures provides rules on establishing national standards for sanitary and phytosanitary measures to ensure food safety and health based on scientific evidence, while not being used as protectionist measures or non-tariff barriers.
The Agreement on Agriculture also required another round of agricultural negotiations, to be launched in Seattle in November 1999. Preparatory to these negotiations, federal and provincial Ministers of Agriculture are conducting extensive consultations with the agriculture and agri-food industry on priorities in the upcoming round of multilateral trade negotiations. Included in this consultation process was the April 1999 conference Toward An Agricultural Trade Position: Dialogue With Canadian Industry.
As well, as indicated above, parliamentary examination of the views of stakeholders and other interested parties has taken place, with respect to agriculture specifically and the World Trade Organization negotiations generally. In 1998 and 1999, the House of Commons Standing Committee on Agriculture and Agri-Food held a series of "Take Note" hearings on the upcoming agricultural negotiations. The Committee’s March 1999 report did not make any recommendations, but did demonstrate the extent to which the agriculture and agri-food industry has achieved broad consensus on its priorities for the upcoming round. As well, in 1998 and 1999, the House of Commons Standing Committee on Foreign Affairs and International Trade held a series of hearings on the upcoming World Trade Organization (WTO) negotiations, where the views presented on agricultural issues broadly mirrored those presented in the Agriculture and Agri-Food Committee’s Take Note hearings.
Also, the Standing Senate Committee on Agriculture and Forestry has held hearings to determine the opinions and priorities of the agriculture and agri-food industry in the upcoming round of negotiations on agriculture. From the testimony of a broad range of groups and individuals from within and outside the agriculture and agri-food industry a consensus among industry stakeholders has emerged that is unlike any in recent memory. The Committee travelled to Europe on a fact-finding mission to determine the view of the European Union as the next round of negotiations gets underway. We are extremely grateful to the groups and individuals, in Canada and in Europe, who shared their valuable insights with us.
Finally, the Committee must comment on the state of the Canadian agriculture and agri-food industry as we head into the upcoming negotiations. For reasons beyond their control -- the collapse of prices in and markets for several sectors, weather, and high input costs, among others -- many in the industry are facing disaster, and it is unknown how many will survive. Many of our industry stakeholders who embraced the Uruguay Round’s Agreement on Agriculture with optimism are now filled with pessimism. Having now had several years of experience with the Agreement on Agriculture, some doubt that the Uruguay Round has been of benefit to the Canadian agriculture and agri-food industry. They believe that the playing field is far from level. Nevertheless, it is clear that further liberalized trade, occurring within the context of clearly-defined rules and disciplines, is "the way ahead." As Canada enters the upcoming round of multilateral trade negotiations on agriculture, and searches for a level playing field, the Committee hopes that this report, and our recommendations, will usefully contribute to an identification of Canadian agriculture’s priorities in the Millennium Round.
Market access has emerged as a clear priority for the Canadian agriculture and agri-food industry, and is generally supported by sectors that are export-oriented and those that are import-sensitive. A formidable challenge will be for Canadian negotiators to gain increased market access for such sectors as grains, hogs and cattle, while maintaining protection for such sectors as dairy and poultry. Most agriculture and agri-food industry stakeholders support a consensus position and believe that sectors should not be traded off; nor should industries be traded off within the context of a comprehensive round of bargaining. This sentiment was expressed by the Canadian Broiler Hatching Egg Marketing Agency, which told the Committee that "within agriculture, no deal should be made to seek gain for one commodity ... at the expense of another commodity. Likewise, agriculture should not be traded off against another industry sector."
Other countries have achieved the objective of protecting some sectors while enhancing market access for others. Witnesses cited milk, sugar and peanuts in the United States and milk in Europe. In its appearance before the Committee, the Canadian Federation of Agriculture commented that "(e)very exporting country that enters into negotiations has dual goals. ... Even those countries that profess to have no intent aside from trade liberalization certainly can demonstrate in their actions that they are willing to go to great lengths to protect their domestic interests." Canadian negotiators may want to use these examples as a model at the bargaining table. If other countries seek high tariffs outside access commitments for products that are sensitive to foreign competition, while at the same time arguing for lower tariffs on other commodities, Canada should be able to do likewise. As the Keystone Agricultural Producers told the Committee, "(w)hy do we talk about dairy and eggs if we do not talk about sugar and peanuts?"
Most analysts and agriculture and agri-food industry stakeholders agree that Canada gained a great deal in terms of market access in the Agreement on Agriculture; however, they feel that greater access must be negotiated in the upcoming round of multilateral trade negotiations, especially if the industry is to meet the goal of $40 billion, or 4% of world agricultural trade, by the year 2005. That goal is achievable only with changes to the Agreement on Agriculture. Agricore told the Committee that "(w)e must be ready to meet that challenge, but we will need some help. We cannot make those significant breakthroughs without some significant changes and gains in the next round of trade talks." Some witnesses stressed the need for rules regarding market access, noting that commitments made during the Uruguay Round were based on guidelines that had not been incorporated into the Agreement on Agriculture. In their view, guidelines are subject to more flexible interpretation by individual countries than rules would be. They told the Committee that, while Canada implemented the guidelines as if they were rules, some other countries did not.
Under the Agreement, import quotas were replaced with tariff rate quotas (TRQs), or tariffs that vary according to market access. TRQs maintain a level of protection for import-sensitive sectors while subjecting them to specific tariff reduction targets to help them adjust gradually to increased competition. Minimum access at the beginning of the Agreement’s implementation period was 3% of average domestic consumption between 1986 and 1988, growing to 5% by the end of the implementation period. As a result of the Uruguay Round, 36 countries agreed to 1,370 individual tariff rate quotas. Of these, Canada has 21 TRQs, while the United States has 54 and the European Union has 85. As well, developed countries agreed to reduce tariffs by 36% on a simple average basis, with a minimum reduction of 15% per tariff line; developing countries are subject to reductions of 24% and 10% respectively.
A number of witnesses suggested that some of the market access gained through the Agreement on Agriculture was illusory. They believe that, in some instances, countries essentially circumvent this improved access through the use of non-tariff barriers, including sanitary and phytosanitary measures; in other cases, real market access did not come about because of how tariff rate quotas were administered.
Some witnesses argued for real access equivalent to not less than 5% of consumption for all commodities, while others believe that Canada should be more aggressive in negotiating an increase to something more than 5% of domestic consumption. Whatever the negotiated level, most stressed that access should be provided on a commodity or tariff line, rather than an aggregate, basis and should be based on recent production or consumption data, rather than a 1986-1988 base period. Under the Uruguay Round guidelines, countries can allocate access on the basis of a relatively broad grouping of products, allowing them to provide significant access for one commodity within that group while restricting access for another commodity.
For example, the Canadian Pork Council told the Committee that "(i)nstead of giving ... a tariff rate quota that equals 5% of their pork consumption, the European Union decided to lump all their meats together. They defined 5% of their total meat consumption and then subtracted imported beef and lamb. Since they are traditionally large importers of beef and lamb, they came up with a figure for pork that was 10% or 15% of what we would have originally hoped." The Committee also learned that the European Union measured its access commitment for dairy products only on butter, skim milk powder and cheese, without considering other dairy products.
Witnesses advocated the elimination of country-specific allocations, which they feel enable tariff rate quota guidelines to be abused and obligations circumvented. Some witnesses reported that the United States has granted an ice cream quota to Jamaica, knowing that the quota will not be filled. A fill rate calculates actual imports as a percent of committed access; the Committee learned that while TRQ fill rates within Canada are at a very high level, the same is not true of some other countries. For example, in 1996 Canada had an average fill rate of 85% for all of its TRQs, compared with 54% in the United States and 72% in the European Union. It should be noted, however, that not all analysts agree with these figures.
While witnesses shared a common view on in-quota tariffs, arguing that they should be reduced to zero, they did not agree on over-quota tariffs. Some believe that tariff reductions are required to enhance access, while others want the existing tariffs maintained. For example, from the perspective of the supply-managed commodities, the Chicken Farmers of Canada told the Committee that "(o)ver-quota tariffs are essential to the functioning of supply management." Given the various priorities among the sectors of the agriculture and agri-food industry, some witnesses suggested ongoing consultation to determine, on a tariff line basis, the change acceptable to each stakeholder affected by a specific tariff rate quota. Some witnesses argued for larger reductions to very high tariffs, rather than a simple percentage reduction in all tariffs; others stressed that tariff escalation, whereby increasing tariffs are applied as products are further processed, should be prevented.
Furthermore, some sectors of the agriculture and agri-food industry support zero-for-zero agreements, whereby signatory countries would agree to eliminate barriers to the trade of a particular commodity and would be obliged to eliminate all tariffs, export subsidies, export taxes and other export restrictions. Since these agreements operate within the context of the WTO, under the most favoured nation principle any border measure concession in a zero-for-zero agreement would have to be provided to all WTO members, not only signatories to the agreement.
Some witnesses believe that Canadian negotiators should pursue these arrangements when so requested by a particular sector and that they should be negotiated at the commodity level. Prior to initiating such discussions, Canada should ensure that there is enough interest among other member countries to make their negotiation worthwhile. Sectors that have identified an interest to date include oilseeds, barley and pork.
It should be noted that some organizations believe there is no role for state trading enterprises where zero-for-zero agreements have been signed. For example, the Canadian Oilseed Processors Association told the Committee that "in a zero-for-zero world, the state trading enterprise is redundant; it is an administrative barrier and therefore there is a case that it should be phased to elimination."
In supporting the view of the majority of witnesses, the Committee recommends that:
in the upcoming round of multilateral trade negotiations, Canadian negotiators establish mechanisms to ensure that the minimum access equal to 5% of domestic consumption negotiated during the Uruguay Round is respected. As well, the tariffs applied to imports within the limits of the commitment access should be reduced to zero and country-specific allocations should be eliminated. Finally, the "zero-for-zero" option should be contemplated for those sectors of the agriculture and agri-food industry that have expressed an interest.
The Committee firmly believes that market access must be enhanced in the upcoming round of negotiations, and we must take advantage of what has been learned since the conclusion of the Uruguay Round. Enhanced access is not only consistent with liberalized global trade; it is also critically important to the prosperity of the Canadian agriculture and agri-food industry. Moreover, that access must be "real," and must fully meet the expectations of access based on the Millennium Round negotiations.
During the Uruguay Round negotiations, a "traffic light" approach was adopted in describing support for agriculture and the extent to which this support was to be reduced or eliminated. Negotiators identified "red" subsidies, which included export subsidies, as trade-distorting support which they agreed would be eliminated over time. "Amber" or yellow measures, which are trade distorting and include such policies as market price support, direct payments and input subsidies, are subject to reduction commitments of 20% by the end of the implementation period. "Green" programs were identified as non- or minimally-trade-distorting and are not subject to reduction commitments. Green support includes research, food security stocks, infrastructure and disease control. The amount of green support provided by any particular country is a domestic decision reflecting the degree to which the country wishes to support its rural sector.
Near the conclusion of the Uruguay Round, as part of the Blair House Accord, the United States and the European Union agreed on a fourth "traffic light," the "blue box," which was seen as transitional. Blue box expenditures are exempt from reduction commitments provided they are received under production limiting programs; for example, if they are based on fixed areas and yields, a fixed number of head of livestock, or if they are made on 85% or less of a base level of production.
The consensus view of the Committee’s witnesses was that the U.S. and the E.U. included all the programs they wanted to keep in the blue box; the blue box basically divides amber measures into those subject to reduction commitments and those not so subject because they fall within production-limitation programs. Representatives of the Canadian Wheat Board told the Committee that, while negotiators felt that the blue box was somewhere between amber and green, history has revealed that it is somewhere between red and amber. Board representatives also told the Committee about the relatively significant increase in wheat production in the European Union, with the wheat area there having risen more than 15% since 1993-94. Canada in 1998 saw the lowest planted area in 19 years.
The Agreement on Agriculture also quantified each country’s domestic support using the Aggregate Measure of Support (AMS), which is to be reduced by 20% by the year 2000. As stated above, however, some domestic support programs, notably green programs, are not subject to reduction under the Agreement. Some witnesses said that part of the problem is that a 20% reduction based on the very high levels of support in the mid-1980s does not lead to real reductions. According to an Agriculture and Agri-Food Canada official, all major countries are "still well within their reduction commitments."
Witnesses repeatedly told the Committee that Canada has reduced its support to the agriculture and agri-food industry faster and more deeply than many other countries. While some believe that the rapid and deep reductions were made to meet Canada’s international obligations under the Uruguay Round, others suggest that they were dictated by fiscal imperatives. In its appearance before the Committee, the Canadian Federation of Agriculture reported that, while WTO member countries had committed themselves to reducing domestic support by 20%, Canada had reduced its support by 85%, including support in many "green program" areas. Some witnesses suggested that the government should use some of the room available to it to increase needed support to the industry so that it may compete better with producers in countries with high levels of support.
Witnesses also noted that the treasuries of many countries cannot compete with those of the United States and the European Union, which are much more able to support their agricultural producers through green programs, although they have given substantial support through blue box programs. Green programs are thought to be non-trade distorting, or minimally so, but they could create an incentive for producers to overproduce and thereby affect world markets and commodity prices, and lead to an uneven playing field for producers in other parts of the world. Moreover, post-Uruguay Round experience has demonstrated that these programs are not all free of trade-distorting effects.
In the view of most witnesses, total domestic support should be capped, perhaps based on a percent of the total value of production, and the blue box, envisioned as a transitional measure, should be eliminated within a tight timeframe. As well, the definition of, and criteria for, green support should be clarified. According to the Saskatchewan Wheat Pool, "even decoupled income supports, when provided in an excessive manner, influence production decisions, and therefore do distort trade." Nevertheless, decoupled support continues to be endorsed by a majority of those in the agriculture and agri-food industry, and is also supported by this Committee.
Some witnesses told the Committee that domestic support programs can function as export subsidies. For example, representatives of the Canadian Wheat Board suggested that the loan deficiency payment system in the United States, under which direct subsidies are given to producers that are not decoupled from either prices or production, acts much like an export subsidy. In the Board’s opinion, this system enables U.S. exporters to sell grain at a lower price than is received by U.S. producers for that grain.
Believing that witnesses have correctly identified the direction Canadian negotiators should take with respect to domestic support, the Committee recommends that:
in the upcoming round of trade negotiations, Canadian negotiators pursue a cap on domestic support, the elimination of the blue box as quickly as possible and in a shorter implementation period than that of the Uruguay Round, and clarification of what constitutes a green program.
With the elimination of blue box programs, however, these programs must not be simply re-categorized while continuing to be trade distorting. Vigilance must be exercised here. Some witnesses suggested that this type of shift does happen, and that some amber programs have been re-classified as blue box and green programs.
A number of witnesses suggested there should be a committee within the WTO that could decide whether prospective programs meet green criteria. They claimed this "advance ruling mechanism" would enable countries to determine the classification of any new program or initiative.
The Committee also believes that trade actions could be avoided if countries knew in advance that newly developed programs and policies met international trade requirements and were not trade distorting. It is from this perspective that the Committee supports the witnesses in recommending that:
Canadian negotiators pursue the establishment of a committee that would examine newly developed programs and initiatives to ensure they meet green criteria. This committee should be part of the World Trade Organization.
While the Committee believes that the realization of these objectives is the best option, in its absence Canada must maintain the flexibility to counteract support policies and spending in other countries that may distort world markets. This may require the federal government to re-visit its policies in such areas as cost recovery, research, safety nets and other areas of reduced agricultural spending to ensure that the Canadian agriculture and agri-food industry is able to compete in world markets.
In general, export subsidies are seen as the most trade-distorting form of support. The Agreement on Agriculture obliges countries to reduce their export subsidies by 36% in value and 21% in volume, based on a historical 1989-1991 average, by the year 2001. Moreover, new export subsidies are prohibited on products that did not benefit from such subsidies when the Agreement was negotiated. In total, 428 reduction commitments have been made by 25 countries; Canada has made 11 commitments, while the United States has made 13 and the European Union has made 20. Because of how the Agreement is being interpreted by some countries, it is believed that a country that fails to use its allowable limit in a given year may roll over the unused amount to future years, provided that the total cumulative limits over the implementation period are not exceeded.
Promptly following the conclusion of the Uruguay Round, Canada eliminated the Western Grain Transportation Act in its entirety. Most witnesses believe, however, that the Crow Benefit was eliminated for fiscal reasons, rather than because this was required under the Agreement on Agriculture.
There was broad agreement among the Committee's witnesses about the proper approach for Canadian negotiators to take on three export issues: export subsidies, export credit and food aid. They believe that the elimination of government export subsidies must be a top priority in the upcoming round; some also argued for a standard and clear definition of an export subsidy. Such a definition might help to ensure that other methods of providing export support, such as export credit and international food aid, that have similar effects to export subsidies, would be subject to enforceable rules.
Other witnesses, including the Canadian Turkey Marketing Agency, noted the need for "stringent WTO trade rules on international food aid, export credit and export promotion programs." The Agency, like other witnesses, believes use of these initiatives is potentially trade distorting and is in favour of disciplines designed to prevent this.
Some believe that Canada should push for clear repayment terms to ensure that existing and future export credits are not simply forgiven, in which case they would resemble export subsidies. The Canadian Federation of Agriculture also commented on export credit, stressing that "(i)f you are going to give credit for a product, that credit should not be greater than the life of the product. If you are selling grain, you are looking at a one-year term, maybe three years. You are not looking at a 20- or 30-year term, because that really is an export subsidy in disguise."
As well, it is argued that the government role in market promotion must be clarified and defined to ensure that export subsidy commitments are respected in fact and in spirit. Moreover, reasoning that international food aid can be used as a market expansion tool, some argued for greater discipline in this area as well. The Committee was told, for example, that the United States recently provided significant amounts of wheat to Indonesia as food aid; in 1996, Indonesia was Canada’s fourth largest commercial customer for wheat.
In support of the view of most witnesses that export subsidies constitute the most trade-distorting measure and that other export initiatives can be disguised export subsidies, the Committee recommends that:
in the upcoming round of negotiations, Canadian negotiators pursue the elimination of government export subsidies and the establishment of disciplines on export credit, export promotion, export taxes and international food aid. The elimination of export subsidies must occur within clearly-established time limits. Moreover, a clear definition of what constitutes an export subsidy must be determined.
The Committee, like virtually all agriculture and agri-food industry stakeholders, believes that the elimination of government export subsidies must be among the top priorities in the upcoming round of multilateral trade negotiations. Given Canada’s prompt action in eliminating the Western Grain Transportation Act following the Uruguay Round and the virtual absence of any other export subsidies, Canada can begin negotiations in this area from a highly credible position.
Despite the attacks and scrutiny of some countries, establishment of domestic marketing systems like the Canadian Wheat Board and Canada’s supply management systems are a sovereign decision that should become an international concern only if, for example, they use export subsidies. Many countries are vulnerable, having both sectors that are import-sensitive and sectors that are export-oriented.
As noted earlier, although the United States appears to be "attacking" Canada, and especially the Canadian Wheat Board, in these areas, the United States itself is vulnerable with respect to such products as sugar, peanuts and tobacco. Europe too has sectors that are import-sensitive. The real focus should be on whether domestic marketing structures use border protections or export assistance programs that are inconsistent with WTO obligations.
Most witnesses agreed that state trading enterprises -- whether export or import -- must be preserved in the upcoming round of negotiations, although other witnesses continued to argue for dual marketing. In particular, in the view of the Canadian Wheat Board, state trading enterprises should be assessed on the basis of their actions, rather than their status. Nevertheless, some witnesses said that transparency should be enhanced. The National Farmers Union argued for expanded orderly marketing systems, telling the Committee that "Canadian WTO negotiators (should) defend Canada’s unconditional right to create, maintain and expand orderly marketing and supply management agencies."
The United Grain Growers, however, argued that "state trading enterprises ... should be subject to competitive market disciplines. The only effective way to achieve this is to make participation voluntary." From a similar perspective, the Western Canadian Wheat Growers Association observed that "(i)mport and export state trading enterprises continue to restrict trade on a global basis. [We encourage] Canada and other WTO countries to consider establishing rules for import and export state trading enterprises to operate at the risk of the market and on a voluntary basis."
A key question is whether the operations of state trading enterprises should be any more transparent, or subject to more stringent requirements, than the operations of commercial enterprises with which they compete. State trading enterprises must not be placed at a commercial disadvantage. It might be noted that some commercial competitors might have greater market power than state trading enterprises. The Canadian Wheat Board told the Committee that it "should not be penalized for trying to create a critical mass ... to market Canadian grain. (It) should be judged on the same basis as any other commercial enterprise, and if they put rules in place for ... the Canadian Wheat Board, similar rules should apply to large commercial organizations in terms of issues such as transparency and market power."
Believing that state trading enterprises must not be placed at a competitive disadvantage, the Committee recommends that:
in the upcoming trade negotiations, Canadian negotiators insist that any disciplines imposed on export state trading enterprises apply equally to commercial operations with which they compete.
The right of Canadian governments to determine appropriate domestic marketing structures must be preserved. This is not to say that these structures should be retained in their present form; what should be stressed is the domestic decision-making authority in this regard. The Committee notes that numerous studies of the operations of the Canadian Wheat Board have not found the Board to be trading unfairly; from this perspective, it should not be the subject of ongoing international investigation and scrutiny. The governance and operations of the Canadian Wheat Board have recently been changed and the Committee believes that the Board will continue to evolve in an ever-changing domestic and global environment. The Board, with its ten producer-elected Directors, seems to be in the best position to make decisions about its future direction. From the perspective of a supply-managed commodity, the Dairy Farmers of Canada told the Committee that "supply management is not a WTO issue: it is a domestic issue."
Recognizing the views of some witnesses and the impact of Canada’s domestic marketing systems on farm incomes, the Committee recommends that:
in the upcoming round of negotiations, Canadian negotiators vigorously defend the sovereign right to determine domestic marketing systems.
The Committee stresses that establishing marketing structures is a domestic decision, provided they do not distort trade, and notes the positive impact that such structures have had on farm incomes in some sectors.
Biotechnology, and Sanitary and Phytosanitary Issues
With the disciplines imposed by the Agreement on Agriculture, it was perhaps inevitable that countries would shift their focus to non-tariff barriers, including sanitary and phytosanitary measures. As mentioned above, the Agreement on Sanitary and Phytosanitary Measures was established to provide a framework of rules and disciplines for measures to protect human, animal and plant life or health from the risks of pests and diseases, and to protect human health from food additives, toxins, contaminants and disease-causing organisms in food. Measures must be based on a scientific risk assessment and the attainment of an appropriate level of protection that should be consistent from one situation to another; they should restrict trade no more than is needed to achieve the country’s appropriate level of protection. Countries are required to notify the WTO of new or amended measures that may affect trade.
One problem may be the enforcement of science-based sanitary and phytosanitary measures, although the WTO has a Sanitary and Phytosanitary Committee to oversee the Agreement’s implementation. To date, the Sanitary and Phytosanitary Committee’s activities have included reviewing notifications of new or amended measures, discussing specific trade problems, developing a procedure to monitor the use of international standards, and developing guidelines for consistency in setting appropriate levels of protection. Nevertheless, some discontent remains with respect to enforcement. As well, some suggest that harmonization should be effected through international standards so as to avoid problems that could be associated with country-specific rules and interpretations of rules.
In supporting the witnesses and the recommendation of the Standing Committee on Foreign Affairs and International Trade with respect to science as the ultimate reference for sanitary and phytosanitary measures, the Committee recommends that:
in the upcoming round of negotiations, Canadian negotiators ensure that objective, science-based reasons are used to develop sanitary and phytosanitary measures. Moreover, given the increasing number of foods that are the product of modern biotechnology and recognizing the great difficulties associated with identity preservation, labelling should also be discussed in order that consumers can make informed choices about what they are consuming.
Some Committee members believe that, in the upcoming round of trade negotiations, Canada should not support initiatives by other countries to have social, cultural, political or economic factors considered in establishing sanitary and phytosanitary measures. Countries worldwide must work toward the development of international, objective, science-based standards, recognizing that nothing ever has zero risk. These measures must not be used as a disguised trade barrier. As well, however, the Committee believes that consumers often make decisions about food safety based not solely on objective, scientific considerations but also on other factors. It is for this reason that the Committee supports labelling, provided that labelling itself does not become a barrier to trade. The Canadian Cattlemen’s Association told the Committee of its concern that "a number of countries wish to use labelling requirements as a means to obstruct trade. It is important that Canada take a strong stand against that type of incursion on science-based rules for market access and promote policies equivalent to our own."
Provided that labelling is not used as a non-tariff barrier to trade, the Committee believes that consumers should be as fully informed as is practicable. Ultimately, those in the agriculture and agri-food industry must provide the food that consumers want to purchase. As noted by the Western Barley Growers Association, "we are going to have a much more consumer-driven agricultural system than we have had in the past ... (I)n the future, the consumer will tell (producers) what they want to eat."
Biotechnology is developing at an increased pace, which makes it critically important for it to be addressed in a meaningful way in the upcoming negotiations. In general, witnesses argued that decisions about biotechnology, like the application of sanitary and phytosanitary measures, should be based on objective science. There was some consensus for regulations to be harmonized on an international basis. In general, witnesses did not support the need for comprehensive re-negotiation of the Agreement on Sanitary and Phytosanitary Measures at this time; however, they believe that genetically modified organisms and biotechnology must be discussed in the context of international trade.
Officials from Agriculture and Agri-Food Canada informed the Committee that Europe’s regulatory approval system for genetically enhanced products is slow and politicized, causing trade problems for Canada. This is particularly true with respect to genetically modified canola, but it can also be seen in reaction to the use of hormones to enhance the efficiency of beef production. Part of the problem appears to be that European scientists lack credibility with European consumers. It was suggested that the approval process that the European Commission theoretically has in place is being disregarded or blocked because of social perceptions, rather than scientific evidence.
In both this study and our earlier study of recombinant bovine somatotropin, the Committee learned of the rapid advances in biotechnology and of ways in which it could enable farmers to diversify production and increase farm revenues. Biotechnology could also be beneficially used by developing countries to enhance self-sufficiency or to become exporters.
While international, objective, science-based standards are an important first step, they are not enough. Also required are clear, enforceable rules for trade in genetically modified organisms. During its European trip, the Committee met with members of the United Kingdom’s Select Committee on the European Communities of the House of Lords, which recently published a report entitled EC Regulation of Genetic Modification in Agriculture. This made recommendations in such areas as: risk assessment and risk management, potential benefits and risks, consumer choice and regulation. As well, Select Committee members have questioned whether the World Trade Organization should become involved in enforcing global regulations with respect to genetically modified organisms.
The Committee respects and supports the need of countries to determine risk tolerance levels and to safeguard human, animal and plant health within their borders. Nevertheless, where genetically modified organisms and other products of biotechnology are found to be safe according to international, objective, science-based standards, countries must not be permitted to use non-science-based arguments as a barrier to trade. In this regard, the Committee is reminded of meetings in Europe where the European ban on hormone-treated beef and the inability to export Canadian genetically modified canola were discussed. We note that at a time when the number of genetically modified organisms is growing, the number of market opportunities for them appears to be falling.
The Committee also learned during its European meetings that consumer acceptance of genetically modified foods can be increased if there is proper labelling, if consumers have the choice of buying a genetically modified or non-genetically modified food product, and if the genetically modified food product has superior taste, quality, ease of preparation or nutritional value. Some believe, however, that price is still the most important consideration. The Committee recalls the testimony of the Canadian Canola Growers Association, which indicated its preference for the word "enhanced" rather than "modified," since it believes biotechnology is "enhancing the production for canola and other commodities." The terminology used in describing the products of biotechnology may have an important role in influencing consumer support and acceptance.
a) A Comprehensive Versus a Sectoral Round
As noted earlier, the Agreement on Agriculture signed during the Uruguay Round required negotiations on agriculture to resume at the end of 1999. One of the key decisions that Ministers must make at the November 1999 meeting in Seattle is whether other issues will also be on the bargaining table.
The Committee’s witnesses held varying opinions about whether the upcoming round of negotiations should focus exclusively on agriculture -- that is, be a "sectoral" round -- or whether it should be "comprehensive" -- that is, include other sectors. Most agreed, however, that a comprehensive round is needed if a meaningful agreement on agriculture is to be concluded.
An official from Agriculture and Agri-Food Canada noted that a number of countries, including Argentina, New Zealand, Brazil and Australia, provide relatively little support to their rural sectors. He pointed out that in entering negotiations a country is better off if it has something to give up. As a result, it is difficult to say, at the bargaining table, "(i)f you do this, we will do that." Instead, negotiating by determining rules that make sense for all agricultural trading countries to follow may be the preferred approach. In his view, "(y)ou do not have to have coins in your piggy bank in order to get into the game. ... It is erroneous ... to say that you cannot be an effective player in a negotiation unless you have something to give away." The Committee supports this sentiment, and believes that the upcoming trade negotiations should proceed from the perspective of what can be gained, rather than from what can be given away.
This raises a number of questions. Should Canada push for a comprehensive round, rather than a sectoral round, in order to gain bargaining flexibility? That is, can agricultural gains be realized only by giving up something in another industry at the bargaining table? On another question, some witnesses suggested that Canada should go to the bargaining table urging countries to respect fully the commitments that they had made in the Uruguay Round before negotiations proceed. Realistically, can Canada demand that existing commitments be respected prior to "true" negotiations in the upcoming round, and then walk away from the table if countries are not willing to comply?
On this last question, the Committee, as well as most witnesses, believes that walking away from the table is not an option. Because of differing interpretation of the rules in the Agreement on Agriculture, different countries have made uneven policy changes and for different commodities. In our view, Canada must remain at the bargaining table if it is to have any influence at all. Thus, while we endorse the spirit of the recommendation of the Standing Committee on Foreign Affairs and International Trade that Canada should open discussions by demanding that all signatory countries respect their current obligations, the Committee does not believe that walking away is an option, should WTO member countries fail to accede to Canada's wishes.
The Committee believes that, by the time negotiations begin in Seattle in November 1999, Canada must have developed a global strategy for the range of issues to be discussed, including agricultural trade. As well, we believe that, collectively, Canadian negotiators must be accountable to all Canadian interests for the agreement concluded and the results achieved. Negotiators working on behalf of the various sectors and industries must view themselves as part of the same bargaining team, negotiating for the good of Canada as a whole, rather than merely for favourable outcomes in their particular area of responsibility. After negotiations are concluded, negotiators must not be able to "pass the buck" by claiming that success was achieved based on any lesser mandate than this. Negotiators must be responsible not only to the Department of Foreign Affairs and International Trade, but to all sectors and the departments that serve their interests.
From this perspective, the Committee recommends that:
in the upcoming round of trade negotiations, Canadian negotiators pursue a comprehensive round of negotiations in order to secure sufficient flexibility to make trade-offs at the bargaining table. Moreover, Canadian negotiators must bargain for the benefit of all Canadian interests.
The Committee, however, supports the recommendation of the Standing Committee on Foreign Affairs and International Trade under which Canada, in maximizing access for Canadian farm exports, would not use agriculture as a whole, or a specific agricultural product, as a bargaining chip.
b) The Expected Duration of Negotiations
A number of countries, including the United States, have stated that they wish negotiations to be concluded in a shorter time frame than the Uruguay Round, and suggest a three-year limit. The key question is whether this time frame is realistic.
The Committee believes that extraordinary efforts are called for to ensure that the upcoming negotiations are concluded more quickly than the unacceptably long Uruguay Round. The Canadian agriculture and agri-food industry cannot wait. Progress towards rules-based international trade in agricultural and agri-food products is needed now, not seven years from now. In supporting the suggestion of many witnesses that the next round of negotiations be concluded more expeditiously, the Committee recommends that:
Canadian negotiators bargain with a view to concluding the upcoming round of multilateral trade negotiations within a period not to exceed three years. Moreover, commitments made with the objective of reducing trade-distorting subsidies should be realized in the early part of an implementation period that is shorter than that of the Uruguay Round.
A related concern highlighted by some of the Committee’s witnesses was the lack of fast-track negotiating authority in the United States. It remains to be seen what impact, if any, this lack will have on the substance and timing of negotiations.
Finally, while the duration of negotiations is an important issue, so too is the length of the implementation period over which commitments made by member countries will be realized. The Committee wonders whether the implementation period for the various commitments, and affecting various sectors, should recognize the degree of crisis being experienced by various sectors and the extent to which they are relying on an improved trade environment for their viability.
According to an official of the Department of Foreign Affairs and International Trade, significant progress was achieved during the Uruguay Round in the area of trade remedies. It is expected that these measures will be improved in the upcoming round. The official noted that Canadian industry, as a "major user" of trade remedies, must have access to "functional" trade remedy laws, and that Canadian access to foreign markets must not be hampered by the egregious use of these laws. While rules are needed to facilitate international trade, clear enforcement mechanisms must exist to ensure that the rules are respected; otherwise, the rules become meaningless.
Given the importance of effective trade remedies in an international trading regime, the Committee recommends that:
in the upcoming round of negotiations, Canadian negotiators pursue progress in the area of trade remedies, particularly with respect to measures that would curtail the use of such remedies to harass, rather than address legitimate disputes with, World Trade Organization member countries.
While the Committee received little testimony on the issue of trade remedies, we believe that, when used responsibly, trade remedies are an important mechanism for ensuring that parties to an agreement fully respect their obligations.
The Committee also received limited testimony on the "peace clause," which restrains until the year 2003 the use of such action as countervailing duties and anti-dumping measures against agricultural subsidies. Among witnesses who did address this issue, Dr. Wolfe, of the School of Policy Studies at Queen’s University, told the Committee that "(m)any countries wish to extend the life of the peace clause but that will be easier to do if new negotiations are successful." In his view, "(t)he Uruguay Round was a ceasefire in the farm war of the 1980s, but no more than that. ... Failure in the (upcoming round of negotiations) could mean that, when the peace clause expires, the farm war will start again."
In particular, it is thought that the United States and some members of the Cairns Group would like the clause to lapse; the European Union and Japan appear to support its extension, perhaps because of the protection the clause gives to blue box programs.
The Committee believes that the peace clause is important, and feels that the protection it offers to green programs must be maintained. We are also of the view, however, that protection should not be given to blue box programs; some other means must be found of addressing these, ideally through their elimination, as recommended above. From this perspective, and supporting Dr. Wolfe’s view that the peace clause is "essential," the Committee recommends that:
Canadian negotiators pursue renewal of the peace clause.
In the long run, the peace clause may prove to be critically important. Its absence could lead to continuous litigation, as countries attempt to gain through trade actions what they were unable to gain through multilateral negotiations.
e) Accession to the World Trade Organization
A number of witnesses expressed their thoughts on the accession of other countries to the World Trade Organization. While some argued for strict adherence to WTO rules, others suggested that these countries must abide by the same rules as all other countries, to the greatest extent possible. Some noted that developing countries may need special and differential treatment.
The Committee believes that much can be gained from expanding membership in the World Trade Organization, and feels that new member countries should respect negotiated rules and disciplines. From this perspective, the Committee recommends that:
all countries that are members of the World Trade Organization fully respect all rules and disciplines.
The Committee holds the view that having countries trade in accordance with clear and enforceable rules is preferable to having them trade without such disciplines.
A lack of financial resources makes it relatively difficult for some countries to make trade-offs at the bargaining table, as noted above. This lack, however, also highlights the importance of developing alliances among small and/or medium-sized countries, so that they can collectively have an impact where individually they cannot. It is for this reason, in part, that the Cairns Group was formed. Such alliances typically lead to enhanced bargaining power, which may be particularly important when smaller countries are negotiating issues with the "supereconomies" of the United States and the European Union.
Some believe that, particularly in the early stages of negotiations during the Uruguay Round, the existence of the Cairns Group highlighted the importance of both developing alliances and of tabling positions early in negotiations. It is generally recognized, however, that the negotiating dynamic between the United States and the European Union will have a determining impact on the negotiating outcome, and that in the final hours it is virtually inevitable that a "deal" will be concluded between the two. That said, it is still important that other countries develop, and bring to the bargaining table, credible positions that have the support of other countries, and that these positions be introduced early in negotiations while negotiators for all countries still have relatively open minds and before the United States and the European Union have developed entrenched positions.
Some of the Committee’s witnesses commented on, or alluded to, the development of a North American "alliance" designed to counteract the bargaining power of the European Union. In fact, Dr. Miner, of the Centre for Trade Policy and Law at Carleton University, was more expansive, suggesting that "(s)ince we are working towards a free trade area in the western hemisphere ... there is an opportunity to coordinate positions in a western hemisphere manner ... ."
Forming alliances may be particularly important, given recent changes to Europe’s reform of its Common Agricultural Policy, known as Agenda 2000. In general terms, the reforms are expected to result in a greater market orientation, decreased prices, decreased export subsidies, direct payments, and a focus on rural development and the environment. The outcomes of the reform process are generally thought to be less significant than had been anticipated and are deemed by both the United States and the Cairns Group not to contribute sufficiently to liberalized trade. The view of the European Agriculture Commissioner, Franz Fischler, however, is that the outcome of the upcoming round of multilateral negotiations must be compatible with the Agenda 2000 policy. This statement is unacceptable, however, since these reforms did not go as far as many countries, including Canada, would have liked.
In view of the alliances among countries, the Committee recommends that:
the Canadian government continue to pursue alliances with other countries to take full advantage of shared mutual interests.
The Committee commends the government for initiatives undertaken in this regard to date, and believes that such alliances will be a critical determinant of bargaining power in the upcoming round of trade negotiations.
During the Committee's European fact-finding mission, the concept of multifunctionality was defined as taking into account the environment, preservation of biodiversity, and animal health as integral parts of agriculture. This concept, which the Organisation for Economic Co-operation and Development supports as a goal, may have greater meaning in some WTO member countries, such as those in Europe, than in others.
While in Europe, the Committee was continually struck by the degree to which European consumers support European farmers, financially and in many other ways. We believe that support is not evident to the same degree in Canada, and feel that urban support for rural Canada, and particularly for Canadian farmers, must become a priority. Agriculture contributes to Canada economically, socially and culturally, and this must be recognized by federal and provincial governments, and all Canadians. Agriculture creates jobs on farms, in the production of agricultural inputs, in the processing of agricultural products, and in the service sector in rural communities. The Canadian Federation of Agriculture informed the Committee that "(a)griculture and agri-food in Canada generate somewhere around $85 billion a year. We contribute approximately 9% to the G(ross) D(omestic) P(roduct) and create one out of four jobs."
In view of the importance of Canada’s agriculture and agri-food industry and the crisis being faced by many farmers, the Committee recommends that:
federal and provincial governments consider providing enhanced support to the agriculture and agri-food industry, in a non-trade-distorting manner and consistent with international trading obligations.
Governments must review their commitment to agriculture, the family farm and a "fair share" of the consumer’s food dollar for producers.
The Committee commends the federal and provincial governments for what we view as the historic and necessary consultations they have undertaken with stakeholders in the development of Canada’s initial bargaining position. Consultation only at the beginning, however, is inadequate. Decisions will be made at the bargaining table that will affect the livelihoods of Canadian farmers and agri-food processors. From this perspective, the Committee recommends that:
throughout the upcoming multilateral trade negotiations, the federal government continue the consultation process with agriculture and agri-food industry stakeholders that has occurred to date. In particular, stakeholders should be consulted as long as is practicable and prior to any significant trade-offs being made during negotiations. As well, Parliamentarians should be consulted on an ongoing basis and prior to substantive changes in strategies or priorities at the bargaining table, and should be participants at the Ministerial meeting in November 1999 and beyond.
Ongoing consultation is critical, since conducting negotiations is typically an incremental and iterative process, both within a specific round and between rounds. The Committee appreciates the difficult task faced by Canadian negotiators. Trade-offs will have to be made, and the current consensus among most stakeholders in the agriculture and agri-food industry may begin to break down as negotiations progress. It must be remembered that the Canadian agriculture and agri-food industry is diverse, with different regions and different sectors subject to different constraints and opportunities.
Canada, like other countries, has learned a great deal in the years since the Agreement on Agriculture was concluded. This information can help us in developing our strategy in the next round of negotiations. Overall, witnesses agreed that the Agreement on Agriculture has been of benefit, giving improved market access, subsidy reduction commitments, and rules and disciplines where none previously existed.
That is not to say, however, that additional changes are not needed to ensure that the Canadian agriculture and agri-food industry can prosper in international markets. The strongest industry consensus appears to exist with respect to the elimination of both export subsidies and the blue box. Moreover, as witnesses conveyed to the House of Commons Standing Committee on Agriculture and Agri-Food, once a new agreement is reached, it is imperative that all WTO member countries comply fully with its rules and disciplines, both in letter and in spirit.
The Committee believes that the recommendations in this report will usefully guide the Ministers of International Trade and Agriculture and Agri-Food in developing the initial approach to negotiating agricultural issues in Seattle in November. We are convinced that strong, credible, consensus-based positions will lead to the changes needed for the agriculture and agri-food industry to achieve the goal of 4% of world agricultural and agri-food trade by the year 2005.
Those in the Canadian agriculture and agri-food industry generally believe that, while they have respected the commitments made during the Uruguay Round, some other countries have not. The title of this report mentions "the way ahead." In the Committee’s view, the way ahead for the Canadian agriculture and agri-food industry hinges on a positive outcome in the upcoming Millennium Round of negotiations. We are confident that such an outcome will be assured through the adoption of the recommendations in this report. We support the Minister of Agriculture and Agri-Food’s observation that "Canada’s producers and processors can compete and win on the world stage against anyone. ... We need a level playing field for freer and fairer trade. We will be ready for the WTO ... ."
WITNESSES
| ISSUE NO. | DATE | WITNESSES |
| 22 | November 5, 1998 | From the Canadian Federation of Agriculture: Mr. Jack Wilkinson, President; Ms. Sally Rutherford, Executive Director. From the Canadian Wheat Board:
|
| 24 | November 19, 1998 | From Keystone Agricultural Producers: Mr. Marcel Hacault, Vice-President; Mr. Don Bromley, Executive Member. From Western Canadian Wheat Growers Association:
|
| 25 | November 26, 1998 | From Agriculture and Agri-Food Canada: Mr. Michael N. Gifford, Director General, International Trade Policy Directorate; Mr. Steve Verheul, Deputy Director, Canada-U.S. Trade Issues, Western Hemisphere Trade Policy Division, International Trade Policy Directorate; Ms. Michele Brenning, Deputy Director, International Trade Policy Directorate. From Foreign Affairs and International Trade:
|
| 26 | December 3, 1998 | From the Canadian Federation of Agriculture: Ms. Sally Rutherford, Executive Director; Ms. Jennifer Higginson, Trade Policy Analyst. |
| 28 | December 10, 1998 | From Saskatchewan Wheat Pool: Mr. Marvin Shauf, Vice-President; Ms. Jennifer Higginson, Trade Policy Analyst, Canadian Federation of Agriculture. |
| 29 | March 18, 1999 | From the Canadian Federation of Agriculture: Mr. Bob Friesen, President; Mr. Jeff Atkinson, Communications Coordinator. |
| 30 | March 25, 1999 | From Supply Managed Commodities (SM5): Mr. John Core, First Vice-President, Dairy Farmers of Canada; Mr. Richard Doyle, Executive Director, Dairy Farmers of Canada; Mr. John Kolk, Chairman, Chicken Farmers of Canada; Ms. Martine Mercier, Chairperson, Canadian Broiler Hatching Egg Marketing Agency; Mr. John Stolp, Chairman, Canadian Turkey Marketing Agency. |
| 31 | April 15, 1999 | As Individuals: Mr. Michael Cayer; Mr. Lee Cook; Mr. Bob Thomas. From Agricore:
From Saskatchewan Wheat Pool:
From United Grain Growers:
From National Farmers Union:
|
| 32 | April 22, 1999 | From the Canadian Cattlemen’s Association: Mr. Jim Caldwell, Director, Government Affairs; Mr. Neil Jahnke, Chair, Foreign Trade Committee. From the Canadian Pork Council:
From the Western Canadian Wheat Growers Association:
|
| 34 | April 27, 1999 | From the Canadian Wheat Board: Mr. Greg Arason, President and Chief Executive Officer; Mr. Gordon Miles, Executive Vice-President, Corporate Affairs. |
| 36 | May 6, 1999 | From Keystone Agricultural Producers: Mr. Don Dewar, President; Mr. Ken Tjaden, Executive Manager, Manitoba Pulse Growers. From Queen’s University:
From Carleton University:
|
| 37 | May 11, 1999 | From Agriculture and Agri-Food Canada: The Honourable Lyle Vanclief, P.C., M.P., Minister; Mr. Frank Claydon, Deputy Minister; Ms. Michelle Comeau, Associate Deputy Minister; Mr. Tom Richardson, Acting Assistant Deputy Minister, Policy Branch; Dr. Brian Morrissey, Assistant Deputy Minister, Research Branch; Mr. Paul Martin, Director, Multilateral Trade Policy Division, International Trade Policy Directorate, Market and Industry Services Branch. From the Canadian Food Inspection Agency:
|
| 39 | June 3, 1999 | From Western Barley Growers Association: Mr. Greg Rockafellow, President; Mr. Leo Meyer, Vice-President. From Canadian Oilseed Processors Association:
From Canadian Canola Growers Association:
|
THE STANDING SENATE COMMITTEE ON AGRICULTURE AND FORESTRY'S FACT-FINDING MISSION TO EUROPE
During its 25 January to 3 February 1999 fact-finding mission to Europe, members of the Standing Senate Committee on Agriculture and Forestry attended 25 meetings with various farm and agri-food groups, parliamentarians, bureaucrats and representatives of the World Food Programme, the Food and Agriculture Organization, and the Organization for Economic Cooperation and Development. During these meetings, discussions of the reform of the Common Agricultural Policy and trade, genetically modified organisms, and food aid were particularly important. A number of other issues were also explored, however, including: contract farming, organic farming, the Canadian Wheat Board, the wine industry, the share of the food dollar received by farmers, and the Canada-European Union Veterinary Agreement; select forestry issues were also examined.
Individuals and organizations with whom the delegation met included:
In London:
From the Canadian High Commission in London
Hon. Roy MacLaren, High Commissioner and his officials
The National Farmers Union (NFU)
The Food and Drink Federation (FDF)
The International Grains Council (IGC)
Members of the House of Lords Sub-Committee D on Agriculture, Fisheries and Food
In Brussels:
From The Permanent Mission of Canada to the European Union
His Excellency Jean-Pierre Juneau, Ambassador and his officials
From the Consumer Policy and Consumer Health Protection Directorate
Mr. Horst Reichenbach, Director-General, Directorate-General XXIV
The Committee of Agricultural Organisations in the European Union
General Committee for Agricultural Cooperation in the European Union (COPA/COGECA)
From the European Commission:
Commissioner Franz Fischler, Agriculture and Rural Development and his officials
Rome:
From the Canadian Embassy
Mr. Malcolm McKechnie, Chargé d’affaires, and his officials
The Agricultural Committee of the Italian Chamber of Deputies
The World Food Program
The Italian Senate Agriculture Committee
The Food and Agriculture Organization
Paris:
From the Canadian Embassy
His Excellency Jacques Roy, Ambassador and his officials
The Association Générale des Producteurs de Blé (AGPB)
The French Senate’s Commission on Economic Affairs (responsible for Agriculture)
The Association Permanente des Chambres d’Agriculture (APCA)
The Fédération Nationale des Syndicats d’Exploitants Agricoles (FNSEA)
The Canadian Permanent Delegation to the Organization for Economic Cooperation and Development
The OECD Agriculture and Fisheries Directorate
Mr. Gérard Viatte, Director