Proceedings of the Standing Senate Committee on
Agriculture and Forestry

Issue 8 - Evidence

The Standing Senate Committee on Agriculture and Forestry met this day at 9:04 a.m. to study the present state and future of agriculture in Canada.

Senator Joyce Fairbairn (Deputy Chairman) in the Chair.

[English]

The Deputy Chairman: Honourable senators, our witnesses today are from the Canadian Federation of Agriculture, President Bob Friesen and Benoit Basillais. We have been hearing from a number of individuals and groups from around the country who have come to talk with us about the difficulties with respect to farm incomes, international subsidies, and the whole complex package that is causing such stress in our community. The Canadian Federation of Agriculture has a major role to play within the community in this country and has appeared before our committee on many occasions with very helpful and insightful presentations.

Before we begin, I should like to mention that we have two new senators here today, Senator Tom Banks from Alberta and Senator Jack Wiebe from the farm community in Saskatchewan.

Please proceed with your presentation, Mr. Friesen. We look forward to hearing from you.

Mr. Bob Friesen, President, Canadian Federation of Agriculture: It certainly is a pleasure for me to be back here. We had a good discussion about Canadian agriculture on my last visit. Canadian agriculture is the one thing that the Canadian Federation of Agriculture is all about. We have membership from all across Canada. Every province has a general farm organization that is a member of the CFA. As well, we have national commodity organizations that are members, including the Canadian Pork Council, all the supply management agencies, sugar beets, and so on, and so we have a very good cross section of farming and farmers from across Canada.

That makes developing agriculture policy challenging, sometimes a little daunting. However, at the end of the day it is very gratifying to see the cooperation and the spirit of commitment and compromise that we have around the table. Once we do have a policy to talk to the government about, it is a very solid one and it has the backing of all our members.

I should also like to draw attention to my staff person here, Mr. Benoit Basillais, who has done an excellent job of assisting me in looking at some of the problems that we see across Canada. He has also done an excellent job of pointing out some of those things that farmers like myself might not readily see. I thank him very much for that work.

You have in front of you a copy of my presentation. We apologize for not having it on a screen; our laptop did not seem to be working right just before we got here. If you could indulge me and just follow through that deck that you have in front of you, I will try to draw out some of the conclusions that we have drawn from looking at agriculture.

It clearly is a challenge. I am not sure exactly what I said the last time I was here. When you look at the problems that have cropped up in the farm industry over the last few years, you can see that four factors have contributed to the crippling situation that farmers are going through and account for at least part of the reason farmers are so frightened of the future and feel so decimated currently. First of all, there has been approximately a 60 per cent decrease in farm support over the last seven years, not including of course some of the current funding we are getting. There has been a 40 per cent to 60 per cent decrease in some of our commodity prices. There has been a 38 per cent increase in input costs over the last 10 years. Finally, many of our farmers have experienced debilitating natural disasters. Those natural disasters have happened across Canada, not just in Manitoba and Saskatchewan. We have had hail in the apple industry in B.C. -- without a decent risk management program. We had too much moisture in Manitoba and Saskatchewan. We had the Red River flood in Manitoba a few years ago. We had the ice storm in Quebec and Ontario. We have had a crippling drought in the Annapolis Valley in Nova Scotia. This last fall we had too much rain in the potato industry in P.E.I. An incredible number of things have added to the situation farmers find themselves in. Part of the problem is that those factors are the ones farmers have the least control over. They can go home to their farms and see that everything they are doing is perfect, but perfect is not enough. That is one of the reasons we are so adamant that we need to do something to give our farmers back the stability they so very much need in order to perform in what I call a new age environment.

All of the challenges we face, whether they are natural disasters, new issues such as biotechnology, the Environmental Protection Act, inevitably always impact on farm income. However, I want to stress today there is far more involved here than just continually asking the government for more money. I hope that, if you remember nothing else about my presentation this morning, you will remember that within the context of asking the government for support, there is another extremely important issue, and that is providing farmers with the tools they need to be able to perform better.

I would invite you now to look at the deck in front of you. On the first page, you will see that we have drawn a diagram that illustrates gross receipts at the farm, input costs, and then farm income. If you look at gross receipts, what impacts farmers' ability to generate revenue? One of the most important things has to do with trade rules. Many of you are familiar with some of the trade policy and international policy we have. We find ourselves in an interesting conundrum. We desperately need good trade rules, and we need our government to negotiate trade at the WTO, because a large part of agriculture in Canada depends fundamentally on our ability to develop export markets and to increase our export markets. Clearly, however, some of the ways that trade rules have been interpreted by other countries have affected how our farmers can generate income and can generate receipts from on the farm.

Then we have input costs, which are of course affected by the regulations we have, by some of the agriculture policies we have and by how we implement those agriculture policies. I mentioned earlier that our input costs have gone up by 38 per cent. Not all of that can be attributed to regulations. We have had an increase in fuel -- an incredible increase over the last little while -- an increase in fertilizer costs and an increase in all the other input costs, and then we have had a 28 per cent increase in cost recovery. Later on we will get more into to how some of the regulations and policy also affect the cost of farmers to do business.

Beneath all that we have what we call a safety net package. Let me use an analogy here that we have used before. When a trapeze artist climbs up on the trapeze to perform, he has a safety net beneath him. However, the safety net is not there to help the artist perform; the safety net is there to catch the trapeze artist when he falls. I should like you to look at farmers in that light as well. We need to provide the tools for the farmer to perform, but, in the event that the farmer does fall due to some of the factors I have already mentioned, we need that net there. Over the last few years we have been moving the net underneath the farmer when a problem already existed. That is like moving the net beneath the trapeze artist while he is falling. If there were several trapeze artists, some of them would have fallen right to the floor while others were caught. It is our desire and our commitment to try to ensure that we develop a safety net package that is there when the problem happens. We do not want to move the net once the problem exists.

The other thing you have heard a lot about is farmers' share of the market dollar. You are all familiar with that discussion. When Mr. Nick Parsons was in Ottawa, we calculated what revenue he would have generated if he had combined a swath of malt barley all the way from B.C. to Ottawa. If that malt barley had all gone for beer, he would have generated $145 million in beer sales. Now, 52 per cent of that would have gone for government taxes, another 47 per cent would have gone to the retailer, and a mere 1 per cent would have gone to the farmer. In fact, the farmer's share is one tenth of the deposit on a beer bottle. That is an exaggerated example of how farmers are working in an environment where they seem to have an inability to accrue enough of the market dollar back to the farm gate.

I should like to focus a bit on trade rules, at the next page of the deck under international subsidies. All of you are familiar with the fact that after the last round Canada committed itself to reducing the subsidies it pays our farmers. Our country committed itself to not paying export subsidies and, interestingly enough, although the deal in the last round was not to go down to zero, our government chose to go to zero when it comes to export subsidies. We are currently at 15 per cent of our amber spending commitments. If we compare our spending to the spending of other countries, you see that Canada falls far short of what farmers get in other countries, no matter what measurement you use to measure the subsidies in other countries. If it is on a per capita basis, Canada spends approximately $145 per capita on farm support. In the U.S. I believe it is around $350 per capita. In Japan it is as high as $550 per capita spending on farm support. If you measure support as a percentage of farm gate value, it is around 16 per cent in Canada and 32 per cent in the U.S., if you include domestic food aid. To give you a simple example of a comparison on spending, for durum wheat, in Canada it is around $16 a tonne, in the U.S. it is around $90 a tonne, and in the EU it is around $200 a tonne. I hope those figures are correct; I do not have them in front of me.

The United States notified about $7 billion of blue box spending in 1995 or 1996. Then they took that spending out of the blue box. In the last round there was a commitment to saying that the blue box was spending that was really not kosher, if I may use that term, but they would allow it for awhile with the intention of eventually removing it. In Canada, when we reduce spending in the amber box or the blue box, we never see that money again. In the U.S., when they moved that spending out of the blue box they in fact moved almost the same amount of spending into the green box. In the green box, there is no limitation on spending. Although the way the U.S. government provides subsidies to the farmers is green or non-trade distorting, we in fact find that it is trade distorting. We have therefore called for a cap on all spending for the next round and we have called for a decrease in spending, even in green box spending.

Of course, that has affected our ability to compete. Since many of our farmers live as close to the border as they do, it does not take a rocket scientist to figure out that when producers across the line are getting $50,000 cheques, those farmers have an ability to be more flexible when it comes to structural changes on the farm. They are able to sell their commodities at a lower price because they know they are getting the cheques from the government.

Next is foreign market access. We depend very much on export development and export markets, on maintaining them and increasing them. I do not want to burden you with too many numbers today but I think some attention should be paid to what Canada did coming out of the last round. Canada is often referred to as being a protectionist country. Currently, Canada has the highest TRQ fill in the Quad countries. Our TRQ fill is 30 per cent higher than the WTO average. We have the second lowest average agriculture tariff in the OECD. In fact, our average agriculture tariff is lower than our industrial tariff. At the OECD, agriculture tariffs on average are 4.27 per cent higher than industrial tariffs, and yet ours is lower.

If you look at those numbers, you realize that Canada has shown real leadership in providing market access and opening it up. We expect the same from other countries in the next WTO round. The success of many of our farmers is contingent on better market access in other countries. It is contingent on eliminating export subsidies, and it is contingent on achieving some kind of equity in domestic support so that our farmers no longer have to compete against government treasuries in other countries. International subsidies and the market access impact very much on farmers' ability to generate revenue and good healthy gross receipts.

We have included program design, which also comes directly out of trade rules. As you know, we have tried to develop an effective safety net package, but we always find ourselves constrained by Annex 2 and the Agreement on Agriculture. Because we are so vulnerable to trade action, we have to make sure that we do not design a safety net package in such a way that we will initiate trade action from the U.S. or from any other country where we depend on export market. A good example is what happened in the beef industry over the last 12 months. We won that, but it resulted in an incredible expenditure for farmers defending their right to trade and in a lot of government spending to defend our right to trade. It is incumbent upon our government to insulate our farmers when we do have trade action. It is incumbent upon the government to insulate our farmers when they answer the government's call and increase their production to develop export markets, and it is incumbent upon the government to insulate our farmers from the added vulnerability that comes from depending on export markets.

We have had a look at trade and how it affects gross receipts and our farmers' ability to work in the environment they find themselves farming it in. Now I would like to spend some time looking at domestic regulations. I mentioned earlier that domestic regulations inevitably impact on farmers' income. Take for example the endangered species legislation that was just introduced this last week. Farmers are asking themselves how that proposed legislation will affect their ability to farm. Will it introduce more costs at the farm gate? Will it introduce nuisance actions by civilians living around the farm community? How will it affect farmers' ability to keep our costs down and our margins up?

Next we have the medicated feed regulations. The hog industry is telling me that if the regulations proposed by the Canadian Food Inspection Agency are implemented as they are currently written, it may result in an added $40-million cost to the hog industry alone. That would be farmers complying with those regulations and again competing against farmers in the U.S. who do not have to comply with the same stringent regulations. There has to be better harmonization there as well.

You are all familiar with the grain transportation review and what that has done to our farmers. There is an announcement pending by the Minister of Transportation to ensure that some of the efficiency gains made by the railways accrue back to the farm gate. That is fundamentally important. In fact, in an informal poll done in Saskatchewan, the two things most important to farmers were eliminating export subsidies and reducing transportation costs. Here is an example of how we can provide our farmers with better tools to be able to perform better. This is not asking the government for more safety net money. This is asking the government to implement a regulation that will reduce farmers' costs and return some of the railway efficiency gains back to the farm gate.

We have a host of other regulations. The biosafety protocol is another agreement. It was developed in Montreal a few weeks ago. There are implications as to how that will affect, first of all, farmers' costs, because we are now getting very close to forcing them to segregate their commodities at the farm gate. Second, it also has the potential to impede trade. We look at our goals and objectives and we see that we have set a goal to achieve 4 per cent of world agricultural trade by the year 2005, yet someone else in the government may be close to signing an agreement that impedes our achieving those goals and objectives. It is time to build better crosswalks between agriculture policies and between some of the regulations we have so that the development of one regulation or one agriculture policy does not undermine the utility of another agriculture policy and does not undermine the farmers' ability to achieve their goals and objectives.

Next we come to domestic regulations. CFA is looking closely at all micro agriculture policies and regulations to see whether there is anything we can do to create a more stable environment for farmers, to provide them with better tools to perform, and to provide them with the ability to compete and the ability to make some money. Far too often we adopt a survivalist mentality; we feel that if farmers can just get by or if farmers can just maintain their operations then we are happy. That always keeps the farmer very close to the line of losing his farm. If that happens, it also affects our rural infrastructure and in fact the farm community as we know it today.

Again, I should like to stress that when we talk about surviving, when we talk about giving farmers the ability to operate in an environment of stability and viability, we need to make sure that we look at all of those regulations and that we identify tools, but then we also have to make sure that we insulate farmers from the added vulnerability that they get in their industry when they depend on export markets and when they answer the government's call to continue to increase their contribution to the Canadian economy.

I should like to go back several pages to look again at the safety nets program. We have outlined some of the important pillars in what we consider to be a good safety net package for farmers. Again, you will see that trade rules impact very much on our ability to design a safety net package and safety net programs. I hasten to add that the problem here is not that we do not have the ability to design a good solid safety net program. The problem is that we always find ourselves constrained by a limited amount of money. It seems to us at times that we have adopted a policy of measuring farmers' needs by how much money we feel is available. What we should be doing is first of all measuring farmers' needs and then providing enough money so that we can fill those needs.

Further, because of that constrained amount of money, when we go to improve our programs -- and a good example is AIDA, because we all know we have to do something to AIDA to make it more effective -- all we do by changing the design is shuffle money from one area to another area. Unless we get more money, instead of providing enough money to flow money where it is needed the most and to flow money in all the areas that it is needed, we find ourselves in the frustrating position taking money from here and putting it there. Then if there is a vacuum, we redesign the program again and move money from there back into here, and we never have the benefit of having enough money to make sure that the money flows everywhere and flows where it is needed the most. Of course we are looking now at improving design.

I mentioned before that this is more than just asking for buckets and buckets of money. This is about taking a focused look at safety net programs and where they need to be improved and adding a price tag to them, and then we will know we have a good program and an adequate safety net that will be in place when farmers go through a crippling situation like they are today.

We have listed NISA as being an important pillar. NISA has worked very well in allowing farmers to mitigate slight variations in income between 70 per cent and 100 per cent of their previous five-year reference margin. NISA can be improved by increasing government's contribution. Currently there is a configuration in NISA where some accounts are building and we seem to have a lot of money at the top, but there are also many farmers at the bottom who have almost no money in their NISA accounts. We need to improve NISA design so that we give those farmers the ability to build up those accounts so that in the future they have enough money there to be able to help them with their net income problems.

Crop insurance differs from province to province across Canada. There again we feel that we need to provide enough money to have an equitable production risk management program accessible to all farmers across Canada in the case of a natural disaster.

Then there is AIDA, although because of the political volatility with the term AIDA we have decided that perhaps after its design has been improved we will need to call it something else. Clearly we have made up our minds that an income disaster program for the future needs to be built on AIDA's strengths. There are some good things in AIDA. We need to make sure that we identify those strengths and then develop a long-term income disaster program that will use those strengths as well as added components in order to be able to compensate more adequately our farmers in times of income disaster.

We are taking a very close look at our current safety net package. Another important pillar in that is companion programs. We have NISA. We need an income disaster program. We need crop insurance, and then we need good solid companion programs. Companion programs provide provinces with the ability to address province-specific safety net needs specifically for their producers.

We are taking a very close second sober look at our safety net package. We are working first of all at the CFA level. We are working very closely with the minister's National Safety Net Advisory Committee, and I believe we are moving closer to the goal posts in being able to identify what is needed in a good program. However, once we have finished identifying what we need, we will still need to fund that program. We also implore you for your help in making sure that we have adequate funding to be able to give our farmers more stability, better stability, especially in the incidence of lack of viability in the industry as a result of things such as pressures from other countries, natural disasters and increases in input costs, so that our farmers will not feel that they are floundering but will feel that they have something that protects them if they need it. Do not get me wrong: our farmers would absolutely prefer to get their money from the marketplace. It does not matter which farmer you talk to. They would like to get their money from the marketplace, but at the same time they realize that that is not always possible.

If you go to the last page of the deck now, I want to stress that there is not a single solution to the problem we face. For the farming industry in the long term, we need adequate tools, better tools for our farmers to perform better and we need a safety net beneath that to ensure that farmers will be caught when the tools are not provided for them or when the tools breakdown and they cannot achieve their goals and objectives.

One of the questions I am asked most often by farmers across Canada is this: Does Canada have an agriculture policy? We have a lot of what I micro agriculture policies, but we need to build much better crosswalks between those policies, between the implementation of those policies by different departments, and between the different regulations that we do have. Too often when we develop a policy here it has the potential to undermine a policy over there.

Let me use the example of transportation. If we could direct $120 million of the railway efficiency gains back to the farm gate, that presumably would be $120 million less that we would have to ask for in safety nets. Therefore, we are insisting now that we need an overarching Canadian agriculture policy that will embrace all of the micro agriculture policies we have and that will make sense when we look at the different agriculture policies we have developed, whether pesticide policy, transportation policy, trade policy, environmental policy or biotechnology policy. They all have to be linked together with very strong crosswalks so that the farming community has a solid package of policies that we can then carry out beneath that overarching Canadian agriculture policy we have.

In closing, let me repeat that beneath that we need an underarching safety net package that will help when the policies and the tools that we have underneath a Canadian agriculture policy breakdown or when we have an inability to provide farmers with the right tools. Then we need that underarching safety net policy to ensure that we can catch the farmers while they are falling and help them back up again.

The Deputy Chairman: As you know, we are aiming to put out a report in the next few months as a result of this round of hearings. Your presentation certainly touches on all of the areas we are concerned about.

Senator Chalifoux: That was an informative presentation. I was in the Peace River country a couple of weeks ago speaking to several farmers. In the Peace River country, in northern Alberta and the northern part of British Columbia, the drought situation is horrendous. It has been for the past three years, and they are looking forward to another drought situation this year. No one seems to be addressing that situation.

My first question has to do with AIDA. I heard from some of the farmers that, in the safety net program you have, in order to access AIDA they have to have crop insurance. They do not have the money to pay for the crop insurance in order to access AIDA. Could you tell me more about that?

Second, there has been developing for several years a really good aboriginal farm organization. I should like to know if they are members of your organization and what you are doing in that area. More and more of our people are moving into the farming area.

Mr. Friesen: Your last point is very interesting, because we are always looking for new members and for more members. That is something I will be looking into as soon as I leave.

The problem you noted with crop insurance linked to the income disaster program is part of Alberta's Farm Income Disaster Program. Currently you do not have to buy crop insurance to qualify for AIDA payments. That is a problem.

Let me quickly point out a few of the things that we are looking at in AIDA. First, we still have the AIDA-NISA link; that is, if you qualify for an AIDA cheque, they take 3 per cent of your eligible net sales off your cheque, so your cheque becomes smaller. Mr. Basillais has done some research on this and has found out that AIDA would have paid out quite a bit more money, in fact a lot more money, both in 1998 and 1999 if that link were not there. Interestingly, it would have gone to those producers who found AIDA to be most inadequate. We are looking at removing that link.

As far as continuous droughts in the farm community, what that does is ratchet down the farmers' historical yield, and it affects crop insurance payouts. It does the very same thing in AIDA. If we cannot turn agriculture around, AIDA eventually will be totally ineffective. It is worse for the grains and oil seeds sector, because the hog industry has already started turning around. In the livestock industry, we find the spikes to be more short term. You may have a drastic downward spike but it recovers and you may also have an upwards spike, so the reference margins the farmers have to work under recover much quicker and AIDA has the ability to build itself up there. That is one of the problems we are currently looking at in a long-term income disaster program.

Senator Chalifoux: Farmers also discussed the transportation issue with me. It is much more expensive. They want to know why they cannot transport their grain to the Prince Rupert port rather than to the Vancouver port, because it would be much more economical and viable for them. Do you have any comments on that?

Mr. Basillais, Policy Analyst, Canadian Federation of Agriculture: That is a very specific question. It is not the farmers who decide, it is the companies. In Prince Rupert, there are many problems about who owns the port. It is a big, ongoing problem. Unfortunately, CFA cannot do much about that. It is a question of who owns the port in Prince Rupert.

Regarding your question on crop insurance, that problem is specific to Alberta. Alberta runs its own program and they have specific rules. That is one of the problems of AIDA. AIDA is a national program, but there are five or six provincial programs with different rules. In Alberta, farmers may have to belong to crop insurance to be eligible for the FIDP program, but they do not need it for the AIDA program, which is the 60 per cent share.

Mr. Friesen: We have two frustrations that I should like to mention. First, it has been very frustrating that the government cannot come to grips with the transportation issue. That would help farmers tremendously in the West. The second frustration is with respect to AIDA. The federal government has shown a fair bit of flexibility in redesigning AIDA as we have been using it in 1998 and 1999. In many cases, the design changes were retroactive. What is so very frustrating is that the federal government has seen that AIDA was designed incorrectly from the start and that we need to make those design changes and then has allowed the changes, but the provincial governments are all over the map. If you look at the spread sheet of the design changes that have been made, and they include family labour, inventory calculation, negative margin and expanding farm size, you see that the provinces are all over the map. When it comes to the provincial level, what we have now is an extremely inconsistent AIDA program.

Complicating it further is the fact that the federal government provides 60 cents on the dollar and the provincial governments provide 40 cents. Therefore, you have 60 per cent coverage on many of those design changes, but whether you get the extra 40 per cent depends on whether you are in a province that has supported those design changes. That has been extremely frustrating. It is all about saving money at the provincial level.

Senator Stratton: It is good to have you back again, Mr. Friesen. I am interested in the regulation aspect. We should consider taking a look at that because it is an aspect that we have heard about but not really examined. The bugaboo we keep hearing about and the one that concerns me most is the World Trade Organization. As I have said before, this is not a short-term resolution. It is long term. The last one took seven years plus 10 years to work out, and you must forecast that likely the same thing will occur. It frustrates everyone that the European Community will be the slowest to come to the table.

We know, then, that we are facing a 15- to 20-year problem. We need a long-term solution to that problem. We need programs that fill the immediate need, because there appears to be a desperate immediate need out there for help. With that in mind, is the three-year plan reached on March 23 regarding farm income safety nets adequate in your view?

Mr. Friesen: With respect to that federal-provincial agreement, let me first tell you the downside of what happened and then I will try courageously to identify the upside as well. To make the deal, they had to move $65 million out of the income disaster fund to keep provinces harmless in the reallocation of safety net funding. We had insisted that the income disaster fund should remain intact and should flow to income disaster issues. Instead, they took the $65 million out and added it to the total safety net, the other "box one" funding or fund one, whatever you want to call it. Now we have an even lower number to work with when it comes to improving the design of the income disaster fund.

We insisted with the government that instead of doing that they should add more money. We have no problem with provinces requiring more funding from the federal government, but here again is an example of what I mentioned earlier. We do not think that to solve that problem they should take money from here and put it over there, either from one province to another province, from one farmer to another farmer, or from one fund to another fund. They should increase the pie so that all the provinces have adequate funding. Needless to say, that did not happen, albeit it does look like they will have to come up with $40 million to keep Manitoba and Saskatchewan harmless. I believe New Brunswick was dealt with the way they did this calculation, so it is no longer a problem.

As for the upside, farmers were starting to feel very insecure because an agreement was not coming together, although we had confidence that the governments would be there for farmers at the farm community level. Farmers were clearly needing an agreement to give them more stability. That is one positive that happened. The other positive is that the income disaster money was guaranteed for an extra year. Instead of just for two years, we now have it for three years. So for three years, contingent on whether there is enough income disaster funding, I believe farmers have achieved a level stability.

However, three years is not long enough. A safety net package or a safety net is not something you can put on a shelf for a while and then when you see a disaster coming take it off the shelf and put it here, because inevitably farmers will fall right to the floor. Three years is not what we would call a long-term program. Why not put it in for 20 years? If the money is not needed, then it will not be used. However, if it is needed, then it should be there so we can use it.

Interestingly enough, we recommended to the minister that an income disaster fund should be a revolving fund. That is, if there is $500 million in the fund for the year 2000 and we need only $200 million, let us move $300 million to the year 2001. Presumably, as agriculture turns around, that fund would be there, and for several years governments would not have to add any money. But that is too loose for the government. They want to put the money in there for one year and then either spend it all or lose it. They do not like our idea, but we thought it was a very legitimate offer to make.

Senator Stratton: They do that with the EI account. There will be $35 billion in it this year.

The interesting part is that while we listen to various groups bring forward concerns, we wait -- I wait, at least. With respect to safety net programs, you said in your statement that you are currently analyzing different options. Are you going to present to government, perhaps to us, a comprehensive plan? I should like to see something laid out on the table from various groups that clearly shows a route to take. Is it a variation on the old GRIP? Is it building on the existing AIDA and NISA? It needs to be there clearly so that the federal government and provincial governments can point to six or seven different solutions.

Mr. Murray Downing from Reston, Manitoba, has developed such a program. I found it really quite an intriguing program. I should very much like to see him present here. He has some support and it is growing considerably across Manitoba and Saskatchewan. Have you seen his program? It is a variation on GRIP, by the way.

Mr. Friesen: Yes. We have had several meetings with Murray Downing. We had a National Safety Net Advisory Committee meeting last week in Winnipeg, and there were four or five different proposals from people on a safety net program. One of those proposals was Murray Downing's. Another one was presented by District 10 from Keystone Agricultural Producers in Manitoba. Sid Gordon presented one and a gentleman by the name of Jason Dearborn from Saskatchewan presented another. We listened to all of the proposals and scrutinized them within the context of some of the regulations that I was talking about earlier. Trade is a big one. While I am not sure that any of them would offer a good stand-alone package, I believe we can glean ideas from all of the proposals. The glaring problem with Murray Downing's proposal is of course trade. It would not be green.

One of the other things we have looked at is what level of vulnerability we can cope with when we design a safety net. NISA is not green either, but with that one at least we feel that we have not made ourselves too vulnerable, so we are getting away with it, if I may use that term. Murray Downing's proposal is based on current production and price and that poses a problem. After the meeting we had, we are analyzing all of the proposals and then we are going to move from there.

The Deputy Chairman: Murray Downing's pamphlet is currently in translation and will be distributed to all members of the committee as soon as possible.

Senator Stratton: Thank you for that because he has been calling regularly. At least I can give him the name of Mr. Friesen who says the proposal has trade problems. Perhaps he will believe Mr. Friesen rather than us.

Senator St. Germain: There is something that really concerns me. I am still in the agriculture business and my great concern is the proposed species at risk legislation. For those of us who are still in the process of farming or ranching or whatever, that is really a scary piece of legislation. Politicians and urban dwellers often do not face the realities that exist in agriculture. The biggest problem we have with our wildlife is the incursion of people into their habitat. We have this policy of bringing people in by the hundreds of thousands. I am not saying that that is a bad policy. I am not criticizing that policy, but you cannot have it both ways. You cannot bring hundreds of thousands of people into the country and multiply your population and not pay a price. Your habitat is going to pay a horrific price.

The countries that are overpopulated and that have huge, dense populations have virtually no habitat, no game. Everything dies and man will destroy the face of this earth if he is left to his own means. Then the proposed species at risk legislation comes along. I can see a horrific impact because it ties into what you speak of here in regards to spraying and all the various aspects. I see what is happening in my own province of British Columbia in regards to forestry with the spotted owl. They are cutting out huge areas, and people are screaming there are no jobs. This is the same thing.

What input did agriculture have into the development of this proposed species at risk legislation? This is not a partisan issue. Urban dwellers, whether Conservative, NDP or whatever, are basically non-realistic. They talk about cruelty to animals and so on and say that man should not be doing this or that, yet they go have a hamburger at McDonald's and never bat an eyelash. It is so hypocritical. The urban community has grown with this sheltered, non-realistic mentality. Nobody stands up and says anything because they have wordsmiths who can expound the virtues of everything. The poor farmers and ranchers and the people who are victimized, they sit back and have to swallow this and reduce their incomes and adjust. So my question is whether you had any input into the development of this piece of legislation.

Mr. Friesen: I cannot emphasize this enough: farmers want to be responsible. They want to sustain the environment. They have to live in the same environment that everybody else has to live in. To an extent, they also do not mind being accountable. However, when extra work, extra stress or extra costs are created because of the public's desire to do something, then farmers are insistent that the costs have to be shared. While farmers want to be responsible, we cannot do all of these things alone and include the environment and all of the other regulations. Not all of the costs can be borne by farmers. They cannot all be put on farmers' backs.

We did have input in the consultation process for the proposed species at risk legislation. Initially we were concerned about several things. First, we could not endorse legislation that would have the potential to shut down a farmer's operation. Second, if a farmer was going to affected to the extent that it would result in extra costs, we wanted compensation. Third, we also encouraged trying to achieve our objectives through incentives. One of the things we were told when we met with the bureaucrats on this issue was that they preferred to go the route of giving farmers the incentive to comply with these regulations. However, we stressed very strongly that compensation had to be the next step if a farmer could not in fact do what needed to be done without incurring costs, especially if a farmer was affected to the extent where it would have the result of temporarily suspending his operations. There is no question then that we would have to have compensation.

The other concern we had at the onset, which to my understanding has been removed, is that we did not want, through this legislation, to give the public the ability to harass farmers with all kinds of court action. I have been told by my staff and by other people that that concern, to a very large extent, has been removed as well.

Clearly, we will continue the consultation, and when the bill moves to committee we will definitely also work through the committee to ensure that the interests of farmers are upheld. As I said, farmers want to be responsible and do not mind being accountable to the extent that that responsibility and accountability will be shared with the general public.

Senator St. Germain: I do not know if you live on a farm, but the other day I was at my place in Pemberton. I was told that people were going across the property. It was somebody who alleges to have been with the fisheries branch. There is a perception out there that, if you own a piece of land that is any bigger than a city lot, everybody has the right to traipse right over it. Yet if you step on somebody's lot in downtown Vancouver that person has the police there within 30 seconds and you are arrested for trespassing. That is the difference in mentality. Urban dwellers feel they can come and trespass all over.

With respect to the question of the public's being able to harass the ranch community and the farm community, who else besides yourself made presentations on this? What actual protection is there? The legislation is going through, I gather, and I just do not want to take the risk for the agriculture community not to ride herd on this thing right from the very beginning.

Under the system in Ottawa often power overrides principle, and that is true no matter who is here -- Tories, Liberals, whoever. On issues like this that have an impact on everybody, I should like to know what you are doing and whether other organizations in the agriculture community are riding herd on this legislation as it goes through.

Mr. Friesen: To my knowledge, certainly everybody we have anything to do with would have been part of that consultation. I would expect that they would be part of the consultation during the committee process. I cannot tell you who all has made presentations to the minister.

Senator St. Germain: Is there a connection between you and the Cattlemen's Association and the various other organizations? Is there a liaison between all of you or do you operate as individuals?

Mr. Friesen: The Cattlemen's Association is not a member of our organization. We do work very closely with them on issues such as environment and species at risk. We did work with them on this issue as well.

[Translation]

Senator Gill: I would like to come back to a question raised by Senator Chalifoux concerning federation members. If I understood you correctly, your organization is comprised of provincial farmers' associations working in virtually all agricultural sectors. Are aboriginals also members of your association? I would image that some provincial associations have aboriginal members.

As Senator St. Germain mentioned, often farmers encounter harassment problems. The same is true of aboriginal farmers. This is happening today.

I am not certain if your federation resorts to this practice, but often aboriginals are referred to the Department of Indian Affairs. Do you allow aboriginals to be members of your provincial or national associations? It is customary for national organizations to refer aboriginals to Indian Affairs because the latter is responsible for aboriginal affairs. Do you, on the other hand, accept aboriginals as members, obviously in your particular area of jurisdiction?

[English]

Mr. Friesen: Absolutely. We draw no distinctions between farmers. The Canadian Federation of Agriculture does not have individual memberships. We have only organizational memberships. Any aboriginal who would be a member of CFA would be a member through a provincial organization or a national commodity organization. We absolutely do not draw any distinctions between any farmers.

Senator Oliver: In your paper dealing with farm income issues, you said that the CFA does not believe that there is any single solution to resolve the farm-income-related problem. I would like to ask you a question about farm power, because it has come up here before; indeed, several witnesses, particularly the National Farmer's Union, have spoken about inadequate power relevant to other elements of the food chain. Some people say that we should have a cap on business profits. What mechanisms do you think should be used to enhance the bargaining power of farmers to ensure they receive fair value for their product?

Mr. Friesen: The solution to giving farmers more power in the marketplace as well as in the political process is solidarity and very strong, large coalitions. That philosophy can be applied at the political level. Clearly, that is the mandate under which CFA works in Ottawa. However, it can also be done at the farm gate level in the commercial world.

That coalition is working very well -- supply management, for example. Producers have the legislated right or mandate to be able to work together. That has given them more authority and more power to deal with those people who buy their products. For example, the Canadian Wheat Board has allowed producers to collectively market their product, and in the long term accrues benefits back to the farm gate.

Senator Oliver: From a practical point of view, for the farmers in Alberta, Saskatchewan and Manitoba who are looking at meeting their payroll and making mortgage and equipment payments today, how will this increase in power that you say you have a practical answer to help them pay their bills at the end of this month? How will they get more value for their product?

Mr. Friesen: At the end of this month, keeping in mind the factors I mentioned earlier, it will be very tough. The decrease in farm support vis-à-vis the support farmers in other countries are receiving, the natural disasters, with inadequate coverage in many cases, the decrease in commodity prices, and the increase in input costs are all factors that have influenced how farmers can work in their environment.

Under supply management, farmers have a greater ability to extract from the marketplace enough money to cover their costs. However, because commodities such as grains and oil seeds and the cattle industry or the hog industry depend so much on the world market and are price-takers in the world market, they do not have the same ability. It is important to realize that supply management depends almost 100 per cent on the domestic market, albeit their exports are growing as well. For example, in the poultry industry, exports could be as high as 10 or 15 per cent of production. However, they fundamentally receive their dollar from the domestic marketplace, which helps them to ensure that they have their costs paid for.

As soon as you depend on the world market and the world price, you make yourself very vulnerable. We need to ensure that we are insulted from that vulnerability, that farmers do not reach the point where they cannot sustain their operations. It is for that reason that we talk about better crosswalks, better tools, and safety nets.

Senator Oliver: There is a related problem that has an impact on farmers' profits and on costs, and it rises from genetically modified foods like canola and so on. A number of committee witnesses have indicated that consumers are demanding more and more regulation in terms of food safety and labelling of organisms. Who should be paying the costs associated with food safety and other activities such as labelling? Should that fall on the farmer, at the farm gate? How do you view resolution of that additional cost?

Mr. Friesen: That brings up many related issues. Let me start with food safety. Canada and Canadian farmers have the reputation around the world for producing a very high quality safe food. Clearly, we have to maintain that reputation, because we depend on the international marketplace. Farmers have worked very hard. In fact, it has been CFA's responsibility to deliver CARD funding to the Canadian On-Farm Food Safety Program. All of the livestock industry, the poultry industry, the dairy industry, and the pork industry are working very hard to move to the phase where their industries will be accredited by the CFIA. These industries aim to receive the stamp of approval that ensures that they have a good, solid food safety program at the farm gate. Yes, extra costs are incurred to the farm gate and, yes, farmers would like to pass on some of those costs to the consumer.

The issue of genetically modified products is one that is tremendously loaded and one that has the potential to affect our production in GMO products if we do not handle it very carefully. We currently produce almost 3 million hectares of GMO products in Canada. The international consumer has reacted very strongly in some countries to GMOs. We must handle this issue very carefully.

We must make sure that one hand knows what the other is doing. This has to do with the biosafety protocol negotiations that took place in Montreal. That protocol is meant to manage the transboundary movement of GMO products. You will recall that we have established a goal of 4 per cent world agriculture trade by the year 2005. We have further established a goal of maintaining the rural infrastructure, keeping farmers viable, making sure their input costs do not exceed the dollars they receive from the marketplace. We believe the biosafety protocol negotiations were long on trade rather than actually dealing with genetically modified products and risk assessment or harmonization with other countries, et cetera. It creates the potential to impede trade.

If the agreement is ratified and I export my non-GMO wheat to Europe, unless I can guarantee that there is no GMO in that wheat -- we currently have no GMO-approved wheat in Canada. I should be able to say that I can guarantee that there is no GMO in this load of wheat. However, if I cannot, then I must document that load as "may contain."

Senator Oliver: That reduces your price?

Mr. Friesen: Yes. For any research that we have done, it is tough to guarantee that it does not have GMO. As you well know, when a farmer rotates his crops, almost inevitably, once wheat is sown in that field, and you have had GMO canola on it, you will have GMO dockage.

Senator Oliver: The same must be true of the United States in trying to sell products to Europe.

Mr. Friesen: Absolutely. Now, we get to the issue of segregation. I have heard people say that, today, there is no way you could ship out any non-GMO products that would not have some form of GMO in it. To get to the level of segregation where you can guarantee that a product is GMO-free would incur an incredible amount of work and cost at the farm gate and at the grain elevator level.

Senator Oliver: What is the answer?

Mr. Friesen: I would like to say that I know the answer to that. At this point, CFA has called on the ministers not to ratify the biosafety protocol until they have done an impact analysis to see what will happen when it is agreed to.

We had three people in Montreal working together on the negotiations. One was Jennifer Higginson from our office. It was because of those three people that negotiations went to four o'clock on the Saturday morning. Clearly, the end result was better than where it started in Cartagena; nevertheless, some of the things that we wanted to achieve were not achieved. When the negotiators reported to our annual meeting, at the end of February, they said that with respect to this issue the environment minister wanted to ratify it but he had no idea of its impact. It is tantamount to diving off a diving board to see if there is water in the pool. Therefore, we insist that there has to be an impact analysis, because our farmers cannot afford to cover all the costs that such an agreement might incur at the farm gate.

Senator Wiebe: Thank you for the opportunity to join in on this hearing this morning. I have been a farmer all my life; I started farming in 1959. There is no doubt that a tremendous amount of generosity from the citizens of this country will be needed to adequately ensure that the price of distortions on world markets are reflected in a program that will keep our farmers out there. When we talk about agriculture, while there are problems within the livestock industry and the dairy industry, they are minute compared to the problems that the grains and oil seed producer now faces. That is really where the energies should be directed.

When we talk publicly about what the problems are, we should probably direct our remarks more towards the grains and the oil seed producer rather than the agriculture industry as a whole.

Up until six years ago, I have been eligible for almost every government program that has come along for the crises in agriculture. Quite often, I have qualified for a program, and the amount of dollars I received was not quite enough to solve the problem as far as my farm was concerned. There were times when I did not qualify for any payment; and then there were times that I received a payment when I certainly did not need it.

The people of this country will have to make tremendous contributions towards the grains and oil seeds sector. Does the Canadian Federation of Agriculture, one of the largest farm organizations in Canada, which speaks on behalf of the majority of the farmers in this country, have a recommendation for the Department of Agriculture -- which we could suggest to the department -- that would ensure that those dollars will be used in the most efficient way, that there be a program that would allow those dollars to get into the right hands? That is a real concern of mine because we are looking now, if we want to correct the problem, at spending more dollars in this country than we have ever spent before on a single program.

Mr. Friesen: You raise a valid point. You are correct that it is the grains and oil seed sector that will really be kicked. Clearly, the grains and oil seed sector has a chronic, long-term income problem. There is no question about it.

Just to divert for a moment, you asked earlier what we had done with the Cattlemen's Association. I just wish to advise you that Sally Rutherford, our Executive Director, worked very closely with Peggy Strankman from the Canadian Cattlemen's Association on that specific issue, species at risk.

There is no question that there is a chronic, long-term income problem in the grains and oil seeds industry. In Canada, the per capita spending on farmers is $145; in the United States, it is $360. We are always a little puzzled when someone tells us that we cannot spend more money on farmers, because, to a large extent, some of our problems result from international agreements that our government has signed. We have said this before: It is time for our government to harmonize its international agreements and its fiscal policy. Minister Pettigrew should not sign an international agreement that allows other countries to spend money with almost total impunity unless he first calls Mr. Martin and says: "I have to sign this agreement, but that means we will spend a certain amount of money."

We are working on an options paper currently. We want to make a list of all the things we think need to be done to our safety net package to improve it adequately. We will attach a cost to those changes. We would be more than happy to provide you with that, once it has passed through our board of directors.

You said, senator, that there were occasions when you received a cheque when you really did not need it. Let me give you a few examples of what has happened. Every time we do a redesign, we trickle a little more money to where it is needed most; however, inevitably, it also has the effect of giving more money to those who do not need it quite as much. I do not want to be quoted as saying that there are farmers who do not need any money. I suspect that all farmers need a certain amount of money. However, there are some farmers who need it a lot more than others.

An example is the ad hoc announcement made by the Prime Minister, the $400 million that will be paid out in Manitoba and Saskatchewan based on three-year average eligible net sales. What will happen there is that the farmer who needs that money the most will most likely trigger income disaster for the year 2000. Guess what happens when that farmer triggers income disaster in the year 2000? The cheque he receives out of this announcement must be calculated as income. The effect of that is that that farmer's income disaster cheque will be reduced. I suspect that that as high as half of that $400 million will simply be a savings on AIDA. However, a farmer who does not trigger AIDA for the year 2000 will receive the cheque anyway.

Once more, where it is needed the most, it is highly diluted; and where it is not needed quite as badly, that income remains intact.

Senator Wiebe: You have not quite answered my question. You zeroed in on the reason for my question, being that one farmer receives this, another farmer really does not receive that.

The key if for you, as a federation, to develop a system in which you could say to government: "Here is the most efficient and the best way to ensure that those who need it will receive the adequate amount. We have done this in such a way that the citizens of this country, whose money you are using to make the payments, can feel satisfied that the stewardship has been proper in the allocation of that money." That type of delivery system is key. If you have that kind of a delivery system, will that delivery system be acceptable to all of the farm organizations who have membership?

I have experience as a farmer. One of the problems we have in the agriculture industry is that we are all individually far too independent, as are many of our organizations. You zeroed in a bit earlier when you said that the greatest power farmers could have is to speak as one voice rather than as half a dozen. I hope that as a federation you have addressed that problem and can provide us with some answers as to how we go about doing that. If we do not ever come to that goal, you and I will be sitting at this table discussing this same question for the next 11 years. Somehow, we have to get down to the nuts and bolts of the issue, and resolve it. Up to now, we have not done very well as an industry.

Mr. Friesen: I apologize for being too political the last time I answered. CFA, as well as the National Safety Net Advisory Committee, has recommended to the minister that, first, to help some of the producers who have very little money in their NISA account, or no money, we should increase the government's contribution to NISA.

We hear complaints that there is far too much money in NISA; however, we do not believe that to be the case. First, if agriculture does not turn around, we could find ourselves out of money in NISA and with an AIDA program that does not work at all in a few years. Therefore, we have said that governments need to increase their contribution so that it gives producers the ability to shore up their NISA accounts.

Second, we have also suggested some NISA design changes, which should help producers build up their accounts faster. We have suggested design changes that should give producers better access to their NISA account. We have also recommended to the minister that he do away with the AIDA-NISA link, which would save the government $150 million. Those are examples of some specific things that we have done.

We will further try to identify some of the things that need to be done. I can assure you that we struggle all the time with how we can better direct money to those who are still falling through the cracks. Yes, there will always be one farmer who will say, "I didn't get a cheque but my neighbour half a mile down the road did." Thankfully, at the CFA table, we do not see that. Everybody realizes that this is about flowing it to where it is needed most.

Let me give you an example. One morning, when I took my 14-year-old daughter to school one morning, she said to me: "My friend at school whose dad is a grain farmer says they do not have a lot of money because they aren't getting enough money for their grain and they can't get enough support from the government." My daughter doesn't pay too much attention to what I do, but occasionally we talk about it. She looked at me and said, "Are you making sure that the money is flowing where it is needed the most?" She had had about four minutes worth of discussing this issue and already she identified that the problem is that, too often, the money does not flow to where it is needed the most. It seems to me that, collectively, we should be able to come up with a way in which that can happen.

We will do everything we can. We will provide you with anything that comes out of our board of directors meeting in relation to this. And ongoing, to make people aware of some of the problems, we will be making this part of package.

Senator Wiebe: Thank you for your comments. I look forward to many more discussions with you in regards to agriculture.

Senator Sparrow: Let me begin by welcoming our two new colleagues to the committee.

Mr. Wiebe mentioned the generosity of the Canadian people towards agriculture. The agricultural community has been very generous to the people of Canada. The agriculture industry has provided Canadians with a cheap food policy for far too long. We have to find a method of ensuring that the consumer pays the proper price. When you purchase an automobile, that price is controlled by the manufacturer. Rail freight rates are decided by the owners. It is only agriculture that suffers from no vehicle to determine how the consumer pays the proper price.

The closest to that, of course, is marketing boards, and they have worked quite well. We are in danger of trading that provision away. I do not think that the consuming public has paid more than a fair price for those products that are controlled by the marketing boards. That is a statement rather than a question, but you may wish to make a comment nevertheless.

When the AIDA program was brought into being, certain people in the Department of Agriculture made statements to the effect that the CFA was the architect of that program. Then, for a long time after that, people said that the program is good because the farm organizations are all supporting it. The problem with that was that it delayed action to rectify the problem for far too long.

In the initial stages, as an example, I supported the program, until the results came out. At that point, it was so obvious that it was wrong, because it was not designed the way that the farm organizations and most of us felt it should be designed.

In making that statement, am I on the right track? How can we avoid having that happen in the future? Did the department not really listen then, or did they not hear what the farm organizations and the CFA was telling them? I know very well that, at a later point, as an organization you had to back away from your support of that program.

Mr. Friesen: You have raised two issues. One of them is the issue of cheap food. You are absolutely right. Agriculture and Agri-food Canada generates about $85 billion annually in revenue. We make up 24 per cent of the trade surplus and about 14 per cent of employment in Canada. Hence, we make a very important contribution to our economy.

Some of you may have seen the piece we did on what we call "Food Freedom Day." You have heard of "Tax Freedom Day," which falls on July 1. Well, Food Freedom Day falls on February 7. That is day when the average household has earned enough income to pay for the entire year's grocery bill. What is even more important is that January 9 is that day when the average household has earned enough money to pay for the farmer's share of the entire grocery bill. Canada has the lowest food bill per disposable income. We are almost a full percentage point lower than the U.S.

With respect to AIDA, at the onset it was fraught with problems because -- I do not want to say that CFA is perfect. However, when discussions on an income disaster program began, we had some clear-cut bottom lines to designing an income disaster program. What happened, though, is that as the AIDA program was coming closer and closer to being approved by the minister and then implemented we lost many of the things we thought were fundamental to creating a good solid disaster program. The coverage of negative margins is a good example. We found out very close to the implementation date that negative margins were not going to be covered.

Let me explain part of the problem. They said that they would not cover negative margins, but then they said that you do not have to use your negative margin in calculating your reference margin. Then, when it came to implementation, they said, "We can't do that, because of trade vulnerability." Therefore, we did not get negative margins covered. Plus, when it comes to calculating that year, they said that the negative margin had to be included in the reference margin. Thankfully, the minister changed it, on a retroactive basis. The feds are covering 42 per cent of negative margins, because they are covering 70 per cent of their 60 per cent share.

Expanding farm size is another example. If a farmer expanded his farm, of course he would have a higher gross income than he would have in his reference period. He may have sold his product at a lower per unit price but had a higher margin because he had expanded. Well, they did not adjust for that. But guess what? They adjusted when a farmer decreased his farm size. So that is another change they made.

Family labour was another one. In 1998, to calculate inventory they used only one price. It was your starting inventory times price and your ending inventory times the same price. Hence, you did not receive the benefit of losing an incredible amount of money in inventory devaluation. That has changed again.

Many of those components in an income disaster program were not included when we said that they should be included. We also did not want there to be a connection to NISA. We are still asking to change that.

So, you are right, we wanted an income disaster program and we thought we had the outline of a good one. However, far too many things were taken out of; to our way of thinking, it was a shambles. We are thankful that some of those changes have been made, but, clearly, to work better there would have to be more changes made.

The other thing is that we were moving a safety net under the farmers while they were already falling -- redesigning and designing. It ended up taking an incredibly long time for the money to move. Of the $8.7 billion that was announced in the U.S. to top up their farm support, $5.5 billion went out as the Fair Act cheques. Two weeks after the $8.7 billion announcement was made, we had a paper in our office listing every state involved; in each state, two weeks after the announcement, almost 100 per cent of the money had already flowed.

The department is working very hard on trying to harmonize NISA and any income disaster program, so that they can work in harmony in such a way that an income disaster program will pay much quicker. Well, first of all, assess a farmer's need quicker, and then we will flow the money faster.

Senator Stratton: In view of the fact that the European community and Japan see farming as multifunctional -- in other words, they recognize farms as being critical to the environment, to the rural country side, all the rest of that -- and, as Senator St. Germain said, we have the endangered species legislation coming down, should Canadians not be asked to pay a price? Should we adapt that multifunctionality? It appears that we are heading in the direction of multifunctionality, but we are not telling farmers that we will help them out. Should we be moving that way, the multifunctionality route, as per the European Union and Japan?

Mr. Friesen: I have two answers to that question. Yes, if the government provides us with enough money. No, if they do not. If our government agrees to the concept of multifunctionality at the WTO but does not want to provide us with enough money to pay for that concept then, again, we would find ourselves behind the eight ball as far as other countries are concerned. We have been trying to decide whether we should embrace this concept or run away from it.

Poland wants to join the EU. Poland currently has more dairy farmers than all the current member EU countries. They average two cows per herd. They will talk in grand terms about trade liberalization and globalization in the next round, I am sure, but will they put those dairy farmers at the mercy of the world market? No, they will not. They will pay them to be dairy farmers. They will pay them to keep their farm in the countryside so that the tourists can drive by and see those two cows grazing in the pasture.

We could make a very good argument. When you look at the strength that supply management adds to some of our communities in Canada, in my mind that could almost be a multifunctional concept as well.

But, yes, if we want to allow it at the WTO, then give us the money. If you will not give us the money, then let us fight to avoid it.

Senator Sparrow: The Grain Stabilization Act was enacted a long time ago and was, as I recall, a good program. I am just wondering if you are making further references to this committee that you might have a look at that program in relation to future programs. The grain stabilization plan was contributed to by farmers as well as the federal government. It set up a fund that was administered by the Wheat Board. I would assume that the money went into general revenues, but I am not sure of that. The fund reached $500 million, almost $1 billion, because it was through the period where there were no problems. The price return was good. There then was a hue and a cry from farm organizations, "It is our money, pay it out. " There was pressure on the government to pay out the money because the money belonged to the farmers, and that is what they did; they paid it out. Then, when disaster struck, the money was depleted. Therefore, the program faded away.

It seems to me that, if we were to develop a similar program, we may have to put a cap on the fund, and perhaps reduce premiums after that so that a certain level is maintained, and then make a provision that the money cannot be so easily paid out, that the fund is a permanent one. Surely, we are capable of determining what a disaster in commodities might mean in dollars and cents. I do not think it would be too difficult to develop a program similar to that.

Therefore, I am asking you to look at that.

Mr. Friesen: I do not have much knowledge of that file, so I would ask Mr. Basillais to address that issue.

Mr. Basillais: One of the options we are looking at is a premium-based program. However, when we move into that, there are major questions with crop insurance and NISA. How do they work together? That is not an easy question to answer. If a program like that is put in place, then why NISA? That is not what farmers would say, but a government may ask that. Provincial governments are asking why NISA is necessary. So, there are some major implications, but we are looking into that.

Mr. Friesen: That is part of our other challenge. A long-term income disaster program must be designed in such a way that it does not undermine crop insurance, that all the programs complement each other. That is another thing that the National Safety Net Advisory Committee is looking at, because there will be implications if we are not careful in designing the programs. Crop insurance is a program that, at least in some provinces, farmers hold dear to their hearts.

The Deputy Chairman: Thank you very much, Mr. Friesen and Mr. Basillais. You have provided us with a great deal of information and many insights. We are very pleased that you are involved as deeply as you are in the safety net advisory process.

We are also pleased that you are continuing to keep a close eye on the WTO file. The cohesiveness of the agriculture community, had the last round gone the way it was anticipated to have gone, was certainly a very strong support in the Canadian position.

I should say to the witnesses that our regular chairman, Senator Gustafson, will regret that he was not able to be here today. He and his wife have suffered a death in their family and, as such, he was unable to be here this week. He would want to give you his best regards. He will avidly read the transcript of your comments.

The committee adjourned.