Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue 2 - Evidence, March 29, 2001 (p.m.)
OTTAWA, Thursday, March 29, 2001.
The Standing Senate Committee on Agriculture and Forestry met this day at 2:00 p.m. to examine international trade in agricultural and agri-food products, and short-term and long-term measures for the health of the agricultural and the agri-food industry in all regions of Canada.
Senator Leonard J. Gustafson (Chairman) in the Chair.
[English]
The Chairman: Honourable senators, today we are examining international trade in agricultural and agri-food products and short-term and long-term measures for the health of the agricultural and agri-food industry in all regions of Canada. Our witnesses today are, from the Department of Foreign Affairs and International Trade, Claude Carriere, and from the Department of Agriculture and Agri-Food Canada, Terry Norman.
We welcome you gentlemen today. I understand that you each have statements, after which we will go to questions.
Mr. Claude Carrière, Director General, Trade Policy Bureau I, Chief Negotiator, Free Trade Area of the Americas: Senators, I will first give you an overview of the Summit of the Americas process as well as the FTAA, which is one element of the summit, and then we can get into a deeper discussion of agriculture in the hemisphere.
The Summit of the Americas began in Miami in 1994, at the initiative of former president Clinton, seeking to launch a process of hemispheric integration, not only at the economic level, but at the political and social levels as well. It was followed by a summit in Santiago, Chile, in 1998, which, among other things, launched the negotiations for the Free Trade Area of the Americas.
At the Quebec City Summit, we will be at the midpoint in the free trade negotiations. Trade ministers who will meet next Saturday in Buenos Aires will report to their leaders on the progress that has been made since negotiations started, and principally in the past 18 months under the chairmanship of Argentina.
The summit is on far more than trade. Its primary focus, as I mentioned, is hemispheric integration in its broadest terms and its top priority is the strengthening of democracy in the Americas. Most of the leaders' discussion time will be focused on democracy and how to promote and reinforce that in the hemisphere.One must look at the hemisphere now as compared to 25 years ago, when there were 19 military dictatorships. Today there are none. That is part of a change that took place mostly in the late 1980s and early 1990s, not only politically but economically. The countries have chosen a different path, of which the key element has been democracy. It is not perfect, and there are many shades of democracy, but there are choices.
The summit needs to reinforce that because of what has been happening in a number of countries. You are aware of the situation in Peru, where we hope there will be success. However, there are the old demons. The prime function of the summit is to reinforce the move to democracy.
For the first time at these summits, and I think at any summit, the first session, which will be dealing with democracy, will be televised live on Saturday morning in an attempt to demonstrate openness as well as to focus on the prime objective of reinforcing democracy.
The other themes are: creating prosperity, where the free trade area of the Americas is a key component; and realizing human potential through implementation of social programs ranging from education and health systems improvements, through to promotion of cultural diversity and the like. Therefore, the summit will be focusing on a wide range of issues of interest to our populations.
On the FTAA, the trade ministers have been perhaps the most visible in the many activities that have been taking place in the hemisphere over several years. They will be considering the reports of their trade negotiators and reviewing the progress that has been made over the past 18 months.
Negotiators received instructions 18 months ago at the Toronto trade ministers' meeting chaired by Minister Pettigrew to begin the drafting process of chapters of the Free Trade Agreement of the Americas, one of which is agriculture, which we will be discussing in more detail.
Negotiators will be reporting to ministers that they have achieved their first task, which was to produce drafts of a chapter. We will be seeking further instructions for the next stage of the negotiations under Ecuadorian chairmanship beginning April 8. We expect that instruction to be to reduce the differences and to start putting together various approaches to negotiating market access in agriculture, government procurement, and other areas.
They will also be considering a number of other issues that are not directly related to agriculture, but that have an important impact. Minister Pettigrew's first priority will be to try to convince his colleagues to increase the transparency of the negotiating process by making public the text of the FTAA that negotiators will have presented to ministers, in order to demystify what we are doing.
Minister Pettigrew will also be seeking agreement from his colleagues to broaden the mandate of the committee on civil society participation, which was an innovation of the FTAA three years ago, but on which progress has been slowed by a number of countries that have been suspicious of the role of civil society in these processes.
We believe that we should collectively be seeking to improve the information that is made available to our civil societies, as well as having a dialogue with them about the advantages and disadvantages of trade negotiations and any adaptations that need to be made in various countries. Those will be our top priorities.
The other issues ministers will be addressing concern the smaller economies, the majority of which are from the Caribbean, being 14 in number, and also the smaller economies of Central America and the Andean community, who have concerns about whether they will be able to adapt to the challenges of negotiating a free trade agreement with the most powerful and richest economy in the world, the United States. Some small islands in the Caribbean are single-product producers.
They have concerns, they expect them to be addressed, and Canada has frequently, both bilaterally and at these meetings, said that we will be there to help them. Canada is already helping them in maintaining what they call the "regional negotiating machinery," developing expertise to use in this negotiation as well as the WTO negotiations. We have assured them that we will work with them through regional institutions, and in particular, the Inter-American Development Bank. Minister Pettigrew recently met with President Iglesias to essentially confirm that the bank is aiming to ensure that its programs are adapted to the needs of the smaller economies, especially in the context of meeting the challenges of free trade. That will be a key issue.
Finally, ministers will be dealing with the question of the calendar of negotiations. You may be aware that President Lagos suggested last year that we make more precise, but also advance somewhat, the calendar of negotiations, which is currently to conclude by 2005. President Lagos suggested that we conclude negotiations one year earlier so that we can begin implementation of the FTAA in January 2005.
There has been some resistance to that, especially from Brazil and a number of other countries, who see more of a need to advance a substantive negotiation rather than focus on the calendar. Brazil also feels that it has undergone considerable adjustment since the early 1990s, when they began opening up their trade, and their industries are concerned that they may not be able to keep pace should the negotiations be accelerated.
They have also been suspicious that the United States has been less open to negotiating in the areas of interest to them, in particular, in anti-dumping and in agriculture. Most recently, the Bush administration has been signalling that, contrary to the previous administration's position, they are prepared to negotiate in the area of anti-dumping as well as in agriculture. The signals are different. I think President Cardoso is in Washington today, meeting with President Bush, and I am sure this issue will be discussed. It remains possible that there will be agreement to advance the negotiations, but the most important aspect that can emerge is that there is political will to undertake this project and meet the challenges of the negotiation.
Agriculture is one of nine negotiating groups. The Canadian side is led by Terry Norman, Director of the Western Hemisphere Division in the Department of Agriculture. That negotiating group meets almost simultaneously, and certainly sequentially, with the market access negotiating group that deals with general tariffs and non-tariff measures, so that positions on market access for agriculture are well coordinated with our overall market access position.
Perhaps I can turn to Mr. Norman to provide a short presentation on where things stand on the agriculture negotiations, with your permission.
Mr. Terry Norman, Director, Western Hemisphere Trade Policy Division, International Trade Policy Directorate, Market and Industry Services Branch, Department of Agriculture and Agri-Food: I will provide a brief summary of some of the substance that is being discussed in the negotiating group on agriculture and where we are in drafting what will eventually become an agriculture chapter in an agreement to create the free trade area of the Americas.
I would summarize the work in the agriculture group under four different categories: market access, export subsidies, domestic support, and sanitary and phyto-sanitary measures. There are a few other miscellaneous issues being discussed here as well that I will mention at the end.
First, our starting point on market access for agriculture in the FTAA negotiations is our World Trade Organization initial negotiating position. Whatever we decide to do in the FTAA must be consistent with our multilateral WTO negotiating position.
We expect that we will be able to go further and faster in opening up markets in the FTAA than is likely to be the case in the WTO, because we are talking about creating a free trade area where most tariffs would be expected to go to zero over some agreed phase-out time, whereas in the WTO there will almost certainly be tariff reductions, but probably not to zero and perhaps over a longer time period. We are talking about creating access to the other markets of the hemisphere faster than is likely to be achievable in the WTO.
In the negotiations so far, we have not really been discussing specific tariffs for specific products, but more what we call "methods and modalities for tariff negotiations." This involves discussing such issues as what is the base tariff that you should start reducing from, what time period should you look at for the trade statistics to measure the relative worth of different tariff items and their reductions, what should phase-out periods be, and what methods should there be for determining concessions. It is these kinds of technical negotiating issues of how to negotiate tariffs, rather than discussing actual tariff reductions.
As Mr. Carrière mentioned, there is close cooperation on all these issues with the market access group, which is dealing with the same issues in a more general way.
One of our basic positions on market access, which is also in our WTO position, is that we will maintain the ability of Canadian agricultural producers to choose the kind of marketing system they want for their products, including the orderly marketing systems such as supply management and the Canadian Wheat Board marketing system.
Turning to export subsidies, the trade ministers and summit leaders, when they agreed to launch the negotiations, also agreed that one of the objectives for agriculture should be the elimination of export subsidies for trade and agricultural products within the hemisphere. That is already an agreed objective, so the negotiation group is now discussing how to achieve that in a practical way. We are agreed on the objective. We are discussing how to achieve it.
There is a difference of opinion within the group among several of the participants on how to deal with domestic support. Canada, the United States and Mexico -- the three NAFTA countries -- and some others, are of the view that domestic support issues and disciplines in reductions for domestic support is a multilateral problem to be dealt with in the WTO, rather than in regional or bilateral trade agreements such as the FTAA. Whereas some other countries think there should be disciplines on those measures in the free trade area of the Americas. That difference of view is being discussed within the group.
There is also a difference of opinion on sanitary and phyto-sanitary measures. Canada, the United States, and several other countries think that the existing WTO agreement on sanitary and phyto-sanitary measures has the right balance between what countries are able to do and the disciplines on what they can do in this area. We want to see agreement on, and some practical ways of achieving, full implementation of the WTO agreement.
Some other countries in the FTAA negotiations want to negotiate new or different disciplines for sanitary and phyto- sanitary measures, so that difference of view is being discussed.
Various other issues have come up in the negotiations. Some countries want to include disciplines on export credit, export credit guarantees, and export market promotion and development activities within the agreement. Others, including Canada, think that those are multilateral issues that should be dealt with in the WTO.
There is one issue in particular on which Canada and the United States have a difference of view, and that is state trading enterprises -- for example, the Canadian Wheat Board. The United States uses every opportunity to say that there should be new disciplines or that we should be getting rid of state trading enterprises such as the wheat board. Again, our view is that WTO rules already exist for the operation of state trading enterprises, and if they have a concern with those rules, the WTO is the right place to discuss it, not a regional trading agreement.
My final comment will be on the draft text that the negotiating group has been working to produce. I am hesitant even to call it a "draft text," because it is really an amalgamation of the various proposals that different countries have made. There has been no attempt to meld those different proposals into one text. If and when it is ever made public, I think that people will be rather disappointed in it, because there are alternate paragraphs and alternate sentences that say very different things, with no attempt to agree on a common text that could make up an agreement.
That is the current situation. As Mr. Carrière mentioned, ministers will be looking at this next week and deciding how we should proceed for the next phase of the negotiations.
I would be happy to answer any questions.
The Chairman: Thank you, gentlemen.
Mr. Norman, have we advanced since the Free Trade Agreement with the United States was signed?
Mr. Norman: If you mean has our trade relationship with the United States advanced as a result of the Free Trade Agreement, the answer is an unequivocal yes. At the time we concluded the Free Trade Agreement, Canada had a net trade deficit with the United States in agriculture and food products of $2 billion per year. We now have a positive trade balance of about $4 billion in agriculture and agri-food products with the United States, and that is increasing. The figures speak for themselves. Canadian agricultural and food producers have certainly benefited from that agreement.
The Chairman: The farm groups that appear before this committee generally talk about a level playing field with the United States. Many are of the opinion, as am I, that the Americans will not get rid of subsidies. We have been hearing that for about 15 years.
I live very near to the American border and I communicate with American farmers all the time. In fact our canola is transported across the border to ADM in Velva, North Dakota. All indications I get on the programs that are being brought in are that the opposite is happening. In fact, I understand that the Americans have now moved their subsidy off durum wheat, which is in a glut situation, and on to hard wheat, because there is a general feeling that there will be a market for hard red spring wheat. In fact one farmer from North Dakota told me to expect to see North Dakota and South Dakota wall-to-wall in hard wheat. This indicates to me that Canadians farmers are in a crisis situation.
What steps are we taking to get a level playing field with the U.S., or is that impossible to achieve?
Mr. Norman: A level playing field is often in the eye of the beholder. Everyone on each side of the border thinks that the people on the other side have it better. That perceptual problem will always exist, no matter how level the playing field.
There is no doubt that since the mid-1990s, the United States has significantly increased its support to agricultural producers. At the same time, Canada has significantly reduced its level of support to agricultural producers because of internal budgetary problems, and for other reasons. There has been a widening of the level of support -- increasing in the United States and decreasing in Canada -- over the last five or six years. I do not think anyone can argue with that.
As to what we are doing about it, there have been some recent announcements of increased support in Canada, of which I hope you are well aware. Certainly, one of our objectives in the WTO negotiations on agriculture is to further reduce domestic support and farm subsidies in all countries, but particularly in the United States and the European Union, which are by far the heaviest subsidizers of agricultural projects.
We think that the WTO is the place to try to resolve that in the long term, but in the short term, we have to take other measures such as those that were announced just recently.
The Chairman: You say that a level playing field is in the eye of the beholder. As I said, our canola is trucked to Velva, North Dakota. The Americans are getting CAN$7.50 for a bushel; we are getting just over $5 right now. We can get more for it in North Dakota than we can in Canada. The same would be true for durum wheat, if we could sell it down there.
A large portion of Manitoba and South-Eastern Saskatchewan had sprouts in their durum. Farmers took samples to American buyers, who said that they would pay a good price for it, but we cannot sell it there.
To me, free trade means that we can cross the border for the benefit of the producer. Frankly, I do not think we will see free trade until we have a North American common market like the European common market. If we are not working toward that end, we are in for a long haul.
That is as far as I will go on that subject today, because I am sure that other senators have many questions, but I believe that our government has to deal with that before we will see any major change, especially in grains and oilseeds.
Mr. Carrière: Senator, I have spent a good many years fighting the Americans to ensure that we retain free access to their markets for grains and oilseeds. We do have free access. There are no trade barriers. We have significant exports of grains and oilseeds to the United States.
The one thing we have been unable to change is the American perception that Canadians are unfair traders. They have a bias. They do not like the Canadian Wheat Board. Anything that comes from the north is bad.
However, we have been able to prevent them from imposing restrictions. We have succeeded in working out a number of very vexing problems, such as blockades by South Dakota Governor Janklow, and a number of other measures taken by various states in 1998. We worked as recently as a few months ago with the North Dakota legislature to try to convince them not to take what I would call -- I am sorry to use the word -- stupid restrictions on cross-border trade in cereals and livestock. A lot of talk comes from the north-western plains; but today, that is all it is. We have successfully penetrated that market.
We have a very large trade balance, not only in grains, but in agri-food products. We have built up the value-added sector. I wanted to make that statement.
The Chairman: Most of that trade balance comes from the cattle industry, does it not?
Mr. Carrière: I would say it comes from grains.
Senator Fairbairn: Perhaps I will address my thoughts and questions to both of you.
I appreciated your initial remarks, Mr. Carrière, about the political changes that have taken place in smaller nations recently, and certainly the notion of free trade in a larger area does nothing but strengthen that process.
I would hope the pursuit of that free trade goal does not necessarily mean the possible destruction of any industry in our own country. I am referring specifically to the sugar industry. I am sure you know that there is great anxiety in the refined sugar industry in the area that I am proud to represent here in the Senate, the south-west part of Alberta. The sugar beet industry surrounding the city of Lethbridge is a historic industry for us. It has prevailed and expanded against all odds and is doing very well. There is much concern about discussions of trading agreements, particularly with Costa Rica, and the precedent that such agreements might set that could lead to a very serious downgrading, if not the destruction, of our own industry.
I would not be doing my job if I did not seize the opportunity of your presence here today to seek any information you are able to share, and indeed, any comfort in this area you are able to offer. It is a very important part of the economy in the area I come from, but it is a larger issue across Canada. Commercially, we have a lot of trouble, obviously, with our neighbour to the south in moving across the border, and so anything that goes beyond that is of true significance to this industry.
Mr. Carrière: Thank you, senator. I can address a number of the matters you have raised.
Sugar is a more complex industry than I had thought when I first started working on these files. I have learned a number of things. I believe the production plant is in Taber.
Senator Fairbairn: The plant is there. The farms are around it.
Mr. Carrière: It benefits from having a natural market, reducing transport costs. That also has the associated disadvantage that exporting outside that natural market becomes more difficult.
The beet production and marketing both benefit from the natural protection of the mountains and the high transport costs.
However, we should also see the FTAA as an opportunity to break down some of the American sugar restrictions. I happen to have negotiated an agreement with the United States in 1997 that gives us a 10,000 metric tonne reserve for the tariff rate quota on originating refined sugar which comes from Southern Alberta, as well as access to the reserve, with a total of, one year over the other, approximately 14 to 15,000 tonnes. If we can use the FTAA to get rid of the TRQ, then Taber should be able to direct a lot more sugar south than before. Thus, we can also find export opportunities for that beet sugar.
The eastern refineries have no beets and must import the cane. In the context of a free trade area of the Americas, we could import cane and use our natural competitiveness in the refining capacity to export originating sugar into the United States.
There are possibilities for progress. We can also see the possibility of exporting to some of the protected markets in sugar-growing areas where tariff rates are as high as 150 per cent. The domestic prices there are significantly higher than in Canada, which are very near the world price.
We are aware of the challenges facing the industry. There are also opportunities. We will continue to work with them to try to minimize any disadvantages and to maximize the opportunities that open up.
Senator Fairbairn: Is there an anticipation at the Summit of the Americas that individual trade deals will be struck with any of the countries that are taking part?
Mr. Carrière: Are you referring to Costa Rica?
Senator Fairbairn: Yes.
Mr. Carrière: If there is one, it will not be signed at Quebec City. There is no agreement at this time.
Senator Fairbairn: I will end there. I simply would say to you again that, in the larger scheme of things, in a negotiation concerning an area as large as this, it may seem to be a small issue, but it is not small to refiners and growers, and could cause considerable hardship should they be adversely affected.
Senator Stratton: I would like to go back to the area of agricultural free trade. We had a meeting this morning with the Canadian Federation of Agriculture, who were reporting to us on the state of agriculture in Canada.
We got into a discussion about the existing Free Trade Agreement. Three issues came up this morning. One was that the European Union and the U.S. have substantially more agricultural subsidies than Canada. It is green so it is legal, and all the rest of it.
The other concern was about what appears to be happening, for example, with the potato problem in P.E.I. The United States declares that Canada cannot export to their country because of this problem, despite the fact that it is now under control according to all reports from both countries' scientists.
Canada has the right of retribution under free trade, but has been told that the entire border will be shut down if that step is taken. That may be hearsay, but that was what was reported to us. Second, the softwood lumber agreement expires on Saturday, and again we are faced with the American perception that things will be done their way or not at all. Then, of course, they are putting quotas on our grain exports to their country.
We have this free trade on the one hand. You talked about how we have gone from a $2-billion deficit to a $3-billion or $4-billion surplus, which is undoubtedly remarkable. Nevertheless, we are concerned that the farming and forestry industries suffer tremendously from these "backdoor" ways of controlling trade into the United States.
With that as a background, and since they are the elephant and we are the mouse, how can another country in the Americas, knowing this, enter into negotiations with any degree of confidence? The United States arbitrarily slaps on quota restrictions or whatever, whenever it sees fit to do so. Other countries are virtually powerless to react. This disturbs me.
I wish you every success, but I would like you to explain how we can get around that major problem. The members of the forestry subcommittee of the Committee on Agriculture travelled to the West Coast in October and found that people there are in trouble.
Mr. Carrière: I have a point of clarification. There are no quotas or restrictions on our exports of grain to the United States. We agreed to those for one year in 1993.
Senator Stratton: The threat is always there, though.
Mr. Carrière: I think our grain producers know that they can export. They have been quite successful. We have been dealing with the complaints from North Dakota that Washington has not yet imposed the quotas. There is talk, but no action to date.
It is a challenge to conduct free trade with the United States and to manage the trade relationship with them. They do have a tendency to look inward, and to think that if another country does something different from them and is successful, then that is somehow unfair. They disagree with the way we manage our forestry, even though our system is fair and we want to see free trade with the Americans.
We do have an opportunity in the FTAA, not only to work with the United States to improve our respective access to other countries, but also to work with those Third World countries to control some of the negative urges of our southern neighbour. It is important to a country like Brazil, for example, that the United States is prepared to negotiate anti-dumping. The United States is a very significant user and has absolutely refused to negotiate that for several years. It was the U.S. against 133 countries on that particular issue in Seattle 18 months ago. We can work with some of our partners to try to improve the disciplines that would apply to some of these measures that the United States uses quite frequently.
Brazil also raises frequently the abuse of sanitary and phyto-sanitary measures. They point out that they have a hard time exporting oranges to the United States. We feel that it is better to deal with sanitary and phyto-sanitary rules in Geneva and avoid developing different rules on something as horizontal as sanitary rules. This is because the fundamental purpose is to determine whether or not a product is safe from a human, animal, or plant life health issue. Therefore it is not fundamentally a trade question, although it is sometimes used and abused that way.
There are opportunities in the FTAA to work with our allies, whether Mexico or other countries, to try and ensure that the United States does not abuse the rules. We will continue to do that.
I hope I have answered your question, senator.
Senator Stratton: My question has been answered to the degree that you feel you can negotiate your way through this successfully. I have a fair level of cynicism simply because of what I have experienced in dealing with this issue over the years.
I do not wish to make P.E.I. into a Caribbean country, but suppose it was a Caribbean country and all of a sudden they had a small, unresolved problem. Their economy would be destroyed. Surely that must be a fundamental concern for those countries.
That leads to my final question. On the "how long" question, you stated that the original target for an agreement was 2005. Then you mentioned an attempt to shorten that to 2004 -- with Brazil dissenting, I understand -- for a 2005 start. Do you think that is achievable?
Mr. Carrière: It could be done if there was the political will. Some countries are concerned -- as I mentioned, Brazil, as well as some in the Andean community and some of the Caribbean countries. On the other hand, the Central Americans are strongly in favour of advancing the calendar. Argentina and Uruguay were until they negotiated a deal with Brazil.
The reason some of those countries want to advance the timetable is twofold: It means that they would have access to the richest market more quickly and a lower investment in time and effort by their negotiators; and, more important, by their private sector and other interested parties. Therefore, you reduce the cost and increase the benefits. The equation is obvious.
The concern in the Caribbean is manyfold. As you have indicated, sometimes those countries have a single-product economy. In some cases, import tariffs are the main government revenue source.
As mentioned before, we have indicated to them, both bilaterally and through regional institutions, that we are prepared to help. If they wish to design alternate revenue collection mechanisms, there are a variety of ways that can be done. It can be designed to kick in at a particular time, but they have to decide whether they want to modernize their system. Whether it is in the context of the FTAA, subsequently in the WTO, or even in the context of their relations with Europe under their preferential agreement, they will have to address that question sooner or later. Our view is that it would be better for them to do it sooner and to plan for and adapt to it over time. However, that is their decision. We can only assure them that we will help, if and when they make that decision.
I personally think that we will probably settle on the same date that our leaders gave us six years ago, which is 2005, but we will see.
Mr. Norman: I would like to respond to the previous questions about grain and potatoes. The grain situation demonstrates the advantage of having a trade agreement with firm rules, because it is those rules, in both the WTO and NAFTA, that have prevented the U.S. from restricting grain imports. Under GATT rules at the time the export restraint was put in place in 1993, the United States did have the right to restrict imports from Canada in the situation that then prevailed. That is why we agreed to limit exports for one year rather than have them impose an import restriction. However, the GATT rules changed that year with the creation of the WTO as a result of the Uruguay Round, and the U.S. lost the right to take trade restrictive action in those circumstances. Since then, we have refused to accept any export restraint, and I submit that that is also the reason they have not taken any restrictive import action, even though they are under considerable pressure to do so. It is clear, even to the U.S. authorities, that doing so would violate both the NAFTA and the WTO rules.
The P.E.I. potato situation is a little different, in that there is a difference of view between the scientists in the two countries as to whether what the U.S. is doing is scientifically justified. We believe that it is not scientifically justified and violates the sanitary and phyto-sanitary rules of both the NAFTA and the WTO. Their scientists disagree and say that they are in conformity. That is why we have dispute settlement processes in these trade agreements, and it may well be that that is how this issue will finally be resolved. However, it is the existence of these rules in the trade agreements and effective dispute settlement processes that put Canada on a more equal footing with the U.S. than would otherwise be the case.
Senator LeBreton: You talked about four main areas on the table on the agriculture front: access to markets, export subsidies, domestic support, and sanitary measures. I wish to zero in on the sanitary measures with regard to food safety and consumer confidence. I consider environmental issues to be health safety issues as well.
How do you deal with an issue like that in countries as diverse as the group that will be in the Free Trade Agreement of the Americas? It encompasses the kinds of fertilizer they use and how they process and handle food. Are there some countries that still use pesticides that we do not? How do you approach such a fundamental problem with such a diverse group of countries?
Mr. Norman: The first way is through current agreements in the WTO and similar provisions in the NAFTA dealing with the sanitary and phyto-sanitary measures. Those provisions try to reach a balance between the legitimate right of countries to protect human, animal and plant health from imported pests and diseases, and the obligation not to use such measures as a disguised trade barrier. The basic method is to develop disciplines that require a scientific basis. First, there must be some scientific basis for determining that a risk exists. Next, you must develop a measure of control that is commensurate with the degree of risk, that makes scientific sense, and that can effectively deal with and prevent the importation of a disease or pest the country does not have. That is the basic approach.
That does not quite deal with the second part of your question about pesticide residue levels and that kind of thing. The approach there is to try to increasingly harmonize the international standards, so that requirements in different countries will be the same. There would no problem with trade moving between countries that have the same requirements. However, that is a long-term and very difficult goal. We have been trying to harmonize some of these issues with the United States for several years and have made some good progress. It is a long, slow process, very technically and scientifically complicated, but it is moving in the right direction.
Senator LeBreton: There are strawberries from Mexico currently in our supermarkets. When products move across many borders, who is responsible for quality control? Is it the government, the producer, or the food distribution agency? What controls are built in, or is that so complicated that it does not arise in that type of trade negotiation?
Mr. Carrière: All the parties that you identified have a responsibility. We are careful in trade negotiations not to prevent sanitary agencies from doing their job, as Mr. Norman mentioned.
The established standards that strawberries must meet in terms of residues and the like are set by Health Canada and applied by the Canadian Food Inspection Agency, either at point of sale in Canada or at the border. In many cases where produce transits through the United States, there is an agreement that their Department of Agriculture inspectors will undertake the inspection, to Canadian standards, at the U.S. border before the produce crosses, and that is verified at the point of destination in Canada.
Fundamentally, the producer in the country of export has the responsibility to ensure that the product meets the standards of the country to which it is exporting. Canadian exporters to the United States must respect U.S. standards, otherwise they risk having their product destroyed, which happens once in a while.
We need to be aware that the sanitary standards in Canada, the United States, and Europe are becoming stricter and more sophisticated. We must also ensure that many of the producing countries have systems in place to enable them to meet our standards and quality control requirements.
In the context of the FTAA, we have created a group or network of sanitary and phyto-sanitary experts to exchange views about standards, processes, and quality control measures, and to offer the technical assistance that many developing countries need to improve their production standards, control storage methods, and the like. Not only do these countries benefit from improved trade, but we are better assured that our imports meet our requirements.
We are trying to do this in a non-negotiating framework, and more to disburse knowledge and build networks among experts in the sanitary and phyto-sanitary field.
Some countries resist this. I do not know why. Hopefully, this network will be created over the next year and will contribute to improved sanitary standards throughout the hemisphere.
Senator LeBreton: I think that is important both for the general health of the economy and for consumer confidence.
I have one last question, Mr. Carrière. Just as a matter of interest, as you prepare for the summit in Quebec City, has the situation regarding the ban on Brazilian beef been resolved? Has that situation caused any difficulties as you have been working towards the meetings in Quebec City?
Mr. Carrière: The beef situation has been resolved. We have lifted the import measure.
Senator LeBreton: I knew that. I was wondering if there were any long-term problems.
Mr. Carrière: There was a very emotional reaction in Brazil and it will take some time to return to normal.
In the early days, there were statements that the Brazilians would not come to Quebec City or would not attend the FTAA meetings. Those statements were contradicted very quickly, because the trade ministers' meetings in Quebec City and in Buenos Aires are not bilateral meetings; they are multilateral meetings. They are meetings where leaders or ministers will take decisions. Brazil would lose its influence in decision-making if it were absent. Contrary to the initial reaction of people in Brazil, the last thing they would do is refuse to participate.
One of our government's top priorities will be to continue to work with Brazil to improve mutual understanding and to broaden the dialogue that we have had in the past. Brazil is not only an important country in the Americas, but one of the leaders of the developing world at the global level. We want to better understand them and we want them to better understand us, so that should issues regarding beef or other matters arise, they will be contained, dealt with on their merits, and not contaminate the broader relationship.
The Chairman: On that subject, I was told by the Canadian Wheat Board at a SARM meeting in Saskatchewan a week ago that it had been negotiating with Brazil on durum wheat, because Brazil had been using hard wheat to make pasta, and the board felt that it had maybe lost that sale over that issue.
[Translation]
Senator Gill: At the beginning of your presentation, you raised some issues that might be discussed at the Summit of the Americas, social and cultural issues, for example. My question concerns Native peoples. You know that the political map of the Americas has dramatically changed over the last century. Still, Native nations were divided because of frontiers. I don't want to get into details, but the issue will have to be raised one day or the other, if it's not at the Summit, it will be somewhere else.
A few years ago, there were approximately 30 million Aboriginals on the continent. The statistics were probably not exact, I imagine some Aboriginals were not counted in Brazil, in Amazonia and elsewhere. Knowing the situation, has this issue been raised at the Summit and if so, since when?
Mr. Carrière: Social components of the inclusion of Aboriginals in our societies, under the theme "realization of human potential," are on the agenda. There will be an Aboriginal Summit and representatives will meet with State or Government leaders or Foreign Affairs Ministers.
One of the objectives of Canada is to give Aboriginal peoples a better place and to include them in society at the economic, political, social and cultural level. The issue has been put on the Summit's agenda and will not be erased.
[English]
Senator Tunney: This is interesting. We do not have long enough to discuss it, otherwise we would be here until tomorrow.
I am a farmer and was always a farmer, until about three weeks ago, when I got appointed to this short-term position here. I am a dairy farmer. I might tell you -- and few people seem to know this -- that for years and years, Mexico was our largest customer for skim milk and whole milk powder. We never had any difficulty with Mexico, either with credit or handling the product when it got there. Much of it went to baby foods. We had a plant in Belleville, Ontario, which manufactured baby formula and other products with our skim milk powder.
You mentioned that scientists do not always agree and that you do not quite know why. I could offer a suggestion. Maybe the political process gets in the way.
The sanitary issue raised by Senator LeBreton bothers me. The two big issues right now for farmers in North America, certainly in Canada, are mad cow disease and hoof-and-mouth disease. It is interesting that the original source of these problems has been discovered, as I read and saw on a recent newscast, at least with regard to the second one.
In the case of the first one, no doubt it was the use of livestock offal from the slaughterhouse, which is ground, dried and processed in with grains by the big feed companies in order to raise the protein level at minimal cost.
In the case of hoof-and-mouth disease, they have traced it to the use of restaurant waste. I tend to think that we deserve what we get if we allow this kind of practice. The proper use for ground-up cattle hoofs, bones, heads, even internal organs, is not in the preparation of livestock food. I remember a hog farmer some years ago who would go around my town of Cobourg to the hotels and hospitals and other such places, collect barrels of scraps, take it home, boil it, and feed it to the hogs.
Senator LeBreton: They called it "slop." I was raised on a farm, too.
Senator Tunney: That is exactly what it was called.
This should be one of the highest priorities in trade negotiations or considerations, since as farmers and as meat or animal product producers, we will lose our markets, because consumers will turn to vegetables, plants, fruits, et cetera. There will not be a market for meat products if we keep on this way. We now have soy milk and other soy products on the market, which will take over our markets if we continue this kind of bad practice.
Honourable senators may know that Brazil is on its way to becoming the largest soybean producer in the world. Two years ago, I saw 35 brand-new New Holland combines in one field in Brazil combining soybeans; one machine behind the other for as far as you could see. They have the potential to be, and will be, the soy producers for the whole world. The Americans are losing markets in Europe to Brazil, which has really just got underway.
Mr. Norman: I have a brief comment on several of the issues the honourable senator has raised. I pointed out the need for a proper balance between the right of health and sanitary authorities to take restrictive action where there is a real threat, and their obligation to do so in ways that do not create a disguised and unnecessary trade barrier.
Senator Tunney: Of course, dairy is an important subject for me, and that includes not just skim or powder, but cheese and all the other dairy products. I do not know what you know about those. It is all a concern for us.
Mr. Norman: The technicalities of the issues you raise go beyond the competence or responsibility of the departments we represent. Health Canada and the Canadian Food Inspection Agency must deal with those. I know the food inspection agency and Health Canada have changed some of Canada's regulations in recent years because of concern about BSE, animal feed, and so on.
The Chairman: In terms of a level playing field with the United States particularly, as well as around the world, our low dollar is a definite advantage when selling a bushel of canola, or a bushel of wheat or whatever, but there are also some serious disadvantages, such as when buying machinery. For instance, you pay the American price when you import a John Deere product. That raises the input costs severely.
I do not know if the department is aware of the situation in land prices. It is important that we consider such matters in this kind of exchange. I will give you an example.
A quarter-section of land is selling for US$100,000 in Crosby, North Dakota. A farm directly across the border sold five quarters of land just three weeks ago for CAN$55,000, which would be in the US$30,000 range. At the same time, the Province of Saskatchewan is talking about removing foreign ownership restrictions, with which I agree to some extent. There was a time when I would probably not have agreed.
The point I wish to make is that these matters are important to the ongoing health of agriculture and should be of great importance to all Canadians. This is Saskatchewan. It is not the same in Alberta, because somehow they have maintained high land prices, and I understand Ontario is in a similar situation. It is good land in Saskatchewan and Manitoba. Moving further north, Americans could walk in and buy up our land for US$25,000 a quarter, and it will happen.
Is the department aware of what is happening at the grassroots level? How do you monitor the impact of a low Canadian dollar and situations that will affect all Canadians, not just farmers?
Mr. Norman: First, the exchange rate issue works both ways, as you explained. A U.S. grain grower from near the border explained to me how he bought two new John Deere tractors in Canada and saved $10,000 on each.
On land values, you have hit on one of the disadvantages of large subsidy payments. U.S. land values are so high because producers are getting large subsidies and can afford to pay high prices. These subsidies get capitalized into inputs, mainly land, which is one of the main reasons for the difference in prices.
I do not think U.S. producers are likely to buy up large parts of Saskatchewan if they can only get Canadian subsidies on production from that land.
The Chairman: I would question that, because that same land in the Torquay area was selling for CAN$100,000 a quarter just four years ago. That is how much it has depreciated because of the current very poor agricultural economy.
Mr. Norman: That land was more valuable then because grain prices were much higher. Canadian land values have gone up and down more or less in relation to grain prices. The U.S. prices are high because large subsidies have kept producers' incomes artificially high.
The Chairman: In fact, we were told today by the federation of agriculture that they could sell their farms in two ways. They could sell them cheaper and still remain farmers, even though they were not actively farming, as well as taking some revenue from the subsidies.
Mr. Carrière: Can I address one comment you made, senator, about how we are aware of what happens on the ground?
I mentioned to you that I was involved in dealing with the South Dakota blockade a few years ago. That led to a negotiation with the United States for several months in 1998. We agreed to what we call a "record of understanding." Essentially, we agreed on actions that both sides would undertake to improve market access in both directions. Our top objective at the time was to create an institution, essentially co-chaired by the Department of Foreign Affairs and International Trade and Agriculture Canada in Canada, and the Department of Agriculture and the Trade Representative in the United States, to deal with Canada-U.S. trade issues in agriculture. The most that we were able to get the Americans to agree to was a provincial-state advisory committee structure, where provincial governments, departments of agriculture, and in some cases, governors and premiers, meet regularly to address local and regional problems and challenges and to develop networks for understanding each other better. The objective was more than just addressing the problems, but looking at some of the common opportunities. This committee would also tell Ottawa and Washington what the problems are, and what we should be focusing on to address issues that matter at the local level.
That was our top priority in that negotiation. We were able to convince the Americans to do it. I was quite pleased to learn a month ago that the new American administration wants to continue this process. That is one of the mechanisms by which we are seeking to ensure that what we do is responsive to what is happening locally.
The Chairman: I want to thank you on behalf of the senators for appearing before us today, especially on such short notice. This is a very interesting time in terms of the negotiations that will be taking place within the week.
The committee adjourned.