Proceedings of the Standing Senate Committee on
Agriculture and Forestry

Issue 21 - Evidence

The Standing Senate Committee on Agriculture and Forestry met this day at 3:34 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.

[English]

Mr. Daniel Charbonneau, Clerk of the Committee: Honourable senators, we have a quorum. I regret to inform you that the chair is absent. We will now proceed with the election of an acting chair, pursuant to the Rules of the Senate.

Senator Tunney: I move that Senator Hubley serve as acting chair for this meeting.

Mr. Charbonneau: We have a motion on the table. Is there any discussion?

Is it your pleasure, honourable senators, to adopt the motion?

Hon. Senators: Agreed.

Mr. Charbonneau: Motion carried.

Senator Elizabeth Hubley (Acting Chairman) in the Chair.

The Acting Chairman: Our witnesses today are Ambassador Danièle Smadja, First Secretary Phillippe Musquar and Senior Advisor Frederick Kingston. Ms Smadja, please proceed.

[Translation]

Ms. Danièle Smadja, Ambassador and Head of Delegation of the European Commission in Canada: Madam Chairperson, I want to sincerely thank the committee for giving me this opportunity to speak to you today, in particular about a topic that is somewhat different from the traditional topics that are discussed in Canada in the area of common agricultural policy. It is a great pleasure to have this opportunity to speak to you about the different aspects, the different functions of agriculture in Europe. I must admit that in general, when I am with politicians or officials from Canadian public organizations, or even with representatives from the agricultural sector, on the topic of agriculture between Canada and the European Union, there is a slight tendency to rake me over the coals, especially where trade is concerned. After my presentation I will be happy to reply to questions, including questions on other topics. I am particularly pleased to have the opportunity to speak about another aspect of the common agricultural policy of the European Union. Your Senate indicated particular interest in this area, and since once does not constitute a habit, the European example could perhaps serve as an inspiration, or at least some of the aspects of the policy we have developed might inspire other countries who attribute a great deal of importance to their agriculture.

We did not want to overwhelm you with documents. We simply prepared a list of tables that will allow you to follow my presentation as I go along. However, we have also given the clerk a certain number of publications that might be of assistance to you in your future business.

[English]

I will convey to you an important aspect of the European Union's agricultural policy that recognizes farmers as not only producers of food, as stated in your invitation to me, but as custodians of the countryside.

Much of the debate on trade liberalization separates agriculture as an industry from the role agriculture also plays in the social-economic and sustainable development of rural areas. While trade negotiators tend to have this focus, policy makers who look at the world picture have recognized for some years now that these roles for agriculture are not separate, but inherently linked.

In the European Union, our trade negotiators have been on board for a long time about the consequences of these linkages, which is why non-trade concerns, such as environmental conservation and rural development, were such an important part of our mandate. This is also why we are glad that these non-trade concerns are an important part of the Doha Development Agenda. That result was achieved last week.

In Canada, as in the European Union, nobody can question that farmers have many and diverse roles to play, all of which will be affected by agriculture and rural development policies. As well as being producers of a variety of high quality and safe food and feed, farmers also have a key and growing role in the development of rural areas, particularly the stewardship of the land. These services, sometimes referred to as public goods, are expected and indeed, demanded by the public. However, sometimes the normal functioning of the market may fail to deliver them.

I will give you some background and make some basic comparisons between European and North American farming. The second table, which you will find on the bottom of the first page, helps to put the sector in perspective. You will see the different elements. Although the respective shares of agriculture in GDP and employment in the economies of the European Union, Canada and the U.S. are roughly similar, there are striking differences that emerge when one compares the average size of the farm. It will important for you to have this sort of basic figure in your mind because it will help understand the background.

These differences that you see between EU, U.S. and Canada, become even more pronounced after the European Union enlarges to include 12 other Eastern European countries in which the average farm size is less than six hectares.

We have a situation in the European Union that is different. This difference is going to be accentuated once we finish our enlargement process and once we get a number of new countries joining.

The aim of the European Union agriculture policy is to modernize farm policy and to foster agriculture based on competitive multi-functional and sustainable farming. We seek to promote economic, social and environmental development of rural areas throughout the European Union territory, including regions with specific problems due to remoteness, difficulty of the terrain or lack of infrastructures. In these regions the potential contribution of farming should not be underplayed.

There are three features of agriculture in the European Union that give rise to particular policy constraints. First, there is a pressure on space. Canada may not be able to relate because you have so much space. The same areas increasingly fulfil roles in addition to agricultural production. For example, towns, villages and areas used for recreation are integrated with agricultural land. As housing and roads encroach on farmland, the need to preserve open land and maintain the recreational value of the farm countryside is a growing societal demand.

The second feature is that centuries, or even millennia of agriculture adapted to site-specific conditions has resulted in a large proportion of biological diversity dependent on the continuation of certain farming systems and activities. At the same time, the concentration and specialization of farming in more fertile zones, particularly if production techniques have not adapted to local conditions, has increased environmental hazards such as my nitrite pollution, erosion, and loss of biodiversity.

The third factor is that the rural landscape, including land use, field patterns cultural features, is the primary element in the citizen's perception of rural areas. While most of European landscapes are the product of agriculture, they can be positively or negatively influenced by current agricultural land uses.

The agriculture policy in the European Union has changed with the past. The European Union has had to respond to public expectations, which continue to evolve. For example, in the past, farmers were only required to cease activities such as, stopping nitrate pollution of water resources, reducing the use of pesticides, or restricting building on farmland.

However, farmers must now make positive contributions. For example, farmers are to manage their stock in a way that improves the grasslands habitat. They must protect and manage field boundaries regardless of the economic inefficiencies of the small patchwork field. Farmers must schedule farm activities, not to beat the weather, but to avoid disturbing nesting birds at the end of the season. We have a landscape that is quite different.

Farming can also fail society. Thanks to technology, we are far less vulnerable to ruined harvests. However, that same technology has in part produced negative pressures on the environment. Of course, continued mechanization of farming has led to a steep decline in the number of farmers dependent on the land for their living.

In the European Union, we see that agriculture provides a range of marketable and non-marketable outputs of interest to the society, thanks to its three main functions. The first one is the production of food, fuel, feed and fibre.

The second one is the preservation of the rural environment, notably biodiversity and landscape. The third function is the contribution to the viability of rural areas and to a balanced territorial development.

At its origin, the common agricultural policy focused on the first function, but the environmental and rural functions have grown in importance. They have become some of the main concerns in the current debate in Europe.

Some of the main preoccupations of food production are adequate supplies at reasonable prices, as well as food safety and food quality. Historically, the supply aspect has been ensured due to price support policies, whereas the safety and quality aspects were met by regulatory framework. Since the outputs of food production are mainly of a private nature, market forces should play an important role. However, we had to realize that direct payments could play a crucial role in the transition period, moving towards a more market-oriented policy, and in reducing price support.

There are two aspects of the second function that need to be addressed. First, when agriculture causes negative effects, for example, pollution, these effects can be tackled through regulatory policies, or where income subsidies are paid, through cross compliance, or making government payments conditional on meeting certain environmental requirements. Second, agriculture, if managed in the right way, can also provide environmental benefits in terms of increased biodiversity and preservation of the farmed landscape.

In the last 10 to 15 years, we have developed, within the European Union, a set of policy instruments to address the complex environmental challenges. At the first level, we expect farmers to reach good agricultural practice, without specific payment to them.

Good practice includes the observance of the law, such as environmental regulations and compulsory conservation measures, as well as the industry standard or farming practices that efficient farmers in the region will normally follow. This means that farmers have to bear the cost of complying with this standard.

We recognize that good agricultural practice will not deliver many of the environmental outputs that society demands. Therefore, at a second level, programs have been developed within the European Union for farmers to voluntarily contract to deliver environmental benefits that go beyond the application of good agricultural practice. As the farmer incurs costs or loss of income, it is legitimate to remunerate farmers for the provision of this public good. We have not followed the path of declaring that farmers are good for the environment and of proposing a general conservation security payment for these otherwise unspecified benefits.

Under the European Union policy, three questions have to be answered. Does the specific activity benefit the environment? Does the farmer go beyond good agricultural practice to deliver the benefits? Does the farmer incur costs or income loss compared to the baseline of good practice in delivering the benefit?

Since 1992, the common agricultural policy of the European Union has included agri-environment programs that cover all farming sectors. In many cases, the environmental services are supplied together with production, although normally at a reduced level. The payments cover only the opportunity cost of pursuing environmental objectives, and any revenues from market activities are deducted.

Examples of agri-environment measures are as follows: conversion of high profit arable land to extensive unfertilized grassland; reductions in livestock density on grassland and management of the stock to promote biodiversity; cessation of fertilizer and pesticide use on field margins or on whole crops; preservation and management of landscape features such as hedge rows in the "bocage" landscapes of France or Britain; and scheduling of farm activities, especially cutting grass and harvesting crops, to avoid disturbing wildlife. These agri-environment programs are established by government, usually at the local level, following consultation with stakeholders, as part of the member states overall rural development planning.

The measures proposed in a program need to be tailored to meet the specific, and sometimes unique, environmental needs of the region in question. They must go beyond good agricultural practice. Member states of the European Union then submit their proposals, as part of their rural development program, to the European Commission, which is the executive body of the European Union. This program is submitted for approval and funding. Once approved, the package can be offered to farmers on a contractual basis for a minimum of five years. Farmers are not obliged to participate; it is on a voluntary basis.

The programs are subjected to scientific monitoring and evaluation. In Northern Ireland, for example, these kinds of programs have been successful. In only a few years, the programs have shown improvements in the diversity of plant and insect species; for example, stress tolerant plants that survive under very intensive agriculture are yielding to the rarer, stress intolerant species.

In the current agricultural budget, about 5 per cent of the total, which equals _2 million or Can. $2.85 billion, is allocated for these kinds of measures.

Maintaining agricultural activities, in particular in remote and peripheral areas, is important. Agriculture, for the most part, makes a significant contribution in many of these rural areas, both in terms of economic activity and employment. There may be few other possibilities for gainful employment in those rural areas.

The objectives of the European Union approach are to lessen pressures for depopulation and to ensure the well-balanced presence of human activities throughout the territory.

Agricultural activities and on-and-off farm diversification can contribute to the economic and social viability of rural areas. In the past, the relatively high-priced support of agriculture helped agricultural regions with higher production costs to survive. However, with the shift in agricultural policy resulting in further reductions in price support, farming in these regions has come under increased market pressure.

Other forms of support, decoupled from production level, are needed, not to increase production, but to maintain the environmental and rural development services provided by farming.

There are two examples of types of program that we have within the European Union. We have one scheme that is targeted to less favoured areas. It is a scheme that provides payments decoupled from output for farming in areas subject to natural handicaps, such as in mountainous regions.

The second program is called the leader program. It is a program that encourages off-farm activities and diversification out of farming to strengthen the family income base.

In the current budget, about 4.5 billion, which is about Can. $6.34 billion, has been allocated to rural development expenditure for each of the next six years. Some of that is to be matched by contribution from our individual member states.

In order to complete this picture, I would like to briefly tell you where we are as far as the current reform of the common agriculture policy.

[Translation]

We launched this reform around 1992 and we have been following through assiduously and consistently. Since the year 2000 and for the period from 2000 to 2006, our heads of State and of governments have adopted a policy document that has proved very useful and very important in this area, which is entitled "Agenda 2000", and which contains all of the details of the reform of our agricultural policy between 2000 and 2006.

[English]

Under the current reform, support has been shifted away from market support to target agri-environmental and rural development measures. The reform aims to safeguard and enhance agriculture's role with the following measures.

First, there should greater market orientation through lower price support to encourage competitiveness. Second, there should be a fair standard of living for farming community through providing direct payments to farmers to partly offset negative income effects of the reform. Third, there would be integration of environmental goals. To achieve this our member states are obliged to undertake environmental measures that they consider appropriate, taking into account factors such as the situation of the agricultural land used or the production concern and the potential environmental effects. The fourth measure is sustainable development in rural areas by making the rural development framework a second pillar of the common agriculture policy.

Under this policy document called "Agenda 2000," annual support for agriculture has been capped at just over 40 billion, which is Can. $57 billion dollars. Eighty per cent will consist of direct payments rather than production or price supports. About 10.4 per cent of that is allocated to rural development alone.

All of this is part of a wider reform of the European Union to prepare the way for an almost doubling of our membership within the next few years as we expand eastward. We are going through this reform not only because there has been a number of criticisms from our trading partners, including Canada, but also because we need to do that. We need to put our house in order before we enlarge, and especially before we go from 15 member states to many as 27 or 28. It is a quantum leap for which we must prepare.

There was a very important meeting in Doha, Qatar, to launch a new round of multilateral trade negotiation after the failure of the meeting in Seattle. Going into those talks in the WTO, we in the European Union were aware that trade liberalization had been perceived by a substantial part of civil society as being in contradiction with other societal goals or values. We had already built up some experience of managing these issues in our domestic policy. To guarantee wider political and public support for WTO and the cause of trade liberalization, it was therefore essential to properly address non-trade concerns, particularly in agriculture.

The European Union, among others including Japan, South Korea, Switzerland and Norway, set about building a consensus on the need to address non-trade concerns. We co-hosted a series of four international conferences starting in Norway and two other locations before meeting in Doha.

In all, some 40 members of the WTO, developing and developed countries alike, explicitly supported non-trade concerns as part of the negotiation. Despite some opposition from members of the WTO seeking a trade only agenda, non-trade concerns are firmly anchored now in the negotiations.

They cover a wide range of issues, a wider range of issues than environment and rural development, such as food security, food safety and quality. Therefore, they reflect the particular concerns of different WTO members. We are extremely happy to see these non-trade concerns being on the table of the negotiations.

In conclusion, I would like to give you two short messages. The first one is a general one. The European Union is committed to the long-term process of agricultural policy reform. How far and how fast it can go depends on securing public acceptance of the process.

The second message is that the implementation of policy instruments to recognize and enhance agriculture's multi-functional role in Europe is a means to ensure this reform.

The Acting Chairman: Thank you, it gives our committee a very complete of view and it is something that we were anxious to hear from you.

Senator Tkachuk: I was particularly intrigued with your statement that the European Union was committed to policy reform in agriculture, providing that political reasons for these reforms can be solidified and organized.

What do you believe are the political obstacles that create the greatest challenge to lessening subsidization for agricultural producers, especially in the North American grain industry? What are the main obstacles to fairer or more liberalized trade?

Ms Smadja: There are several factors, and some are common to the ones here or in the U.S. Others are more particular to Europe. The first one that is common to every industrialized country is that farmers are vocal, and they are important on the political level. Politicians need to be re-elected. European farmers are well-organized and they have a long-standing tradition of playing an important role in the political scene. That is common to our society.

More particular to Europe is the size of the farm, the agricultural traditions and the way that the farm has been organized. If you looking at the basic agricultural statistics for Europe, the U.S. and Canada, you will see the average farm sizes measured in hectares. Eighteen hectares is the average size in the European Union, 172 hectares in the U.S. and 422 hectares in Canada.

Add that to the previous figure, which is the number of farms, and you will see this multitude of farmers. In Europe, there are 7.3 million farmers, and the average farm size is 18 hectares. Whereas, in Canada, there are 280,000 farms, and the average farm size is 422 hectares.

We must understand these figures so that we are able to understand why I was speaking in defence of public acceptance of this reform. You have the public constituted by the farming communities that face bad weather, drought, flood or bad harvest, just as farmers in all countries do.

In Europe, we have had foot and mouth disease. That has been catastrophic for the farmers. Before that, we had dioxins in food, which caused people to be very wary of foods. All of these factors weigh heavily on the relationship between the farmers and public opinion, and between the farmers and the politicians.

There are a number of tensions when you deal with agriculture, and this is something common that you will find. The government will give less in terms of helping the farmers, following natural occurrences that have adversely affected the farming community. The farmers will think that they are not receiving enough assistance. There are some commonalities between Europe and North America. The main difference is in the structure of the farm and the way in which agriculture is organized around the farms in Europe.

Senator Tkachuk: Is it that you have subsidies that you can afford to have small farms? We have heard, in the information we receive on grain farming, that the subsidies are quite substantial for wheat and other grains. The farmer does not need the efficiencies of larger farms. He simply needs to survive because he has a guaranteed income. You can have a farm of just two acres and survive if you have a guaranteed income.

Ms Smadja: Yes and no. Yes, I agree with you that this is why we are shifting in our current reform. We are moving to direct support of the farmer rather than the product. However, there is one thing that is very unique to Europe, by comparison to North America, and that is the historical role of agriculture. We have had a long-standing tradition of farmers in European society.

For example, Canadian farmers complain that Mr. Vanclief is not giving them enough money after they have faced a natural disaster. I am not sure that the complaints are receiving as much support from the rest of the Canadian population that they would receive in Europe. In Europe, when the farmers complain about not getting enough support from the government, the rest of the population does not say, "Oh, these farmers, they are never happy."

European society respects farmers. It is probably because of their historical role in society that they are listened to. Farmers have the support of the people, who probably view them as their feeders. The farmers were the ones that traditionally provided the food, and more and more, they are seen in their new roles as stewards of the land.

The rest of the population in Europe also hates to see areas of vacant land where the farmers left because they were not surviving, and the small villages were abandoned. There is pressure from the rest of society to not lose this rural lifestyle. There is pressure on the government to help farmers to perhaps mix agriculture with tourism. There is much green tourism around farming. It may sound anecdotal, but it is not. It is an important reality of European society that the other side of society is supporting the farmers.

Senator Tkachuk: You mentioned the question of available space and the amount of money that agriculture receives from the budgets of the economies of the European Union. If people stay on the farm, and you have a growing population of urban dwellers, it must put a tremendous strain on things such as available space for housing.

Does that contribute to the fact that housing is more expensive? If you designate and make this farmland valuable with the subsidy program and your conservation program, does that put tremendous pressure on land prices? Does it make it more difficult for people to obtain good quality housing? Do you have a problem in respect of available space?

Ms Smadja: I want to be certain that I understand your question. When you talk about pressure on the price of housing, do you mean in terms of building houses on the farmland?

Senator Tkachuk: You said that you have to protect this rural base because of the population pressures. If you have population pressures and you forbid an amount of land to be used for new housing, it must make housing prices more expensive. That has to be a societal cost to this program. I am wondering whether that is an issue?

Ms Smadja: The housing problem is not in those terms. We are not forbidding people to leave the land. We do not want the farmers to give up that easily, so we help them, as you do. They have a role to play in the rural area and in the preservation of the soil. Wherever possible, we are helping the farmers, so that they not only continue to maintain the landscape, but also play their societal role in terms of employment, et cetera.

Senator Tkachuk: I need clarification of your earlier statement. You said that part of the reason for the amount of money that goes into agriculture is to maintain a strong rural life because of the size of the population and the lack of space. If you have a lack of space, then by preserving more rural area you make land for housing much more expensive for your urban dwellers; is that correct? Have you built that into the cost of what you are trying to save in agriculture?

Ms Smadja: The price of housing will not be necessarily around the parameter that you imply. The price of housing will be a function of whether there is an economic activity. If there is no economic activity, then there is no attraction. However, I will ask one of my colleagues to add something to that.

Senator Tkachuk: You do not have space pressures; is that correct?

Mr. Fred Kingston, Senior Adviser, Economic and Commercial Affairs, Delegation of the European Commission in Canada: There are space pressures, but some areas have more than others. For example, there are more space pressures around London than there are in Northern Norway.

Senator Tkachuk: That same difference exists when comparing Toronto to Saskatoon. You are the one that made the statement, and I am trying to figure out what you mean by it.

Mr. Philippe Musquar, Counsellor, Economic and Commercial Affairs, Delegation of the European Commission in Canada: We are confusing two different ideas and two different objectives that our policy has. On the one hand, to prevent cities from expanding too much into the rural areas and from reducing the rural landscape, there would be, possibly, an attempt to encourage the retention of farming for the area, despite the demographic pressure, to maintain a viable landscape and a certain quality of life in these urban areas.

On the other hand, and that is a completely different issue, you may be talking about remote parts of Europe where the issue does not arise. Rather, the objective is to maintain some kind of economic activity to keep our villages populated. We are not saying that agriculture is the only, or exclusive, activity that must be promoted to that effect, but it is indeed an important factor for many reasons.

Agricultural activities are maintained and sometimes supported, to retain a population and to maintain a reasonable degree of economic activity in these areas of Europe. We are talking about two different objectives and about two different aspects.

The Acting Chairman: Before I move to our next question, I will introduce the chairman of our committee, Senator Gustafson.

Senator Tunney: What percentage of your population is involved in agriculture? What is the approximate net income from your farms?

Ms Smadja: We have been sophisticated in our preparations with the exception of those figures. We will look into that for you, Senator. You want the percentage of farmers within the European population. What was your second request?

Senator Tunney: I would like the approximate net income per farm.

Ms Smadja: I am sure we have those figures in our papers.

Senator Tunney: How much of that net farm income comes from the commodity that your farmers produce and how much of it comes from government subsidies?

Ms Smadja: The more you ask questions, the more I am certain that I will not be able to answer right now. I will have to send the responses to you.

Even if we had the answer now, I would not want to give it to you because there are numerous differences in the European countries. I would not want to give you, for example, the average income per farmer without also giving you some other figures such as the income for farmers in Italy, or in Austria. The types of agriculture also vary from country to country and region to region.

I would prefer to give you the European average as well as additional figures of the individual countries and regions. Otherwise the numbers could be misleading. We will arrange to obtain the information for you.

Senator Tunney: At the WTO talks, farm subsidies will be a high profile item.

I am a dairy farmer here in Canada, and I have had exposure to government subsidies. It was not many years ago that 70 per cent of a dairy farmer's income in France came from a government subsidy. It got to be so high that the government could not maintain it and they were cut badly, and then you had manure spreaders on the street.

Do you see the day when your government subsidies to farms or farmers will be drastically reduced, which would help our farmers here in Canada realize a decent return on the grains and oilseeds that we produce?

The U.S. subsidies are very high, and the EU subsidies are higher. The ones in Canada are less than a quarter of either of these other places' subsidies. We cannot ever hope to, and we do not even want to, pay subsidies of that level, because it discourages efficiency and productivity. Our farms are getting larger in size to try to offset this lack of government support.

Ms Smadja: We are not afraid to enter a negotiation where export subsidies will be discussed and will be at the top of the agenda. We have been ready for that for a long time. We have started our own reform, and are going through the trend of reducing the budget that we devote to subsidies. That is not a problem.

I am amazed to see that after so many years where we have said we are serious about negotiating, people will say to us, "Are you guys aware that we are going to be discussing that?" Yes, we are ready and we are willing. We have consensus, which is not that easy when you talk about the agriculture budget within the European Union. We have a solid front of all 15 agricultural ministers committed to that.

Maybe the difference between us is that we have been ready for a long while to negotiate on these issues, on two conditions. The first condition is that all types of export subsidies should be on the table. For example, one of the reasons why people like you, who are very well informed, continue to say that the European subsidies are much higher than the American subsidies is that you are misled by the calculation.

Why are you misled? The reason is that in the last and the first negotiation at the WTO at the time of the GATT, which included agriculture, we did not manage to have all the different types of export subsidy on the table. The only ones on the table are the ones of the European Union. When you make up your sum we are higher because all our goods are there, but the all goods of the Americans are not. All the export credits are not encapsulated. If you catch less fish in the net, then you will have a smaller amount.

The second condition is that when we are willing to enter into negotiation, it means negotiation, which means give and take. We are not trying to be the only one giving in. That cannot be the name of the game. It is clear that we are not ready to embark on a negotiation where it is only going to be us, like that form of poker where you get rid of your clothes one after the other.

We are aware that exports subsidies are on the table. We are willing to address them as long as all forms of export subsidies are addressed and as long as it is a real negotiation, which means give and take.

The trend of our expenditure in agriculture will show you that we are going downwards. The trend is that we are going even further than what we had committed at the time of the Uruguay Round. Unfortunately, at the same time, the Americans went way up, and I have a couple of figures here that give the comparison between Canadian, American and our spending on agriculture.

Mr. Kingston: We estimate that U.S. domestic support payments have increased from about U.S. $2,000 per farmer in 1996 to about U.S. $12,000 per farmer in the year 2000, while the EC support payments have been about U.S. $5,000 constantly through that time.

In Canada, there has also been a trend in the last several years for increased support payments, at least budgeted by both the federal-provincial levels. Some of it has been responding to emergency crises. We estimate, in terms of per farm spending, that in Canada, in the year 2000, for the new income safety net and disaster assistance, it is Can. $9,286 per farm. In contrast, the common agricultural policy capped at about 40 billion, in terms of per farm spending, as opposed to the production, is less than the Canadian spending. It is Can. $7,437 per farm.

Senator Tunney: That reflects the size of the farm. This western farmer right beside me farms about 40 quarters. His figures are the same as yours at 9,000, and you have 10, 12, or 15 farms in the area that he farms himself, and each of these farms receives the support that you just mentioned. It does not reflect well. If you want an income per hectare of agricultural land, that would be different.

Mr. Kingston: This is a debate we get into with statistics, and it is clear that statistics from North America are done on the basis of the amount of production and what not. If the statistics come from Europe, because of the large amount of farmers and the amount of support that is given on a per farm basis, when one works it out to the actual establishment, it is very small per establishment.

These basic agricultural statistics give you an indication. There are so many more farmers in Europe that it is easier to ratchet up the figures in that respect. We are not saying that, in terms of the amount given in Canada that I mentioned here, it is contrary to WTO rules.

They are within the WTO rules, as far as we understand. However, there is a commitment for the Canadian government, in terms of dollars, to at least support farmers' income safety nets and disaster assistance. It would be universal.

Senator Tunney: Our farm programs are mainly programs where there is contribution from the farmer, the federalgovernment and the provincial government. The three parts enter programs that are safety nets used when there is a downturn in agricultural prices or when weather becomes a factor. We have both of those issues right now all across Canada. We do not receive direct federal treasury payments, which we see happening elsewhere.

Ms Smadja: It is amazing to see that, whenever we discuss agriculture, we all have our denial phase. We develop this terminology. Since I have been posted here, I have learned the concept of the safety net. Within this concept, we are the nice guys and the others are the bad guys. We all go through this phase.

In Canada and the European Union, we value the role of our farmers in our society, both at the political level and at the level of the rest of the society. We cannot ignore the difficulties faced by our farmers. We have to stay within international commitments, and when they are not comprehensive or good enough, we have to work together to achieve a better discipline. In the WTO negotiation, it is important, if there are some export subsidies, to reduce to the maximum, or even to eliminate, the trade distorting effect.

Earlier I referred to the fact that we are not afraid to negotiate export subsidies because we have done our homework, we think it is good for us and because we cannot continue to spend so much on our budget. We also understand that it is not good to have a race to subsidize. The European Union could also relate more to Canada when they see the very unfair increase by the Americans while the Europeans are trying to be the good guys. We began our reform in 1992 and we wanted to continue this reform. At the same time, the other guys were spending tremendous amounts of money, and that is frustrating.

Although Canada is a member of the Cairns Group, we have found, from time to time, that Canada is in a more balanced position than other members of the Cairns Group. This is good news for our negotiations.

Senator Tunney: I am old enough to remember, after the Second World War, that Europe was saying, "We will never be short of food again." No one could blame them for saying that. We have never experienced a shortage of food that caused widespread starvation, or even an inconvenient shortage of food. I sympathize with Europeans for that.

Ms Smadja: The historic reasons I spoke of are related to the starvation phase, whether in the Middle Ages or during the Second World War. That is very much in the genes of the Europeans, and that is why there is the capital of sympathy with the farmers. It comes from people who have personally experienced the trauma or have heard their parents or grandparents talking about it. The food supply aspect is still at the fore of peoples' thoughts. However, it is no longer the main reason; it is complemented by the two other reasons that I mentioned.

The Acting Chairman: A farmer might receive remuneration for good farming practices that go beyond normal expectations and cause him to incur some cost. Is that cost overrun factored into the number that you gave us for the support payments per farm? Is that a program?

Ms Smadja: Yes, that would be included in the figures that Mr. Kingston provided.

The Acting Chairman: What would that entail? What would a farmer do to extend beyond the normal, or usual, good farming practices, while addressing the needs of environmental law, et cetera?

Ms Smadja: I mentioned a number of examples. Instead of scheduling the farm activities within the normal times for cutting or harvesting the crops, he would schedule in such a way that would take the welfare of the wildlife into account, for example, he would wait for the nesting to finish. He would probably have a loss of income because at the same time, his colleague on another farm, who is not making such considerations, would go ahead with the harvesting of crops and would send them to market that much sooner.

Another example would be the reduction of livestock density grazing on the grassland, thereby managing the stock while preserving biodiversity. That farmer may be raising smaller animals that will eventually be sold for less, or maybe not sold at all because of their sizes. That would be a case of loss in income that would be compensated.

There will be cases, in an extreme example, where he will go to organic farming. Therefore, he will not use a number of pesticides and so on. These examples go beyond the good practice, and they are well known because we started this program in 1992. It is a very serious program that, little by little, is helping the change of mentality.

Normally, our agricultural department manages the agricultural policy. Over the years, our environmental department tried to interfere, and in the early days, it was getting a no. These days the agri-environment programs are a success story, where our people from agriculture will not take any decision without the people from environment. It is really the integration of the environmental requirement into agriculture. At the level of officials in the administration, you see the change of culture.

That change of culture is also witnessed in the agricultural community on the consumer side, and, I am tempted to say, on the tourist side. When tourists travel around Europe, they go to some rural areas, they discuss things with the farmers, and they see that the farmers are part of this agri-environment program. It is fascinating for them to see that. Therefore, it is also a way for the farmers to be recognized. When the same farmers are going on the street because they think they do not have enough subsidies, they get the sympathy of the people who are watching TV because they say: "How about these guys? They are great. They are doing a lot for the environment."

Senator Gustafson: Our committee was in Europe two and a half years ago, and we had 25 meetings in four different countries. This exchange is necessary because farmers are facing problems all around the world. It is a global problem that we are facing. Our governments at times would like to encourage us to blame somebody else or to cover up for their mismanagement of agriculture.

One thing we heard there more and more was, "You Americans do not understand the importance of food" - they often considered us Americans. In Canada, we take food security for granted. Senator Sparrow could discuss that better than I because he has done studies on soil conservation. We are also taking that for granted. If farmers do not have some money to work with, they cannot look after the soil properly.

We are down to very low numbers of food in storage in the world today. I can remember in the Second World War when certain farm families could not go to war because they had to stay home to farm because it was an essential service. We have lost the vision of the essential service and rural way of life.

I farm in grain and oilseeds in Saskatchewan. Most of the farmers there will tell you that in the last three years, they have had no income at all. If they broke even, they are very fortunate. I do not want to take anything from the European common farmer, or even the American farmer. I have been down there too. We have to look at how we are going to deal with this on a global scale. We can all give examples. We can all put numbers and figures behind it. If you look at the general situation, for instance, in Canada, our dairy producers are doing fairly well. They will admit that.

Ms Smadja: We know why.

Senator Gustafson: Our marketing boards in chickens and turkeys are doing well. Our grain producers are seriously hurting. I was talking to farmers yesterday who are moving in 100 quarter sections, just to be able to compete and stay in the business. That is not good.

It is important that we have these kinds of meetings. We are moving into a global economy very fast. It is about time that the different countries put their heads towards what kind of a world we want, what kind of countries we are going to have, and whether food security is of importance.

Ms Smadja: You were referring to the visit you had in Europe and also in Brussels. We do remember, and it was an important visit that was extremely well received on our side. If I remember correctly, you saw our commissioner, Franz Fischler, who is a farmer himself, so he knows what he is talking about. I know he kept a good memory of his meeting with you. If you want to come back, I would be happy to help organize a new trip for this committee because things are changing quickly in Europe, and you may want to check the new reality.

You are right, there are a number of differences in way agriculture is organized in every country. I do not think that we could think about one model that would be the best for everyone. At the beginning, when I was talking about the multi-functions of the agriculture policy in the European Union and where there could be a source of inspiration, I meant, for example, that all these programs that we are developing on an environmental aspect and everything we are developing on the rural development side are very good topics for people across the Atlantic to exchange views. You could be a source of inspiration for us and we could be a source of inspiration for you.

We all want to keep some rural aspects in our societies and we all want to recognize the role of stewardship that the farmers have assumed. I agree with you that there is no way that one model should be designed and then applied to each system. However, there are some cases where the exchange of views could be interesting. That is the new role of agriculture that society demands. Farmers are expected to deliver.

My impression, and I have not yet digested all the results, is that what was achieved in Doha is certainly positive, especially in terms of dealing with the global situation for the long term. We also acknowledge that it was not so long ago that agriculture was totally out of the multi-lateral trading system.

Between the Uruguay Round and Qatar, we have come a long way. I am talking about the collective membership of the WTO. The result of Doha clearly shows that people have accepted the idea and will become used to agriculture under the umbrella of the multi-lateral trading system. Before, it was a case of how much you wanted to get in, and now people are accustomed to having agriculture included. They are more positive about how we could use the WTO negotiations on agriculture to face the global situation in the long term.

Despite what you think about us and what your deep beliefs are, you must keep a couple of things in mind. The European Union is the largest importer of goods. I am sorry that some of the Canadian sectors, such as grain, have problems, but I am telling you that it is not necessarily because of us. We are the largest importer, and since last year, we are also the largest exporter.

The conveyed message is that we are open; otherwise we would not be the largest importer. This out-dated vision that we are protectionists does not hold any longer. We are also an exporter, and an important one, so we are interested in market access negotiation. We are interested in negotiating the reduction of tariffs. This is important for us. We are accustomed to negotiation and the give and take process. If we want others to reduce their barriers and tariffs, we will take our share and reduce ours also.

Senator Gustafson: You are very protective when it comes to genetically modified foods.

Ms Smadja: I would not call it being protective. We are in the middle of an important political crisis and, unfortunately, our trading partners are the victims. We have a serious crisis of confidence in Europe. Our consumers simply do not want GMOs. For that reason, and because they are extremely organized at the consumer level, politicians have been obliged to take some measures. The legality of some of those measures is borderline, and we are the first ones to recognize that.

To restore confidence and resume trade, we have proposed new legislation that will rebuild the confidence. We already have one new piece of legislation that has been adopted and should be effective in October 2002. It concerns the authorization of GMOs on the market. When it was adopted, we saw that some of our politicians were not sure that this would be sufficient for them to resume authorization. Therefore, we asked them what they wanted. They said that they want better labelling; so we are now proposing new legislation on labelling.

We have a number of things on the table, and we are hopeful that these will meet with the satisfaction of the member states and will restore the confidence of the public.

Returning to protectionism, I said that we are the largest importer and exporter. If you look at the statistics, you will see that we are the only one to have a trade deficit in agriculture, whereas Canada and the U.S. have a surplus.

Senator Gustafson: When it comes to the issue of genetically modified foods, you cannot sell something that the consumer will not buy. On the other hand, there may be some danger in throwing the baby out with the bathwater. Not all genetically modified products have turned out good. If there were to be a future in that industry, I would use the word "balance." Food security and food health are important, but balance is also very important.

Ms Smadja: The people in charge at the level of the European Union, such as the commissioner in charge of the environment, the commissioner in charge of food safety and consumer protection, are not happy with the current situation. There was a problem at the outset, and we needed to revisit our legislation concerning GMOs, which was outdated and thus criticized. We have put it back on the table, but we still face hesitations to resume the authorization.

There are two problems. The first one is that some of our member states decided to have a moratorium on the placing of GMOs on the market, although a number of GMOs have been authorized. Therefore, there is discrimination and there is a paradox. The GMOs that have been adopted are on the market, and no one is saying to take them off the shelf because they do not have a label. On the other hand, they are saying they do not want to approve new placing on the market until there is good legislation in respect of the labelling. There is a little bit of schizophrenia.

Senator Gustafson: What impact will the Eastern countries that have applied to join the European Common Market have, and how fast will that happen?

Ms Smadja: Do you mean impact on agriculture or impact in general?

Senator Gustafson: It would impact the world in general.

Ms Smadja: Going from 15 members to 27 or 28 is a huge leap. In the past, we have gone through many enlargements, but it was always, maximum, three members at a time. Now, in a very short period of time, we will grow to almost double. It is the same for the population. We have 7.3 million farmers in the European Union. When all the member states will have acceded, we will have an additional 10 million. We will have more than a doubling of the farming population within more or less the budget. Whether we like it, we are still going the way of reducing the budget for supporting our agriculture.

This enlargement of the European Union is historical by its size and by where the countries are coming from, whether politically or economically. Historically, it has an incredible impact because the European Union as a political entity is not matching the geographical reality, but more and more it will.

This Europe, even with 15 members, which is a major player on the trade scene, which is becoming an important player on the political scene with the development of a common security and foreign policy, which is developing a common European security and defence policy, which will not have an army but a rapid reaction force by 2003, is getting bigger not only in size but also in intensity, in the number of common or even single policies that we develop, let alone a single currency in a couple of days. It would be immodest if I said this enlargement would change the world. It will change the world because there has been preparation for that, and our partners, politically on the trade scene, are getting used to it and they are moving together with us.

The enlargement will bring Europe much more into the centre of many things. More relations among our partners will be done at the European level than at the level of the individual member state. There will always be things that will be dealt with by our member states. For example, we do not aim at a common policy for culture. Therefore, Canada will always have bilateral agreements with the United Kingdom, with France, with Spain, with Italy, with whomever, on some aspects that will not be dealt with at the European level. On the other hand, wherever the European Union has developed a common or a single policy, our partners will deal more and more with this issue with the entity itself. You are going to make an economy of scale in the way you will deal with the union.

The single market will be bigger. It will have almost 500 million citizens. It will be the biggest in the world. Already now with 15 members, 370 million people is the largest single market. With the enlargement, it will be 500 million. We are talking big numbers.

When will that happen? I do not know. In this enlargement process, we had put a number of strict criteria which did not exist in the previous enlargements and that were required by where the countries were coming from. A number of criteria relate to democracy, human rights, rights of minorities and so on, and relate to the capability of these countries to face competition within the European Union. We do not want the entry of these countries to provoke the collapse of the European Union. That would be in the interest of no one, including the entrants. We have been saying that the actual accession will take place, when, first of all, the accession negotiation will have been completed, and each accession is looked at on its own merits.

It is in the public domain that a number of these acceding countries are in a greater hurry than others. We can see already the first ones, which could be in the East Block, countries such as Poland, Hungary, perhaps the Czech Republic. That could happen as quickly as 2004.

Senator Gustafson: A country like Ukraine has tremendous potential.

Ms Smadja: For the moment, Ukraine is not an applying county. We are aware that when we conclude these accession negotiations with the ten Eastern and Central European countries, as well as Cyprus, Malta and perhaps Turkey, then we are already looking at the geography, and we may have a problem. If we are building this area of prosperity, peace and stability, leaving out some of the Balkans, Ukraine and Russia could be a problem. We had left Kosovo out and so on. For the moment, we are looking at the geography, and while not at all having accession in mind for these countries, which will be outside that I have just cited, we have decided to propose to them a special relationship, so that they do not feel out. They will not be in, but they will be in the close circle of friends and partners. For example, with Ukraine we have been working and are still working on a very special partnership agreement that will foresee maybe in the second stage a free-trade agreement and that, for the moment, is more towards trade preferences, political dialogue and a great deal of technical assistance. It is the same vis-à-vis Russia, to develop a very strong and meaningful partnership and also with the Balkans.

Senator Gustafson: How strict is the trade between members of the union?

Ms Smadja: What do you mean by strict?

Senator Gustafson: If one country has something for sale, the other members of the union have the first opportunity to buy it; is that correct?

Ms Smadja: We have a community preference.

Senator Gustafson: You intend to have this special privilege to some extent for the Ukraine, Poland and other countries?

Ms Smadja: It will not be the same, but we will give them preferential treatment. Canada wants to have a preferential regime with the Americas. It is your courtyard. You have to give a little something, maybe less than what you give to the member of the family, but something.

The enlargement of the European Union is also a golden opportunity for Canada, because you already have many relationships with these countries. A number of these countries also have communities in Canada. The government is looking at this enlargement and trying to anticipate some of the opportunities that Canada could reap from this. You should look at it as an opportunity. You will have a bigger market, and I am hopeful that you will take advantage of it.

The Acting Chairman: Thank you, Ms Smadja, Mr. Musquar and Mr. Kingston. This dialogue has certainly been informative.

The committee adjourned.