Proceedings of the Standing Senate Committee on
Agriculture and Forestry

Issue 24 - Evidence

The Standing Senate Committee on Agriculture and Forestry met this day at 3:31 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, we are pleased to have with us today the Honourable Lyle Vanclief, Minister of Agriculture and Agri-food. With him are Mr. Samy Watson, Deputy Minister, Mr. Ron Doering, President, Canadian Food Inspection Agency, and Ms Diane Vincent, Associate Deputy Minister.

I understand that the minister will make some opening remarks, and then we will go to questions from the senators.

The Honourable Lyle Vanclief, Minister of Agriculture and Agri-Food Canada: Honourable senators, this is the first time I have been in this committee room or in this part of the Senate, and I must say that it is absolutely beautiful. Furthermore, for those who are not aware of it, the chairman will provide desert to everyone at the end of the meeting. He tells me that he will pass it around then. I am sure he will explain that later.

Mr. Chairman and honourable senators, it is a pleasure to be here. Since I last spoke to you in April of this year, much has happened in agriculture and in the agri-food sector. I am pleased to have this opportunity to give you a brief overview of some of the key issues that have taken place and that are ongoing since that time.

We all know that this year has been another one of ups and downs. On the down side, once again producers in many parts of the country had to deal with the vagaries of the weather. Particularly this year, there was probably more drought in more areas of the country than in a number of decades.

On the positive side, along with my provincial and territorial colleagues, I marked a historical first by agreeing to a new national framework for agriculture when we met this past June at our annual summer meeting in Whitehorse. We also met with success at the recent WTO ministerial conference in Doha.

I would like to make a few comments about the WTO conference in Doha. As you know, that meeting was held about two weeks ago. I represented Canada along with my colleague, the Honourable Pierre Pettigrew, Minister for International Trade at this fourth ministerial conference.

At that conference, ministers from 142 countries launched a broader round of the multilateral trade negotiations. These talks have certainly paved the way to opening up markets for Canada, and certainly the opportunities for brightening the future for Canada's farmers and increasing opportunities for the developing world.

From an agricultural perspective, the successful launch of expanded negotiations will significantly increase the prospects for achieving a substantial and far-reaching outcome in the agricultural negotiations, an outcome that will take us a long way towards further opening agricultural markets and eliminating distortions in the world trade of agricultural exports. We know that is so important to so many of our producers.

Ministers made a commitment to a comprehensive and ambitious round of negotiations aimed at three particular things, but certainly not only those. The first is substantial improvements in market access; the second is reductions of, with a view to phasing out, all forms of export subsidies; and the third is substantial reductions in trade-distorting domestic support.

This would certainly allow Canadian farmers to compete on an equal footing with their international competitors. I should also point out clearly that, during the conference, the United States came in strong on eliminating export subsidies and agreed to all of those points that everyone agreed required to be negotiated.

We also agreed on clear time lines to bring the agriculture negotiations to a conclusion in three years, that is, by January 1 of 2005.

We are certainly pleased with the outcome at Doha. We accomplished what we set out to do. We went there as Canadian representatives, and this will hopefully be of considerable benefit to our agriculture and agri-food sector. However, we must understand that our work is just beginning. We must continue our momentum. We know that agriculture negotiations did start as mandated in the Uruguay round in March of 2000. Now that we have adopted a ministerial text, it gives us clear objectives, guidelines and time lines to work towards achieving our goals in those negotiations.

As you know, Canada has been, and will continue to be, guided by a strong initial negotiating position, on which we are making proposals and presenting papers in the WTO agricultural negotiations. Our position was developed in close consultation with our agriculture and agri-food stakeholders and reflects the views of the entire sector. These consultations, I can assure you, will continue throughout the negotiations. As well, we will ensure that decisions about production and marketing of Canadian products will continue to be made in Canada.

As we can all appreciate, with an increasingly integrated global economy, it is more and more important to have a multilateral and enforceable framework governing the international trade of agricultural products. Canada, despite our small population, certainly has a significant amount of interest in the agricultural area. We have so much to gain. We can gain that from further trade reform through the WTO.

Canadian agri-food products are exported to 190 countries. We have an annual value in exports alone of over $23 billion. Our net agriculture and agri-food exports provide about one-third of our total surplus of trade in all goods and services from Canada.

Just as important as levelling the playing field in international trade, we need to have the products that consumers around the world want and the product that they trust. Powerful forces of change are shaping the agriculture and agri-food sector. That is not new. In my many years in agriculture, I think those forces are moving more quickly now than ever before.

International trade has become more important, and it is become more complex. Advances in science and technology are occurring faster than ever before. The sector is becoming more knowledge based requiring new skills and management practices.

Consumers around the world are more knowledgeable and more discerning than ever before. They demand products that are innovative and fill certain niche life styles. They want to know that their agri-food product are the highest quality and of the highest safety. They care about the environment and want the assurance that their food was produced in an environmentally sustainable way.

The agreement reached with my provincial and territorial colleagues will position the Canadian agriculture and the agri-food sector to respond to the challenges posed by the global trade reality of today. My provincial and territorial counterparts and I unanimously agreed, in principle, on an unprecedented action plan for the future of agriculture in Canada.

This comprehensive agriculture policy framework is the first for Canada. Never before has there been such a concerted effort to bring all of the elements of the sector to the same level of prominence and strength - to get the sector firing on all cylinders at once. This represents good news indeed for Canadian producers and processors.

The other ministers and I agreed that we must address five key elements to secure the future of the sector and brand Canada as the world leader in food safety, innovation and environmentally responsible production. The five elements are farm income safety nets; on-farm food safety systems; protection of the environment; the use of science and research to create new economic opportunities; and renewal for the sector.

First and foremost, we are not going anywhere domestically or internationally if our producers do not have strong and financially healthy operations. As we saw this past year with the drought, there are times that call for a flexible safety net to stabilize farm income as much as possible.

We have such a system in place. This safety net package provides $5.5 billion over three years through 2002 in support of farm income stabilization. The policy framework will ensure that our safety net program are effective in helping to improve farmers ability to manage the risks that are unique to farming. This includes a review of our current safety net systems.

As I mentioned, consumers are concerned about foods safety. The action plan aims for a comprehensive consistent policy for on-farm food safety. We also need to have such things as tracking and tracing systems through the food chain, so that the consumer knows who produced the product, where it was produced, and how it was produced.

As well as food safety, consumers are concerned about the health of the environment. The policy framework will help facilitate environmental management at the farm level, as our farmers take appropriate steps to limit the effect of their practices on water, soil, air quality and biodiversity. Consumers will also be the driving force in the successful adoption of many new products such as health food products and other products of life sciences. The nutraceutical revolution is certainly creating a whole new world of value-added products - products like plastics, enzymes, ethanol and biodiesal. Many of these are derived from grains and oilseeds.

We understand that, in order for farmers to implement and integrate a food safety system, to apply the most environmentally sustainable practices, and to use the applications of science to their best advantage, they need the right programs and the right tools in this new agricultural environment. For this reason there is a renewable component to the policy. For beginning farmers, it might mean having access to capital or business courses in order to prepare for a long career in agriculture. Established farmers need the right programs to assess their situations, improve their operation and to make choices.

In this regard, I should add that my colleague, the Honourable Andy Mitchell, Secretary of State for Rural Development, is working with rural communities across Canada to encourage the flow of ideas, solutions and strategies that will ensure the sustainability of those communities.

For the past two years, Mr. Mitchell has been meeting with rural citizens across Canada to discover and discuss the best ways to build capacity in rural and remote communities, to make the best use of community assets, to ensure access to government programs and services to ensure that rural Canadians continue to contribute to the wealth of our nation and that they have access to that wealth as well.

Last month, I met again with my provincial colleagues and we strengthened our commitment to our long-term action plan to secure a solid future for the sector. We agreed at that meeting to move forward to make our strategy pay off internationally, to make making this excellence that we are establishing at home recognized on the international stage.

We will continue to coordinate our efforts in areas such as market development and investment. The federal government will also work in international development, technical assistance, trade policy and technical trade.

Mr. Chairman, with the progress that we have made in Doha, and with the new architecture on which to build the sector, I am confident that the Canadian agriculture and agri-food sector has a promising future. With those comments, I certainly welcome any remarks or questions that the senators may have.

The Chairman: Thank you Mr. Minister. In the interests of time, I will ask senators to confine their questions to five minutes for the first round.

Senator Wiebe: Minister Vanclief and officials, I would be remiss if I did not say that farmers across this great country of ours have been well known for their ability to adapt to change. They are now facing now some pretty rapid change, more rapid than we have ever seen in the past. As a result of that I should make note and compliment you. I think this is the first time in the history of the Senate Agricultural Committee that we have had a Minister of Agriculture appear before us twice in six months, which indicates your recognition of the rapid change that is taking place. For that, I sincerely thank you.

During the past summer, those six months, we have had an opportunity to meet with many farm organizations and experts from across this country. As a member of the Prime Minister's special task force on the future of agriculture, you know that we had an opportunity to meet have those organizations in their home provinces. As a committee, on two occasions, we met with the Pro-West Rally Group, which is headquartered in my province of Saskatchewan. I should like to read an e-mail I received from the president of the Pro-West Rally Group that I received late last night. It is addressed to all members of the Prime Minister's task force on future opportunities in farming.

It is from Sharon Nicholson, the president, who says:

Re: recent changes in CFIP formula for funding from 70 per cent to 100 per cent.

I heard on the radio this evening that there has been a significant change to the CFIP protection level. From my perspective, and that of the Pro-West members that I represent, this is monumental. I would like to take this opportunity to thank you on behalf the entire Pro-West Rally Group membership. Your announcement is a definite step in the right direction and comes at the time of year when hope should spring eternal. We encourage all of you to continue in this vein and look forward to future announcements that will further stabilize farm income and stop the exodus from rural Saskatchewan.

This is certainly a different line than what we heard from many farm organizations in the past. I want to commend you, Mr. Minister, for recognizing the need that is out there at this particular time, and for making this announcement yesterday jointly with the provinces.

The Chairman: Would you care to comment on what these changes mean?

Mr. Vanclief: CFIP provides to producers a guarantee of 70 per cent of their gross margin back to a reference number of years. As we go into the program each year, we do not pay up to 100 per cent of what the claims may be until we know that we have sufficient money in the fund to do so.

For the 2000 business year we had not yet paid up to 100 per cent of the claims. This announcement informed everyone that the final cheques would go out to bring them up to 100 per cent of their claim. If they triggered a claim, they will now get 100 per cent of that.

The Chairman: When can they expect that cheque?

Mr. Vanclief: Before Christmas.

The Chairman: What amount of money is in that package?

Mr. Vanclief: I do not know. The figure was moving up. We had increased it once before. I cannot remember what the level of payment was before, but this tops it up to the 100 per cent. The size of the cheque will depend on the size of their claim. It will bring it up to 100 per cent of the claim.

Senator Tkachuk: As Senator Wiebe said, a number of farm groups, particularly from Western Canada, have expressed concern about the price of their commodities and the amount of federal assistance available. Through no fault of their own, as you know, we are in the middle of a world trade war.

Of course, we never believe that the government is doing enough considering that we are out in the free market in the Prairies, while many other parts of Canada in agriculture are not. That applies particularly to the supply side. At a meeting on October 18, the Standing Senate Committee on Agriculture and Forestry moved a motion condemning the federal government for its lack of action in the western farm crisis. Surprisingly, the motion was carried by the committee.

Earlier you mentioned the upcoming trade talks and you told us that you will be discussing the export subsidy, which I believe was initiated by the Americans.

What will our strategy be? We know that the Europeans have subsidies built around conservation and environment. It seems to be just one tangled web of cash rolling down on the farm land. Of course, there are political reasons for that. What will be our strategy for dealing with this issue? What will we do to help the farmers, in the meantime?

Mr. Vanclief: Senator, our strategy in the international arena is to negotiate with the U.S. and all other countries. At Doha, it was interesting to note that, as we got down to the final agriculture paragraphs on the ministerial text, it was the European Union against the rest of the world in our discussions of the term, "with a view to phasing out." It was our understanding that only two of the European Union countries wanted that phrase left in and the other 13 of the 15 member states were satisfied to leave that in. They have their own internal negotiations within their member states. In the end, those words were left in.

I do not know who started export subsidies. I only know that the last time I was informed of export subsidies, the European Union had 89 per cent of them in the world. The United States has export subsidies, and we in Canada do not have export subsidies.

The other subsidies that are certainly detrimental in terms of production, trade and price distortion in the world, are domestic subsidies. Some of those domestic subsidies are green, according to WTO; and some are amber, which means that you do not know whether to go with them or not. They may be questionable. There is debate around that sometimes, so we get caught in the cross-fire of the two: export subsidies, primarily from the European Union and some from the United States, and domestic subsidies in the United States.

The reality is that our pockets in Canada are not deep enough to ante up to the table with the same kind of money. Therefore, we need to do is look to our safety nets, giving all the support we can, and make those safety nets work better. For example, in Saskatchewan, this year's program payments for crop insurance, et cetera, between the provincial and the federal governments, will pay out to Saskatchewan farmers over $1 billion. Last year, it was $775 million. Over the last five years, the average has been only $440 million, so it is a considerable increase this year.

That does not mean to say that everyone received the equivalent of a good crop and a good price. We need to work with our safety net programs, so that they work better together. Perhaps we need to put them all in one package, so that each producer has more insurance and assurance of what they can provide to him.

We also need to build upon the reputation that we have for the quality of Canadian products, the safety of Canadian products, et cetera, so that, in many areas, if we cannot meet the Americans or the Europeans on the price, we can beat them in some other ways. In that way, when people around the world and in Canada think of food, they think of Canadian products, and then look to buy those Canadian products, rather than someone else's products. That encompasses many issues from environmental issues to food safety issues.

Senator Oliver: Minister Vanclief, I am old enough to remember when a person could make a living as a farmer with 300 to 400 acres on a family farm. My question to you deals with the issue of the death of the family farm, corporate concentration on the farm and from the farm gate to the plate. What is your model? If the family farm is dying and the big corporate models are taking over, what will this mean for the future of agriculture in Canada? Is this something that your government wants to see happen? If not, what will you do to try to breathe life back into the rural communities and to reinstil faith in the small family farms?

Mr. Vanclief: First, we should dispel the myth there is the death of the family farm. Over 98 per cent of the farms in Canada today are owned by individual families. There could be various combinations of family members who have taken over the running of the family farm and operating the business. That is not any different from - and I hate to draw the parallel - the fact that there are not as many single law practices in Canada as there were many years ago. Lawyers are making the move to large law firms so that they can have a different life-style or so they can be more efficient, or whatever the case may be.

Over 98 per cent of agriculture on the farms in Canada today is operated by families. They may be incorporated for business reasons, but I do not think we can therefore call those corporate farms, as such. That is the reality.

We need to look at a proactive, broad approach such as an agriculture policy framework that will help them in a number of different areas. The renewal aspect is an incredibly important part of it. The renewal aspect of this is to help people stay on the farm, contrary to what some people think, which is that farmers should leave the farm.

There are many resources attached to the farm: the size of the land; the type of land; financial resources; or skills resources. Those resources will vary, and it could be by considering the resources that we look at the renewal aspect. For example, there may be a grain farmer who does not have sufficient finances to diversify into livestock production.

The reality is that the percentage of those involved in agriculture with a high school education is lower. In Canada the average number of high school graduates is about 64 per cent but for farmers it is only about 50 per cent. Can we help some of those individuals, be they beginning, mid-term or farmers who want to retire? Can we help them to assess their situations?

Perhaps they have some skills that they can use outside of the farming sector. Farming has always involved people who also work in other sectors of the economy so that they can afford to farm. The percentage of farmers doing that today is not very different from what it was a number of years ago. In many Canadian families today, there are two sources of income, possibly from two different sectors of the economy. That happens in agriculture, too. Someone may have a small business in Ottawa or Belleville, and the spouse may teach school, or nurse, or he or she might be a member of Parliament or a senator.

Senator Oliver: What can you say about corporate concentration from the farm gate to the plate?

Mr. Vanclief: That is an issue all over the world. Frankly, I do not have the answer to that. We do have the Competition Act and we have bureaus to deal with that. However, there is no question that there are fewer and fewer buyers; and there are fewer and fewer sellers to the producers for their product.

Senator Oliver: Is that not one of the reasons that there is so little money left at farm gate for the raw product producers?

Mr. Vanclief: I do not think that is the case. For example, our fertilizer dealers or farm equipment dealers are few in number. When I was farming, I could probably count more of them than you could count on one hand, but now their number is down to two. There are fewer farmers, but all of the land is still being farmed. There is less equipment, because of the efficiencies of better equipment. My son with zero tillage can put in 100 acres in one day with one person. I used to have to prepare the land and do all sorts of things before I could start planting, but I will not go into right now. However, the equipment is certainly not any cheaper than it was before.

I will be crude: We just do not need as many two-wheeled manure spreaders as we used to. It is no longer done the way it used to be done. We do not need as many 14-foot cultivators in Prince Edward County as we used to, because there are fewer farmers and they have 30- and 40-foot cultivators. There is zero tillage; and they do not need that equipment. They buy a zero till seed drill and they do a lot of work with it. They may do work for the neighbours as well.

Let us take fertilizer prices for example, I am not saying they are not high, but they are controlled, international prices. When you look at the prices relative to the United States, the Canadian prices are not out of line. The farmers are keeping pace with that change. There is no question about that. Is it easy? No it is not, and we need to help them.

Some individuals do need assistance, and we hope to provide some of that with the renewal of the policy framework. However, the best assistance would be peer assistance. The best people for farmers to talk to about making changes are other farmers. When I was farming, if someone stood up at a farm meeting in a white shirt, tie and jacket and tried to tell me how to produce hogs, I would question what he said. However, when a producer stood up, whether that person had been a mentor of mine or not, I learned a lot from him because would speak from experience.

Senator Hubley: Recently we had a presentation from European Union representatives during which the ambassador presented figures. She expressed the view that the European Union and the United States subsidies were terribly out of line with Canadian subsidies. I came away from that meeting with questions about those figures.

When we talk consistently about trade distortions such as green subsidies and so on, as Senator Tkachuk said, we tend to get wound up in a maze of verbal descriptions. Do we have figures that we can present in an argument?

Mr. Vanclief: We do, and they can be found in the OECD producer subsidy equivalents. We do not have those figures crop by crop, but we have them as they relate to dairy, beef, pork, grains, oilseeds, et cetera.

However, we must keep in mind the definition of OECD producer subsidy equivalents. They take into account every way in which a government supports an industry, whether it is by high tariffs or by legislation. For instance, Senator Tunney will know that the dairy industry has a very high level of producer subsidy equivalents. However, countries provide those types of equivalents to each industry differently. Some do it in cash, while others do it in different ways.

Those figures are available. We can certainly send a package of that information to the chairman, and the clerk can circulate it to the committee.

The Chairman: Thank you.

Senator Hubley: The other point that the representative from the European Union made was that Canadians have a different attitude towards their farming community from people in the European Union. I think she was suggesting that, perhaps, we do not hold our farmers in high regard, that we do not always support them with financial need when it is required and things of that nature. How would you respond to that?

Mr. Vanclief: I would say that it is probably true. The population is dispersed in Canada whereas there is a large concentration of primary producers in many European countries. Vineyards, orchards and livestock farms are interspersed because populations are dense. Everyone either lives close to a primary producer or has a family member involved in the agriculture and agri-food community. Probably a higher percentage of people in the European Union remember what it was like to be hungry. Unfortunately, some Canadians are hungry now.

We all have a challenge and an opportunity to change this through the agriculture policy framework. In my view, we are meting with some success, even around the cabinet table. It is not that this was not recognized before, but a lot of eyes are opened when we point out to people that one in seven working Canadians is working in the agri-food industry; that this is a $130-billion industry; and that food manufacturing is the largest manufacturing industry in seven of ten provinces. Very few Canadians know those facts. We know that the automobile industry is large in Ontario, but I do not think many people in Ontario know that agriculture is the second largest manufacturing industry.

Demonstrating a high regard for farmers does not equal cash assistance. There is no question: money always helps. Since 1985, the Government of Canada has expended $37 billion in farm income programs, and provincial governments have put in about $13 billion on top of that. Even though we have expended $50 billion collectively, we are still talking about the same problems we were talking about 10, 15 or 20 years ago.

I am not saying the money was not needed and was not used. However, we must now consider whether there is not some better way to expend those monies, those limited resources, to achieve a better result.

Federally, we have $1.1 billion in the safety net envelope for crop insurance, NISA companion programs and CFIP. Those programs could be cherry-picked. If no assistance is available from other programs, then CFIP may offer some assistance - if you can even trigger it.

Is there some way in which we can take that $1.1 billion and do a better job? There must be. All the producers tell us that they like having crop insurance, but that it needs to be better, that it needs to be fixed. They tell us that they like NISA but that it needs some changes. They also say that they like having CFIP, but that it does not work in all cases. The question is: Are we using the money in the best way possible?

We must work with our industry to prepare for other realities of the day. Concern about food safety was nowhere near as strong even three years ago. When I became minister in June of 1997, food safety was not an issue. Then, we were concerned about getting salmonella or some other form of food poisoning. However, since September 11, we have been greatly concerned about food safety.

Those comments also apply to the environment. The concerns and issues about the environment that we have today did not arise until we had some larger livestock operations. Consumers want cheaper beef and cheaper pork, and they want to benefit from the results of those kinds of efficiencies. However, it is the responsibility of federal and provincial governments as well as producers to do that in a sustainable way.

Senator Sparrow: You mentioned that 98 per cent of the farms are still owned by individual families. How many farmers were there 20 or 30 years ago, and how many farmers are there now? Many individual family farms are now run as part of large corporate farms. Do you have those figures?

Mr. Vanclief: I do not have them with me today. There is no question there are fewer farmers. When I was a young lad, I road the milk truck the 2.5 miles to my grandfather's place. I stopped every 40 rods, which is 650 feet, and picked up a can of milk. Now, I pull out my driveway and drive 7.5 miles to the next highway. This is in a rural setting, and last time I counted, there were 97 households along that drive. Three farmers live in that area, but all the land is being farmed.

Senator Sparrow: Would any of you people have the figures with respect to the number of farmers?

Mr. Vanclief: There are different definitions of who qualifies to be a farmer. We must make sure that when we give you figures, we have counted, so to speak, apples and apples.

I believe that at one time, Statistics Canada specified that anyone who sold over $2,500 worth of agriculture products was a farmer. I will leave it to you to decide whether that person could be classified as a farmer. I got $14,000 worth of zucchini off one acre one year.

Senator LeBreton: Mr. Minister, you must have been reading my mind when you talked about food safe because, although I was raised on a dairy farm in Eastern Ontario, and my father would be turning in his grave if he knew how I felt about some farm products, I do not eat butter. I do not even want to eat beef.

Mr. Vanclief: Mr. Chairman, I do not want to get into a feud here.

Senator LeBreton: We had Jerseys and we drank raw milk that was three-quarters cream.

In any event, as a consumer, the food safety issue interests me today. You talked about tracking and tracing products through the food chain and putting the right programs and the right tools in the hands of farmers and other people. Could you expand on that or give examples?

I have become a very conscious consumer in that I look at the origin of any product. In fact, when I see that a product is from a certain country, I do not buy it, because I have a perception that the food might not be produced in a clean or safe environment. I do not know what they use as a fertilizer.

Could you give us examples of the types of things you do to track food, not only produce, but also meat products, through the system. I am referring to tracking that food from the time the food is literally being raised or grown, through to when it comes onto the shelves of the supermarkets.

Mr. Vanclief: By way of example, I would refer to the investment the federal government made in the beef industry a couple of years ago. Over $1 million was invested in work with the beef industry in Canada to establish an identification process. Starting last January, every beef animal that leaves the farm, including a spent dairy cow that is going for beef, is tagged, so that the slaughterhouse knows where that animal came from. Some European countries have taken that a step further.

We have already had a couple of situations in the beef industry where they had to trace an animal back. They were able to identify the farm the animal came from. That is excellent for many reasons. It is excellent for the consumer, for trace backs of diseases, but it also is excellent for the industry. If there were a problem with one herd, all of the beef producers in Alberta would not want to be tarred with the same brush. The origins of that herd can be traced back.

The other example relates to the seeds industry. I talked to a major international seed marketer the other day who told me that it is easy to get $10 or $20 a tonne with identity preservation. The buyers of soybeans from Japan are now coming to Ontario during the year and they are buying food-grade soybeans. They physically visit fields. They want to know where the soybeans are produced, how they are produced, what is used on the fields, and they track them all the way through to the other end.

We need to build on that. This tracking and tracing is called identity preservation. It can used to identify beef and grains. The horticultural industry is a long way down that road. When horticulture producers take a product to the food terminal in Toronto, they must have the farm name on the carton. When it goes into a chain store, if there is a necessity, there is a trace back.

Senator LeBreton: Are beef cattle tagged at birth?

Mr. Vanclief: Yes, with an ear tag. The sheep industry wants to move in that direction. The pork industry is already there because each animal is tattooed and the producer is paid according to the quality of that individual animal. When I marketed 100 hogs in one week, I got a slip back that specified the dressed weight of each individual pig. If a disease or a residue had been found in one of those animals, it would have been traced back to my farm.

Senator LeBreton: It would affect the whole herd.

Mr. Vanclief: They would come right back to Lyle Vanclief and Willowlee Farms Ltd.

Senator Tunney: Mr. Minister, I serve on the Finance Committee of the Senate, which is currently dealing with the Supplementary Estimates. I noted one item for $550 million. I take it that $500 million of that relates to the announcement of a year ago. I am interested in why a figure of $550 million is showing up now in Supplementary Estimates when the figure we heard mention of was $500 million.

If that showing up in our Supplementary Estimates, has some, any or all of that money been paid out? I would assume that, if it is in the Supplementary Estimates, it has not been paid out.

Mr. Vanclief: Senator, $500 million was the ad hoc amount of money that we announced last March. That has gone out to the provinces. They were given the opportunity to distribute that in their provinces the way they saw fit. The $500 million was the federal portion of 60 per cent. The provinces added their 40 per cent. Therefore, on a national basis, the figure became $830 million.

I will ask the deputy if the $50 million is money in Alberta that was not spent; therefore, it was carried over to this year.

Senator Tunney: I am not very concerned about Alberta because Albertans are all wealthy.

I have question for Mr. Doering. In my area of southern Ontario, the small abattoirs, the slaughterhouses that kill, pack and freeze have gone out of business for a variety of reasons, including inefficiency, low productivity and high cost. In some cases, the cause is the high cost of compliance with environmental regulations. I have always questioned why some of these plants are federally inspected and some are provincially inspected. Why is there a difference?

Mr. Ron Doering, President, Canadian Food Inspection Agency: Thank you for the opportunity to explain this somewhat complicated situation. Meat inspection in Canada is a shared responsibility between the provinces and the federal government. If a meat plant wants its product to cross provincial or international boundaries, then it must be federally registered. The Canadian Food Inspection Agency has responsibility for all federally registered plants. These plants represent 95 per cent, by volume, of the meat produced in Canada. That means that 95 per cent of the volume of meat produced in Canada is produced under the guidance of a Canadian Food Inspection Agency veterinarian and inspectors working for him.

If a meat plant does not intend its produce to cross provincial boundaries, there is no federal jurisdiction. That is a provincial jurisdiction. It is these areas, for example in southwestern Ontario, which would fall under OMAFRA, the Ontario Ministry of Agriculture, Food and Rural Affairs. For several reasons, there has been a significant reduction in the small provincial abattoirs in those areas. One is that new safety regulations have been introduced to bring them up to higher provincial standards. Another reason is that there are environmental factors to be considered. I am sure there are other efficiency and effectiveness considerations.

The federal government does not have someone on site at those plants. The only role the federal government has in relation to these plants is if there is a problem. They do not fall under federal jurisdiction. If there were a problem, however, under the Canadian Food Inspection Agency Act and the Meat Inspection Act we would go in and solve the problem. We can impose recalls and, if necessary, we can close a plant down under other legislation.

That is why there is this split responsibility in Canada. We deal with 95 per cent, by volume, of meat, but with less than 20 per cent of the number of abattoirs in Canada.

Senator Day: Mr. Minister, thank you for your very interesting presentation. When we receive the transcript from the reporters we will be able to reflect on many of the points you made such in a short time.

I should start by confessing that I am not a farmer and I am not from the West. I am in a small minority in this group. However, that does not make me any less interested in the agriculture business.

Mr. Vanclief: I am sure that you still like food.

Senator Day: You are quite right. You visited my part of southern New Brunswick a while ago and met with the farmers there to discuss some of the unique producer issues we deal with in that area. I hope to take my colleagues there next year.

As you indicated, farming has become more complex because of environmental issues, the science and research into food safety and, in particular, because trade issues are now a part of the overall portfolio that the farmer must be involved with through farming organizations.

I congratulate you and the Minister for International Trade on your successes at Doha, Qatar, and the World Trade Organization. I am assuming that there will be some considerable ongoing debate and discussions in relation to agriculture and the agri-food industry as a result of those discussions and the progress you have made.

However, we were somewhat disappointed that we did not have a representative of this committee in attendance there, but I would like to say at this stage that we have a mandate. This committee's order of reference provides that we are authorized to examine international trade in agriculture and agri-food products. I just want to remind you and your staff that we are interested, capable and willing to participate in that debate. Undoubtedly, legislative matters will flow from the deliberations over the next few years and we, as a committee, could be much more helpful if we had an opportunity to participate throughout.

Mr. Vanclief: Thank you, senator. Our chief agriculture negotiator will be busy with the negotiations, but I am sure, if her schedule allows, she or some of her staff would be glad to come and chat with the committee about the whole situation.

In negotiations, it is interesting to note that usually there are like-minded views. When we went into the ministerial negotiations, 142 countries were represented. We also had the ministerial text which consisted of a number of paragraphs. There were paragraphs on agriculture, the environment, investment and competition, and trade and intellectual property rights as they apply to medicines. The developing countries had concerns in those areas, as well as others. Out of that we were seeking to compile a ministerial text. Had Canada written the ministerial text, I am sure it would have been different from a text by the European Union or Zimbabwe. We ended up with a ministerial text in which everyone felt they could get their issues on the table in the negotiations and go forward from there.

For example, in the agricultural text we addressed the three pillars that I mentioned, but we also specified that there should be special and differential treatment for developing countries. One of the challenges for developing and less developed countries is that some of the more prosperous countries are not, at times, very welcoming of their products. Many of the developing countries have agrarian economies, therefore, they need to sell agricultural products so they can raise currencies to allow them to diversify and be able to buy other products from countries such as Canada.

When it comes into an implementation period, what needs to be considered is the manner and the speed things are implemented in developed countries in order for the developing countries to get help so they can to do a little better. In my view, that is why the WTO was not launched in Seattle. Much went on in the street in Seattle, but what really happened was that just prior to the Uruguay Round, back in 1993-94, the European Union and the United States got together in what was referred to as the "Blair House Agreement." I might be exaggerating a little bit, but they basically said to many of the developing countries, "We have a deal that will be good for you. Sign on."

The developing countries found out that, between 1994 and 2000, their increase in trade was only 1 per cent. When we got to Seattle some of those countries said that they wanted to be more involved. Canada has helped a number of them in their capacity building because some of them did not know how to participate in these kinds of things. That situation exists through no fault of their own, it is just a reality. They had never been involved before. They do not know how to approach those kinds of things. That is our involvement as well, senator.

We will be busy and, as I said before, we can now get on with the job. However, it will be tough for everyone. Successful negotiations happen when everyone leaves the table thinking that they won.

Senator Chalifoux: I should like to deal with three issues. I come from a rural area in Alberta where farmers are not all rich. The rich get richer and the poor get poorer. There seems to be no middle ground in my province. Two areas in my region have small processing plants that want to expand, but in order to expand, they must come up to HASAP standards and that will cost about $1.5 million. They do not have the money. They meet with me continually. They have tried every which way, and they have not succeeded. They have to deal with quality issues. They must also deal with the large oil companies.

The large organizations that have the money to come up to HASAP standards, are doing it, and they are taking the contracts and the work away from our small rural communities which are bankrupt. This is a serious issue in at least three small one-industry towns in Alberta. At present they fall under the health authority where they are inspected every month. However, in order for them to increase their marketing, they must get the HASAP and they do not have the money to do that.

Another issue they must deal with is provincial barriers. They cannot cross the borders to the territories. I do not know if you have any ideas on the subject of provincial barriers for our producers.

In regard the WTO rounds, we have some expert farmers around this table, yet honourable senators were not invited to sit with the delegation to the WTO. Canada has a bicameral system. Even protocol suggests that you contact our chair or co-chair in such matters. Senator Fairbairn and Senator Gustafson went to the round in Seattle. This year, we were not included.

Those are my three areas of concern.

Mr. Vanclief: I will ask Mr. Doering to comment on the first item in a moment.

I must be honest, I expected senators to be at the WTO meeting. I know there were a number of MPs who were not in Seattle. I am not trying to pass the buck, but I do know that some MPs decided not to go because of the situation in the world and the location of that meeting. My wife did not want me to go. The delegation was primarily led by representatives of the Department of Foreign Affairs. I do not know whether invitations went out to the Senate. If they did not, I agree with you that they should have. I am not saying that because I am appearing before you today. Senators should have been given the opportunity to attend. If you choose not to, that is another issue.

Senator Chalifoux: At our age, who cares? We go.

Mr. Vanclief: There is time left, senator. The fun is not over yet.

Mr. Doering: In regard to the food plants, most people do not understand that there are two jurisdictions for plants. The plants you mentioned are Alberta provincial plants. Some markets are now requiring them to be HASAP. For example, Safeway stores expect these places to be HASAP for their fruit and vegetables. That is a purely provincial matter and has absolutely nothing to do with the federal government.

However, if these plants want their products to cross provincial boundaries, or to be exported to the United States or some other country, you are quite right, that means that they have to meet the federal standard. The federal standard is a combination of regulations and HASAP and compliance can be expensive. The company must make a decision: Is it worth the expense to upgrade their facilities to meet the standard of the country to which they are exporting, or is it not worth the expense?

For those plants that do want to become federally registered, because they have made a decision that they can make money if they export, there are Agriculture Canada programs to help individual, small processors become HASAP and to help them with a view to becoming federally registered.

Honourable senators, I agree completely that there are situations where this process is expensive. The Canadian standard for export purposes must meet the requirements of the customer. The customer is always right. If the Americans require certain standard of our meat plants, we must require that that standard be met.

Senator Chalifoux: HASAP is international. The regulators say that every processing plant must be up to HASAP standards by 2003. When I was in Washington, senators and congressmen told me that they have the same situation in the U.S. Those small plants will just have to die. I do not think that is fair. I think that, in Canada, we should look after our rural communities. HASAP is an international regulator. The federal government should at least have some idea of how to assist small processors.

Mr. Doering: By the way, HASAP is not an international standard. HASAP is a way for people to have critical control points they can check. It is a way by which government can be moved to be the auditor of industry's risk assessment systems.

If a meat plant wants to sell to the Americans, they must have HASAP. They must meet the American mega-reg rule, and if they do not meet it, they cannot ship to them. In order to comply with that rule, that plant must become federally registered. Then there would be a veterinarian in charge who would do an ante-mortem and post-mortem examination of every animal. There must be three inspectors on the line dealing with every part of the examination.

There is no doubt that it is expensive to move to that standard. As I say, there are programs to assist people to become HASAP recognized and registered federally, if that is what they want to do.

Senator Chalifoux: Could I be provided with information on those?

Mr. Doering: By all means.

The Chairman: Minister, my first question is: Has the war on terror had an impact on the export of grain?

On another subject, I have some problems with your indication that we will move away from subsidies for a number of reasons. First, on our visit to the U.S. in July, it seems that Americans talk the talk, but that they do not walk the talk. If you ask congressmen off the record if they think they will get off subsidies, they say, "Don't hold your breath."

Following your meetings, on November 16 The New York Times reported:

The Senate Agriculture Committee approved an $88 billion farm bill today that places no limits on subsidies to America's wealthiest farmers...

The article also stated that the House had passed a 10-year, $171-billion farm bill that provides more generous subsidies paid to farmers and less money to conservation; and that democrats from the farm belt had succeeded in blocking the Bush administration's emphasis to revamp the farm policy. President Bush had asked to cut that back because of the terrorist attacks.

It seems that, contrary to what you are telling us today, and I hope you are right, the Americans are going the other way. They are pumping all this money into their farms. It almost looks like they did it in a move of desperation at the last minute in relation to the conference.

Mr. Vanclief: In answer to your first question, officials have informed me that the war on terrorism has not, apparently, affected the export of grain. If you have heard something different from that, please let us know.

The Chairman: We are not aware of that.

Mr. Vanclief: On the second question, I agree with you that we want the Americans to walk their talk. I had a bilateral meeting with Secretary Veneman and Trade Ambassador Bob Zellick just prior to the Cairns Group meetings in early September, before September 11. They are not members of the Cairns Group, but they made a presentation to the Cairns Group. Secretary Veneman said the very same thing when I had a bilateral meeting and when I chatted with her a number of times in Doha, Qatar.

The farm bill debate in the United States is far from over. There is no question that Congress has come out with a very healthy package, as has the Senate. They will now go through their conferencing program.

It was just yesterday that there were statements out of Washington. I will read the first two or three sentences:

While a Democratic-backed overhaul of U.S. farm subsidies waits in the Senate, President Bush called for "generous but affordable" farm legislation Wednesday that adheres to budget limits and gives farmers a safety net without sparking the overproduction of crops.

Separately, his agriculture secretary said the Democrats' bill, which Senate Majority Leader Tom Daschle planned to bring to a vote late this week or next week, raises subsidy rates so much it could encourage such overproduction and drive down commodity prices.

Ann Veneman is quoted as having said:

This creates pressure for more government payments, thereby creating a self-defeating and ultimately unsustainable cycle.

I think they have finally caught on. Will they walk their talk? Mr. Chairman, we will pressure them to do just that. When I met with them in early September, I pointed out to both Veneman and Zellick the reality of what they were doing. It is a proven fact, and we can show you, that capital costs in the United States have gone up in the last number of years. The grain producing states have not diversified, like we have in Canada, to any extent at all close to what we have. They capitalize many of those subsidies into the cost of land. They increase their cost of production. The return does not go up accordingly. They then go back to the government and say, "We have a bigger hole to help you fill this year than we had last year."

I also had a conversation with their chief agriculture negotiator who agreed with what I had to say. We had that exchange in a private meeting. At the Cairns Group meeting I told them that they were saying the right things, but that we would watch to see if they would walk the talk.

The Chairman: That is very important because that farm lobby in the United States is very powerful.

On the topic of subsidies, our Canadian farmers are looking forward to expanding into pulse crops.

Mr. Vanclief: They have been.

The Chairman: They have done a good job. However, the Americans are now threatening to put subsidies on pulse crops like peas, beans and so on, which will stifle the opportunities for Canadian farmers. Are you are aware of that, Mr. Minister?

Mr. Vanclief: Yes, I am.

The Chairman: I think it is important to register a negative reaction in that regard.

I want to thank you for appearing before the committee today, Mr. Minister.

I mentioned to our co-chair how efficient you have become, over the years, in presenting your story. We appreciate your appearance before our committee. We look forward to the importance of agriculture being more recognized in Canada.

Senator Tkachuk: Your attendance at our committee meeting is much appreciated. We hope you have formed a habit of coming to our committee twice a year.

As you know, we in the Senate do not have same opportunities to ask questions during Question Period as do members of the House of Commons, although I must admit I am not sure how much they learn from their Question Period.

Mr. Vanclief: They just ask the wrong questions, although we always give the right answers.

Senator Tkachuk: This meeting has lasted a good hour, minister. Of course, agriculture is a complicated subject. The Governor of the Bank of Canada appears before our Banking Committee twice a year, for two hours each time. I think that is an excellent practice for members of the executive of our government. Would you consider affording us that same courtesy, because I am quite sure we could easily use two hours? We did not have enough time to touch on many topics of interest to this committee. This is an excellent forum for discussion in that we do not expect anyone to take a confrontational stand. It is a way for us to get information that will help us in our own jobs and to fulfil our duties in the Senate chamber. I put that proposition forward for your consideration.

Mr. Vanclief: Senator, I will consider it. I will come as often as I can for as long as I can, but it must fit into everyone's schedule. I always enjoy attending your committees. As far as I am concerned, when we have a discussion like we had here today, we all learn. As you said, we have had an exchange of views on a complex industry.

The committee adjourned.