Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue 20 - Evidence - October 23 meeting
OTTAWA, Thursday, October 23, 2003
The Standing Senate Committee on Agriculture and Forestry met this day at 8:32 a.m. to examine the issues related to the development and domestic and international marketing of value-added agricultural, agri-food and forest products.
Senator Donald H. Oliver (Chairman) in the Chair.
[English]
The Chairman: Honourable senators, in the ``Canadian Farmers at Risk'' report, this committee devoted six pages to value-added products in agriculture and recommended that the government develop a comprehensive strategy that encompasses tax incentives as well as direct federal government funding and expertise to enhance the development of value-added industries, including farmer-owner initiatives in rural Canada.
It is the committee's belief that the adoption of value-added production and security and expanding trade exports has become vital to the survival of Canada's agricultural economy. Demand for value-added products has increased, as has the competition from other countries. If Canadian producers are to excel in this environment, they are required to innovate and adapt to advances in the new technology and changing consumer demands.
This morning, we have invited officials from the Internal Trade Secretariat, the Canadian Food Inspection Agency and the Department of Agriculture and Agri-food Canada to discuss the importance of value-added products. Appearing before us on behalf of the Internal Trade Secretariat is Ms. Andras, the acting executive director. Following her presentation, we will hear from Ms. Bryanton, an executive director at the Canadian Food Inspection Agency. Accompanying her are Mr. Thomson and Mr. Verheul.
I invite Ms. Andras to begin her presentation, but I will say that another committee will be coming into this room at about 10:30. We must be finished with our witnesses and questions of both groups by 10:15. With that gentle admonition, you have the floor.
Ms. Lorraine Andras, Acting Executive Director, Internal Trade Secretariat: Honourable senators, it is indeed a privilege to be here today to speak to you. Let me introduce the Agreement on Internal Trade. It is an umbrella agreement that is not necessarily intended to foster or provide the incentives at which your committee is looking, but rather it is an agreement among the federal government and the governments of the ten provinces and two territories to remove those barriers that would inhibit free markets, expansion and growth.
I would like to just touch briefly on the nature of the agreement. I will race through other elements of it. In the second part of my presentation, I will focus on those elements that pertain to agriculture, alcoholic beverages and natural resources.
I believe that honourable senators have a copy of the presentation. It is not functioning on the screen; we will just use the paper version.
The agreement introduces general rules that prevent governments from erecting new trade barriers. It is a commitment on the part of all parties to enhance, by removing or eliminating barriers, the free flow of persons, goods, services and investment across Canada. Essentially, it stops at the borders of Canada.
The agreement is managed by a committee of ministers. These ministers generally are the intergovernmental ministers or the ministers of industry or industry and innovation across the country. For purposes of specific sectoral chapters, the responsible minister for implementation of those measures to which they have committed under that chapter is the Minister of Agriculture, Natural Resources or as appropriate for the other sectoral chapters.
Under the procurement chapter, all governments have agreed to open their government procurement process on a non-discriminatory basis, without preference for local products, and with open tendering and public notification of calls for tender. This has, to this point, included approximately $50 billion worth of public procurement.
The agreement sets basic rules, including that you should not have to be resident in a given province in order to invest there. In order to invest, you do not have to commit to certain buy-local or subcontracting requirements. It levels the playing field. Therefore, it allows businesses, whether they are in agri-food or whatever, to operate based on market conditions rather than specific requirements.
There has been very dramatic movement on labour mobility to reduce the difficulties for members of professions in moving from one province to another.
In consumer-related measures and standards, there has been considerable movement to ensure harmonization of the standards and regulations on behalf of consumers. This benefits industry as well, in that there is increasingly one focus within Canada for the regulations that they may have to meet on behalf of consumers.
An energy chapter is being negotiated, but it is not complete yet.
On the subject of communications, all telecommunications carriers are now under the same set of rules. There are no exceptions.
Transportation may be a factor that relates to the movement of agricultural products within Canada. A large number of issues have been addressed over the years dealing with permits, weights, axle lengths and things of that nature.
Some parties have complained that it takes four different sets of axle weights to get from one side of the country to the other. Significant steps are being made to reduce that but I will not go into those details.
The reference to environmental protection simply means that, whereas governments have the right to invoke environmental protection measures, they shall not use them as a means of either attracting or discouraging investment. In other words, government should remain trade neutral.
Dispute resolution is one of the key elements of the agreement, which is self-regulating. In other words, if no one complains, the assumption is that everything is okay. Dispute mechanisms have been agreed to by all governments and, therefore, if one government feels that their suppliers, their producers or others have not been treated in accordance with the agreement, then there are precise procedures for dispute action, ultimately taking it to an independent, third- party panel. A number of disputes to date have occurred that, for the most part, dealt with procurement, and most of those dealt with federal procurement.
There are six disputes within the agricultural and food goods chapter, with three of them pending. There are three disputes concerning alcoholic beverages but they were launched many years ago and are currently inactive. There are four disputes at present that deal with natural resources and snow crab processing. I will spend more time on this chapter. Essentially, the agreement is to eliminate measures that create internal trade barriers and obstacles in respect of agricultural and agri-food products. Parties have agreed to harmonize standards and regulations and to not enter into new food or agricultural restrictions, with the exception of sanitary or phyto-sanitary regulations. In this instance, if a new measure were invoked, it would have to take into consideration the trade implications and be no more restrictive than necessary to achieve the purpose of the new regulation.
I will let the representatives from Agriculture and Agri-Food Canada deal with the specific issues related to their progress in various matters. However, I will point out that there are two active committees, and I believe representatives are here today from both, that deal with technical barriers to trade. Provincial agricultural ministers have reaffirmed the importance of liberalizing internal trade. Under the agreement, there was a mandated review of the scope and coverage of the chapter with a view to broadening and liberalizing it. This has not yet been presented to the ministers, and at this time, only officials have undertaken it, I believe.
There are technical barriers but the chapter applies only to those 10 specific barriers listed. Disputes have been launched concerning some of the more contentious barriers, such as the interprovincial movement of fluid milk. A couple of those disputes are related to imitation vegetable-oil-based dairy products. These are identified as covered by the agreement. A newer initiative, the federal-provincial agreement for Chicken Farmers of Canada, has been renewed to make it more flexible. Newfoundland and Labrador has joined the National Milk Marketing Plan. I would let the agricultural representatives speak to this because they are far more cognizant of the details.
The agreement is to eliminate the barriers in respect of alcoholic beverages, which means that listing prices, access to points of sale, distribution and merchandising will not present barriers to trade. Certain exclusions had been in the original agreement but, by and large, have been withdrawn or are no longer active.
The key focus is to establish a national wine standard. Significant work was underway for a couple of years within the Canadian Standards Council. The industry had issues with that process and related events. More recently, there has been movement to institute an industry-led group to work with government in order to finalize the national wine standards.
The chapter on natural resources processing does not include a particularly active work plan. Essentially, all parties agreed that they would not introduce new barriers and they have complied. They have agreed that they would not require certain processing to take place within a province so that the resources could go outside that province for purposes of licensing and permits, et cetera.
That is a quick overview of the area, but keep in mind that it also includes fish. The snow crab disputes are proceeding under that chapter.
I have provided senators with an overview of the agreement as it pertains to agriculture. Again, this is not a legislated agreement but rather a political agreement expressing the will of the parties to do these things. Where one party is perceived by another government not to have met their commitment, that other government is fully within its rights to challenge the party's policies through the dispute process, and in some cases, that is being actively pursued.
The Chairman: Thank you for that overview. I must say that your presentation and this topic go to the root of the study that we are conducting. Many farmers and industry people have told us that the biggest barriers to maximizing their work from their farming efforts are interprovincial barriers. Those barriers are substantial. If our committee can do anything of value, this is one area where we must have a careful look at a number of the things that you have talked about. Could you tell the committee about some administrative items? Is your office in Ottawa? How big is the secretariat in staffing terms?
Ms. Andras: Our national office is based in Winnipeg, from which we service all 13 governments. The full complement of staff numbers six; so it is a small secretariat.
The Chairman: Are some of the staff trained in agriculture?
Ms. Andras: No.
The Chairman: Does anyone have an agricultural background?
Ms. Andras: We cover the chapter from a monitoring point of view. The responsibility for implementing that chapter lies with the agriculture ministers across the country. Our role is more to monitor and report to the ministers responsible for the overall implementation of the agreement within their individual jurisdictions. The person on our staff who monitors that chapter happens to have some agricultural background, but is not a specialist.
The Chairman: Are there any plans, to your knowledge, to expand the coverage of the AIT for agriculture and agri- food products? Are other things being looked at, including items on this list?
Ms. Andras: To my knowledge, not at the moment. The agricultural representatives might want to give a fuller answer, but my understanding is that the focus has been largely on the international negotiations. At least, that is what we are given to understand. There is some reluctance to disclose their hand or to move aggressively on the Canadian front before there are some commitments for reciprocal movement in the international scene. You will have to ask them what further plans they may have for broadening the chapter.
As I indicated, there is a commitment in the agreement to a review of the chapter. It was to have been completed by September 1997. My understanding is that it has been completed at the officials' level, but has not been presented to ministers for their approval.
Senator Gustafson: Many have said that we operate in Canada like 10 vassal states — province to province and territories — and cannot seem to move our products across borders. Certainly, there is a great need for the things that you suggest; but these are only objectives, they have not all been accomplished. The truckers tell me it is sometimes easier to truck into the United States than from province to province.
We had examples, especially in the meat industry, where, in Manitoba, they had certain restrictions on the definition of a ``slaughterhouse,'' and in Saskatchewan it was different again. They could not even move beef across the border. I want to point out the tremendous importance of the situation and the way it ties the federal government's hands.
The ministers, in many cases, are not able to move ahead with programs across the country because the provinces dig their heels in and all of these obligations have to be met. I see it as a real deterrent to the federal government accomplishing things, especially in agricultural areas.
Did you mention $30 billion worth of product?
Ms. Andras: No, my reference was to close to $50 billion in government procurement. That is one of the other chapters where all governments have agreed that they will not discriminate against the products of anyone else to favour their own.
What that has done is establish the same set of rules for all governments, although the nitty-gritty application may vary from province to province. However, the high-level rules are the same, and basically that chapter is functioning relatively well.
Senator Gustafson: How far away are we from free trade among the provinces in Canada?
Ms. Andras: If you take a look at the agreement as a whole, much of what has been accomplished was accomplished in the basic agreement. We look at NAFTA and we say, ``My goodness, is that not a magnificent thing, that three governments were able to get together?'' I tell you, 13 governments is another issue; 13 governments, albeit some smaller and some larger, did get together and agree on the necessity of removing trade barriers. Where possible, a consensus was reached at that point. To a large extent — for example, in procurement — those basic commitments were radical when they were introduced. Since that time, an entire other tranche — the municipalities, health care, that other para-public sector — has also been added, so that there has been forward movement there.
The fact that governments, despite some local constraints in terms of some of the provincial agricultural marketing and licensing structures, did agree to remove barriers is a step forward. In agriculture, as in some of the other chapters, such as transportation, not everything was a done deal when it was signed. There were work programs, things that still needed to be done. The situation under the Agreement on Internal Trade is no different than under NAFTA or WTO. Agriculture is an area where there are continuing negotiations among all of the players. Again, it is no different in Canada in that domain.
Senator Gustafson: A good example of that, of course, is the agriculture project that the government is trying to implement now. I do not think Saskatchewan has signed. I think there is one other province, is there not, Senator Wiebe?
Senator Wiebe: There are three that have not signed.
Senator Gustafson: Three that have not signed. Do you negotiate directly with the provinces?
Ms. Andras: No, certainly with a staff of six that would not be possible.
Senator Gustafson: You need more power and direction than you have now to really accomplish your goals.
Ms. Andras: Our role may be different from what you anticipate it to be. Maybe it should be different — and that is another issue — but our defined role is to support the parties in their negotiations. Therefore, we try to provide the impetus — the legs, the arms, the hands, the eyes — to move forward on these issues.
The Chairman: You are not the catalyst or the impetus for change; it has to come from the ministers themselves.
Ms. Andras: It has to come from the parties. We facilitate the process.
Senator Wiebe: My question follows on from your last answer that you facilitate with a department of six people. Is there anyone within the federal government, whether it is trade or agriculture, acting as the engine in driving an all-out effort to obtain free trade within Canada, similar to the effort that we seem to be expending on trying to develop free trade with other countries? Do we just sit back and say, ``Well, gee, here is maybe an opportunity to get a free trade deal worked out on toilet valves, so let's move on that''? Is there a full-out effort? Has the Government of Canada realized the importance of a free-trade policy right across this country? Are they putting an all-out, constant effort into that?
Ms. Andras: I am going to dodge that question. You will have to ask them. However, there is a group within Industry Canada, and an official whose title is ``internal trade representative.'' There are people who report to him, and a structure within which he reports. Industry Canada would be responsible for the overall implementation.
The detailed implementation of the agricultural chapter would be the responsibility of agricultural ministers. In the federal scene, I believe that the Department of Agriculture is co-chair of two of the major committees. In that respect, they have the opportunity to take a leadership role. I would let them speak to the role that they do play in the committees.
In terms of your overall question — is the federal government taking a leadership role — clearly, they were a key impetus in bringing this agreement into play in the first instance. They continue to be a strong advocate and a strong supporter of the agreement and of moving forward. There is no question about that. I cannot comment on the question of whether they have the horses or whatever.
Senator Wiebe: I appreciate that.
Ms. Andras: It is not for me to comment on the adequacy of the resources that they or any other government provide. I cannot do that.
The Chairman: We are a little worried that there are only six of you, and this area happens to be very important.
Ms. Andras: I agree with you entirely.
Senator Wiebe: You hit the nail on the head. We are really lacking, in spades, someone within the federal bureaucracy who has some kind of vision of where we would like to see this country go. While the agreements on the ground have to be political, and governments are more concerned, because they are political animals, about their re- election in four years than the long-term goals, if anyone is responsible for those goals, it must be the existing bureaucracy. I sometimes question whether they have that kind of determination. Somewhere along the line, a fire has to be lit, because this has been going on for far too long in this country. It is one of the things that are hurting us badly. If we cannot get our act together in our own country, how will we be a world player?
Pardon me for that little outburst, because I know it is not your responsibility, but it is certainly one of the frustrations that we see from the Senate perspective. This is one way to try to address it.
[Translation]
Senator LaPierre: Are you responsible for developing and implementing the agreement?
Ms. Andras: We have responsibility for both of these aspects. We provide support to cabinet, to cabinet subcommittees, to working groups and so forth. We assist them with the process of implementing existing commitments. We support them in ongoing negotiations, but we do not initiate the negotiation process as such.
[English]
Senator LaPierre: When you say you ``monitor,'' does that mean you are like the police and make investigations?
Ms. Andras: No.
Senator LaPierre: Do you wait until someone complains?
Ms. Andras: We are not the policemen. If we were, we would need to be a much larger organization. The agreement is self-regulating. If there are no complaints, then —
Senator LaPierre: There is nothing happening?
Ms. Andras: It is presumed that there is agreement.
Senator LaPierre: I have a little difficulty with the numbers. You say it is between 13 governments.
Ms. Andras: Yes.
Senator LaPierre: We have three territories, ten provinces and the federal government. That is 14.
Ms. Andras: Nunavut was not in existence at the time.
Senator LaPierre: Has it entered into it?
Ms. Andras: Not yet. They are going through a process internally in Nunvaut to assess whether they wish to join the agreement.
Senator Chalifoux: I have three questions, and I will ask them all and then you can respond, because one relates to the other.
I live in Northern Alberta. In the early 1980s, the Metis settlement there wanted to grow potatoes, carrots and things like that to deliver to the territories because it would be much easier and less costly. We found that the marketing boards had a very large influence in this. We also found that the trade barrier was at the point that we were not allowed to ship across the border into the territories. We are about 80 miles south of the border with the territories. This could create a lot of good economic development for our settlement, which is a wonderful growing area because we have 24 hours of daylight through the summer months. The marketing boards had a huge influence on that. The trade barriers were huge.
What influence does the marketing board have on the agreement between the Yukon and the territories, and have you heard if they are doing anything about the trade barriers between the territories and the mid-Canada corridor of our provinces right across the country?
Ms. Andras: I do not know the specifics of that. I know that the territories have signed the agreement and that they are part of the two major committees that are co-chaired by Agriculture Canada, and perhaps you might save that question for them. The agreement came into place in 1995. I hope that has had some positive impact, but I cannot speak to the specifics.
Senator Chalifoux: Do you know anything about the influence the marketing boards have on creating trade barriers across the provinces and the territories?
Ms. Andras: Part of the agreement is a commitment to reduce and harmonize some of the standards. I could not comment on the extent to which the marketing boards that relate to trucking local produce are involved. I just am not aware of that level of detail.
The Chairman: Supply management does retard the free flow of goods between provinces and territories, does it not?
Ms. Andras: Yes, and the agreement itself specified a review of the supply management system.
The Chairman: Has that been done?
Ms. Andras: To my knowledge, no.
The Chairman: Why is that?
Ms. Andras: You will have to ask the Department of Agriculture.
Senator Hubley: My question may be misplaced as well, but it is of interest to me. I wonder if you have a role in what I would call ``crisis management.'' I will use the example from Prince Edward Island when a disease was discovered in our potatoes. Our trade with the United States stopped, but they also interfered with our trade across Canada. Do you have any role in a crisis management situation like that?
Ms. Andras: No. The ability of provinces to put in place phyto-sanitary and sanitary standards is not impeded, other than there is a commitment to review the trade impacts and to ensure that any measure is not more trade restrictive than absolutely necessary. Also, if P.E.I. had wished to challenge the basis for other provinces not allowing P.E.I. potatoes in or limiting trade in whatever manner, the agreement does provide a mechanism to deal with that, but it is not really designed to respond in a crisis situation. The full process would take a year or more, and that will not help the farmers.
If, on an ongoing basis, the P.E.I. producers perceive a restriction to be discriminatory and, after consultations with the other province, they feel they have a case to present to an independent panel, then the mechanism does provide a means for dealing with that issue. Frankly, other than through bilateral consultations, which have always been available in the past, there has never been an across-the-board mechanism to deal with these different perceptions as to what is or is not a trade barrier on the part of those who may be subject to a regulation that they do not feel is proper. There is that mechanism and it is being used.
Senator Hubley: When we are dealing with agricultural products, the seasons determine when the produce arrives, and sometimes the system works more slowly than Mother Nature. When that happens, it is the farming communities that suffer.
Senator Day: Have you done any comparisons with other countries, for example, the United States? They deal with many more jurisdictions. What is the situation with free trade between states compared to between provinces?
Ms. Andras: We have not done any formal study. There are very few states that are not bordered by at least four others, whereas in Canada we have one or two provinces bordering one another. You will probably find that they have to get along a little better because there are four against one. They are all contiguous with each other. Having said that, I am not sure from what I hear that the flow of goods or whatever is as smooth as they would like it to be either.
Senator Day: No formal studies have been done?
Ms. Andras: Not that we have done or of which I am aware.
Senator Day: Is there something that we can review to determine what they have done to solve the issues and whether we should think about some of those things?
Ms. Andras: I am not sure that there are magic bullets. The system and constitutional structure in the States are different.
You were talking about the need for federal leadership. Yes, there is clearly need for that. However, in interprovincial trade, many of the things to be regulated are clearly within the provincial domain. Interprovincial aspects may fall to the federal government in terms of the Trade and Commerce Act provisions, but it is not absolutely clear-cut in every case that they can dictate. There may be a difference in the States.
Senator Day: I have a point of clarification with respect to the dispute resolution mechanism. You gave some statistics. This is not legislated, but there is an agreement between the provinces. How is this binding?
Ms. Andras: It is not binding.
Senator Day: Do you administer the dispute resolution process?
Ms. Andras: Yes.
Senator Day: You have a panel of experts who get involved as arbitrators, presumably?
Ms. Andras: Not as arbitrators, but they are an expert panel. They make a formal recommendation.
There have only been four cases that have gone that far down the path. There are a couple in progress at the moment. Two of the four cases concerned agricultural products, specifically, the interprovincial movement of fluid milk. Both cases went to a panel. In both cases, the panel agreed with the complainant.
In the one case, P.E.I. did ultimately agree to follow the panel's report. The second case concerns New Brunswick, which has not yet complied.
Senator Day: You gave us figures noting that there had been 175 disputes to date, with 164 completed. Those figures should be interpreted according to what you have just told us?
Ms. Andras: Ninety-five per cent of those complaints are procurement related. Of those, approximately another 95 per cent relate to the federal government.
The number of disputes that have followed the entire process is much smaller with respect to the other chapters. Disputes under agriculture are the most prevalent.
Senator LaPierre: It would appear to me from what I have heard today that your office must either be abolished or beefed up. There must be a centralized authority in Canada to administer and develop this agreement. Six people will not do it. Winnipeg is a marvellous location.
Ms. Andras: Even in Winnipeg, six people are not enough.
Senator LaPierre: Perhaps we should look at that down the road.
It is fascinating that there are so many problems in moving alcohol. Alcohol is good. There is nothing like a single malt to keep your arteries open.
Why are they so obsessed with alcohol? It would appear that Quebec will not allow wine into the province unless it is bottled in Quebec. Newfoundland does something else. I hope it does not do anything about its magic vodka because my life will be over.
Why is the movement of alcohol so difficult? I am told that I cannot bring liquor from Hull to Ontario in the trunk of my car.
Ms. Andras: You can bring it, but it is a question of not paying the appropriate provincial taxes. The entire financial sector is not covered in the agreement. The issue of taxes that may be imposed is part of that. It is not covered by the agreement.
In that particular case, the issue is more one of whether you have paid the proper taxes in bringing liquor across the border.
Senator LaPierre: The taxes on liquor are higher in Ontario than in Quebec.
Ms. Andras: Drink it in Quebec and do not bring it over.
Senator LaPierre: I still think that we need to do something about this matter.
The Chairman: I quite agree. At the risk of beating this thing to death, I say it comes down to the division of powers. I have always been against centralizing power, but in this case, the provinces have too much power. Agriculture is really suffering because of the way we are operating.
It is a vast country. It is not an easy problem to solve, but it is certainly one at which we must look.
On behalf of the committee, I want to thank you for coming here. You can tell by the quality of the questions that your evidence has raised some very grave concerns for us in this study on which we are embarking.
If we have more questions of you, do you mind if we have the researchers write to you? I know there is more information we will want to get so we can fully understand your office and how you operate. Do we have your consent to continue to communicate with you on this?
Ms. Andras: Absolutely, we would be delighted to communicate.
Senator LaPierre: Do you report to the federal Minister of Agriculture?
Ms. Andras: No. I report to the 13 ministers responsible for internal trade.
Senator LaPierre: Are you still sane?
Ms. Andras: Sometimes, I wonder. The provision within the agreement is that the designated ministers for internal trade have overall responsibility within their jurisdiction. How they deal with their agricultural ministers is up to them individually. I report to the CIT, the Committee on Internal Trade.
Senator LaPierre: Who signs your paycheque?
Ms. Andras: We are funded by all 13 governments, and I sign my pay cheque.
The Chairman: Do not tell us that because we do not want to hear it.
Ms. Andras: We are not public servants of one government or another because all 13 governments provide our funding. The federal government funds one-half and the other 12 governments fund on a proportion-to-population basis.
The Chairman: Thank you, Ms. Andras. We will now hear from witnesses from Agriculture and Agri-Food Canada. Senators will recall that Mr. Thomson graced members of the committee with his presence when we travelled to Ireland and the U.K. Welcome, Mr. Thomson.
Mr. Ian Thomson, Director, Western Hemisphere Trade Policy Division, Agriculture and Agri-Food Canada: It is a pleasure to see so many friendly faces again since we walked upon the moors in Northern Ireland.
I am pleased to be joined this morning by my colleagues, Mr. Steve Verheul and Mr. Eric Johannsen; and from the Canadian Food Inspection Agency, Ms. Debra Bryanton and Mr. Paul Haddow.
I assume that we have been asked to appear before your committee because we co-chair the Federal-Provincial Agriculture Trade Policy Committee, FPATPC, along with officials from the provinces and territories. The provincial co-chair is rotated on a bi-annual basis. There is an equivalent federal-provincial inspection committee that deals with a number of regulatory and technical issues in respect of interprovincial trade and other matters, hence the presence of the food inspection agency this morning. We look forward to your questions and we thank you for inviting us.
The Chairman: Did anyone else in your group want to add anything to that before I turn to Senator Wiebe to begin the questioning?
Ms. Debra Bryanton, Executive Director, Food Safety, Canadian Food Inspection Agency: I am certain that senators are familiar with the Canadian Food Inspection Agency, CFIA, which is Canada's largest science regulator. Our priorities are to contribute to the safety of food in Canada and, through our programs, to protect our animal and plant resource base. The CFIA also co-chairs the Federal-Provincial-Territorial Agri-Food Inspection Committee mentioned by Mr. Thomson, which deals with some of the technical trade issues raised earlier.
Many of our federal-provincial committees are not so much oriented toward resolving barriers — because in the technical world, there are few barriers — but more oriented toward proactively working with the provinces to build national systems that avoid trade barriers. We did not prepare any specific comments for this morning but we are happy to respond to your questions. As well, Mr. Paul Haddow is here from our interprovincial affairs group to comment on any issues in respect of international trade agreements and how the sanitary and phyto-sanitary agreements are domestically integrated into our system.
The Chairman: You will recall that the previous witness, when talking about the interprovincial barriers, said that they are trying to avoid putting up new obstacles, provided sanitary and phyto-sanitary issues do not arise. With that in mind, what is the current status of the movement of cheese products between the provinces?
Ms. Bryanton: The Canadian Food Inspection Agency has two kinds of legislation. The food and drug legislation is based on criminal law and applies to all food products sold in Canada. We also have legislation based on trade and commerce authority that applies to products shipped internationally. We have dairy products regulations that cover cheese and there are no restrictions on the movement of cheese interprovincially. The requirement is such that if the product moves interprovincially, it must be produced in a federally registered establishment.
Senator Wiebe: Are any of you members of the Federal-Provincial Agriculture Trade Policy Committee?
Mr. Thomson: As I tried to explain, senator, the federal co-chair of the committee is the Director General of the International Trade Policy Directorate at Agriculture and Agri-Food Canada. Unfortunately, he was unable to attend this morning because he is on language training, and yes, there is a direct relationship between Agriculture and Agri- Food Canada and the FPATPC.
Senator Wiebe: You were here during our last witness's presentation and so you will probably recall the comments I made to Ms. Andras regarding the lack of an engine to drive the free trade agreement within Canada. If there were such an engine, would I be safe in assuming that this group might be one of the cylinders?
Mr. Thomson: Absolutely.
Senator Wiebe: Responsibilities within the provincial and federal levels of government are spread throughout many departments.
Mr. Thomson: When you mentioned being one of the cylinders, were you referring to the Senate committee or to the FPATPC?
If there is such an engine, it is not running on all cylinders because we are moving terribly slowly.
I would like to put my next question. The AIT, which you said you were a member of, or your boss was a member of, had set a number of deadlines for reviews on internal trade barriers, especially relating to food products. So far, these reviews have not been undertaken. Some of them were set as annual reviews, and those too have not been undertaken. Can you tell me why they have not been undertaken; or if they have, why they have not been tabled? What is the problem?
Mr. Thomson: You are right, the scope and coverage of chapter nine is an ongoing concern. However, within the Federal-Provincial Agriculture Trade Policy Committee, time constraints and the focus on our international negotiations within the WTO have tended to overwhelm the agenda.
Mr. Steve Verheul, Chief Agriculture Negotiator, Agriculture and Agri-Food Canada: If I could add to that, the idea of reviewing the scope and coverage of the agreement has been brought before federal-provincial ministers on a number of occasions. They have taken the decision that we would not make any efforts in that regard at this time. Their view was that the industry was more interested in putting the focus on the WTO negotiations. They have made that decision, pretty much on an annual basis, not to pursue those negotiations.
The Chairman: Is that good public policy for Canada?
Mr. Verheul: That is a much different question. As you would understand, to have a negotiation you have to have willing partners come to the table. The provinces have expressed the view that they do not want to negotiate any further on those particular issues at this time.
The Chairman: Statistics indicate that internal trade has been increasing, but at a much slower rate than external trade. Can you provide the committee with your views on why external trade is growing faster than internal trade? What do you say to that?
Mr. Verheul: It is not an issue on which we have done a lot of analysis. My immediate reaction is that part of the reason is the nature of the economy within Canada. We have a lot of north-south trade in the West and East. In many cases, that kind of trade is easier than trade between the far West and the far East. I would suggest it is, in part, for reasons of geography. However, as I mentioned, we have not done a lot of analysis on that.
The Chairman: It is also due in part to the interprovincial barriers that we are now studying. Would you not agree?
Mr. Verheul: That would be part of the issue, definitely.
Senator Gustafson: The policy framework, the APF, was announced in June 2002. The farmers still do not understand the program and agriculture is changing so fast on the global scene. For instance, we had $5 durum; we now have $2.60 durum. That presents a whole new challenge for agriculture. How long will it be before the farmers will understand what is happening? I realize that, as Senator Wiebe said, three provinces have not signed on yet. This is becoming a serious problem.
It may be easier to inspect the shrubs in Ireland than to answer this question.
Mr. Thomson: What can I say, senator, that you are not aware of already? There are difficulties in trying to resolve these issues between the federal government and selected provinces for varying reasons. What we do know is that you are right, agriculture is changing fast around the world. The notion that underlies the APF is that Canada should be much more able to respond effectively to those challenges, and hence the different elements under the APF designed to meet them. That includes an international component, for example, which contemplates new movement in terms of our representation abroad, our trade advocacy efforts in the U.S. and around the world and other such elements. In relating it back to interprovincial barriers, I can appreciate what you are saying, but there might be a difficulty in making a causal link between the APF and the movement of goods between provinces as an issue.
Senator Gustafson: The position of the World Trade Organization will definitely impact what happens in Canada. It will impact in different areas, such as the milk industry, the chicken industry, the turkey industry and so on. They are calling for the removal of a lot of the significant programs currently in place. How will Canada respond to that? The last response we had in Mexico was that there were no negotiations. Things broke down. It appears to me that the problems are becoming greater and the answers probably fewer.
Mr. Thomson: Fortunately, we have our chief agricultural negotiator here this morning. I notice you did not mention the Wheat Board in that list of items.
Senator Gustafson: It gets too complex when you get into all of that.
Mr. Verheul: Without a doubt, we do have some challenges ahead of us in the WTO negotiations. We do have a particular challenge with our level of border protection with respect to supply-managed commodities. Other countries are seeking greater access to our markets. We are by no means the only country with commodities that are import- sensitive — as we have with dairy, chicken and eggs. The progress that we made over the last six months or so in the negotiations leading up to the Cancun ministerial conference was more in the direction of recognizing that there should be some different treatment for import-sensitive commodities. We do have a chance at addressing that issue in the negotiations.
Senator Gustafson: If that door is opened, what happens in the long run?
Mr. Verheul: Much depends on what kind of agreement we end up with. If we have an agreement that results in more pressure, or we get more pressure on our existing tariff levels, then that obviously has an impact on the industry. However, I do not think we are talking about the kinds of impacts that would mean the end of supply management, for example. We may have to look at whether any adjustments might be required, or an evolution of the system, but I do not think we are talking about something that will result in the end of supply management.
Senator Wiebe: Talking about the impact on the industry, we are putting a significant effort into the removal of subsidies worldwide on grain. Let us say that we are successful in our world trade negotiations and are able to remove all of the subsidies on grain. Every country now involved in these negotiations has so much cultivated land. What would those farmers who were receiving subsidies grow — and those farmers who were not?
I ask that because in my mind, our problem is not the subsidies; the problem is overproduction. Even if the subsidies were all removed tomorrow, the price of grain would not go up. The farmers in Europe would react exactly the same way as farmers in Canada, in that the only thing they know to do with their land is to grow durum or barley. They will continue to grow durum and barley.
What we see now is a world price level for grain that reflects the value of the product. Governments in the United States and Europe have made the decision that farming is a way of life and not a business, and they will provide the dollars to ensure that those farmers remain. Is that a correct assessment?
Mr. Verheul: Certainly the main protagonists in the negotiations, the U.S. and Europe, have indicated that they are committed to continuing to support their farmers. Much of what we are talking about in the WTO negotiations is not necessarily how much you subsidize your producers, but how you subsidize your producers. We are calling for reductions in or elimination of the most trade-distorting kinds of subsidies that do result in overproduction, but we are pressing countries to provide subsidies without any links to production or prices so that farmers in many cases — and this is the direction Europe is going — would receive subsidies without necessarily having to grow anything. It would be based on what they did during historical periods. The idea is to remove some of the distorting factors in production and allow those producers who can produce the most efficiently to compete in a fair marketplace.
Senator Wiebe: In Canada, we are very good at what we do. I am talking about the farmers. Because the price is low, the farmer who receives no subsidies does whatever he can and uses whatever technology is out there to increase the number of bushels that he produces per acre. He does that because his costs per acre are about the same, but if he can increase what he gets from that acre, he will be able to keep that on his table because he will be able to sell that much more product.
If those subsidies that we call ``trade distorting'' and that encourage more production in Europe are causing the problem, why would those farmers, after the removal of those subsidies, react any differently from our farmers? Again, the problem of oversupply will continue, and the only way we will be able to get that price up is if Mother Nature causes a disaster somewhere in the world and no crop is raised.
Mr. Verheul: It is a generally anticipated outcome of the negotiations that if we do succeed in getting real reductions in subsidies, particularly trade-distorting subsidies, we would see a fair amount of production adjustment around the world. We would see some producers in those areas that are not competitive moving out of that kind of production, or moving out of production entirely. Certainly that has been a feature of the direction in which Europe has been going. Also, the expectation in some of the reforms is towards providing producers with assistance even if they do not produce, and some of the analysis that we have seen out of Europe is that many of them would not. Why go to all the extra trouble if you will get the same cheque anyway? The expectation is that if we get the right kind of reductions and move to the right kinds of support, then we will see a production effect. We will see less production and a more competitive and fair marketplace.
The Chairman: I have a question about the import-sensitive commodities. You mentioned that you might consider making some adjustments in supply management. I would like to know what specific adjustments you are prepared to put on the table on Canada's behalf.
Mr. Verheul: We are not prepared to put any adjustments in supply management on the table. Supply management is not really an issue in the negotiations. What could have some potential impact is an agreement that results in reduction of tariffs at the border. That would then have some impact on the supply management system's ability to set a domestic price without reference to what is happening elsewhere in the world.
Our position in the negotiations is that countries should have the option of either making reductions in tariffs or making improvements to tariff quotas. The supply management sector supports the Canadian position that there should be an option to make improvements through tariff quotas. Supply management would be able to continue to function in that kind of an environment. We are seeing some progress in the negotiations towards that idea that Canada has been promoting.
The Chairman: We have heard some evidence today about the AIT. We have heard that it is not working as well as it could. Some might even say it is a failure and should be restructured. In one sense, some of the parties are treading water and we are not doing as much as we could to break down provincial barriers. I would like the five of you to consider what advice you would give to this committee as policy-makers on what we should consider doing about this apparent impasse.
Senator Hubley: We are looking at value-added products from the perspective of the farmer, to give more opportunities to the primary producer to reap more of the benefits. There seems to be an imbalance in the cost of the primary product and a value-added product. What can you do to assist farmers to make that move or encourage them to consider value-added products? It might be identifying a market, or securing a market if you are on any of the trade expeditions. What trade barriers face our farmers in moving from being primary producers to a value-added situation?
Mr. Verheul: Others may wish to add to this. One of our objectives in the WTO negotiations with respect to our access to other markets is to address the issue of what is called ``tariff escalation,'' where the tariff on a basic product is much lower than on a processed product, which discourages processing in an exporting country and favours the processing being done in the importing country. A number of proposals are on the table to address those disparities. Rather than shipping canola seed to a country, we could ship canola oil or canola meal and start to add more value without facing the kinds of barriers in other markets that we might otherwise face.
The other issue I will mention is a movement on the part of the industry and producers in Canada, as well as in other countries, to try to get a greater profile for the whole issue of market power on behalf of farmers, so that farmers can have an opportunity to get a bigger slice of the pie when selling produce around the world.
Senator Ringuette: In my area, dairy producers feel that the issue closer to home is NAFTA. Are there any unresolved trade issues in regard to agricultural products in NAFTA?
Mr. Verheul: No, there are no unresolved issues at the moment. Some areas have been described as being left out of NAFTA, in particular, the supply-managed products, and, on the U.S. side, their sensitive products, including sugar, cotton, peanuts and others. Those were essentially exempted from the NAFTA. That agreement has been challenged, but not successfully, so they remain exempted.
There are also provisions in the NAFTA that we would examine when reviewing subsidy levels or making further progress on subsidies between the two countries, but that work has not really progressed. The debate has shifted more to the WTO than to NAFTA.
Senator Fairbairn: I apologize for being late. It is Literacy Action Day on Parliament Hill, and I was leading the charge this morning at some ungodly hour. At any rate, I am sorry I missed the initial comments.
I come from Southwestern Alberta, which at the moment is the centre of the woes in the cattle industry and the industries surrounding it. For the record, I would like to thank the Canadian Food Inspection Agency for its work on that issue. It has taken an extraordinary and powerful role in putting Canada in a position to give factual reasons for the border to be open.
One of your colleagues came to auction barns and rallies with me in order to explain a complex issue that was causing the farmers great anxiety in the beginning. The fact is they were having difficulty in understanding the science.
I say hats off to the agency. They did a splendid job, and all Canadians should be proud of them.
I want to pick up on the matter that the chairman asked witnesses to think about. It has always been a mystery to me why there is so little movement on the interprovincial trade issue in Canada. In 1993, the then Minister Manley of Industry, Science and Technology came out of the gate with a determination that, come heck or high water, he would achieve movement in that area. He put much time and effort into trying to create a process and seeking resolution of issues that would allow for better interprovincial trade.
We worry about the WTO and everything else that is happening in the world, but we have ten provinces, three territories and the federal government and we cannot get our own house in order.
Could you briefly indicate the key points that prevent the players in our country from finding common ground? I know the issues might be somewhat different in each province, that is understandable, but what are the main reasons why we are depriving ourselves of agricultural value, efficiency and a future for our producers? There must be a switch that can be turned. Can you help me understand this?
Mr. Paul Haddow, Executive Director, International Affairs, Canadian Food Inspection Agency: We must be careful not to exaggerate the problem. There are many interprovincial barriers. In the presentation from the Internal Trade Secretariat, Ms. Andras indicated that there had been a vast number of disputes, about 985, but most were in the area of government procurement.
In the agriculture area, the situation is not all that bad in the sense that there have been a handful of disputes over the past eight years. They have predominantly been in the area of dairy products and probably rooted in the mechanics of the supply system.
I am not an expert in the supply system, but let us leave that aside. That is dairy. It is poultry. It is eggs. I do not say that those are insignificant, but the issues surrounding supply management are bigger than the question of interprovincial barriers to trade.
If you put that aside, what are you considering? Essentially, everything else can move back and forth freely today.
Senator Fairbairn: There are no major transportation issues?
Mr. Haddow: There may be some, but there are no agricultural policy or regulatory issues that would interfere with free trade.
My colleague Ms. Bryanton mentioned earlier that in order for meat and animal products to move between provinces or outside the country, they have to pass through the federal regulatory system. For example, meat has to be slaughtered and processed under federal inspection.
The Chairman: To meet the requirements of international markets.
Mr. Haddow: To meet the requirements of international markets and to cross provincial borders. There have been complaints here and there that small abattoirs cannot afford the costs of meeting the federal standards. They can only sell within the province.
They are asking if there is a cheaper way for them to achieve equivalency with the federal standard without undertaking the expense of the federal regulatory system. We are looking at that with the provinces. Are there better ways to meet the food safety objective without all of the architecture and procedures of the federal system? We are trying to come up with a creative answer to that.
Occasionally, we will have a plant health problem. For example there was potato wart in P.E.I. You want to contain the problem and not export it to other provinces. However, once that issue was resolved through finding the farm causing it, there were no barriers to interprovincial trade.
Supply management is an issue. However, the situation is not as gloomy as I have heard it described today.
Senator Fairbairn: There was a report from the international panel that did an overview of how the situation had been handled in Canada that in large measure was very favourable and complimentary. That report did make some significant recommendations, some of which are already in the process of being addressed, with the remainder to be addressed.
Will that exacerbate the difficulty in moving meat products and the inspection process? Will these new recommendations to which the government has committed to respond add another problem for the smaller operators who are already experiencing difficulty?
Ms. Bryanton: One of the first recommendations with which we moved forward was the removal of specified risk materials at point of slaughter. The specified risk materials are those that are most likely to present BSE.
The provinces were very helpful in moving forward on that initiative. The ministers of agriculture indicated their full commitment. They are working closely with us to implement those measures within provincial establishments.
This may actually contribute to a more positive national meat inspection system. It certainly has brought the provinces together in understanding the importance of a national approach. The risk removal is the first example of how the provinces are working with the federal government to understand the requirements and implement them in federal establishments.
Some provinces are further ahead than others. However, all provinces have indicated their support.
Senator Fairbairn: This is encouraging news.
Senator Wiebe: In answer to Senator Fairbairn's question, you said that there is not much of a problem in interprovincial trade as it relates to the raw product, and I agree. When our country was formed in 1867, we did not have to worry about interprovincial trade. However, in terms of what our committee is studying, in order for the farmer — that is, the primary producer — to create value added to his product, he has to move up the processing chain. That is where interprovincial barriers are hurting. The producer is not allowed to move up the chain because of provincial barriers that prevent him for moving a processed product, rather than raw product, to another part of the country. I think that the AIT has a long way to go in helping the primary producers in this country to move up the value chain because the barriers are there still in every province.
Ms. Bryanton: The AIT primarily deals with barriers introduced between the provinces. When we look at the activities of the Federal-Provincial-Territorial Agri-Food Inspection Committee, there are few issues that have been introduced as a unique requirement in one province. At their last meeting, for example, they were looking into the issue of blueberry maggot. This is a plant health issue. They are looking into interprovincial movement of cervids. There was an impact internationally because of chronic wasting disease. They are looking at head blight, a requirement that was introduced by some municipalities in Alberta. The committee is working to resolve issues introduced by an individual province or, in some cases, more than one. In reality, there are very few technical or regulatory issues introduced by a province.
There are restrictions on interprovincial movement of product, as you indicated, for those areas regulated under trade and commerce legislation. For example, if processed product is covered by some of our legislation under the dairy product regulations, the processed product regulations, in order to move across a provincial boundary, it must have been produced in an establishment that meets the requirements of federal legislation. There are also provincial establishments that do process food products sold within the province. Are you concerned that some of the provincial establishments that are unable to meet federal requirements are not able to accept the product from that producer and ship it interprovincially to build their markets?
Senator Wiebe: My apologies, Ms. Bryanton. The question that I raised was inadvertently directed to the wrong person. It was to Paul Haddow. My eyesight is such that I thought the nametag I was reading was Mr. Haddow's and not yours. However, I must compliment you on a great answer.
The Chairman: Mr. Haddow, you now have the floor.
Mr. Haddow: My colleague has answered the question as well as I could have.
I do not want to minimize the problem. There was a concern in the sanitary and phyto-sanitary areas — that is, animal and plant health and food safety. This agreement was born at a time when we had just negotiated NAFTA. The WTO had just come into place and there was enthusiasm for treating each other within Canada as well as we treated our foreign competitors. Therefore, there was a chapter on sanitary and phyto-sanitary issues. Essentially, it has not been a problem. Provinces have not taken advantage of food safety or animal health measures to block trade. We have been treating each other well and have not abused the system. There has been no dispute on sanitary and phyto- sanitary issues. People have not been cheating. I am not saying that it should not be more ambitious, but in the narrow section with which I am concerned it has been very quiet because there have been no problems. I will leave it there, senator.
The Chairman: I will now ask Senator Day's questions, since he had to leave for the Transport and Communications Committee.
The goals of the AIT are to remove barriers to free domestic trade in goods, services and capital, ensure greater labour mobility within the country and reduce overlap by harmonizing differences in standards.
Senator Day wants to know whether studies are being done on this. If they are, are they being done in universities or think tanks, and which universities and think tanks are doing research on interprovincial trade issues? In relation to that, what are some of the issues that this research is studying? What are some of the challenges that the researchers are meeting in relation to the breakdown of barriers interprovincially?
Are we trying to achieve too much in terms of breaking down these interprovincial barriers at one time? Should we be going product-by-product, or sector-by-sector, or bilaterally — two provinces at a time, for example?
Are you looking at a program like that introduced a few years ago by Otto Lang?
What are the issues and challenge they are facing?
Mr. Thomson: Specific to agriculture, I am not aware of any particular focus on that type of study within Canada. There may be pockets in some graduate economics program at Queen's or wherever; however, I am not aware of any.
There does not seem to be any think-tank focus on the issue of interprovincial trade barrier removal and the economic impacts and benefits. If we reviewed the journals of the Canadian Economics Association, for example, we might find some quantitative pieces, but there are so many Greek letters and backward sixes that it would be beyond my comprehension.
The Chairman: Should we be going sector-by-sector, product-by-product?
Mr. Thomson: That is what happens, perhaps. On the regulatory, technical type of issues like blueberry maggot, my colleagues work to try to come to some accommodation. I think that happens just by the nature of the beast.
The Chairman: Before we conclude, I posed a question to you that Senator Fairbairn followed up on; I would like to know what public policy suggestions you and your group has in relation to beefing up the AIT.
Mr. Thomson: Things are essentially done through consensus. The dispute resolution system is founded on adoption without any legal responsibility to implement any of the recommendations. One must wonder if that is an area that might be explored for enhancement of one type or another. All of us work in the realm of international trade agreements, for example, the SPS agreements within the WTO and NAFTA and the WTO agriculture agreements. We would not get far without binding decisions by panels on the issues and the requirement to implement those decisions over time.
There might be some analogies that the provinces might want to consider over time.
The Chairman: Senator Day asked if the decisions of these panels were in any way binding. We hear you on that. Is there anything else that others would like to state to this committee as areas that we might want to canvass?
Ms. Bryanton: Earlier, I had mentioned that the federal-provincial-territorial committee does not have to deal with many barriers. The more important aspect is avoiding barriers.
Not to in any way discount the importance of the Internal Trade Agreement, but it is also important to recognize the efforts to avoid problems in the future. The committee is working actively on a national meat code, for example. It is working to develop an approach to on-farm food safety systems and the ability to trace food origin.
These are some of the emerging issues in the agricultural sector. The committee is looking at them seriously to ensure that it can take best advantage of those, but also avoid barriers as a result of initiatives at the provincial or national level.
It is probably important to recognize that there are other mechanisms for avoiding trade barriers.
The Chairman: For your information, Mr. Thomson, we have just learned that the Montreal Economics Institute did release a study two years ago calling for the further removal of trade barriers. That is an example of a think tank that has done work in this area.
Mr. Thomson: In agriculture?
The Chairman: Not specifically in agriculture, no.
On behalf of the committee, I would like to thank you. As with the previous witness, there are a number of unresolved matters in our minds, and we hope that as the study continues we may feel free to call upon each of you to return for any further questions after we learn more.
In one sense, the three of you have painted a rosy picture. That is not represented in some of the literature that we have read thus far. We may want to bring you back and put some more difficult questions to you based on the evidence we may hear.
Mr. Thomson: On behalf of my colleagues, senator, thank you very much for having us. We remain at your disposal.
The committee adjourned.