Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue 5 - Evidence
OTTAWA, Tuesday, December 14, 2004
The Standing Senate Committee on Agriculture and Forestry met this day at 5 p.m. to study the present state and future of agriculture and forestry in Canada.
Senator Joyce Fairbairn (Chairman) in the Chair.
[English]
The Chairman: Honourable senators, thank you for being here. Today's session promises to be interesting.
To those who are watching this meeting on television, we are the Standing Senate Committee on Agriculture and Forestry. Tonight, we have with us the Minister of International Trade, Jim Peterson, who is accompanied by Ms. Elaine Feldman and Ms. Suzanne Vinet.
Minister Peterson, if you would like to say a few introductory remarks, we can then go right into questions.
The Honourable Jim Peterson, P.C., M.P., Minister of International Trade: Thank you very much, madam chair. It is a great pleasure to be with you. I thank you for arranging this meeting. I welcome your advice on an ongoing basis as we handle this very difficult, complicated softwood lumber file, a file that has plagued us for more than two decades now. I had planned to make opening remarks of about 15 minutes, but because of time constraints I will say only a few words and then open it up to your concerns and questions.
I have two very brilliant people with me. They can answer all the difficult questions, and I will take the easy ones.
The softwood lumber file had an important occurrence today. The final determination of the dumping and countervail duties was set down at noon by the United States Department of Commerce. It reduced the duties from 27.22 per cent to 21.21 per cent.
This 21.21 per cent is up from the 13.24 per cent, the preliminary determination of the commerce department last September. One can only speculate at what they were attempting to do by actually increasing these duties when the NAFTA and WTO panels have consistently refuted the right of the United States to impose any duties on Canadian softwood lumber. Perhaps they are trying to drive our industry to the table. A meeting is scheduled for the 16th in Chicago, industry to industry. They are pursuing what we have encouraged from our department, which is the two- track approach to resolving the softwood lumber dispute.
We will litigate, and I am confident that we will continue to win. On the other hand, we remain open to a negotiated settlement, providing it is in the best interests of all Canadian stakeholders, including the industry and the provinces. This is why we have encouraged, in terms of a negotiated settlement, the industry to get together to see if they have a coherent and national view for all of Canada.
I have worked consistently with the industry and with my provincial counterparts to deal with this issue. It is not something that the federal government can deal with on its own. You will recall that last spring we encouraged negotiations between the provinces and the U.S. commerce department as to policy reform in the forests that would lead to free trade. I was optimistic at that point — because we were hoping to end these disputes once for all and have free trade in softwood lumber in North America.
Discussions took place with British Columbia and Ontario and the commerce department, but then they faltered. It became obvious at that point that the lumber coalition in the United States did not want to have free trade, even if we had forest practice reform here in Canada. At that time, the U.S. commerce department said to us, “Don't speak to us, the government; speak to the lumber coalition.”
Our position remains that which has come out of the numerous decisions of the panels of the WTO and the NAFTA — that is, that our lumber people are fair traders in lumber, that none of these duties should be charged and that the more than $3.8 billion in duties that already has been collected should be returned to the Canadian producers.
We have a problem. We have the Byrd amendment, which has been declared illegal by the WTO and which would give all of these duties to the U.S. industry. It has been declared illegal because it declares double jeopardy. Not only is a duty imposed, which is supposed to level the playing field, but that duty also goes to our competitors. They benefit; our people suffer twice. This encourages champerty and maintenance on behalf of the U.S. producers. If they can get that money, why would they not sue us at every opportunity?
On top of this, we have the veneer of the Baccus amendment, which would have taken the money that is held by Treasury right now, even before the cases are determined, and given it to the industry. This is totally illegal. Thank goodness the Baccus amendment died on the Order Paper when Congress rose. This is the type of harassment we are getting. It is very distressing to see that the United States is not, in the softwood lumber dispute, abiding by the rule of law.
We shall continue, however. With those few words, I wanted to open it up for discussion.
The Chairman: Thank you very much, Mr. Peterson. Colleagues around the table will be interested in hearing from you about some of the opportunities for Canada following the recent release of information from the World Trade Organization on issues like our Canadian Wheat Board, our supply management and that kind of thing. I think you can be prepared for questions on that around the table.
Senator Gustafson: Welcome, Mr. Peterson. Senators, I have known Mr. Peterson for a long time, and he is not too bad a fellow, really.
Mr. Peterson: I think they would say in response, “I don't think you know him as well as you said you did.” You are very kind, senator.
Senator Gustafson: My question is on the duties that they are charging, which are very high — 27 per cent, you say. Is that paid right up front?
Mr. Peterson: Yes, it is paid right up front. As a matter of fact, with this new determination today, one company will be paying even higher than 27.22 and that is Tembec. They have had their company-specific anti-dump duty increased by the commerce department.
Senator Gustafson: To your knowledge, in the negotiations with the Americans, are the Americans asking for tradeoffs?
Mr. Peterson: We have heard no word of tradeoffs of any sort. I could take you back a bit. I was appointed about a year ago. On December 6 of last year, the Americans had put an offer on the table that would have given Canadians 31.5 per cent of the U.S. softwood lumber market. It would have required certain changes to take place in the provinces. Provinces would be dependent on other provinces complying in order to get free trade. This offer of the Americans was quickly rejected when I canvassed both the industry and my colleagues at the provincial level. My first task was to go to Washington on January 11 to speak to Donald Evans, Secretary of the U.S. Department of Commerce, to tell him that this offer was one that our industry, regrettably, could not accept. From that point on, there has been really no engagement on a government-to-government level. There have been industry discussions.
Of course, one of the big problems that offer presented to us was that it required quotas for various provinces. This is a very divisive exercise when it comes to Canada. Because of the 27.22 per cent duties, the impact on various regions varied. B.C. was ramped up and started producing a great deal, but it was much more difficult for Quebec and Ontario, with a different type of forest.
The answer to your question is, no, there has not been a linkage to another issue.
Senator Gustafson: What about volumes of shipment? I live on the Sault line. Coming out of B.C. to Minneapolis, there is trainload after trainload of lumber going up that Sault line.
Mr. Peterson: Our volumes are up. We are now up to over 34 per cent of the U.S. market, in spite of the 27.22 per cent tariff. This is a tribute to the capacity of our producers to overcome difficulty. It is also an indication that the demand in the United States is quite high — because of housing. We have seen record prices in August of this year of approximately $470 per thousand board feet. It is now down to $371, which is still a profitable level for most Canadian producers to be shipping.
One of the impacts of this trade action against Canada — this harassment of our producers — is that our producers have become leaner, meaner, tougher and better able to compete. There have been some job losses, which I regret very much, but there has been consolidation and modernization in the industry. As a result of this harassment, we have a very strong industry in Canada.
Senator Gustafson: Is this pressure from the Americans coming because the American lumber industry itself is being depleted?
Mr. Peterson: Ms. Feldman could help me on this. Their lumber is not as good as ours; it is not as desirable from the U.S. construction industry's point of view. Their southern yellow pine is a little more brittle and does not take the nails quite as well. Ours is straighter and better. As I say, all lumber is not created equal. This is obviously to me an attempt by the U.S. lumber coalition to keep up the value of their timber reserves, which are private, and to keep up the price of lumber by this artificial means.
Senator Gustafson: I have a brother who worked with Weyerhaeuser in the Seattle area for years. He tells me that Washington State is not producing like it used to.
Ms. Elaine Feldman, Associate Assistant Deputy Minister, Trade, Economic and Environment Policy, International Trade Canada: That is right. A number of years ago there were environmental aspects, such as the spotted owl and others, that reduced the amount of logging in the West. That has been one of the issues in the United States.
Senator Hubley: Welcome, minister, Ms. Feldman and Ms. Vinet. It is wonderful to have you here.
I would like to ask a question on BSE. On October 23 of 2004, Japan and the U.S. reached a framework agreement that will allow the resumption of beef trade between the two countries. Japan is now revising domestic regulations to alter its BSE cattle-testing requirements and other procedures. A special marketing program will be developed for Japan under which the U.S. Department of Agriculture will certify that exported products meet the terms of the agreement.
Has Japan lowered its standards? At one time, I think they were testing all product or all cattle for BSE.
Has the Government of Canada tried to reach a similar agreement with Japan?
Mr. Peterson: I will ask Ms. Vinet to answer that question.
Ms. Suzanne Vinet, Director General, Multilateral Trade Policy Bureau, International Trade Canada: I do not have the specifics, but I know that a team of veterinarians from the CFIA has been working closely with their Japanese counterpart. There have been assurances that we would be treated on the same footing as the U.S. More of the details of what is being done should really come from the Canadian Food Inspection Agency.
Senator Hubley: Might there be an opportunity for Canada to increase its export to that particular country?
Mr. Vinet: There certainly have been constant communications and efforts with Japanese counterparts on the part of the Minister of Agriculture, the officials at Agriculture Canada and the Canadian Food Inspection Agency to try to open up the market and get no less favourable treatment for Canadian exports to Japanese markets. I know there have been significant efforts.
Senator Hubley: Does the United States ever apply pressure in a way that would isolate, say, Canada from a market? Can they do that? Have you ever known of an example where they would apply pressure to, for example, Japan to take their product over the Canadian product?
Mr. Peterson: I do not know about Japan, but we have seen this in terms of Mexico. Mexico is quite prepared to open their borders to our cattle, at which point the U.S. said, “If you do that, then we will close our borders to yours.”
This may reflect the integrated nature of the North American and the NAFTA cattle market. We were grateful to the Mexicans, because they were sympathetic to us, but their hands were tied. They continue to fight alongside us for a science-based resolution to this issue.
The Chairman: This committee issued a report last spring that was a quick study, produced under considerable pressure, dealing with the question of the cattle issue and the closed border. That report carried two recommendations, which we thought would be more useful than having 10. One of them was the notion that is growing now of returning to the days when we had Canadian-run processing opportunities here in Canada.
The other recommendation was to ask the Canadian, American and Mexican governments to use some of the opportunities within the NAFTA to learn from this experience that has been, and is still, extraordinarily painful for this country and our producers. We wanted them to create a mechanism for the future, via the NAFTA, so that when incidents like this happen it does not mean that the border has to be closed.
I am wondering, minister, whether you have any thoughts and, hopefully, enthusiasm for that.
Mr. Peterson: These matters come under the purview of the Minister of Agriculture and Agri-Food. Both those suggestions are first-rate. We see how the government is moving ahead to get Canadian slaughter capacity up by 30,000 pieces a week. This will be absolutely critical to the survival of our beef producers.
Even if the border eventually opens, which I am sure it will, it may produce unintended consequences for American industry. We were an integrated industry, and we will move from being partners in the North American continent to competitors. We have to have that processing capacity. You are right on.
I like the idea of using this as an example of what can go wrong and finding better ways to resolve disputes. Can we do that in the face of the litigious interests that exist in the U.S, including R-CALF and the small producer interests, which are quite capable of grabbing hold of a legislative agenda and forcing it in a particular direction. We see this in the cattle industry; we see it in softwood lumber, where a small number of U.S. producers are able to control an agenda far beyond what should be their normal influence.
Consumers are being left out of that agenda in the U.S. It is estimated that the cost of a house is $5,000 to $7,000 higher because of the protectionist actions of those lumber producers. I do not know how analogous that is to the cattle industry, but this is something on which we should enter into discussions with the Mexicans and the Americans very quickly. That is a good suggestion.
The Chairman: Obviously, you will get much support on that from the people around this table.
Senator Oliver: Welcome, minister. When Canadians talk about the similarities and differences between themselves and the Americans, the first things raised are softwood lumber and BSE. In your remarks today, minister, you used the word “harassment,” indicating that Canadians have been given a rough time on softwood lumber and BSE.
The President of the U.S. was in Canada recently. Many meetings took place with our Prime Minister, our Deputy Prime Minister, our Minister of Foreign Affairs, and so on. Do meetings at this level, between the President of the United States and the Prime Minister of Canada, help to break down this harassment, this perpetual problem that Canada has had with softwood lumber and BSE?
Chapter 19 of the NAFTA addresses dispute settlement mechanisms. These people do not have the right to make laws nor make rulings. They talk about whether the domestic countries have applied their laws properly.
That does not seem to be working. What types of things would you like to see to give these mechanism more teeth? What types of things should be done to make them more effective?
Mr. Peterson: That is an important question, Senator Oliver.
Let me start with chapter 19 and the dispute settlement mechanism. We are looking at various ways to end these disputes. The dispute settlement mechanisms went into the NAFTA at our insistence. We did not want to be subjected to the U.S. court process in order to enforce our treaty rights. However, we have seen how they can continually come back and back, even when we win. The Prime Minister came out of Sun Valley saying that we have to find a better way to do it. He asked industry to participate in that quest.
It would be helpful to us if, perhaps, your committee were to make suggestions to us on these things. We are looking at certain things. Can we put time frames on some of these processes? Can we speed it up in a certain way? Once the dispute is settled, could we get people to agree not to revisit the same issue for a particular time period.
Our people are looking at this. We would welcome any suggestions that you might have.
In terms of the presidential visit, I have the sense that it did not do all that much good for the softwood lumber issue. It is in the hands of Congress to determine if they will get rid of the Byrd amendment.
There is some sympathy on the softwood lumber file from the President. He knows it is an irritant. It is not good for the reputation of the United States that we have this type of ongoing suppurating wound. His instructions were to try to settle it. Whether we will be able to do so, however, is another issue. I will continue to be open to that type of thing.
We saw some progress on the BSE issue. It was during the visit to an APEC meeting in Santiago that President Bush announced that the matter had moved from the agriculture department to the U.S. Office of Management and Budget — the OMB — which was a discretionary phase in the evolution of that BSE dispute. Once it got into the OMB, it provided for a finite time during which decisions had to be made. We see the end of the tunnel there. This was part of the goodwill.
I hope that ultimately President Bush would intervene with Congress. After all, both houses are Republican. Perhaps he could put some pressure on Congress to resolve these disputes. I hope he can speed up the OMB process as much as possible.
That goodwill is important. The President has met with our Prime Minister six times. On each occasion that I have been with them, I have noticed an ease and a growing familiarity and confidence in that relationship. Their relationship is such that they can say, “Yes, we can disagree with you, but we can still be comrades and friends in this greatest economic partnership that has existed on the face of the earth.”
So I believe the high-level meetings are important, although they cannot be counted on to solve every dispute.
Senator Oliver: You mentioned that the big problem with the resolution of softwood lumber issue is that it is in the hands of Congress. As the Congress is composed of elected officials, is there any merit in having Canadian politicians go to Washington or other parts of the United States to meet with them one on one and build relationships at that level. Is there any merit in breaking down some of the barriers that lead to the harassment of which you speak?
Mr. Peterson: I could not agree more with you. This is absolutely critical, and we will not have done our duty until we have exhausted that type of approach, put our hearts and souls into it.
We have undertaken a number of measures to try to do what you are talking about. We have not implemented them fully yet. The first was our enhanced representation initiative in the United States, where we opened seven new consulates and appointed 20 honorary consuls. The second is the parliamentary advocacy centre, which has been established in our embassy in Washington. The Prime Minister suggested that last March. The centre was opened in September.
I announced recently that we would be leading advocacy missions down to the United States. I want members from all parties and both Houses to join with us to visit with opinion leaders, including senators, congress persons, governors and mayors. We will be announcing one of those missions early in the New Year, certainly before the spring. We want to establish personal connections so that people can make phone calls and ask for help with problems. We have to do more to build those relationships because they are obviously important to Americans.
Senator Oliver: That is encouraging to hear.
Mr. Peterson: We would welcome the participation of your committee.
The Chairman: For your own information, Mr. Minister, if our colleagues in the Senate agree to pass the budget of this committee, we will go to Washington in March. We will spend enough time there to enable us to try to build some of those connections and friendships that you are talking about. Prior to going there, we would certainly want to get some suggestions from your people.
Mr. Peterson: Thank you very much, Madam Chairman. I know that our advocacy centre in Washington would be very pleased to work with you.
The Chairman: We are looking forward to that.
Mr. Peterson: I recall that, when I was newly elected, we had a major steel dispute with the United States. The administrations were dealing one to one. President Reagan was onside with our position, but he could not get Congress on side. We decided to form a steel caucus and go down and talk to our colleagues there. I was the first president of that caucus. We got incredible support from the members of Congress. They had not met Canadian politicians before, yet politicians seem to have an affinity with one another, I guess because they have all been through the same types of battles. They came on side. They realized that we were not the dirty traders in steel in the world.
The Chairman: We look forward to working with you.
Senator Callbeck: Welcome, ministers. It is great to have you and your officials with us here this evening.
I have a couple of areas that I want to ask you about. The first concerns U.S. country of origin labelling, or COOL, legislation. As I understand it, that labelling is mandatory on meat, seafood and produce. This will be costly for Canadian exporters.
I understand that the Government of Canada has been lobbying to have this legislation rejected and that there is currently in Congress another bill that would make this labelling not mandatory but voluntary.
What can you tell me about that?
Mr. Peterson: I do not know the details of the current status of that bill. A number of “buy American” or non-tariff barriers are being set up in the United States. It is outright protectionism. We have seen it in a number of areas, including outsourcing issues with bills to try to identify the country where the call centre is located, et cetera.
We are attempting to oppose these. I will have to get back to you as to what type of success we are meeting.
Senator Callbeck: The other area I want to ask about is anti-dumping duties on live swine that are being imported from Canada. I understand they range from 13 per cent to 15 per cent. Of course, this puts added pressure on exporters across Canada.
What is your department doing to alleviate that problem, or what can you do?
Mr. Peterson: We are working very closely with swine producers on this anti-dumping case. We think it is totally unfair. It is shades of softwood lumber. We went through this for decades with the Americans and finally got some peace. Meanwhile, our industry had consolidated, became very strong and was out-producing the United States.
We have been able to withstand any attack on our pork producers, by going through the hoops of the WTO and the NAFTA process. It is absolutely ridiculous that when we sell our small weanlings to the Americans the prices are fixed and determined by us as opposed to by international market conditions for hogs.
We will continue to fight. I do not know whether the Americans will ever give us peace in this area.
Senator Callbeck: It is my understanding that the United States Department of Commerce is going to make a final decision on this in March. If that decision is not favourable to Canada, where do we go from there?
Mr. Peterson: We can continue to appeal it. We can continue to fight this under the NAFTA and under the WTO, and we will work very closely with our hog producers to do this. I do not know whether there is a finite end to using these dispute settlement mechanisms. If you have some suggestions on how we might get a favourable ruling, I would love to hear them.
Senator Callbeck: I wish I had.
Mr. Peterson: On BSE, softwood lumber, swine, and probably wheat, the U.S. has consistently taken action against us, bowing to producer pressures. In spite of that, fully 96 per cent of our trade with the United States is dispute free. I am afraid the issues that are in dispute will mess up an otherwise incredible relationship that has benefited us greatly.
Opponents of the NAFTA and trade liberalization say that the U.S. is not playing fair, evidenced by all these disputes. In spite of these disputes, we are still selling a record amount of softwood lumber into the United States and we are prospering from that relationship.
My message is that we also have to look at the other side of the coin. Our trading relationship with the United States is not only about disputes and difficulties. It is probably the most successful trading relationship the world has ever seen. However, we can make it better, and my goal is to get the disputes down to zero, with your help.
Senator Hubley: You said that 96 per cent of our trade with the United States is dispute free. Why, then, have our farmers had such a tough time with not only BSE but also the P.E.I. potato crisis? It is the man on the land, the farmer, who does not prosper.
Am I understanding you correctly, or am I putting a different slant on it?
Mr. Peterson: You are right. I do not know why the current disputes are mainly in the agriculture and natural resource area. Another area where we have traditionally had a bit of tension is steel, but that seems to be resolved for the moment.
Is it because the industries in the United States are so well organized and so litigious in these areas that they know how to use the courts to do what they cannot do, which is to beat us in the fields or in the auction houses. I do not know.
Senator Hubley: Although I do not want to say it, there is an element of protectionism.
Mr. Peterson: I agree with you; it is protectionism. We have to call a spade a spade. We are quite prepared to live up to our trade obligations and trade fairly. We are prepared to make sure that we do not subsidize, that we do not dump, and that if we do, to pay the penalty. The tribunals have said we are fair traders in all of these areas.
Why do they keep coming back on us? Is it because they are not as good as we are and as such want to keep us out of their markets?
The Chairman: Colleagues, we have 20 minutes remaining. As always, we want your questions out and crisp and in a way that we can get full answers from the minister in those 20 minutes.
Senator Ringuette: Thank you, Mr. Minister. Coming from the potato belt of New Brunswick, I can tell you that every time there is a bumper crop of potatoes in the U.S. the border automatically seems to be closing. I do agree with you that the industry in the U.S. is very well organized — lobbyists — to protect their market, protect their prices.
I vaguely recall — I am unsure as to whether it was last year or the year before — that several million dollars was dedicated to lobbying Washington or the American lumber industry with respect to the softwood lumber dispute. Can you expand on the amount and tell us the result?
Mr. Peterson: We dedicated about $17 million to lobbying efforts in the United States. We were able to mobilize Home Depot, for example, which ended up heading up a lobby group to speak on behalf of consumers of softwood lumber. They feel they have lined up close to 100 members of Congress and the Senate who would be supporting us now. Of course, this is not enough to carry the day.
I am not sure that type of effort will win the day — although we welcome all of the allies that we can get from those groups in the United States. Maybe it is more difficult down there to advocate consumer interests than producer interests, particularly given the electoral funding laws they have. That might be a factor in the whole thing.
I believe we will have much greater impact in the future if we adopt the route that Senator Oliver and Madam Chair have indicated — that is, face-to-face contact, where we go down there deal with our counterparts, who are facing innumerable problems for their own agriculture producers, particularly with the WTO, getting rid of those obscene farm subsidies in the United States.
This will create different ways of doing things — and change is always difficult for anybody.
The more you can talk to your agriculture counterparts down there, the better we are going to be. In addition, this type of lobbying is much less expensive and far more effective. We hope to join you with many other members of Parliament who have particular connections and interests as well.
Senator Ringuette: In closing, I want to thank you for the efforts that you are putting into these issues. I certainly have more understanding on the major challenges that lie ahead in regards to WTO negotiations for our farming community.
Senator Gustafson: As you know, Mr. Minister, agriculture is in big trouble. Recuperating the input costs at the price our commodities are now selling for is, at the very best, break even. This has been going on now for four years. Frost and drought, among other things, are problems, but they are not the major problem. The major problem is price. There is no question that the Americans are subsidizing, and in a big way. So are the Europeans.
Would you agree that it is time we took a serious look at the global economy of agriculture? If the status quo continues, there will not be a lot of survivors. If you do not take my word for it, take Senator Sparrow's word. He has been around here for 37 years and we have had many conversations about this. The situation in agriculture is very serious. We must change our global approach.
We have bought the line that we are going to get the Americans off subsidies. It is just not happening. I farm right beside them; I know what they are doing. Their neighbours are farming on both sides of the border. I visit with them often.
We are in big trouble because the Americans and the Europeans control the world market, especially the French. The French grow considerably more wheat than Canada des.
Unless we recognize the reality of this, I do not know what the answer is.
Mr. Peterson: I certainly do not have the answer, but I would like to ask your opinion on the WTO and what impact those negotiations might have in levelling the playing field.
You talked about the incredible U.S. subsidies to their farm community, and the EU, as well. The OECD estimated that farm subsidies globally total $1 billion per day, which is about six times the total amount of overseas development assistance that we give to developing countries.
If we are to level that playing field for our farmers, and probably even more important for developing countries, so that they can finally get their basic produce into global trade and earn some foreign exchange and start to develop — the only hope I see in dealing with these obscene subsidies is the WTO negotiations.
This was the framework agreement that we tried to create in Geneva at the end of last July — and your committee has been following this carefully. After Cancun, a year ago September, a lot of people thought the WTO was dead. Then Robert Zoellick, the U.S. trade representative, came back in January with the incredible offer of starting again. He got the Europeans on, and they are putting their subsidies on the line.
We have a framework agreement and we need to work very hard to ensure that the flesh and skin we put on this skeleton do the job that you are talking about of getting rid of those subsidies, so that we level the playing field.
Whether the Americans will go the distance and give us what they promised might be the real issue for us to stay on top of. I would not advocate Canadians giving up one cent of protection of any kind unless we see actual steps being taken by the Americans. Some say that after Uruguay we were promised certain things — and Minister Ralph Goodale will tell you this — that we did not get. We were the good people, in that we gave up access. We gave up 5 per cent and we did not get anything in return.
Having been burned, we will want your expertise as we proceed through these negotiations to ensure that we receive is what we should receive.
Senator Gustafson: Minister, I am afraid that, as I have assessed this, we will not get the Americans off subsidies. I was talking to a John Deere dealer a couple of days ago who told me that John Deere cannot produce enough combines to meet the needs of American farmers. That is all subsidy dollars.
Mr. Peterson: Yes.
Senator Gustafson: The American government has decided, as I view it, that in this way they stimulate their economy. While they continue to do that, we continue to take the other route and not subsidize. In the end, we will not have an industry. That is how serious it is.
Mr. Peterson: Many of us were shocked when we saw the farm bill in the U.S.
Senator Gustafson: You know what the numbers are — some $90 billion additional subsidies — and they are only into the third year of that.
Both the Europeans and the Americans are starting to take environment, rural development and agriculture, and put them under one caption. In other words, they are saying that the farmers cannot pay for this on their own and that there has to be an obligation from all of society. That is the future of this.
Mr. Peterson: That is a bleak future. We are certainly attempting, through the WTO, to knock down that incredible subsidy base that they provide. I am cautiously optimistic that we will be successful, but you might be quite right, Senator Gustafson.
Senator Gustafson: I have watched that for 20 years and it is not happening.
Senator Oliver: My question relates to the July meeting in Geneva. All the papers were filled with news of a breakthrough. Then, the Canadian Department of Foreign Affairs said, “Wait a minute. In terms of the Canadian Wheat Board and supply management, there are problems for Canadians who will go to the table next time. The Canadian Wheat Board can get loan guarantees from the government, which means that their borrowing costs will be a lot less than the Americans”. Other countries are deeming those loan guarantees to be unfair subsidies. What will we do about those allegations that might hurt supply management in Canada and the Canadian Wheat Board?
Mr. Peterson: It was an experience of a lifetime being over there. Minister Mitchell and I were there. We were one of about 15 countries around that table. I am not happy with what happened to the Canadian Wheat Board. We lost the ability to provide government financing and to underwrite losses.
Senator Oliver: Exactly.
Mr. Peterson: They had been proposing was much worse than that, and we were able to fight back a little bit. However, we did not get everything we wanted. In terms of supply management, we were able to make sure that we could keep the high, over-quota, tariffs, which are the basis of protecting supply management. We were accompanied there by the Wheat Board people, by 40 people representing supply management and by four or five others who represented the rest of agriculture that is not under supply management — the other 90 per cent.
They were extremely helpful to us. We met with them once or twice a day and found them to have great expertise. We had very frank exchanges. As a country, I felt very alone over there, because it was one against 146.
That is why we are encouraging these industries to talk to their international counterparts, to tell them why Canada's way of doing things may be beneficial to other countries and hence they would not want to preclude Canada. Sometimes these things can work to the benefit of Canadian producers.
I have no illusions about the fact that these state-trading enterprises and supply management will be under assault. Again, having ongoing input from you as to what we should do is important.
There is no developed country in the world that is more reliant on trade than Canada, in terms of our economy. Almost 40 per cent of our economy comes from exports. There can be no doubt about it. Our major thrust must be to get access to foreign markets for Canadian producers. We are only 32 million in population, and we cannot survive with our standard of living unless we export.
Our major interest lies in getting this market access. In terms of supply management of the WTO framework, we were able to achieve that each country would be recognized as having certain sensitivities. We are not alone in having sensitivities. India, Korea and pretty much every agricultural producer has sensitivities, including Switzerland. We will fight in Hong Kong one year from now as hard as we possibly can on our defensive interests — the ones you mentioned, senator. We will put up as big a fight as we possibly can.
In the end, we will have to look at the result in terms of the overall benefits to all Canadians. We are pledged to try to attain the best possible result. The input of senators will be important to those negotiations.
The Chairman: Mr. Minister, I notice that the clock is ticking away fairly quickly. We will have a historic, concluding questioner for this occasion. I speak of our beloved Senator from Saskatchewan, Herb Sparrow. Herb, as you have heard, has been in the Senate for 37 glorious years. This will be his final committee hearing with the Agriculture and Forestry Committee. Senator Sparrow has been a member and chairman of this committee. He also helped whip this committee together to produce one of the most famous pieces of work in the history of agriculture in this country, Soil at Risk, which was honoured with awards and praises around the world. We are losing a gem when it comes to these agricultural issues. It is most appropriate that Senator Sparrow would have one last word today.
Senator Sparrow: Thank you. I wanted to be here because, Mr. Minister, you are here.
I know time is of the essence. Minister, you talked about the good trade relations we have with the U.S., and that is true in a broad sense. It is difficult to convince the agriculture community that that is the case and to convince the softwood lumber people that that is the case. It is difficult to say, “Everything is just fine; you are merely suffering a little bit while the rest of the country is not suffering.” Somehow or another, I have not felt that Canada is in a position to play hardball. We have to find some way of doing that.
Please do not think I am being critical — it is great to have visits and international relationships and so on, but we are continually falling behind. We are falling behind in the World Trade Organization on the international situation. We keep giving away our agricultural ability in this country.
Is there some area that you could tell us about, where there could be some retaliation that might work? We certainly have energy — which we are exporting by millions of dollars. Is there some way that we can retaliate and say, “If we cannot get this our way, we will use some penalties ourselves.”
We have to look at that. I heard nothing tonight about that type of message. We are great traders, but we have nothing to play hardball with.
Mr. Peterson: Let me, first, start by congratulating you on an incredible career here in the Senate and on your service to our country.
Can I tell them about the time you took me out to Saskatchewan?
Senator Sparrow: You bet.
Mr. Peterson: I had a wonderful three days with Senator Sparrow around his area. He showed me a lot about farming, life and politics. I was very appreciative of that.
He gave quite a speech, too. It was magnificent.
When you say free trade and the NAFTA have not been good for our farmers, you are right, and I would not try to convince them that it has been. You are quite right. This goes back to what Senator Hubley was saying about how much farmers suffer. This is why we are always going to have to have safety nets and programs to try to get our agricultural producers through these rough times. They are critical to what we conceive Canada to be and the type of nation we want to be, and how we want to conduct ourselves in the global marketplace. Agriculture is extremely important to us.
Your concept of could we link, for example, treatment in terms of agriculture to trade in energy or some other things — that has been suggested. I would love to be able to get the United States to adhere to the rule of law, particularly in terms of the Byrd amendment and things such as that.
You have to look at relative size, and it is not just population or size of the economy. What is more important is that we are almost four times more dependent on our exports to the United States than they are on their exports to Canada. In a trade war, who will suffer the most? Are we sure we will win that war? It is advisable not to get into a fight with someone unless you are pretty sure you have a chance of gaining something from it.
This has always been our problem, in terms of linking one product to another and trying to play hardball. If that border were to close for any length of time, a lot of Canadian jobs would be lost very quickly. We saw this danger on September 11. That is why we worked so closely with the United States to meet their security needs while meeting our trade needs and our security needs at the same time.
I would be very reluctant to get into that type of linkage without knowing exactly where it would take us and whether we could actually win. We have opted instead for a rules-based system whereby, if we have a problem with any of their products coming in here or ours going in there, we can deal with that specific item.
It may not be working exactly the way we want — witness how softwood lumber is dragging out — but the way to go is to try to improve the way we deal with those disputes, the way your committee suggested that we could probably deal with disputes in the future such as BSE and SPS issues with the United States — that is, learning from what we have done in order to make it even better, and get rid of the disputes those ways.
The Chairman: Thank you, minister, for attending here this evening. We have been waiting eagerly for this meeting. We would certainly like to have you back. We will keep you informed as to what we are up to. We wish you all the very best in your efforts for us outside this country. Thank you.
Mr. Peterson: Thank you very much, Madam Chair and honourable senators, for the opportunity to be with you. I think your advocacy efforts on behalf of Canadians in the United States, particularly with your Senate counterparts, where senators are so important, can do a great deal for our relationship and for our agricultural producers.
The Chairman: We will do our very best.
Mr. Peterson: Thank you for doing that.
The committee adjourned.