Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue 14 - Evidence
OTTAWA, Tuesday, May 17, 2005
The Standing Senate Committee on Agriculture and Forestry, to which was referred Bill C-40, to amend the Canada Grain Act and the Canada Transportation Act, met this day at 4:05 p.m. to give consideration to the bill.
Senator Joyce Fairbairn (Chairman) in the chair.
[English]
The Chairman: Honourable senators, we have a quorum. We are studying Bill C-40, an act to amend the Canada Grain Act and the Canada Transportation Act.
We will have as a witness this evening Mr. Wayne Easter, parliamentary secretary to the Minister of Agriculture and Agri-Food. The minister regrets that he cannot be here. As we speak, he is appearing before a House committee dealing with the Main Estimates of his department.
We also have as witnesses this evening Mr. Howard Migie, Director General, Strategic Policy Branch of the Department of Agriculture and Ari-Food; Mr. Régis Gosselin, Director of Corporate Services of the Canadian Grain Commission; and Mr. John Dobson, Senior Policy Coordinator, Grain Monitoring, Transport Canada.
Mr. Easter, please proceed.
The Honourable Wayne Easter, P.C., M.P., Parliamentary Secretary to the Minister of Agriculture and Agri-Food: Thank you very much. I extend the apologies of Minister Mitchell who is appearing before the House of Commons committee dealing with the Main Estimates.
Bill C-40 is a bill to amend the Canada Grain Act and the Canada Transportation Act. It became necessary to make these amendments as a result of a decision made by a World Trade Organization panel ruling made September 27, 2004.
The World Trade Organization panel ruled that the two acts violated Canada's national treatment obligations under the General Agreement on Tariffs and Trade in three areas. Two of the areas are under the Canada Grain Act. One is that we require the permission of the Canadian Grain Commission before foreign grain can enter licensed grain elevator systems. The second is that authorization by the Canadian Grain Commission is required for the mixing of different grades of grain in terminals or transfer elevators. The third area upon which the WTO panel ruled relates to the Canada Transportation Act and requires us to extend national treatment provisions to foreign grain. We have to extend the revenue cap provisions to foreign grain imported into Canada.
Bill C-40 is short and to the point. It deals with those three issues in a way that we believe to be effective. There were consultations with industry prior to December. I was conducting farm income consultation meetings across the West in January and at that time we took the opportunity to hold meetings on this bill with producers, the industry and the railways in B.C., Alberta, Saskatchewan and Manitoba, so there has been wide consultation on it.
A positive amendment was made to the bill before you. Concerns about the Canadian Grain Commission were raised in the hearings we held across Western Canada. People would like to have broader discussions on the commission. That was stated by several witnesses who appeared before the House of Commons committee as well. Therefore, the bill was amended to ensure broader discussions on the Canadian Grain Commission within a year.
It is critical that this bill is passed fairly quickly. If we do not bring our laws into compliance with the WTO by August 1, the U.S. could legally retaliate against a number of commodities. We do not want to give the U.S. that opportunity. Therefore, it is critical that the bill becomes law as quickly as possible so that we are in full compliance with the WTO.
Madam Chair, we are willing to entertain your questions.
The Chairman: Thank you very much, minister.
Senator Callbeck: Welcome. It is nice to have an Islander appearing before us.
With regard to the railways, I understand that the CPR has expressed concern about how this bill will affect their revenues from U.S. operations and that CN has not expressed those same concerns. Can you tell us why that is?
Mr. Easter: I will ask Mr. Migie to elaborate further on this, but the grain line that will be most affected, being closer to the U.S. border, is the Canadian Pacific line. In our discussions in Manitoba, as well as before the House of Commons committee, Canadian Pacific proposed an amendment that would have further narrowed the national treatment provisions for foreign grain coming into Canada.
The government believes that if we narrow the implementation of the Canada Transportation Act to that extent, we might open ourselves up to a further challenge by the U.S. Therefore, the decision was made to leave it as broad as it is in this bill.
In fairness to Canadian Pacific, their concern is that it might have an impact on their capacity to meet Canadian commitments for rail cars. However, our discussions with both the grain trade and the industry indicate that most believe that would not be the case.
Mr. Howard Migie, Director General, Strategic Policy Branch, Agriculture and Agri-Food Canada: There is a possibility that there will be grain imported into Canada from the United States because of the change in the revenue cap, and that would likely be on CP lines using CP capacity.
There is a difference of view between the grain companies and CP rail. The grain companies believe that the change would be negligible, because the extra cost of keeping U.S. grain separate in our system would outweigh any difference in freight rates.
It is possible that U.S. grain could come into Canada with these changes, probably using CP, but we do not see it as a problem. We do not think there will be a large amount of grain, and we believe that the market system can handle it through freight rates and elevator charges.
Senator Hubley: Welcome, Mr. Easter. It is a pleasure to have you with us.
New reporting and identification requirements will allow the Canadian Grain Commission to monitor and ensure that foreign grain or Canadian grain mixed with foreign grains is not identified as Canadian grain. Regulations pursuant of subsection 116(1) of the Canada Grain Act would be enacted to ensure that grain is not misrepresented as to its origin in the Canadian grain handling system.
Are we considering country-of-origin labelling across the grain handling system?
Mr. Easter: Canada's reputation worldwide is second to none and is due, to a certain extent, to the Canadian Grain Commission and the integrity of the Canadian grain supply. When we state that a grain is a certain grade and class, that is what it is rated as on the international marketplace. We must ensure that these amendments do not in any way jeopardize the integrity of the Canadian grain supply and we believe they do not.
Currently, you have to ask for authorization to import and to mix foreign grains with domestic grain. With these amendments, companies will be required to report it. Therefore, although the system is a little different, the same requirements will be applied to both grains. We believe that we protect the integrity of our system that way.
At the meetings we had with producers, they indicated that they will soon want a border notification system. Currently, the Canadian Food Inspection Agency, the Canadian Grain Commission, the Canada Border Services Agency and other agencies operate at the border and the Canadian Wheat Board is strongly advocating a coming together of these agencies. We need to implement a border notification system so that everyone knows what is happening, while remaining in compliance the WTO panel ruling.
Mr. Régis Gosselin, Director, Corporate Services, Canadian Grain Commission: It is not our intention to develop a country-of-labelling system. We will require elevator operators to report to us the origin of the grain, whether it is of Canadian or foreign origin. We intend to monitor the movement of grain through the system based on the reports they give us. We will require them to indicate the origin before we give them an official inspection certificate. We will also be testing wheat and barley when it is going on vessels to ensure that there are no non-registered varieties present in those shipments.
We believe that the measures we are putting in place will be adequate to ensure that we do not have co-mingling of foreign grain with Canadian grain.
Senator Mercer: It is a pleasure to have you gentlemen here.
Senator Hubley used the words "country of origin'' and you responded by talking about "country of labelling''. I am very concerned that this may be the thin edge of the wedge on the use of country-of-origin labelling. I know that in this case we would be imposing it on product coming this way as opposed to having it imposed on us when exporting product. My concern is about labelling being imposed on us when we are exporting beef, fish and other products.
With regard to beef in particular, if country-of-origin labelling becomes the norm, when a quality Alberta steak is on the shelf next Montana beef, I think the consumer in New Jersey, New York or Boston will choose the steak with the "Grown in the United States'' label as opposed to product from Canada. We have avoided country-of-origin labelling in the past because it is to our disadvantage since we are such large exporters.
I understand the need for us to identify when other grain is mixed with our grain, but have we considered the possibility that this is the thin edge of the wedge?
Mr. Easter: You are talking about a much broader topic than this bill deals with. With this bill, we are trying to ensure that the same treatment is applied to foreign grains coming into Canada that may or may not get mixed with Canadian grain. We want to be able to assure our customers to whom we are selling Canada No. 1 hard spring wheat that it is indeed Canada No. 1 hard spring wheat. You are talking about a broader topic that I do not believe will be impacted by Bill C-40. However, I do believe that Americans would choose to buy Canadian pork rather than American pork.
Senator Mercer: That may be so, but I do not think we can isolate this issue to one product, although we are recognized as growing the best pork in the world. We have to consider the entire agriculture industry. We hear the marketing by R-CALF in Montana selling beef in the large cities in the United States in competition with ours. That is a major issue. I agree that labelling of pork might be to our advantage, but labelling of all products across the board may be to our disadvantage.
I understand that this bill does not deal with that, but it may be the thin edge of the wedge and we need to think about it before we go down that road.
Mr. Easter: There is no question that we need to think about it. Mr. Migie has been involved in discussions on this.
Mr. Migie: Bill C-40 is not an extension of what we have had in the past. In some ways, we are applying the same policy as had in the past. The WTO decision made it clear that we are entitled to this type of distinction when exporting our Canadian product so that people will know the qualities the grain has for baking. We are entitled to keep it separate.
This bill ensures the same provisions as we had before. It does not deal with product coming from the U.S. directly to a flour mill in Canada or directly to a user. However, if it is going into the elevator system and will likely be exported, it is a way for the customer to know that the baking characteristics will be as we have indicated. They would have no way of knowing that if we were mixing product without any care.
This does not deal with labelling the product for either the Canadian or American consumer. It deals primarily with the integrity of our grain for further export.
Mr. Gosselin: A fair quantity of U.S. grain already moves through the system. An example is U.S. grain moving through ports or going to the St. Lawrence via elevators located along the St. Lawrence. That product is currently identified as American and the Canadian product is identified as Canadian. We are only maintaining a level playing field as far as that movement is concerned. Nothing in this bill will change what we have been doing in the past.
The Chairman: I understand that the Western Grain Elevator Association spoke strongly about this at the House of Commons committee meetings.
[Translation]
Senator Gill: I understand wanting to improve grain handling here in Canada. Do the Americans take a similar approach? Do they do the same thing as we do or is their approach preferable to ours?
Mr. Migie: With respect to grain transportation, we now use the American system. For example, the Canadian Wheat Board uses the American system to transport wheat to the Caribbean or to other destinations in South America. The Americans can also use our system.
There is no equivalent in the case of the Canadian Grain Commission.
Mr. Gosselin: There are regular movements of certain types of Canadian grain through the United States. One type that comes to mind in particular is canola from Western Canada. This commodity is transported by rail to Mexico or to the United States and is handled in U.S.
[English]
Mr. Easter: These three issues — the requirement to authorize imported grain, the requirement to authorize mixing of grain, and national treatment provisions under the revenue cap — were part of a package of challenges that the U.S. made to the WTO panel. The major challenge in the package was with regard to the Canadian Wheat Board, which the Americans have challenged a number of times and which we have always won. These were considered minor losses for us.
As a result of the panel ruling, we are required to make these changes to bring our laws into compliance with the WTO panel decision. It is not a matter of making the system better or worse; it is a matter of making the system compliant with the WTO panel ruling. We believe we are doing that in a way that still protects the integrity of our high quality grain system and our grain supply.
[Translation]
Senator Gill: Several years, or several months ago, Canadian National tried to broker an arrangement with some rail companies. Was any kind of resolution achieved? What was the outcome of the talks? Do these arrangements favour the movement of grain between the United States and Canada?
[English]
Mr. John Dobson, Senior Policy Coordinator Grain Monitoring, Transport Canada: In 1999, there was a proposed merger between CN and Burlington Northern, Burlington Northern being one of the largest U.S. railways. That merger was stopped by the Surface Transportation Board in the United States primarily because of concerns about earlier mergers of major railways in the United States. I should point out, however, that both CN and CPR have operations in the U.S. and, for all practical purposes, the rail system in North America is an integrated one.
Senator Tkachuk: Are there any parts of the bill that have no consequence to the WTO?
Mr. Easter: We did amend the bill at the House of Commons committee. The only part of the bill that does not directly relate to the WTO panel decision is the provision in the bill for a general review to ensure that the act remains up to date. That is a review of the broader aspects of the Canadian Grain Commission, be it in licensing semi-dwarf wheat or whatever. That amendment was made at the request of industry and other witnesses. We incorporated it in the bill to ensure that that review takes place within a specified time.
Senator Tkachuk: Clause 1 of the bill reads:
Section 57 of the Canada Grain Act is amended by adding the word "or'' at the end of paragraph (b) and by repealing paragraph (c).
What does that apply to?
Mr. Gosselin: Section 57 relates to the permission that elevator operators are required to get before they receive foreign grain in a facility. The rule of the commission is that if you want to receive foreign grain into your facility, you must ask permission of the CGC. That was considered to be beyond national treatment. In other words, it was considered to be not in keeping with our obligations on trade, and that is why it is being removed.
Senator Tkachuk: Previously when the Port of Vancouver received grain from Australia, did they not have to report that?
Mr. Gosselin: They would ask permission of the CGC to receive it and the CGC would routinely grant that permission. We periodically have small quantities of grain unloaded in Vancouver that has arrived by rail from the U.S. They would have to ask permission from us to receive it. We get a fair number of requests for canola going to processing facilities in Western Canada. The commission typically has approved all those requests over the years.
Senator Tkachuk: Clause 2(1) says that paragraph 72(1)(a) of the act is repealed. Which part of the WTO does that apply to?
Mr. Gosselin: The decision of the tribunal was that when we take in a Canadian commodity, elevator operators are free to mix that Canadian commodity with other Canadian commodity. For example, if they are receiving 3CWRS, they can mix it with a feed grade. That routinely happens in elevators. The prohibition on mixing that prevented the elevator operator from routinely mixing American grain, and the tribunal ruled that that was unfair treatment.
The changes in this bill allow people to mix, if they choose, but they must identify it as being mixed, Canadian, or of foreign origin.
Mr. Easter: There was previously a requirement to get authorization to either import or mix. Under this bill, the requirement will be that it be reported.
Senator Tkachuk: The bill will repeal sections 72(2) and (3) of the act.
Mr. Gosselin: That is also a mixing provision and was also considered to be not in keeping with our obligations with respect to international trade. These mixing provisions were followed up by provisions in the regulations. By removing the regulatory provision, we are also addressing the provisions contained in the statute. We are, in effect, removing all the provisions that relate to mixing, whether in the statute or in the regulations. We will be replacing those with another regulation that will require the identification of origin when the grain is being handled.
Senator Tkachuk: The big issue before the WTO panel was that of the Canadian Wheat Board, and on that the panel ruled in Canada's favour.
Mr. Migie: The Americans are not expecting to suddenly be able to export large amounts of wheat into Canada as a result of these types of changes. These are items that clearly violated national treatment. They will have no practical impact in the grain situation, because people do not choose between importing or buying domestically based on prior approval that was always granted routinely versus grain companies now having to report equally whether the product is of Canadian origin, U.S. origin or mixed. The Canadian Wheat Board was the target. The other issues were instances of violations in our law that had very little practical impact.
Senator Tkachuk: Did we agree with the Americans to make all these changes? How did we deal with this after the ruling? Did we agree separately with the Americans on any parts, or did we just agree to implement the WTO decision?
Mr. Migie: We did not appeal the WTO decision with respect to the Canada Grain Act or the Canada Transportation Act. We determined the best approach to implement it while still providing national treatment. We developed the approach that is before you in this bill. We believe it complies fully and no more than complies with what the WTO requires us to do.
Mr. Easter: The U.S has often tried to target the Canadian Wheat Board as a single-desk selling agency, and they have always lost. We consider these changes required by the WTO to be pretty minor, which is why we did not appeal. By making the minor changes that are in this bill, we still protect the integrity of our Canadian grain supply system. We meet the WTO requirements without jeopardizing Canada's ability to operate our grain handling system.
Senator Tkachuk: You said that you want this bill passed by August 1 to prevent the United States from having an excuse to take trade issues to the WTO. However, this really does not prevent them from doing that. The Americans are not the choirboys of the WTO. They have a reputation of acting in their own self-interest, the WTO be damned. Whether or not this bill is passed will not mean anything as far as that is concerned.
Mr. Easter: That may be true in some other areas, but the urgency in getting this bill passed is that if we do not bring our system into compliance with the WTO panel ruling, the Americans would be in a legal position under the WTO to retaliate against a certain list of products, which could include malting barley or durum wheat. There would be a fairly narrow list that they could potentially retaliate against, but they could do that legally under the WTO rules.
In many of the cases that we fight with the Americans before the WTO, we do eventually win. The Canadian Wheat Board is a prime example. We do not want them to be able to legally retaliate against a list of products simply because we did not pass this minor bill to implement the necessary changes, which do not affect the integrity of our system.
Senator Mitchell: The bill does provide for a review process within a year as a result of an amendment made in the House of Commons at committee stage. Have you given any thought to how that review process might be structured? Will you be asking our committee to do that review?
Mr. Easter: There was a review a few years ago by a committee set up by Minister Vanclief, I believe. That committee made a number of recommendations and its report is now available.
The amendment says that "the Minister shall cause,'' and it is certainly the minister's intention to abide by the legislation. I know that he has not yet had a lot of time to think about how this will be done, but it could be through a process similar to that of the previous report. In accordance with the amendment, it would be an independent and comprehensive review.
Senator Mitchell: On agricultural issues, most notably BSE, some argue that the U.S. border has been closed to Canadian beef because there is something wrong with the way in which we have conducted our relationship with the United States. I would argue that is not the case. I would argue that it has everything to do with U.S. politics. Those states that raise beef vote Republican, and those states that do not, like New York, vote the other way, so it is very political.
We are making a concession to the U.S. and we are responding responsibly and quickly to an issue that was of disadvantage to them. Do you foresee this resulting in them being more accommodating to us on issues that affect our ability to export to them? They do impose tariffs on a number of our agricultural products.
Mr. Easter: No, although I do hope that the U.S. will see that we are bringing ourselves into compliance with the WTO panel on those areas in which we were not in compliance.
On BSE, I agree that it was initially political. However, it is important to note that the United States Department of Agriculture, inclusive of President Bush and the administration, are fully on side with the rule that our cattle under 30 months of age should be moving into the United States. We are fully in agreement on that. The border remains closed due to a decision of a Montana judge. The USDA and the administration are in full agreement that we have the necessary science and safety standards behind our cattle and that the border should not be closed to us.
Senator Tkachuk: In a vote in the American Senate on the BSE issue, Democrats overwhelmingly supported the continued closure of the border, not Republicans. I want to make that clear.
Mr. Easter: I told the chair of the Senate committee only yesterday that you do not often see politics at a Senate agriculture committee. In my former life as president of the National Farmers Union, I appeared before many committees in the House of Commons and the Senate. Senate committees always get to the heart of the issue without partisan politics. Senate committees have always done good work.
The Chairman: Thank you for that vote of confidence.
Colleagues, if there are no further questions, we can move to clause-by-clause consideration of the bill.
Shall the title stand?
Hon. Senators: Agreed.
The Chairman: Shall clause 1 stand?
Hon. Senators: Agreed.
The Chairman: Shall clause 2 carry?
Hon. Senators: Agreed.
The Chairman: Shall clause 2.1 carry?
Hon. Senators: Agreed.
The Chairman: Shall clause 3 carry?
Hon. Senators: Agreed.
The Chairman: Shall clause 4 carry?
Hon. Senators: Agreed.
The Chairman: Shall the title carry?
Hon. Senators: Agreed.
The Chairman: Shall clause 1 carry?
Hon. Senators: Agreed.
The Chairman: Is it agreed that Bill C-40 be adopted without amendment?
Hon. Senators: Agreed.
The Chairman: Is it agreed that I report Bill C-40 at the next sitting of the Senate?
Hon. Senators: Agreed.
The Chairman: Carried.
The committee continued in camera.