Proceedings of the Standing Senate Committee on
Foreign Affairs
Issue 17 - Evidence - Meeting of June 8, 2005
OTTAWA, Wednesday, June 8, 2005
The Standing Senate Committee on Foreign Affairs met this day at 4:06 p.m. to examine the development and security challenges facing Africa; the response of the international community to enhance that continent's development and political stability; and Canadian foreign policy as it relates to Africa. Topic: World Trade Organization
Senator Peter A. Stollery (Chairman) in the chair.
[English]
The Chairman: This is our twenty-eighth meeting on our Africa study. Mr. Verheul and Ms. St. George are our ninety-eighth and ninety-ninth witnesses. We have had an interesting few months. I wish to welcome them to this meeting of the Standing Senate Committee on Foreign Affairs, a meeting held in the context of our special study on Africa.
[Translation]
The focus of today's meeting is the current round of talks in the context of the Doha Round of the World Trade Organization, and more specifically, agricultural issues.
[English]
In this context, we have the pleasure of welcoming Mr. Steve Verheul, Chief Agriculture Negotiator. Mr. Verheul hasbeen working at Agriculture and Agri-Food Canada for the past 15 years and is now responsible for Canada's involvement in international agriculture negotiations with the World Trade Organization. Mr. Verheul is accompanied by Ms. ShelleySt. George, Senior Trade Policy Analyst, Multilateral Trade Policy Division. Welcome to the Senate of Canada.
Thank you for attending here this afternoon. I know you have come from another meeting. You are aware of some of our concerns and questions. We must be fair here. We must understand that the negotiators receive instructions from the ministry as to what position Canada will take at the WTO in the Doha Round in the agricultural negotiations. You have the floor, Mr. Verheul.
Mr. Steve Verheul, Chief Agriculture Negotiator, Agriculture and Agri-Food Canada: I should like to give you a brief outline of where the negotiations are at the present time in terms of the process itself. With respect to issues related to Africa, I will talk about how African countries are negotiating at the WTO and talk about some of their key offensive interests in the negotiations as well as some of their defensive interests and the status of those issues. I will try to do that fairly briefly to allow time for questions.
As to the status of the negotiations, we have actually been at the negotiations for a little over five years. We got off to a fairly slow start until the 2001 ministerial meeting in Doha, Qatar, that established the ambition and the timelines for the negotiations. Since that time, we have missed every single deadline that was set, so the negotiations have been going slowly, but we are starting to pick up speed more recently.
We had a failed ministerial meeting in Cancun in 2003. That sent a bit of an alarm bell to different countries about the prospects for the negotiations. That led us into a more intensive process that started in the fall of 2003 and led up to last summer, last July 2004. At that point, we reached agreement on a framework for the negotiations on agriculture. The framework is essentially a road map of how we will conduct the rest of the negotiations, a structure for the various issues and how we will try to move those forward.
After reaching agreement on the framework, we have been holding fairly intensive negotiations, at least a week a month in Geneva since then. Those negotiations have been getting progressively more intense as we head towards this summer.
We are now into a process where we will be in Geneva virtually non-stop beginning next week until the end of July. Our objective now is to try to reach what has been called the first approximation of modalities. Modalities are essentially all of the specific provisions we are trying to negotiate — that is, by how much we are going to cut tariffs, by how much we will cut domestic subsidies, when we are going to get rid of export subsidies, those kinds of issues. Our deadline is to finish all of that by the Hong Kong ministerial meeting, which will take place in December of this year.
After that, we will probably take most of 2006, if we are still on track, to try to finish the remaining elements of the negotiations. That is an outline of the time frame and process we are following.
With respect to developing countries in Africa, in particular, I wanted to talk first about how they are negotiating. The African countries, much like all countries now in the negotiations, are largely negotiating in groups. You see very few countries negotiating on their own. That is very difficult to do in an organization with 148 members, so countries have tended to form groups and participate in the negotiations that way.
There are African countries that are part of the G20, which is a group that is led by Brazil. It also includes several powerful developing countries like China, India and South Africa. Five African countries are part of the G20. That is probably the most powerful group outside of the U.S. and Europe in the negotiations.
We also have a group called the G33, which is all developing countries as well. Those 33 countries are oriented more towards the defensive interests of developing countries and trying to limit the amount of market access concessions they will have to make in the negotiations.
Beyond that, one Africa member, Mauritius, is part of theG10, which is a collection of more defensive-minded countries but also includes developed countries like Japan, Switzerland and others. In addition to that, we have the Africa Union, which is often represented as a negotiating group as well. We have the group of least developed countries, of which 24 of the 30 LDC members at the WTO are countries from Africa. We have the African, Caribbean and Pacific Group, which is a grouping of countries mainly tied to preferences into the European communities. We also have the G90, which is the largest group of developing countries. All of these are various negotiating groups. They overlap, and they have different interests, but that is how most of the negotiations are taking place with respect to the developing countries.
On the offensive side, the key objective we are hearing out of Africa and from developing countries overall is the need to make some fundamental changes in subsidy levels being provided by developed countries around the world, primarily the U.S. and the European communities. A lot of their focus right now is to try to get the maximum possible reductions for elimination of those kinds of domestic subsidies. In particular, they do not want to discuss much in the way of opening up their markets at all until they have can some assurance that they are not opening their markets to subsidized product.
They are also keenly interested in the elimination of export subsidies on all products because that tends to distort world markets and lead to the dumping of product at very low prices into their own markets, disrupting their production. That is another key objective they have been pursuing.
They are also pursuing issues that may seem somewhat unrelated, but even issues like food aid. In particular, the abuse of food aid is a concern in Africa, because we have the U.S. in many cases dumping surplus production into commercial markets in Africa and disrupting those markets.
Their offensive interests are focussed on getting developed countries away from a lot of the subsidies that are not only distorting international markets and international prices but also distorting their own markets within Africa.
On the market access side, they are interested in getting much better access into developed countries and, for many of them, into other developing countries as well. We do have the initiative, which you are aware of, of trying to provide duty free and quota free access for all imports from least developed countries. That is part of the framework that was agreed to last year.
Beyond that, they have issues with respect to tariff escalation, where developed countries put higher tariffs on processed products than they do on the basic commodity, which discourages value-added production within African countries.
Those are the main issues they are pursuing on the offensive side.
On the defensive side, most of their concerns relate to market access, access into their own specific markets. Here they are trying to limit the amount to which they have to open up their own markets. They will have access to a number of different provisions in relation to that. First, they will have access to special treatment for sensitive products, which will also apply to developed countries. That will mean those sensitive products do not have to take the same tariff reductions that other products would have to take.
Second, for developing countries only, there is a provision related to special products, and those will be identified on the basis of specific criteria relating to food security, livelihood security, rural development and that kind of thing. They will be able to designate a certain number of special products where they will not have to take anywhere near the same kind of obligation as they would on any other product — not much in the way of a tariff reduction and not much in the way of any kind of market access opening.
In addition to that, they will have a special safeguard mechanism for developing countries only that will cushion the impact of any kind of import surges that might occur or, in all likelihood, any kind of product coming in at very low prices that would disrupt local markets. In those cases, they will have a mechanism to provide some increased protection and reaction to that kind of an event, like an import surge.
On the defensive side, there is also the issue of preferences and preference erosion in particular. A number of developing countries in Africa, and Mauritius comes to mind as one, get a significant benefit out of preferential access to the European communities on sugar. It is a very high priced market, and they have access set aside only for them. If they start to lose that preference as tariffs come down into the European communities, they could lose that access to other developing countries that are more cost competitive, like Brazil, for example. They are concerned about losing that preference into the European communities.
At the same time, we also have developing countries that are concerned about gaining increased access to other developing countries — the whole south-south trade issue. African countries tend to be more on the defensive side than the offensive side, but we have developing countries in Central and Latin America that are trying to ensure they can improve their access to other developing countries.
Domestic support is being led by the G20 group I described that Brazil, China, India and South Africa are part of. They are looking for longer implementation periods for any kind of domestic support reductions they might have to make, and they are looking for more flexibility in how programs or spending, which would be of particular interest to developing countries, could be allowed under the rules. They are starting to put proposals forward on that basis.
That is essentially a very quick overview. I recognize there is a lot of information there, but that is where we are at with respect to key interests of Africa and negotiations and how those issues are starting to unfold. We would be happy to go into more depth on any of those issues, if you wish.
The Chairman: Thank you. Ms. St. George, do you have anything to add?
Ms. Shelley St. George, Senior Trade Policy Analyst, Multilateral Trade Policy Division, Agriculture and Agri-Food Canada: No.
The Chairman: It has been very rich testimony, and we are trying to absorb it in the context of our Africa study. I will call on Senator Robichaud.
Senator Robichaud: You mentioned domestic support and where those people are looking to keep or put it in place. I was under the impression, because there were pressures from the World Bank on the one side and the International Monetary Fund on the other, that they had to get rid of all those programs tied to domestic support. Am I right or did I get it wrong?
Mr. Verheul: You are certainly right with respect to a number of African countries. The requirements of the World Bank and other international monetary institutions on African countries limit the amount and types of support those countries can provide.
They still do have the flexibility to provide some support, as long as it follows certain criteria or certain types of support. Obviously, most of those countries do not have a lot of income to put towards those kinds of programs. There really is not a concern about the amount they would spend, from a WTO perspective. It is a matter of providing them increased flexibility so they can fall within the rules.
At the moment, one of the complaints coming out of Africa and other developing countries is that all the subsidy rules developed were developed with developed countries in mind and not developing country needs. We are trying to adjust some of the specific provisions and rules to accommodate the types of programs that developing countries would want to pursue.
Senator Robichaud: Surely, there must be some chance of success, but how is it moving on that front?
Mr. Verheul: We are starting to get into that issue now. In the discussions we had in Geneva last week, the G20 — this group led by Brazil that has a number of African country members — has started to put more detailed proposals on modifications to the rules they would like to see for developing countries specifically.
Given the influence this particular group has, they can attract a lot of support from developing countries at large, to the point that they have now become as powerful as the U.S. or Europe in the negotiations. On certain policies or proposals, they can bring anywhere up to 90 or 100 countries in behind them in support of them, which is a lot of weight and influence in the negotiations.
Senator Robichaud: Where does Canada stand? Do we bring support to those countries?
Mr. Verheul: Yes, we do. In fact, we had meetings in Brazil two weeks ago. We went there to engage in some discussions with them on these various proposals. I also had a meeting with Brazil last week to discuss this as well.
They gave us a copy of their draft proposal. We were the first country to see it outside of the developing countries, and they asked for our reaction and comments and any advice we could give them on the types of changes they were suggesting. Over this past week, we have been working on some advice we can provide that might make those proposals more acceptable to the broader membership.
Senator Robichaud: Would we be supporting those proposals?
Mr. Verheul: We are not supporting all of the proposals as they put them forward, because some of them, we think, are not precise enough in terms of what they are trying to achieve. If it will work for their interests as well, we need language that is quite precise, so you can tell whether you are within the rules or not. We are prepared to provide a considerable amount of flexibility to developing countries with respect to modifying the rules, but we want to ensure that there are still some limits around what can be done.
There is also the broader issue of trying to find a way to develop criteria that will address the concerns of countries, for example, in Africa but will not necessarily provide a lot of protection for Brazil because Brazil is much more competitive and capable of taking care of its own interests.
Senator Robichaud: You say develop criteria. Is the capacity for a nation to feed itself taken into consideration when you look at the rules? I am under the impression that those rules are for the protection of the developed countries, so that we have a market selling to the developing countries. Do they take into consideration the ability of those countries in agriculture? I say ``we.'' When we tried to help, it did not work out very well. We have heard stories of families where on Mondays it was three of the children eating and on Tuesdays it was the rest. Some families in some countries have lost the ability to feed the population. Is that a factor?
Mr. Verheul: That issue specifically does not tend to get discussed at the WTO. However, the shift we have seen, particularly over the last two years, is we are now seeing coming out of developing countries proposals that are starting to drive the agenda in a way they did not before. This is fairly recent. It did not start with the beginning of the Doha round, which is supposed to be the development round. It is much more recent, as some developing countries have taken more of a leadership role.
Brazil is the best example. Brazil is certainly negotiating for itself in the negotiations, but they are also trying to exercise a leadership role on behalf of developing countries, as are some of the other ones, which is why they are drawing in African countries as part of their membership. When they are developing these proposals, they are actually coming from developing countries. That tends to make it a discussion much more focused on what they themselves are looking for in terms of flexibility.
The dynamic in the power relationship within the negotiations has taken a fundamental shift.
Senator Robichaud: Who has the advantage?
Mr. Verheul: The developing countries are now a full player whereas before they were largely on the sidelines watching while developed countries worked out the rules between themselves.
Senator Corbin: Senator Robichaud dug into some of the questions I wished to ask.
Yesterday, Mr. Blair met the President of the United States. Mr. Blair could not get a commitment from President Bush with respect to supporting his so-called report. President Bush announced $750 million in additional aid to Africa. How is that going to impact what you people are attempting to do? Is that not just the sort of thing that some of the groups are opposed to at this time?
Mr. Verheul: Certainly, our focus is to create an environment where developing countries, and in particular African countries, can participate more effectively in international trade. They will not face the same level of subsidies from developed countries they are facing now. They will have more capacity internally to develop their own economies on the agricultural side. If they can develop and advance their own economies, they can do better than if they have money handed over to them from developed countries. That is the kind of environment we are trying to encourage at the WTO, to allow them to advance in that direction. If they can participate more effectively in international markets, it advances not only their interests but also the interests of other developing countries and international trade generally.
Senator Corbin: Would you be concerned about the fallout of recent referenda in Europe and the rejection of the proposed project for a European constitution and Blair putting everything on hold? Would not that impact in a certain way on your negotiations? That is the current trend, but who knows about the future. Would you not be concerned with that?
Mr. Verheul: We have not seen much of that translated into the negotiation side yet. As you say, it is still an evolving issue. I spoke to the Europeans about this last week. At the moment, their policies and position remain the same as far as the negotiations are concerned. Their interests remain the same. I am not expecting to see any kind of difference or change at the negotiations level. The kinds of discussions relating to the constitution could have some broader impacts on the European communities as an entity, but I think their negotiating position will remain the same.
Senator Corbin: I should like to go to what you call the defensive side positioning. You related to special treatment for sensitive products. Could you tell us more about that?
Mr. Verheul: There are actually several layers. There is a provision in the framework we negotiated last July for sensitive products that apply both to developed countries and to developing countries. That is a matter of identifying a number of products to be negotiated where you do not have to take the same kind of tariff reduction that would apply to most other products. In other words, it is an exemption from the overall tariff reduction formula and you get special treatment for those sensitive products. Developed countries will have a certain number of sensitive products; developing countries will have a larger number of sensitive products. That is one element.
In addition, developing countries will have an additional provision relating to special products — these will be products related to staple products, to products that are a major factor in the nutritional requirements of the country involved, products that are essential to human and resource livelihood, and so on. They will be oriented more towards development purposes and they will be able to identify a certain number of products for that.
I mentioned the special safeguard, which is the third element, which will allow them to react to any kind of import surge or disruption caused by imports into their market.
Senator Corbin: Such as low prices?
Mr. Verheul: Yes.
Senator Di Nino: Throughout these hearings, I think I can fairly state — and my colleagues can disagree with me, if they choose — that the vast majority of witnesses have opined that the developed world's commitments and approach to helping Africa or helping Africa help itself has been pretty much of a failure. The vast majority point to agriculture as being one of the worst failures. The witnesses from a variety of countries have told us that the IMF and World Bank programs have been a disaster and that, in effect, they have resulted in countries that were self-sufficient in their ability to feed their own people become countries that need to import food for their people. Since we are talking about agriculture, we will try to concentrate on that area.
Obviously, the international agreements — that is, the WTO and the preceding agreements, et cetera — have not been favourable to the African continent. Would you agree with that statement?
Mr. Verheul: Yes, I would.
Senator Di Nino: Is that because the African continent has not been able to fend for itself, if you wish? Have they been taken advantage of by the developed countries, or is it some other reason?
Mr. Verheul: It is a combination of factors, I believe. In previous rounds of negotiations, the negotiations have been primarily conducted among the big players, the Europeans and the Americans in particular. It has been all about trying to get some kind of limitations on the subsidy practices of those big players as well as trying to get market access improvements that would apply generally across the board. Throughout that negotiation and previous negotiations, developing countries were by and large bystanders. They would not have a lot of input into the negotiations. They would be more or less pressured into accepting whatever outcome had been negotiated between the big players, the developed countries. They were not able to exert much influence on the negotiations and they were not able to contribute much in the way of proposals because, for the most part, of a lack of capacity. When we launched the Doha development round back in 2001, the idea was to bring developing countries into the international trading system, to pay more attention to their needs and, through trade, to try to advance the interests of development. We could certainly argue whether that has been a success to date. We have a long ways to go.
At a minimum, we now have a situation where developing countries are playing a major role in the negotiations themselves in terms of the dynamics of the negotiations. They are coming forward with specific and detailed and, in many cases, well thought out proposals. It will not be possible to ignore them this time around. Unless there is accommodation for developing country interest in this negotiation, we will not have a result. That is far different than we have ever seen in the past.
Senator Di Nino: You mentioned the abuse — my word, not yours — of the food aid program, in effect being a method of dumping excess products on the markets under a the umbrella of food aid, which reduces the ability of the local farmers to be able to produce at a competitive rate. Is this a practice that Canada has been guilty of, in your opinion?
Mr. Verheul: The main target in all of this has been the U.S. by far, because they tend to be the only country that offers concessional credit as food aid. In other words, countries have to pay for their food aid. We have been of the view that food aid should be provided in grant form. If you are giving food aid then you should be giving it, not charging for it. The U.S. has often tied delivery of food aid to future commercial sales, which, again, is something we do not consider to be a fair practice. Those are the kinds of issues we have been trying to get at.
One area we have been criticized, along with the U.S., is the notion that we require a lot of our food aid to be sourced domestically. A lot of NGOs will tell you that that is probably the least efficient way to provide food aid. It is far better to source it locally to the recipient countries rather than to pay transportation costs to get the food aid to the country that needs it — along with the time it takes. That is another issue look that will be looked at in the negotiations. If we are criticized for any of our food aid practices, it is probably for that practice more than for any other.
Senator Di Nino: How does that differ from the American way?
Mr. Verheul: The Americans have the same requirement. In fact, they require 100 per cent of their food aid to be sourced domestically. For us, I think it is 90 per cent.
Senator Di Nino: We are not really much better than the Americans. I am not trying to lead you in this, but the difference between 90 per cent and 100 per cent is slight when you are considering this abuse of the rules.
Mr. Verheul: With that particular issue — however, we do provide our food aid in fully grant form. We do not charge for our food aid, as do the Americans. We do not have the same kind of linkages to commercial sales that the Americans do. In general, our food aid practices are much more conducive to the kinds of food aid practices most NGOs would support, but there is that one element of domestic sourcing that we do get criticized for.
Senator Di Nino: Let us switch gears a little and look more on the positive side, because we could probably go on and talk about all of the mistakes, some more intentional than others, that we in Canada made in the provision of our support for Africa. What has worked? What do you think we should change so it can work better?
Mr. Verheul: The most difficult issues are the ones that would deliver the most benefits — which means trying to get rid of as much of the distortion in world markets as we can. We have seen this in particular in the example of the four West African countries that have been promoting the issue of cotton. They have been arguing very clearly that the American and European subsidies on cotton have reduced their own prices to such an extent that they will be out of production, whereas if they were able to get a legitimate market price for their production, they would be able to compete and sell their product into international markets. Focusing on issues like that is one way we can advance the negotiations, and it illustrates the impact those subsidies have. Trying to restore order to the international marketplace is the first order of benefit, as well as allowing them to have the flexibility to protect their own markets from any kind of disruptive actions from others.
Senator Di Nino: Is it your position as a Canadian representative in these discussions that we should reduce or eliminate those subsidies? Are we in Canada making a strong point of that in the negotiations? The G20 is the group that you mentioned, including Brazil, that now has some clout. Are we supporting them?
Mr. Verheul: We are supporting them very strongly. In fact, Canada and Brazil are probably the two leading countries calling for the most aggressive position in respect of reduction and elimination of those kinds of subsidies, and we work very closely with Brazil, probably more closely than any other country, on developing strategies for how we can try to achieve that.
[Translation]
Senator Prud'homme: My question has to do primarily with political considerations. Until now, our African friends have been seriously at odds with Western producers.
We are politicians and perhaps, as senior officials, you can help us reflect upon this state of affairs. How do we go about convincing our producers who tend not to look kindly upon Canadian aid to African nations, which could well be excellent markets for our agricultural surpluses?
As a politician, my problem is convincing ordinary Canadians, my constituents, that sharing agricultural resources in this way is a viable option. I am especially interested in the political aspects of this complex issue.
In Europe, farmers have staged large-scale protests against their government. The United States protects its farmers — maybe a little too much — and always at the expense of producers elsewhere in the world.
What is your take on this situation?
[English]
Mr. Verheul: There are a number of areas where we can work in common with developing countries and with the support of our own farmers. We have many areas of common cause. On the issue of subsidy reduction or elimination, we are working hand in hand with developing countries. We have the same interests. Our farmers understand that.
Our farmers also understand that access from least developed countries should not be something we should be concerned about, other than the exception we have made for dairy and poultry and eggs because of supply management. One way in which I think we can sell this most effectively to our producers is to find a way to ensure we can make a distinction between those developing countries like the African countries who are not a great threat to our own producers. We would anticipate getting more imports from Africa as compared perhaps to some other countries. Certainly the market opportunities in Africa are not like they are in some other countries.
The biggest concern I have been hearing from farmers is that they do not want to give a wholesale break to developing countries across the board because they are facing major competition with Brazil and Argentina and seeing the prospect of India coming on and China. If there is a way to develop approaches that will allow Africa to have much more flexibility while still constraining the major players in developing countries, then I think we can get a lot more support for that kind of approach.
Senator Prud'homme: I will reflect on your answer.
Senator Downe: I am interested in pursuing this question about the Americans charging for food aid. How does that work? Do they advance the funds to the countries and then they buy it back?
Mr. Verheul: They generally provide concessional credit. In other words, they provide the countries with funds at low interest rates, but they are expecting them to pay them back over a period of time. They do not necessarily have to pay them back entirely, but there is a payment that must be made.
Senator Downe: I assume that over time they simply write off the debt if the country cannot pay.
Mr. Verheul: That is right.
Senator Downe: What is the reason we do not do that?
Mr. Verheul: We have taken a view from a food aid policy standpoint, as has every country in the world expect for the U.S., and Japan is one of the countries that does some concessional credit but not much, that if you are providing food aid, then there is no point in charging for it. Our position is that food aid should be provided without any cost. Every other country in the world with the exception of U.S. and in some cases Japan has the same view.
In fact, the Europeans have gone further. They are now supporting and practising an approach whereby food aid is provided in cash terms only, and then the recipient can purchase food locally or from their own markets, whatever makes the most economic sense.
Senator Downe: My second question regards the link for economic development. How does that quid pro quo work? They advance the aid, but then they want to build a bridge?
Mr. Verheul: In some cases, it goes that far. Generally, the approach they have is to provide food aid to a country on the condition that, after a certain period of time, the country will commit to purchasing food of the same type or different type into the future. Concurrent with a country getting a provision of a certain quantity of food aid, the country would sign a contract to purchase a certain amount of food going into the future.
Senator Downe: Does any other country in the world besides the U.S. do that?
Mr. Verheul: No.
Senator Robichaud: The U.S. approves credit so those countries can buy American products. When the World Bank and the IMF come in, these are debts that have to be paid by those countries, debts that are held against them and reduce their ability to support their interior market and, therefore, put a pressure on them to eliminate that?
Mr. Verheul: Yes, that is right.
Senator Mahovlich: In terms of the negotiations you are involved in, is an arbitrator ever brought in? Who makes the decision of what is fair? Do you just sit there and argue?
Mr. Verheul: It is a very slow, painful process, I assure you.
Senator Mahovlich: The process must be confusing, because there is the G90, the G10 and the G20.
Mr. Verheul: It tends to be very confusing. The process is not very straightforward. The current chair has developed a series of what he calls locks, as in a canal. The first meetings take place with all 148 members in a room. As you can imagine, we make no progress in those rooms. We then have a more detailed discussion with about 50 countries, in which the discussion is a bit more technical, and then there is a third level, where the chair has meetings with about 12 to 15 countries. It is at the third level where most of the work gets done. It is there that work begins on actual text and drafting. Once you make progress in that room, you take it back to the broader membership and explain to them what has happened and try to convince them to support that same direction.
Among that group of 12 to 15, you get representatives from most of the major groups. There is almost always a representative from Africa, from the G20 and the G10. It tends to be representative of a lot of different groups.
Senator Mahovlich: Do those groups make the rules that allow the Americans to charge for their aid?
Mr. Verheul: That has never been the subject of negotiation, up until this point in time. We have had negotiating sessions in Geneva over the past couple of months where every country in the room, other than the U.S., has stated that we should be outlawing this practice and developing a rule banning the provision of concessional food aid.
Senator Mahovlich: That makes sense to me. Is the creation of a marketing board a valid option to protect the incomes of poor farmers in Africa? Have you considered that? Would that be a solution?
Mr. Verheul: It is something worth exploring by a number of African countries. There are different types of marketing boards, and different practices might be of benefit; others might not be. We see in a country like Brazil their advancement in the agricultural sector to a great degree on the strength of cooperatives, and the cooperative movement in Brazil is strong and pools a lot of resources and labour. They have managed to get the kind of economies of scale that have allowed them to expand through the use of cooperatives.
A supply and management marketing board as we have in Canada may work for some commodities in some countries, but not for all. A lot of these countries will have a great deal of difficulty in maintaining higher prices for farmers that might come as a result of supply management since they have a lot of rural and urban poor to feed. A lot of them are seeking to expand so they can export in international markets to get foreign currency. It depends on the commodity and the country, but certainly that is one of the tools in the tool kit that should be part of what they look at.
Senator Downe: You indicated that the Europeans give cash so the countries can buy locally. Is there any concern about corruption?
Mr. Verheul: Yes. A lot of the cash actually is not given directly to the recipient countries. Most of the cash transactions being discussed are done under U.N. organizations like the World Food Program. The World Food Program has specific rules and criteria they have to follow in how they deliver food aid. Another element we are trying to pursue in the negotiations is to have organizations like the World Food Program be responsible for, first of all, identifying whether there is a real need or not, and then identifying the manner in which food aid can be channelled from developed countries to developing countries, to target as much as possible those truly in need.
Senator Andreychuk: I apologize. I was in another committee so I missed the first part. If you have gone over this already, just tell me so.
We have talked a lot about subsidies. I am one of the pessimists, having been around this for 30 or 40 years, about the reality of something being done on subsidies. Usually, in the end, very little is done. One of the optimistic signs in the last round was the developing countries seeming to come together in a way they had not before. The trade distortions have not just been from the north to the south. They have been where the north supports the south. In bananas, it is Europe protecting Africa and having different agreements there, and the Americans with the South American banana trade. Rice and other commodities fall into that same category.
To what extent is that a problem in subsidies? If the developing countries were able to sort out their position and be unified, would they be in a better bargaining position and therefore be as Canadians vis-à-vis the Europeans or the Americans?
Mr. Verheul: There has been significant progress on that front. With respect to export subsidies, which have been a major concern, after some 55 years we finally have agreement to eliminate export subsidies on all products entirely. That will be off the table at long last, and that is a significant accomplishment.
The other accomplishment in negotiations was the Canadian-suggested provision that those with the most capacity to spend should cut the most. In other words, the Europeans will have to cut their subsidies by a significantly higher percentage than the Americans and the Japanese. The Americans and the Japanese will have to cut their subsidies by a significantly higher percentage than Canada and other countries. It will be much more harmonizing in terms of balancing the field. Those are significant gains.
You mentioned some key commodities of cotton, rice, sugar and bananas. We also will have a provision calling for product-specific caps on subsidies. In other words, you cannot spend any more than you have historically on a particular commodity, which also will help. It will particularly constrain the U.S. because their support tends to be tied to what happens with prices in the world. If the price goes up, they do not subsidize very much. If it goes down, they subsidize a lot. That tends to distort markets even more. If they are going to be kept at a flat level, you will not get that same distortion. That is progress as well.
The more challenging issue is the preferences some countries have into either the U.S. or European markets. If an African country like Mauritius is selling sugar to the European communities, they have a preferential rate into Europe, and that is a benefit they rely on quite heavily. The problem is other developing countries, such as Costa Rica, who ask this: ``Why should that country get an advantage over my own economy because I do not have that and I can produce even more cheaply?'' We are starting to see more conflict between developing countries over those issues, and that is more of a challenge to try to fix.
Senator Andreychuk: That was really my point. Perhaps I did not make it clear. To what extent will that be attacked or identified in Doha?
Mr. Verheul: It will be identified. There will be pressure to reduce those preferences in the negotiations because, as tariffs on bananas or sugar in Europe come down, those preferences will be eroded and a lot of African countries will not have the same advantage they have had before.
Since it is viewed as generally the direction we are headed in terms of liberalizing trade, we are now giving some thought to what else can be done in terms of allowing that to happen over a longer time period by talking with some of the other multilateral organizations that could provide other forms of assistance to help diversify economies. It will have to be a more global approach than just what can be done within the WTO, and that is being explored.
Senator Andreychuk: When I go to Africa, I am always reminded that, as a commodity, cocoa is only 100 years old; cotton was injected in many areas later. Here, I am not talking about Egypt and those areas but about sub-Saharan Africa. They are relatively new commodities in the span of history.
What do you make of the theory that water will impact agriculture as much as trade and subsidies and the Lester Brown theory that, as the water tables shrink and are not re-established, we will all be readjusting to what we can grow and that we are not preparing for that? In his latest books, he points out that wheat may become a more sought after commodity in a number of decades because of the water shortage and the fact that China's reserves are being depleted. Do you have any comments on the linkage between water and agriculture?
Mr. Verheul: There will be a lot of pressure coming from that direction. Most countries will have to get away from the notion of producing commodities that they have historically produced for a long time and from assuming they should be getting the same price they got, in trying to maintain their production levels. Climatic conditions are changing. There is the issue of water pressure. Even in Canada, we need to be more flexible with respect to what kind of products we produce. Producing them because it is a tradition — that is, someone's grandfather in Saskatchewan produced wheat, his father produced wheat and he is producing wheat — is no longer acceptable. We need more flexible thinking and we need to accommodate changes to the environment.
Senator Andreychuk: I was thinking more about the changes within Africa. When I was posted there, the experts were saying that a two degree change in temperature in Uganda would result in them not being able to grow coffee in many of the areas. Rainfall follows that, too. How much thinking is going into that and how much are we assisting countries to understand those dilemmas. I know what Canada has been going through, the adjustment Canadians farmers have had to endure and what that has done to the family farm and subsistence farmers. What are we doing in Africa, for example?
Mr. Verheul: As far as the negotiations themselves are concerned, it has not been an issue that has been under much discussion. The kinds of changes that may be made internally within a country or any kind of development assistance we would provide in that regard is beyond my own particular field.
The Chairman: This does not pertain to Africa, but I have noticed that the trade negotiations seem to be negotiations among producers and that consumers do not seem to get a look in. What is your opinion on that?
A second issue was raised by Senator Mahovlich. We are interested in protecting our market system in Canada. The committee has heard that we have 85 per cent of the population in subsistence agriculture. I am not suggesting some marketing system until the end of time but only as one of the ways of bridging the change to a more industrial economy. Should we not be promoting some element of a marketing system for those countries with huge peasant populations? If they are driven off the land, as they have been by subsidized agricultural exports of the EU and the U.S., is not the marketing board approach a good one for us as well? With an internationally traded commodity, it is difficult to have a marketing board. However, for locally traded products and produce, some formal system could be employed. Would that not be a good idea for many of these countries with 85 per cent of the people working in subsistence agriculture and where the alternative, if they have to leave the land, is more millions going into cities that do not have services?
Mr. Verheul: With respect to your question about whether consumer interests are factored into the negotiations, you do not generally hear much about consumer interest in the negotiations. However, I hear regularly from producers that producer interests are not taken into account in the negotiations, particularly the issue of producer returns. Their suspicion has been that a lot of the negotiations are driven by processing interests, multinational companies, and so on.
What is needed is to find a balance by removing as much distortion from governments as we can. Affecting the distribution of income on the farmer and processor level tends to get a bit beyond where the WTO can go. That issue is more of a domestic or a national issue. We have been arguing at the WTO that, if our producers in Canada want to have some kind of supply management system, we should have the flexibility and the WTO should not be telling us what kind of systems to have. That is an ongoing argument.
That leads to your second question about those kinds of marketing systems and the potential benefits to developing countries. Again, it depends on the particular commodities and the particular countries and the type of system you can talk about. To transport the type of supply management system that we have in Canada to a developing country would be virtually impossible. It is a complex and heavily regulated system. Our producers know exactly how much they are supposed to produce. They are required to be within limits of production. It is all measured and quantified. It is a difficult system to translate into a developing country world, where they do not have the kind of technology or the detailed tracking of production.
The notion of having producers organize themselves to give them more power in the market in order to negotiate better prices in order to take account of economies of scale, whether in equipment or in production, is a promising avenue for developing countries to pursue in order to balance the power somewhat between the people they are selling to and those who are producing. That is certainly an avenue that could carry them a long way.
Senator Corbin: Who makes up your negotiating team? Who accompanies you? Are you accompanied by agricultural spokespersons, by NGOs?
Mr. Verheul: For the most part, the negotiations take place between negotiators appointed by government. I have a negotiating team that includes roughly 30 people. However, I do not take everyone to negotiating sessions. I take the people who have the expertise on the particular issue under discussion.
Senator Corbin: Sectorial people?
Mr. Verheul: Exactly. We also consult closely with the industry. I have an advisory group of 45 to 50 industry representatives, producers, processors, NGOs, the whole gamut. I speak to that group both before and after every negotiating session to tell them what is coming up. I seek their advice and then afterwards to report back on what happened.
We also get a large number of industry representatives attending different sessions with us in Geneva or elsewhere around the world. As an example, we had a negotiating session in March that also included an event that was put on for non-governmental organizations at the WTO. About63 agricultural representatives attended from Canada; the United States had one or two; Australia had one or two. Our industry is extremely engaged and extremely committed to working with us to get a result that is in their interest.
Senator Corbin: Is the fisheries a component of the negotiations?
Mr. Verheul: No, fisheries are being dealt with in thenon-agricultural market access negotiations.
Senator Corbin: In terms of processing, I am from New Brunswick, and we have McCain Foods and various groups involved in processing. Would they be consulted?
Mr. Verheul: Absolutely. We have representatives from those various companies that we consult with regularly.
Senator Di Nino: You talked about sectoral representation. I am assuming you also have regional representation on your committees.
Mr. Verheul: We have regional representation and provincial representation.
Senator Di Nino: I asked the Minister of International Development when she was here a question about tied aid. Certainly the majority of the aid under her program is tied aid, or at least that is what she told us. Is the agricultural aid that we provide to Africa also tied to something?
Mr. Verheul: It is important to clarify what we mean by tied aid, because there are two definitions out there, depending on who is actually using the term.
There is tied aid that we spoke about earlier, aid that is tied to commercial sales, like the U.S. does. We do not do that. There is also the issue of aid that is tied to domestic procurement. You have to source the food aid from your own domestic production. That we do. Along with the U.S., we are the countries that do that more than any other. We do have the requirement that 90 per cent of our food aid must be sourced from Canadian production, so it is tied in that way, but we do not have it tied to future commercial sales or anything like that.
Senator Di Nino: That is good news, because I was under the impression that it was not. Obviously, agriculture is one of the components where we do not have strings attached, because that is really what tied aid means.
When we were talking before, I asked you to put your mind on the positive side. Can you give us some examples of successful initiatives in the continent, particularly the sub-Saharan continent, in the agricultural segment? Can you tell us things that have happened or that we have done or that others have done that have resulted in success stories? We are mostly hearing negative commentary.
Mr. Verheul: I am certainly not in a position to talk about any development projects or that kind of thing that we have done. That is outside my particular area.
On the negotiation side, we have made significant strides on issues like cotton that have been of importance to African countries, because we have been a big supporter of the efforts they have been trying to make. We have also helped out with disputes that have been initiated at the WTO against U.S. practices on cotton, for example, and their subsidies. The U.S. lost that panel, and they lost a subsequent appeal. That will be a major opening for developing countries in trying to get a better outcome on that front.
Since the negotiations are ongoing, it is difficult to point to any real success stories until we get some kind of conclusion. I am sure that, if you spoke to some of the officials from the development side, they would be able to identify projects in Africa that may have been helpful. Perhaps you have already spoken to some of them.
Senator Di Nino: I am troubled by some of the information that has been provided to us. There seems to be the suggestion that we are tackling the misuses or abuses of other countries that will help the African nations with their negotiations with the U.S. Our performance or our behaviour has not been particularly stellar either.
I am trying to get at the Canadian position on some of these issues. We talk about marketing boards. We have certainly supported the international agreements and the criticism in the past of African nations with their marketing boards where they have had to privatize, and yet we have kept our own. I am not comforted by your comment. That is not meant as a criticism. As you said, it is an area that you are not particularly involved in.
The agricultural issue has come up continuously in our discussions. It has left at least me — and my colleagues can speak for themselves — with a very sour taste in my mouth as to the way the world has, and I used the term before, abused the African nations in this area. Certainly, I have not heard a heck of a lot about Canadians changing their behaviour or their method of operation with the African nations other than to help them attack another country, if that is the right term, on some of the practices of those other countries.
Having said that, I am not trying to point the finger at you. I apologize if I sound that way, but it has been a frustrating experience for us. We have listened to nearly 100 witnesses. Occasionally, we have heard stories of success, but for the most part we have heard stories of sad and I would say improper behaviour on the part of the developed world and their treatment of the issue of aid to Africa. If I sound frustrated, it is because we have not heard many good things.
If you were able to write a chapter or part of a chapter on agriculture for our report, what would you suggest we recommend to the Canadian government?
Mr. Verheul: I am talking from a fairly narrow perspective of the WTO negotiations. Obviously, there is much more that needs to be part of a package to help Africa, including what we do on the development side, what we do with technical capacity, building, infrastructure, support. All of those are important and can go a long ways.
From a WTO negotiations perspective, we need to get as ambitious a result as we can on the kinds of things you mentioned we are attacking, because that will make a substantial difference to them. We also need to be flexible with respect to the kinds of needs that African countries in particular are looking for. Part of what we have done is the initiative to provide duty free and quota free access to least developed countries. We have the most generous program of that type of any country so far. We are out in front on that one, other than our supply managed products. We need to encourage others to do that as well.
It would go a long way if we could restore some order to international markets so that they can get a reasonable return on their sales. If we can allow them to protect their economies against subsidized products coming in or import surges or the abuse of food aid that will disrupt their local markets, then we can go a long way there.
The development of a kind of package that will accommodate both a lot of their offensive and defensive concerns can put them in a better position to be able to effectively compete in international markets. That is what we are trying to do through the WTO negotiations. If I were writing that portion of the report, I would suggest that we need to go a lot further in that direction.
The Chairman: I will read into the record the observation that Mr. Goodale gave the committee on this subject a matter of few months ago. This is from Mr. Goodale on April 12:
As we work through the end results of the Doha round on trade negotiations, for example, and I am thinking particularly now of the agricultural sector, what may work for the average farmer in North Dakota or South Dakota, or the average farmer in the French countryside, or for that matter, the average farmer in Red Deer or Brandon, may not work for the average farmer in Mali or in Tanzania.
You take direction from the government, and that isthe Minister of Finance who was before this committee on April 12. Does that say what we are trying to do? I realize there is more to it than that, of course, but I do not want to take up the time of the committee.
Mr. Verheul: We do not want to fall into the trap of saying policies we have in Canada, the U.S. or elsewhere should simply be grafted on to African countries. First of all, they do not have the kinds of resources allowing them to do that. They need solutions that will be made in Africa, not designed by us or other countries. We need to provide them the flexibility and the kinds of tools they can use in order to protect themselves while those reforms take place.
That is the right kind of message. We do not want to prescribe the kinds of domestic policies they have. We want to provide them with tools and guidance they need in terms of providing technical assistance and capacity building, but we do not want to prescribe for them how they should be developing their economies.
Senator Robichaud: We are talking about world trade, and the Doha round is about that. We are looking at countries and speaking about Africa, which is still in the very basic agricultural production of feeding feed their country. We are trying to make them jump from this subsistence to international trade. Are we dreaming in colour here? Is there some intermediate stage? We did not go quickly from being small producers to becoming international traders, yet we are trying to get those countries to do exactly that.
Mr. Verheul: I do not think so for the most part because we have decided that, with respect to least developed countries, the majority being in Africa, they should not have to take on any commitments, no tariff reductions and no commitments, where they have to make any changes at all. In other words, they will not be affected by commitments others will make. This gives them more freedom to proceed along the track to where other countries have gone in the past.
If we can make substantial changes in damaging practices other countries have used, that can go a long ways as well. If we remove a lot of the distortions being imposed upon them and give them the flexibility to expand and develop their own agricultural economies — that is the kind of combination we need to strike the right balance on.
The Chairman: With that note, honourable senators, I wish to thank our witnesses. Your testimony certainly fits into the picture we have developed of a rather disastrous situation in Africa. I wish you well in trying to resolve some of these problems. I think I speak on behalf of the majority of the committee.
Let us take care of a few housekeeping matters now. We must deal with a small budgetary matter concerning our proposed trip to Washington in the fall. We had planned to visit the UN in New York, but because of some of the testimony, we have decided that we should go to the World Bank and the IMF. We do have important questions to ask them. That involves a slight increase in the budget, which I then need to defend before the infamous Internal Economy Committee.
Senator Andreychuk: I thought we had already passed this one.
The Chairman: We passed the budget, but it only involved New York, because that is where we were going for the UN. What I am talking about is extra, allowing us to go to Washington.
Senator Andreychuk: You are dropping New York?
The Chairman: No, we are adding to it.
Senator Andreychuk: This just says Washington, so we should combine the two budgets?
The Chairman: It is a supplementary budget — if we want to go to Washington. We already have New York.
Senator Downe: Is the air transportation from Ottawa or New York? The price strikes me as very low. I guess there is a seat sale.
Mr. François Michaud, Clerk of the Committee: As you know, we already have money for air transportation to go to New York. The addition of Washington does not add much to airfare. With $250 for each person, we should able to pay for the entire trip. It is the same trip.
Senator Downe: It is the same answer for the per diem?
Mr. Michaud: Yes. It is just one additional day.
The Chairman: It is a matter of just adding to the trip we were already making.
Senator Di Nino: I would suggest that that be a little clearer when you go before the Internal Economy Committee.
The Chairman: I will accept a motion.
Senator Di Nino: So done.
The Chairman: All in favour?
Hon. Senators: Agreed.
Senator Robichaud: Before we adjourn — I do not know how many people would want to come here in July.
The Chairman: We may be sitting.
Senator Andreychuk: You want to bet?
The Chairman: If it is about July and the meetings we want to hold on the policy review, the steering committee will be meeting tomorrow, and we find we do have some time at the end of June. As I said in the chamber today, we will try to do our review of the international policy statement in this last week of June, which will then make it easier for the staff, and they will not have to come in July.
Senator Di Nino: We are doing this for the staff so they do not have to come in July.
The Chairman: We have the option. Remember, we are not in camera. That is the plan, Senator Robichaud. I realize people would like to do it in June rather than July. As we all know, the parliamentary calendar has been a little bit unsteady lately, so we have had to be flexible. Is that okay?
Senator Di Nino: Mr. Chairman, is it fair to say that, when we discussed this, there was little opportunity that we could see that would allow us to take a look at this document? We are the Standing Senate Committee on Foreign Affairs. A document has been prepared on a new international policy and we have not even looked at it. That is not acceptable. That is an alternative that we have. If we can do it before, we will. Is that correct?
The Chairman: That is correct.
Senator Robichaud: On the motion that was put through the Senate that we would report on those documents, is not the date 2006?
The Chairman: Yes. We put a date because we have to put a date.
Senator Robichaud: I know, but do we have to rush?
The Chairman: No. Again, it is a perfectly legitimate question, Senator Robichaud. I do have a letter from the ministers to the committee asking us to look at the statement. As Senator Di Nino says, we could not see a time, because we were not clear how the calendar would unfold. We allowed for these three days in July, which has been approved by the Senate. Again, I repeat, though, that we are trying not to do that.
Senator Robichaud: It is an option?
The Chairman: It is an option.
Senator Downe: July, if necessary, but not necessarily July.
The Chairman: Well done. I think we should go in camera.
Senator Andreychuk: When we raised the foreign policy statement, I raised that we have to do it in a timely way. That moment has passed. Everyone else has commented on it, and it is almost passé. What is the rush now when we did not really respond when everyone else was responding?
Second, I do not think we can do it justice, if you have read all of the document — and I trust all of the members have. It is in five parts. It is very extensive. It is more detailed than defence. Defence is only one part of foreign policy. We are to attempt to do something reasonable in three or in five days? It does not sound very optimistic to me to do anything other than give it a broad overview. We will say, yes, it is okay. It sounds good.
The Chairman: First, Senator Andreychuk, the House of Commons is doing it now, so it has not been done. Second, as you know, we have had numerous meetings of this committee on our Africa investigations. We are all here. We will take your opinions. I do not think we are trying to rush anything. We thought we should invite the ministers to explain their position and the policy statement to us. I think that is what we are supposed to do. That is what Senator Di Nino thought.
Senator Andreychuk: We did not do it as an immediate response. The Standing Senate Committee on Foreign Affairs has the ongoing possibility to monitor the policy, how they are implementing it and what steps they are taking. I do not mind starting with ministers. It is a framework. That is what it is. How will you implement this document now? We bump up against the departments. How will they put them together in light of what Parliament said? I think we have valid questions but this involves an ongoing dialogue and analysis that cannot be done in a week. I would hope the approach is that it will be the start of something continuous.
The Chairman: That is right. I do not think anyone is contemplating that this will stop us from reviewing this or any of the points you have made.
Senator Corbin: In the letter, did the minister specify a terminal date?
The Chairman: I do not have the letter with me. I do not think so.
Senator Mahovlich: I must confess that I have not read the document.
The Chairman: You will have time to read it.
Senator Downe: You should not confess to that.
The Chairman: Our chief researcher wishes to add something.
Mr. Peter Berg, Research Analyst to the Committee: If I recall the letter correctly, there was mention of 2006 and the potential of over annual updates of foreign policy. Presumably, this advice would be factored in for their review next year, for 2006.
Senator Andreychuk: Could we get a copy of the letter?
The Chairman: Yes. It is not a secret. Everyone can have a copy of the letter. It is basically a standard letter from the ministers supporting their statement. There is no secret about it.
Senator Corbin: You fixed those July dates. Presumably, you have already secured the witnesses. They will be available?
The Chairman: The staff will be working on the witnesses.
Senator Corbin: Minister heads, deputy heads, and so on? That is the middle of the holiday period, you know.
The Chairman: I am trying not to meet in July, if we can. I would like to use that last week in June, if we can. This is up to the members of the committee, but we have room in that last week of June to start taking a look at this. No one said we had to make a big deal out of it, but the policy statement is an interesting document. It has received a lot of comment. We are trying to arrange meetings with ministers for the last week of June. This has all come up rather quickly. The Senate has given us three days in July in case we need them, as I said in the chamber today. That does not mean we have to sit in July. I know there are members who would prefer not to sit in July. I understand that. We are trying to accommodate everyone. What else can we do?
Senator Robichaud: Thank you.
The committee adjourned.