Proceedings of the Standing Senate Committee on Agriculture and
Issue 26 - Evidence
OTTAWA, Thursday, December 3, 1998
The Standing Senate Committee on Agriculture and Forestry met this day at 9:07
a.m. to study the present state and future of agriculture in Canada,
consideration of the effect of international subsidies on farm income.
Senator Leonard J. Gustafson (Chairman) in the Chair.
The Chairman: We have been made aware of the very serious situation that exists
in agriculture across Canada, particularly in the area of the hog industry and
the grain industry.
This morning, we are pleased to have with us Ms Sally Rutherford, the Executive
Director of the Canadian Federation of Agriculture, and Jennifer Higginson,
Trade Policy Analyst.
Ms Sally Rutherford, Executive Director, Canadian Federation of Agriculture: We
would like to speak to you today about where the CFA sees the World Trade
Organization process going over the next little while; what kind of an
agreement we are looking at; and what the elements of that agreement might be.
The caveat that we would point out is that that this is a fluid process. As time
goes by, our members develop their thoughts, and our thought process changes as
As we move towards our annual meeting at the end of February, we will firm up
our positions, always with the proviso that we can change our mind as things
develop. Many of the issues out there will take on lives of their own over the
next six months, and we will be following those issues quite closely. They may
indeed affect the detail of our position, but our base position, as Ms Higginson
will tell you, will certainly remain the same.
Ms Jennifer Higginson, Trade Policy Analyst, Canadian Federation of Agriculture:
I have been with the CFA for a number of years. I work mainly on trade policy,
and certainly very closely with our trade committee. A meeting of that
committee could consist of anywhere from 15 to over 50 people, depending on the
issues being discussed.
The committee meets about six times a year, depending on the issues that come
up. We form our policy based on consensus with our members. It takes a lot of
time and effort to come to a consensus. In terms of trade policy, that is what
we need to do; discuss issues, bring everyone around the table to find
solutions that everyone can agree to.
I will talk to you about the upcoming negotiations on agriculture, which, it is
said, are to be launched in the fall of next year. The agreement on sanitary
and phytosanitary measures, as well as services, is also scheduled for
negotiation, and the launch will be at the end of next year.
There have been a number of questions as to the scope of the next negotiations,
and that is still unclear. We definitely know that agriculture, sanitary,
phytosanitary, and services will be included. However, there has certainly been
some discussion as to whether industrial goods will be included in this
negotiation. Depending on the scope of the upcoming round, that would certainly
change the dynamics of the discussion, and impact on the length, and probably
the outcome, of the negotiations.
I will talk to you about forming issues for the key segments of the trade policy
that we currently have and market access -- actually getting product out of
Canada and into another country.
I will also talk about export subsidies. Although we have an agreement from the
last round of negotiations that we would have a 36 per cent reduction in value,
and a 21 per cent reduction in volume, they still exist. As we move into a
period of low prices, we are certainly seeing a rebirth of the use of export
I will also talk to you about domestic support. I am sure you are all experts on
this subject after your series of hearings on international subsidization. I
will touch on that as well, because it is an extremely important component.
I will also touch on non-tariff barriers. They have been emerging in the last
few months, and have affected our ability to take advantage of some of the
market access that was negotiated in the last round. We need to learn from our
experiences in the Uruguay Round, and then build on that as we go into the next
round of negotiations.
In the last round, one item that was agreed to was the establishment of a
dispute settlement panel. That has been very beneficial to our producers, and
to Canada as a small to medium-sized country. Through this panel, Canada has
been able to defend what was negotiated in the last round, as well as to defend
some structures in place in the systems we use.
In the last agreement, any panel decision that was made could be blocked by one
of the countries. In the current agreement, countries cannot block the
decisions of the panel. That is definitely a big step forward for Canada. It
will be interesting to see how the hormone issue works out with the European
Union. If they could block that decision, they certainly would have done so by
now. They are having a lot of difficulty because they cannot block it, which is
a result of the dispute settlement panel and what was agreed to in the last
round of negotiations.
The main point is that we need enforceable rules. If we are going to agree on a
set of international trading rules, they have to be enforceable. This is very
important for a country the size of Canada, because we are a net exporter.
In terms of the development of Canada's negotiating position, from a CFA
perspective, we think Canada has two main goals as we approach the next round.
One of those goals is to improve market access. At the same time, however, a
number of commodities have distinct domestic interests as well. Those
commodities will be similar to those of almost every single country going into
this round. I do not think we need to move away from that, because this is
exactly where the negotiations are going to end up.
Our goals can be achieved in this round. They are not hypocritical, nor are they
mutually exclusive goals. Every exporting country that enters into the
negotiations has dual goals. Even those countries that profess to have no
intent aside from trade liberalization, certainly can demonstrate in their
actions that they are willing to go to great lengths to protect their domestic
interests. We certainly see this in some of our neighbouring countries -- in
the U.S., for example, in terms of sugar, tobacco, peanuts, and cotton. While
they are large supporters of trade liberalization, they are certainly willing
to go to great lengths to protect their domestic industries as well.
As we develop our position going into the next round, we should not get trapped
into thinking that we must resolve -- or reach a consensus on -- every single
possible negotiating issue at the beginning of the negotiations.
In the last round of the Uruguay Round, Canada put forward its detailed position
early on, within two to three years of the beginning of the negotiations. The
negotiations continued on for a number of years, and finally, two to three
years later, they came to a Blair House Agreement between the European Union
and the United States. In hindsight, I think that, if Canada had known what the
participants would come out of the Blair House Agreement with, we would have put
a different position forward two years earlier.
We need to look at what happened in the last round of negotiations, and to think
about how we will approach this upcoming round. We do not necessarily need to
iron out every single detail. We need a strong, credible position going into
this next round, but it is a fluid process that is evolving. Before we put our
cards on the table, we need to see where some other countries position
I will talk to you briefly about domestic support. Further to your previous
hearings, you are already familiar with domestic support and international
subsidization levels. From our point of view, the export level to Canadian
farmers has been substantially reduced over the last decade. It is public
information, in terms of the World Trade Organization notifications.
We have seen that there are no limits on spending on green programming. In other
words, there is no reduction commitment in terms of programs that are
considered green. For amber box programs, there is a reduction commitment of 20
per cent, which was required in the last round of negotiations.
As a result of the U.S. and the EU Blair House Agreement, the blue box program
was developed. We would consider those to be amber programs -- prior to the
Blair House Agreement they were also considered amber programs -- and they
managed to get them into a separate category, not subject to reduction
commitments either. At this point in time, I believe that only the European
Union has programs in the blue box category, but there is no reduction of those
In terms of amber support, we are spending 15 per cent of our allowable spending
limit under the last round of the agreement. Therefore, we have reduced our
spending by 85 per cent since the last round. In comparison, the European Union
is spending 60 per cent of its allowable spending limit. We would argue that,
in our mind, and I think in our negotiator's mind, if they could have managed to
get the blue box eliminated in the last round, it would have been done.
We would consider the blue box to be very similar to amber. The U.S. -- at least
in 1995 -- was spending 30 per cent of the amber limit on blue box programs.
The European Union spent another 27 per cent of the amber limit on blue box
programs. They are not subject to reductions, but we would argue that they
still are trade distorting.
In terms of green program spending, Canada is spending about eight per cent of
the value of our production, whereas the U.S. is at about 24 per cent of the
value of its production. In the WTO, it takes a number of years before the
reporting mechanism catches up to the actual programs that are taking place,
therefore, these are 1995 figures. They do not include the extra $6 billion that
the U.S. has put into its programs in the past year, nor do they include any of
the additional dollars that the European Union has put into its programs.
From our point of view, the domestic support provisions that were agreed to --
the 20 per cent reduction in amber expenditure in the last round -- will not
have a great impact in terms of levelling the playing field. There is so much
room to manoeuver within that 20 per cent reduction and Canada has already
reduced its expenditure. However, we are not seeing other countries coming down
from those commitments to the same level that we have already reached.
In terms of export subsidies, those would absolutely be the most distorting of
all of the domestic support or subsidy programs. In the original negotiations,
they were considered to be red box programs. It was agreed that they would be
reduced by 36 per cent in value and 21 per cent in volume. Canada eliminated
them completely. We went to a 100 per cent elimination of export subsidies in
the first year or two after the agreement. We certainly are strides ahead of a
number of the other 136 countries that agreed to the WTO.
What we have seen recently, in a period of very low prices, is most notably the
European Union -- but also the U.S. -- starting to put export subsidies back
into place. The reduction was only 36 and 21 per cent respectively. In the
first few years of the agreement, it was not necessary to use export subsidies,
because we were dealing with very good prices, or the export subsidies were
fairly small and it was not a problem. These countries are now starting to put
the export subsidies in place.
Unfortunately, we are seeing the text of the agreement being interpreted
somewhat differently than perhaps the intention was when it was written. The
European Union has rolled over the unused export subsidy commitments from the
first few years and has used them in the latter years. This has contributed to
the decrease of the world price and has made it even more difficult on our
exporters to compete in world markets as the prices move down.
We also are concerned with the use of export credit and food aid. In terms of
export credit, it was discussed in the last round of negotiations, but was
deferred to be discussed within the Organization for Economic Cooperation and
Development. Those negotiations have basically fallen apart, largely because
the U.S. was not prepared to agree to rules and terms on export credit.
We have seen some use of export credit, and our fear is that export credit not
be limited to the life of the product. If you are going to give credit for a
product, that credit should not be greater than the life of the product. If you
are selling grain, you are looking at a one-year term, maybe three years. You
are not looking at a 20- or 30-year term, because that really is an export
subsidy in disguise. We want to ensure that there are rules concerning the use
of export credit, so that it is used on a commercial basis, and not as a
We certainly support the use of food aid. If it is food aid, there should not be
conditions imposed on it, and it should not just be the dumping of product on
commercial markets to take away commercial sales.
If we manage to eliminate export subsidies, which we would strongly support in
the next round of negotiations, we need to ensure that, to the largest extent
possible, the use of export subsidies is reduced. However, we do not want that
to turn into disguised export subsidies through the use of export credit.
In terms of market access, we want to ensure that, when we receive commitments
in market access, we are getting real market access, not just market access on
paper; that we can actually move product without being held up at borders on
non-tariff barriers, sanitary and phytosanitary barriers. We have been
concerned with the way some import permits have been auctioned off by producer
groups. These groups are often responsible for distributing the import permits,
but there is no desire on their part to bring competing products into the
market. It makes it very difficult and you start seeing low tariff rate quota
In terms of the aggregation of tariff lines, we have seen the European Union put
a number of meat products together in one tariff line and give the five per
cent of consumption the minimum access commitment. They have not given their
commitment in some of their sensitive products, but they have given it in other
products. There is not a great deal of pork going into the European Union.
Unfortunately, pork has been aggregated with a number of other meats and it is
very difficult for them to take advantage of the market access that we felt was
negotiated in the last round.
In all the supply-managed commodities, Canada has given more than the five per
cent minimum access, as agreed to in the NAFTA agreement. We have been very
clean and up front, and certainly have allowed our full commitments in TRQs
coming into Canada.
On market access, one priority is for the grains and oilseeds sectors; that they
not only have market access, but that they receive parity of access for
competing products and parity of access between raw and processed products.
For example, canola should enjoy equivalent access to U.S. soybeans. If they
have managed to negotiate market access, then canola should be going in at the
same rate of duty. As well, canola oil should be going in at a similar duty as
canola seed. This is certainly very important for our exports.
In terms of non-tariff barriers and sanitary and phytosanitary barriers,
especially in this period of low prices where a lot of countries are looking to
protect their domestic interests, veterinarian inspection standards are
becoming an issue. Environmental standards are popping up. There are sudden
changes in standards.
GMO is able to get some of our products into certain markets, not based on
science, but on genetically modified organisms. There are problems with
labelling hormones. There is a range of non-tariff barriers, for example, the
recent issue with Dakota having difficulty getting pork and beef, and going
through inspections there. The issue of trade barriers is going to be very
important in the next round of negotiations. These problems have to be worked
out, however complicated the issues are. We must ensure that the market access
we manage to negotiate is real, and will not be stopped with non-tariff
We are also aware that state trading enterprises are going to be attacked by the
United States. It is very important that our producers be able to maintain
their right to choose the marketing structures they want, whether it be the
wheat board or any other marketing agencies and structures.
The Wheat Board has been investigated often enough to prove, without a doubt,
that it is operating under a clear and transparent set of rules. We must ensure
that producers are allowed to use the marketing structures that they choose to
The Chairman: You mentioned that Canada was strides ahead of other nations in
meeting the obligations that were laid down in the Uruguay Round. Quite
frankly, as a defender of the Federation of Agriculture, the farmers feel that
we are a 100 per cent behind. In other words, we moved ahead, gave everything
away, and other nations did not. As I see it, it is a whole new approach.
What was the role of the Federation of Agriculture in the negotiations?
Mr. Gifford was here and he made the statement that every country went to the
table with what they could give. We gave away the freight rates. We gave away,
as you say and I agree, 100 per cent and received nothing, or very little. We
have the European Common Market subsidizing at 103 per cent, $175 an acre. We
do not have much left to negotiate with, because we have given everything. That
is pretty serious.
That is the way the farmers see it. I am a farmer and I am here representing
Ms Higginson: I guess we would agree that definitely the Western Grain
Transportation Act was given away. However, that was not a result of the WTO
Agreement. We were only committed to reducing export subsidies by 36 per cent
in value and 21 per cent in volume. It was a domestic government policy
decision to eliminate it. We had six years to decrease our export subsidies by
36 per cent and we chose to decrease them by 100 per cent in the first year.
Therefore, it is not as a result of the WTO Agreement, and it is not something
we pushed for.
As far as farmers are concerned, the impression is definitely out there that we
gave away everything in the last round and did not get very much. However, when
you actually look at what was agreed to, we gave it all away without
necessarily agreeing to do that. We did it for free.
The Chairman: Did the Federation of Agriculture speak for the farm community? Do
you feel that you had input in the negotiations and in the agreements that were
reached? Was there adequate input on behalf of the farm groups?
Ms Rutherford: We certainly had a great deal of access to the negotiators and a
great deal of opportunity to make our views known. We know, as a matter of
fact, that the position that was essentially reached at the CFA trade table
formed the basis of the Canadian government's position on agriculture.
The point that Ms Higginson made is very important. The truth is that Canada was
in significant financial difficulty, and the choices that Canada made to cut
programs were based entirely on a domestic financial decision that was separate
from what we agreed to under the WTO. I think that is very important to
remember. We did not give anything away that we did not have to give away, in
terms of how we implemented those agreements in relationship to our financial
situation. There is general agreement that the financial situation that Canada
was in required some significant action.
Now, what that action was, and how it was parcelled out, was definitely not to
everyone's liking. There were definitely problems and concerns about the way
that the WGTA was eliminated as quickly as it was. There were ongoing arguments
about the fairness of the distribution of the pay out.
One has to be very careful, because it does come back to the kinds of
discussions that we have been engaged in. We must ensure we are not mixing
apples and oranges; that we are not mixing the result of trade agreements in
terms of the actual signed pieces of paper and government policy decisions.
Every single country has made those decisions, both in terms of what they
negotiated, and in terms of what kinds of programming they made available.
Every country made choices, in particular, choices in relationship to their
ability and the political will to fund those kinds of choices.
Senator Whelan: My views on WTO and NAFTA, and all these great worldly
organizations are well known. They sound good, but they just do not work out
that well. For instance, last Monday, Peter Scher, the United States Ambassador
for Agricultural Trade, -- you will notice I said, "United States
Ambassador for Agricultural Trade"; some people might not call that a
subsidy, but we do not have an agricultural ambassador for trade -- said that
the United States would seek a worldwide phase-out of agriculture export
subsidies in the next round of world trade talks. Would you comment on this?
What confidence, what assurance, if any, do you get from that type of statement
from their ambassador for trade?
Ms Higginson: In terms of what U.S. representatives state, it is very different
whether they walk the talk or not. We are pushing for the elimination of export
subsidies, and they are pushing for the elimination of export subsidies in a
much increased trade liberalization. However, we are not using any export
subsidies and they are.
Senator Whelan: You are not answering my question. I want to know if you believe
Ms Rutherford: I believe that he said it. The Americans have a very interesting
way of dealing with it. Agriculture in the U.S. is even more political than it
is in Canada, if that is possible. In the U.S., there are numerous factions, as
there are in Canada, with varying levels of support. Eliminating export
subsidies is, indeed, one of the goals.
How they will interpret what is the elimination of export subsidies is the
interesting question. They may actually, from their point of view, be proposing
to eliminate export subsidies. From our point of view, or other countries'
points of view, they may not be actually proposing to eliminate export
subsidies at all, or at least not quickly and not absolutely. One would want to
look at the fine detail, but not now, down the road, to see whether it is
Senator Whelan: I am bringing this up again, because I am alarmed that this is
their Ambassador for Agricultural Trade. He is also quoted as defending his
country's recent $6-billion bailout by noting that countries need to support
their farmers without putting a burden on other countries.
How can they do that? Is that realistic?
Ms Rutherford: Senator, we are really hoping that, this afternoon, Mr. Vanclief
will tell us that we are going to do exactly the same thing here. Quite
honestly, I think governments have an obligation to support their citizens. In
agriculture, it is not just the citizens, or not just an industry that it is
supporting; it is whole communities. If that is the way the Americans see it, I
do not think it is very different from how we see it.
One of the things we must to be very careful about over the next period of time
is that we do not end up in an escalation of support, in the same way we did
before WTO. That would be incredibly damaging, and it is not something that
anybody is looking for. At the same time, nobody ever expected we would be in
the situation that we are in right now, not even a few years ago.
Every country realizes that, sometimes, it has to do what it has to do. I am
certainly not supporting the amount of the largesse that they have distributed
and the way they have distributed it. However, there is a need in the U.S., in
some sectors, as there is in Canada, for some support right now. It comes down
to not simply saying we are going to support the pork industry or the grains
industry. What we are really looking at is the support for the economic
infrastructures of extensive parts of rural Canada.
Senator Whelan: He says, and I repeat, "by putting this huge subsidy, but
never put a burden on another country." His statement is false, because
they cannot help but put a burden on other countries, especially one that is as
close as we are to them. It is a tremendous burden on us. To me, it makes a
farce of WTO and NAFTA. They fly out the window, and I think it would be a good
idea if they did.
Ms Rutherford: On the other hand, senator, I am sure you would not want Canada
to be constrained in its ability to support its farmers.
Senator Whelan: No, I would not. However, I do not believe in subsidies either.
I believe in farmers organizing themselves. I am sure you must have followed
the agriculture committee report of the House of Commons. Supply management was
told to bend, but who is telling them to bend? The head of the canola growers
is saying "We are going to give you away; we are going to use you as a
trading point, because we have to have something to offer to give."
This part of our agriculture community is stable. Consumers are getting a good
deal, when you compare what Americans are paying for butter, because of the
shortage of butterfat in the United States. Simon Sigal, a long time
agricultural official, who is now an Ottawa consultant and the Chairman of the
Canola Council of Canada, told the House of Commons on November 19 that there
is little or nothing export sectors can offer. However, he said that supply
management tariffs are a visible target.
That is as ancient as a medieval system of trading or bartering that took place
thousands of years ago in agriculture. The World Trade Organization and NAFTA
are still using this system. I cannot believe that we are accepting that.
In your brief today, you state you are for orderly marketing. However, you also
state that you are going to get into those markets. That is the same thing as
he is talking about. He is ready to get into those other markets with canola,
but he is ready to give away the cows, the chickens, the turkeys and everything
else that has supply management. Under Market Access, you state:
Pursue full implementation of the WTO minimum access commitments and the
establishment of measures that will fully achieve the Uruguay Round goal of
five per cent minimum access by 2001.
That is what he also wants, but he is ready to give something away. Consumers
get a good deal. If producers are efficient they can survive.
Ms Rutherford: That is Mr. Sigal's point of view, not the CFA point of view. We
do not believe that it is necessary to give away supply management.
Senator Whelan: Are you on the telephone asking, "What in the world are you
saying? What are you trying to do to the most stable part of agriculture that
is not asking for subsidies or assistance." These people are supplying the
highest quality product we ever had in our society.
Ms Higginson: You have picked out one example, but there are other exporters
that spoke at the House Committee as well. Their comment was that we need to
look at how broad the scope of the next round of negotiations is going to be,
because the markets they are looking at getting into, in terms of grains and
oilseeds, are Japan or Asiatic or South America. Those countries are not looking
at our supply-managed system. The U.S. is looking at it, but we already have
access to the U.S. They are looking for a larger round that is going to include
Senator Whelan: I know the CFA is doing their very best. As I said to Michael
Gifford, no farm organization and no political party of any description asked
that concessions be made in Uruguay on dairy products, when they should have
asked for the same thing the United States asked for their dairy product. We
gave it away at the Uruguay Round. I am concerned about who is going to do the
negotiating for us. We know who sat behind the Americans. The biggest food
processors in the world sat behind them telling them what to say.
Senator Stratton: I would like to go into the reason why these subsidies are
growing. Essentially, I would assume that, to a large degree, it is because of
the recession or the fallout of the economies in the Far East. The fear is that
we are now entering the longest boom in the history of the United States as far
as an economic recovery is concerned.
In a series of articles, The Economist magazine forecast in 1996 that the
Japanese banks were in trouble and there was going to be a real problem. Sure
enough, a year later that occurred. According to The Economist, the United
States are in a bubble economy, in other words in the final stages of a
recovery. The likelihood is that that bubble is going to burst. When that
happens, we are into a worldwide recession.
We are going into negotiations on the WTO one year from now, and I understand
the forecasted time to completion is about three years. With that as a
background, and the fact that you are now starting a negotiation with very low
prices, I worry that, with this forecast and the events in Asia, why or how
could the European Union or the United States give up on their subsidies? If
this so-called bubble economy in the United States bursts and we do end up with
a fairly severe recession, how can we expect them not to give up on their
You know it is going to happen; I think we all do. The recognition of that fact
has to prepare us for such an event. I believe The Economist is right. What is
likely to occur and what do you recommend when it happens?
Ms Higginson: I guess our hope is that our negotiators are going to push to
reduce export, the most trade distorting of the subsidies. We see export
subsidies as being much worse, much more trade distorting than some of the
other types of green box programs. Therefore, we need to target what we need
reduced or eliminated in the next round.
If we were to go into a negotiation, and if your prediction were correct, you
would see domestic support increase. We are already seeing support increase
manifold in many of the big countries. All we can do is try to work with other
countries that have smaller budgets; try to reduce the level of domestic
support and spending; and target on the worst of the trade distorting subsidies
that are out there, not depressing world prices and distorting trade to a
We would push as hard as we can the priorities we want to see as we go into the
next round of negotiations and work with several of our allies.
We always hear about the European Union and the U.S., but there are actually 136
countries sitting at the table of negotiation. There are a number of developing
countries, as well as the Cairns Group, and a number of other blocks that would
also like to see domestic support and export subsidies reduced substantially. I
think we can work with a number of allies in terms of pushing for that in the
Senator Stratton: Marketing boards are a favourite topic here. The U.S. is
pushing for access to our markets. They want to be able to export their
products into our marketing board protected areas, and are going to use that as
leverage during this upcoming round. Mr. Gifford said that is a domestic policy
and not one that would come under the WTO. Nevertheless, the U.S. is going to
push hard, because they want access to our markets. Do you not see us caving on
If we want to achieve what you have previously stated; if we are going into a
round in the WTO where we want to diminish subsidies, particularly in a hard
economic time, then would we not have to give in an area such as marketing
Ms Rutherford: The Canadian system of orderly marketing, whether it is the
Canadian Wheat Board or those products under supply management, is small
potatoes in terms of the WTO. The U.S. is not the only other country at the
table. There are other countries, including the U.S., which have orderly
marketing systems. They are domestic decisions. We need to convince, from a
domestic point of view, our government, and therefore the negotiators through
the government's instructions to them, that the negotiations are not to impact.
In terms of the marketing boards, in terms of supply management, what we are
looking at now essentially would be tariff reductions. We are not looking any
longer at article 11, or anything like that, which we can give away. It is
entirely a domestic decision as to which areas we are willing to accept tariff
If we are willing to take those decisions domestically, then there really is not
that much of an issue. The only country that has a problem with this is the
U.S. Canada is not the only country that the U.S. is targeting. We firmly
believe that it does not matter what we do, the U.S. will complain.
The Australians have completely altered the way their wheat board works. It is
privatized. It has no government support to speak of. The only thing it has is
a regulation, and the Americans are going to continue to challenge that as
well. A few years ago at an International Federation of Agricultural Producers
meeting in Washington, one of Mr. Scher's predecessors, was quite up front in
saying he did not care whether it was legal or not, they did not like it. If it
does not meet their vision of the world, they will continue to challenge it.
That is simply a reality of going into the negotiations, and these negotiations
will not come down to Canada and the U.S. fighting it out at the WTO table.
Senator Stratton: I am not going to disagree with you on that issue. I think
there will be many nations on our side. It is just that we do sleep next to the
elephant, and I do not want him to roll over too hard.
The Chairman: I was a silent observer at the table with Mr. Dunkel and Michael
Wilson when our government defended chapter eleven. His statement was this: "You
Canadians, on the one hand, want a protected market; on the other hand, you
want open trade, world trade and liberalized trade." That is the view of
much of the world.
Ms Rutherford: It is a very different situation now. We have set tariffs on all
of the protections. Essentially, it is a decision about what the level of the
tariffs is. The U.S. has a number of commodities on which they maintain high
tariffs. There are also other countries that also have a number of commodities
on which they maintain high tariffs.
We are no longer dealing with a situation where we are trying to keep an
exceptional rule to protect certain commodities. Whether that is a good thing
or bad thing is up to everyone's individual discretion. The situation we are
going into is quite different now. It has become quite definitely a domestic
issue, how we decide we are going to go forward. In terms of trading one
commodity against another, I am not trying to denigrate Mr. Sigal, but I think
the view that he has put forward is somewhat simplistic.
The Chairman: I would agree that it is about the only thing we have left.
Senator Hays: Briefly, on the supply management issue, you mentioned sugar,
cotton, tobacco, peanuts, and so on, which are commodities that have comparable
support to our supply-managed commodities.
I have a supplementary question following from Senator Stratton's remark. Would
the U.S. bilaterally, voluntarily walk away from those on the principle that I
believe motivates the readers of The Economist generally, and say, "We
will stop doing this and we expect you to do the same?" Is that a likely
Senator Fairbairn: Especially on sugar?
Ms Higginson: The U.S. has no plans to discontinue supporting and protecting
those industries. The U.S. President passed a bill recently where every pack of
cigarettes sold in the U.S. must contain 50 per cent U.S. tobacco. So when you
talk about a country trying to protect its domestic interests, those
commodities certainly have strong lobbies that are listened to. They are not
even worried heading into the next round of negotiations, because they have the
support of the majority of their Congress.
Senator Hays: I thank you for helping us to better understand this really
complex and difficult subject. Are we as well- positioned today as we could be
heading into this negotiation? Some of the things you have said prompt me to
ask if we really have done as much as we can to implement the deal we thought
You used pork trading into Europe as an example. You state that trading agencies
are another. One would be offensive, the other defensive in terms of an action.
The other example that occurs to me is the use of growth hormone in beef
production, and the WTO panel's decision that that was not a phytosanitary, but
rather a trade measure, and that they should change their practice in terms of
importing North American beef accordingly.
Correct me if I misunderstand the panel's decision, but as I understand it, a
country can accept or not accept a panel's decision. Although not accepting it
may lead to other trade action. In any event, have we done all that we can? We
head into this negotiation basically trying to achieve what we thought we had.
Ms Rutherford: We are not alone though.
Senator Hays: We are not alone. Have we done everything we can to draw attention
to the fact that some countries are not abiding by what they led us to believe
were the rules of the agreement?
I do not want to cover specific programs so much as to make this an abstract
issue. You talked about "disguised" export subsidies, and how you can
have a green payment that is really a disguised red payment. If acreage is the
example, and the Canadian Wheat Board says volumes of wheat have increased in a
particular environment, you can relate that to additional green payments when
you negotiated a category of red payments. Now you might lose at the panel.
Have we done ourselves justice by complaining about that, and should we not now
try to make an example of it?
If pork is not being allowed into the European Community because it is being
categorized with other red meats, then the agreement that we intended to sign
is not being observed and is flawed. Should we not try to draw attention to
that by using the available rules-based dispute settlement remedies? Perhaps we
would lose, but we could then head into a negotiation saying we went to the
panel because what was called green was not really green. Why was it not green?
Well, here are the numbers. We made this agreement because we wanted a more
level playing field on red meats, on cereals, and we did not get it.
We did not get it because these payments were made, and the persons making the
payments, or in fact subsidizing, are saying it is okay because it is in a
particular category -- blue, green, whatever. There is a lot of rhetoric on the
WTO, but it has not achieved its objectives. You suggest that a disguised
program is no different from an undisguised one.
Senator Stratton: That was a wonderful speech, by the way.
Ms Higginson: I agree that the text of the agreement is being challenged and
clarified through the dispute settlement and panel process. It is interesting
to see how it is being interpreted by the panels.
When you negotiate and write the text, you believe it has one interpretation,
but another country may see a slightly different interpretation. It is very
useful to have these precedents set and to see what the panel's interpretation
of a specific line or a specific section of the agreement will be.
There have been many panels over the last few years, and the process uses a lot
of time and a lot of resources, including money.
I do not disagree with you that it is very important to look closely at these
panels and make sure that we fully understand what has been agreed to.
That work is definitely not done as we head into the next round. It is an
evolving process, and everyone is looking closely at what was agreed to last
time and making sure that we do correct any mistakes. I mentioned a few that
have already been pointed out, and I am sure there are more that have not been
raised yet. Our negotiating team has a very big job ahead of it.
The WTO Committee on Agriculture meets every two or three months and reviews
each country's notifications in terms of market access, domestic support, and
export subsidies. There is a great deal of discussion on those notifications of
green box programs, on blue, on amber programs, and many questions raised on
whether a program described as green really is.
Canadian negotiators have raised a number of questions on some of the programs
the U.S. has notified as green. The CFA has certainly promoted, for the next
round of negotiations, the idea of some sort of body or panel that you could
consult before you develop a program to make sure that it will be considered
green. Therefore you have not gone through the whole implementation process and
notified the program that has already been in place for a year or two as green,
only to have a panel come forward and decide that it is not green. Similarly,
it would avoid another country putting in a program that they considered green,
it has been in place for two years, only to have it decided that it is really
an amber program and should be reduced.
Senator Spivak: Senator Stratton mentioned the European Union and subsidies in
case of recession. The European Union is looking to get the eastern European
countries included, but from what I have read, they could never afford then to
have the same subsidies. Can you comment on that?
They are changing somewhat from export subsidies to domestic price supports, is
that not correct?
When the transportation subsidy was eliminated in this country, it was not just
for budgetary reasons. It was also felt that it discouraged value-added
activity because raw grain was being shipped out. I do not think that what is
being suggested now for a domestic program is any different in budgetary terms
from the transport subsidy. Do you think it is better, and do we need both? Do
we need domestic price supports?
There is a really strange situation now in Manitoba where it does not pay to
ship anything because it is so expensive. What is your view on dealing with
that, both domestically and in the European Union?
Ms Rutherford: The Europeans feel in many respects obligated to take on some of
those responsibilities. They cannot afford to provide those same subsidies, and
they do have some intention of trying to balance any expenditures made in that
direction with their commitments under the WTO. That is something that must be
seriously looked at and worked out because it is a situation that no one is
terribly comfortable with. I do not think they are very clear about how they
will work it out over the next little while.
Many of those countries are in very difficult situations. During the last round
we had some visitors from the Lithuanian government who were asking questions
about the Canadian position at the WTO and what we planned on doing. They
admitted that they barely had a government, so they had no programs of any
sort. They had absolutely nothing to even notify on, so how do you calculate a
reduction from nothing? Consequently, anything they did put in was immediately
regarded as a 100 per cent increase.
There are some very difficult situations that must be worked through in terms of
eastern Europe, both within the specific countries and the WTO, as well as
within the potential European Union expansion. It is an issue that every
country is aware of, and every country realizes it must be dealt with. Simply
saying you cannot let them in, or you cannot let them do that, will not work.
Russia certainly has not lived up to its agricultural potential, but other
countries do have real opportunities, and not including their potential volumes
within the rules of the game is not a good strategy for Canada, or for any
other country. It is an issue that every country will be paying very close
In terms of how Canada distributes its program dollars, a transportation-type
subsidy, and some kind of income support, which is what we are looking at, are
quite different types of subsidies, as you pointed out.
The elimination of the WGTA came about primarily within the circumstances of a
financial crisis, but certainly there were strong arguments for elimination, or
at least alteration, in order to encourage value-added processing. The
situation in Manitoba is not very well understood even in the rest of the
Prairies, and people tend to think that Manitobans are just whining about it.
However, when you look at the numbers, you realize how difficult it is.
It is fairly analogous to what we are looking at within the actual application
of the WTO agreement, where you can develop something theoretically, write it
down on paper, and decide it will work. Then you realize you cannot ship
anything out of Manitoba because it does not pay.
So what can you do? A province like Manitoba is forced to look at really
significant changes to the way its industry is structured. Some interesting
situations developed in terms of massive increases in hog production, for
example, which means that Manitoba is taking one of the biggest hits right now.
There are other, slightly extraneous pieces to that puzzle that cannot be
ignored, and are a lot more political than economic.
As with the WTO, you can indeed come up with rules, but how they are interpreted
and how they are applied and how they are put into place practically can vary.
We believe that the kind of programming we are looking at under the present
farm income situation is better both in terms of the WTO rules, in terms of any
NAFTA rules, but also in terms of support. It is not only non-trade distorting,
it does not distort between or among commodities. Nor does it distort between
or among provinces. That is a really important point, because again we are
talking about a situation analogous to that of the WTO.
Ten years ago in this country we had provinces buying industries, buying sectors
of the agriculture industry, but that is not a situation we want to go back to.
It is not useful or productive. We had our own massive subsidy war within
Canada, and it is not the kind of thing we want to see happen again.
A program that provides support on an equivalent, farmer-by-farmer basis, as
opposed to a province-by-province or commodity-to-commodity basis, not only
works from a trade point of view, in the long run it is a fairer system and
significantly less distorting from an industry perspective. Although I realize
some people have difficulty accepting that.
Senator Spivak: Farmers of specialty crops and canola seem to be doing okay. Why
is durum wheat not a specialty crop, and is there any other place that grows
the same kind of high quality durum wheat as Canada?
Ms Rutherford: No country grows better durum than Canada, but there are other
countries in the business. It depends on the specifications. Some of the
importing countries to which we have traditionally sold have perhaps altered
their specification. That is not to say they are not looking for the highest
quality, but they have altered what they are willing to pay.
Technology changes, and there are different ways of dealing with things. You can
use different qualities of durum wheat for different purposes. We are selling
durum wheat into an export market, so we are subject to what our importers are
actually looking for. They may decide that they are not willing to pay the
price this time, but that does not mean they will not be looking for it next
Canada has a very small portion of the grain trade, and our very high quality
grain can be mixed with somebody else's lesser quality durum wheat to produce a
fairly decent product. That means the quantities they buy from us may indeed be
fairly small. It is a very complicated game in many respects.
Senator Spivak: Some Scandinavian countries, for example, have developed very
successful markets based on quality. Is it to some degree a marketing problem
on our part?
Ms Rutherford: No, I do not think it is a marketing problem, rather, it is a
matter of the market shifting.
The Chairman: Durum wheat has been a specialty crop. It was $6 a bushel last
year, and now it has dropped to $2 because farmers have switched over to it.
The same thing can happen with canola. If everybody starts to grow canola, the
price will drop right out.
Senator Fairbairn: My questions are process questions. You noted in your
presentation the difficulty you have in finding a consensus within a broad
organization such as yours and the many differing points of view. That is
exactly the same the difficulty the federal government will have in trying to
find the best possible consensus heading into these negotiations.
There is general agreement that one of the most important things is for Canada
to have everyone in the same room, presenting a very strong position for this
You have worked within your own organization, with the federal government, and
other governments. Do you believe that a sufficient amount of time and emphasis
is being spent at this point by government to achieve that consensus among
Canadian groups, so that we will have a cohesive team heading into these
Ms Rutherford: There have been a number of conferences co-sponsored by
Agriculture Canada across the country this fall and there are a few to come in
the wintertime. We understand that there is to be a major conference on trade
The goal of those exercises has been to allow people to develop their own
thoughts and positions as opposed to developing any comprehensive policy. We
have made it clear to Agriculture Canada that we do not believe that at a
conference with 700 people, the skies will open and there will be some huge
revelation and everyone will fall to their knees with one position. At best,
hopefully they will be able to listen to each other's points of view, because
that is very important.
Work has already begun on the development of a cohesive position. We know that
in our trade committee process, both DEFAIT and Agriculture Canada have been
very forthcoming with their time and energy, helping us work through some
issues and listening to us. They will continue to do that.
There will continue to be ongoing lobbying from individual groups, but the vast
majority obviously desires to come to some common opinion. I am not trying to
prejudge annual CFA meeting delegates, but I cannot see them turning down the
port council, as a former member, and Sask Pool and Agricorp will be members of
All three of those organizations are members of the Export Alliance. They are
all very clear about their commitment to a strong agreement that supports
Canadian agriculture. Clearly, they are looking for a strong agreement that
supports their particular sectors, but also one that supports the entire
industry. One thing the industry has learned over the last number of years is
that no commodity stands alone. There are very few people who have only one.
Most have two or three, depending on whether they want to include their apple
orchard with a couple of trees behind the barn.
It can be more than that. They realize very clearly that they are
interdependent, that having enough farmers out there to maintain the machinery
dealerships, the fertilizer dealers, the hardware store, the school, the local
doctors, let alone the hospital, is crucially important.
People are looking for a supportive deal, and it has been an interesting process
for us to go through. It is not a secret that CFA has led the way on the income
disaster program, having all of the partners at the table and having no one say
no. That has been really interesting and important for how we move ahead on the
trade agreement. It is clear that even if your specific commodity is not
currently in deep trouble, you understand that the guy's next door may be, and
you need him or her there to ensure that you can continue to function properly.
It has been an eye-opening experience to everyone because we have not had that
Senator Fairbairn: It sounds very encouraging as a method of operation.
Ms Rutherford: This has been a really good fall, although I was told off the
other day for having said something similar. The income situation out there is
really bad, and farmers coming together to try to address it has been really
Senator Fairbairn: In your advice on the development of the Canadian position,
you discussed the need for us and other countries to try to correct things that
did not quite work out the first time around.
The other point is that it should not be a totally cast-in-stone position
heading in, but that it should be developed incrementally as the discussions go
on in order to see how other countries are playing certain issues.
How difficult is it in those negotiations to be incremental? When gears shift
and things move quickly, do you not have a pretty good idea of where you are
heading? When these international negotiations become hot and heavy, does that
permit a more desirable but slightly slower pace on the part of a country? Does
there come a point where it is difficult to keep up and adjust quickly?
It is one thing to correct problems, but it is another thing to be sensible and
cautious. Is a lot of effort being put into anticipating what other countries
will likely do? The Blair House episode should warn us. This time around, will
the smart negotiator be the one who has taken a lot of time to try to
anticipate the angles and the surprises coming from other countries?
Ms Rutherford: There is a difference between deciding on one's goals and the way
of achieving them. We must have very clear goals in heading into the
negotiations, but how things actually unfold behind the closed doors is a
different issue. That is where we must have flexibility. Perhaps I did not make
myself clear, but we are not proposing that the Canadian government be flexible
in its overall goals. That is not to say that if we do come down to a crunch,
because there are always bolts out of the blue, that we should throw up our
hands and walk away. How we achieve those goals in relation to the positions of
other countries is very critical and there must be some flexibility there.
As to your second point, I believe this time, as last time, the negotiators for
Canada are looking very closely at what is happening in other countries, such
as at Geneva, mentioned earlier, at the Agriculture Committee, and other
committees. They are watching what is happening at panels, within the
committees, and the kind of submissions that are being made.
There are whole committees spending their time studying the application of the
rules and trying to figure out if the outcomes were as expected, because nobody
could be sure. We have a pretty good handle on that. Canada had last time, and
has this time, some excellent negotiators who are looking very carefully at
what is coming down the line. They are trying to weigh the options and develop
negotiating strategies to deal with some of the issues.
Ms Higginson: We want the Canadian government's position heading into the next
round to have flexibility as well as details. We are seeing the text of the
agreement being defined through a number of upcoming panel rulings, and there
will be more panels that will rule on the interpretation of the current text as
we approach these negotiations. Certainly those decisions may have an effect on
how we approach certain details in our negotiating position.
The scope of the agreement has not yet been decided, and if industrial goods are
included as well as agriculture, then that will change the focus somewhat.
Currently, there is not only the WTO Committee on Agriculture, but also a
subcommittee on analysis and information exchange that is studying
approximately 40 different informal papers from countries putting forward ideas
on a number of issues heading into the next round.
One idea being discussed is multi-functionality, a key word being put forward by
the European Union. There has been a lot of discussion as to what that means,
where it fits, and how it is defined. As those discussions on many aspects take
place, and as any consensus builds, that will affect the details of much of our
negotiating position. We do not expect these details to be agreed to in these
committees, but maybe in the next few months, and certainly throughout the
course of the negotiations, there must be some agreement on this. There is a
need to retain some flexibility so that we can adjust our position as these
details are worked out and defined.
Senator Fairbairn: Often when we have these discussions around this table and
with all sorts of groups, and we start talking about the European Union and the
United States, the latter becomes certainly an opponent, and as conversations
heat up, perhaps a villain. However, the United States is our largest trading
partner, our closest neighbour, and probably has strong views about the European
How can we work with the United States instead of heading in with our fists up?
How can we try to establish in advance some kind of mutual-interest working
relationship, because in the end, the whole world must live with them, but we
really must live with them.
Ms Higginson: We often portray the United States as maybe a villain in our
dealings with them, but we do have some common interests. There are some areas
where we can work with them, as we can with a number of other countries.
We certainly have some common interests with members of the Cairns Group and
some that are separate. There are a number of countries that we can partner
with on some issues, and with others we will differ. That is how we need to
approach the next round of negotiations.
We are with the Canadian Federation of Agriculture and we have been meeting with
the American Farm Bureau Federation. There have been a number of discussions
with the United States to try to help them get up to speed on even
understanding what Canadian agriculture is. We are finding that there is a real
lack of knowledge in a lot of the U.S. agriculture community about what a
marketing board is or what the Wheat Board does. They have an idea in their
minds as to what the situation is, and we are trying to work with them and
educate a number of people on how Canadian agriculture really operates. We have
been making an effort to work with the United States where we can find
The Chairman: Eastern Saskatchewan is in exactly the same position on the
freight rate as Manitoba. A comparison was done between eastern and western
Saskatchewan on the same assessment of land. In the west it was selling for 14
or 15 times the assessment, while towards the Manitoba border it was down as
low as nine or 10 times. That is the difference.
The freight rates often work out to at least a dollar a bushel, which is a
severe situation. Currently in Saskatchewan and Manitoba there are large
semi-trailer trucks heading west as fast as they can, and the farmers are
trying to find the cheapest freight rates to move into a better market. It is a
very serious problem.
I attended the Regina Agribition and I talked to farmers and small implement
manufacturers. One manufacturer told me that in the Saskatoon area, where there
are a number of small manufacturers, 2,000 workers have been laid off. That
affects 2,000 families in a small city like Saskatoon, and the impact is
tremendous. It is not only affecting farmers, but the whole community.
Senator Robichaud: We greatly appreciate your presence and your presentation. In
your presentation, you commented that the Canadians were perhaps a bit holier
than thou in our attitude during the last negotiations, and suggest we might be
a little less so in the next round.
It is my impression that we are leaving it up to the Americans to define virtue.
I connect this with the comments made by Mrs. Higginson, who said that we work
with them, listen to their criticisms of our system or of the Canadian Wheat
We explain to them what we are doing and have no problem doing so.
Ought we not to accept a kind of "tough love" attitude, admit the
Americans are not that bad, and let people know what the situation is? I may
have the wrong impression, but I would like you to clarify this situation.
Ms Rutherford: It is more difficult in the case of the WTO because it is not so
close. However, there was a press announcement from Washington on Tuesday. At
Mr. Vanclief's meetings there, he simply stated that the Americans will not get
away with the kinds of things they have been doing in relation to Canadian pork
As a result, we will now have complete chaos at the border, starting on the
weekend, and there is nothing we can do about it. That is a very difficult
situation for Canada to be in.
Our political systems and the way decisions are carried out are very different,
and sometimes that really does put us between a rock and a hard place.
We have taken a harder line with the U.S. in the last year, as it is necessary
that we do not simply roll over. Maybe in the past we have rolled over on to
our side, maybe not the whole way, but we are not prepared to do that any more.
One problem for Canada is that the States is a significant market, and it is not
realistic for us to simply say we do not need you any more. We must be cautious
about how we engage in "tough love."
We are not alone in trying to deal with the WTO and the U.S. The Cairns Group
was created to try to deal with the European Union on the one side, the U.S. on
the other, and it has provided some strength in trying to address some issues.
While it is sometimes hard to live with, most Canadians are quite proud of the
fact that Canada tries hard to be as clean and upstanding as possible, not only
in its trade negotiations, but in other areas as well. At the same time, we do
not like to be snookered, and there is a strong feeling that maybe we have been
taken advantage of.
We do not believe that we negotiated anything away that was not necessary to
complete a deal the last time around. However, our government could perhaps
have made different decisions, although they were trying to deal with the
In February, prior to our annual meeting, and I think again at the meeting in
April, we will be looking at how Canada can develop future programming that
fits into the green box, but that is delivered somewhat differently from
previous programs. For example, the farm income situation we currently find
ourselves in is an interesting one.
We do not have a program that can deliver necessary funds to farmers, whereas
the U.S. has programs that can that are all within the green box. It is the way
they were developed in the first place.
If you look at the American programs, a huge portion of that $6 billion is not
there for income support, it is for rural development and environmental
programs. We started keeping track in September, and there was a press release
almost every two days out of Washington about some new program out of the White
House for rural America that began to build up the $6 billion. They had an
election in November; we did not. This made it a little more difficult perhaps.
We too have an opportunity and an obligation, because it is not just an
agricultural issue. It is broader than that. How will we be able to support our
industry, but also provide assistance in achieving some of the goals that we
must achieve? For example, under the greenhouse gas agreements, we must be able
to develop assistance programs that cannot be challenged.
We cannot change the way the American system works, or their laws. All they have
to do is challenge us, and it does not even have to be a good case. It does not
have to be based on a lot of fact, but it immediately puts our industry into a
tailspin and costs people lots of money, so we must be very careful about how
we do these things.
Senator Whelan: I have in front of me a copy of the Windsor Star. It states that
"Heinz Competitor May Get Break." We were talking about these panels.
The H.J. Heinz Company appealed against the Gerber Products Company, not for
selling into Canada, but for selling into Canada for less than they were
selling in their own country. So they appealed and a 60 per cent tariff was
placed on the cost of the product. Then Gerber appealed again, and the panel
reversed its decision. It lowered the tariff to about half of what it
originally put on.
Consumers came forward and said that Heinz would be taking advantage of them.
However, the whole thing seems unfair. Do you follow that type of action in the
Ms Higginson: There have been several cases, and obviously we cannot follow them
all. In terms of dumping and determining injury, certainly our sugar industry
has gone through that, with products being dumped into Canada. Trade remedies
are important for Canadian agriculture and we need to maintain the ability to
protect our domestic markets when products are dumped at below cost into those
Certainly countervail is a big issue for beef right now, and has been for pork
over the last five to 10 years. We did manage to get some agreement in the last
round that green programs were non-countervailable. Unfortunately, we only have
two programs in the green box, so we cannot actually take advantage of the
provision that we negotiated. That is something we are hoping to do with the
disaster relief program, is to put a program in the green box that is
non-countervailable, so that we do not have this problem with the U.S. imposing
duties on our products when we export them.
Senator Whelan: If a company is selling into Canada at a lower price than to its
own consumers in the United States, that is a blatant breaking of the
agreement. That is blatant dumping. One U.S. trade official said the other day,
"We must have more free trade because we have surplus products we must get
rid of." Why do they produce surplus products that may destroy another
Some people have the idea Americans cannot export an egg or a chicken into
Canada, but they have the same percentage of the market they had when the
supply management was put into effect, and if it increases, they increase
proportionately the 1 per cent. That is never very clearly explained and people
think it is a complete barrier. Yet they do not spend one penny towards the
advertising of that product. They do not make sure the science, the hygiene,
the nutrition we use in our production is superior to theirs, and they bring
their product in here and they sell it at the same price, so they have an
So I am concerned when I see this guy who runs a desk. He is a former country
employee, and his thoughts must have been the same when he was an Agriculture
Canada employee, giving away supply management. Who have we got in there
negotiating for us who we can trust?
I do not trust Mike Gifford and I told him that the other day. I dealt with him
for years and I knew his stand on supply management and marketing. When Gerry
Shannon was representing Finance, he never went to a Canadian agriculture
export corporation meeting. Yet we send those people over to do the negotiating
for us. Where are they having the meetings, in Geneva?
Ms Higginson: Yes, the committees are meeting in Geneva.
Senator Whelan: Who are the committees?
Ms Higginson: WTO Committee on Agriculture has representatives from Agriculture
Canada, and the others from Foreign Affairs, and Finance and Revenue, depending
on which committee it is.
Senator Whelan: How many of them have agriculture knowledge?
Ms Higginson: We work very hard to make sure agriculture interests are
represented. Agriculture Canada is on the one directly related to agriculture,
and we bring people into our trade committee to make sure what they are doing
in other committees is taking agriculture into account. We work very diligently
and spend a lot of time trying to make sure these people actually understand
Senator Whelan: I have not done a recent check, but in the department, over half
of the directors and half the assistant deputies would not know a cow from a
sow. They have no agriculture background at all, and they are from Finance or
Treasury Board or Foreign Affairs. They are making the decisions.
Ms Rutherford: We see that as part of our job, to try to ensure that they have
the information and the knowledge to take forward, and that we continue to
create a situation where we are open to having them come and ask all the
questions that they may not be comfortable asking others, so that they have the
right kind of information.
I know that there has been some concern expressed about the way negotiations
have been carried on in the past. However, it is fair to say that we are
confident that those who are carrying out the negotiations are frankly taking
the position of the government to the table. We have never been able to
identify a situation where that has not been the case.
Ms Higginson: CFA has always very strongly supported the use of anti-dumping
provisions. That was a big issue when Canada negotiated an agreement with
Chile, and we strongly supported the retention of Canada's ability to use
anti-dumping provisions. Also, the Special Import Measures Act is being
discussed in the House. We are certainly in favour of keeping anti-dumping
provisions so that our producers have some available trade remedy measures to
fight against products coming into our markets at lower prices.
Senator Whelan: The headline of an editorial that appeared in The Ottawa Citizen
yesterday states "Subsidized Squeals." They immediately give the
impression that farm people lobby better, have a better propaganda system, and
are better treated than anybody else in our society, which I know is not true.
Ms Rutherford: I think we lobby very well. I take exception to that.
Senator Whelan: I mean lobbying for subsidies. There is a lot more you could do
on lobbying. For instance, you could have hired me for eight years at a
reasonable rate. I know some of the lobbyists that were working for
I am really offended when you keep using that figure of 136 countries that are
telling us what to do, because some of them could not send an egg to market.
They could not send a chicken, and we keep quoting that. In the United States
of America, for instance, Ohio has a gross domestic product in agriculture that
is as large as all of Canada's. California would be the fourth largest
agriculture producer in the world if it were a country.
We quote 136 countries as having told us we cannot have supply management, we
must get rid of it. I went to a lot of those world meetings. Some at the UN
wanted to declare war, and they could not send a bicycle to war.
What is a subsidy? Is it research? Is transportation a subsidy? In Western
Canada there is a tremendous difference in the ability to make it to market by
roads. Certain roads in Alberta you can run on all year, but in Saskatchewan
you have limitations on roads. Manitoba also has limitations on roads because
they do not have the economic resources. Alberta is into research and subsidies.
They have 80 per cent of the cow/calf operations because they subsidized their
We have a terrible situation with market share right in our own country. The
market is more available to them, and I know that CFA's resources are limited.
I would love to be able to provide a couple of million dollars, hire more
researchers, buy more computers to do the work. What is a subsidy again?
On the issue of trade officials, we had one or two persons, for instance, in
Mexico trying to sell agriculture products. The United States had 400 people.
Now if we had a tenth of that, we should have at least 40 people in Mexico
selling agriculture projects. The United States does not call that a subsidy.
Those are Foreign Affairs officials, and they are knocking on the doors. They
are doing all that kind of thing.
When we started the Canadian agriculture export corporation, the United States
said it was a wonderful idea. Then the new government took over and banned it
within three months.
They spent the same amount of money within the Department of Agriculture, or
more, using their own bureaucrats within Agriculture Canada, to do that. Have
you done a study on subsidies?
Ms Rutherford: Our recent work has been to compare levels of subsidies and which
boxes they fit into. In terms of the WTO, it is perhaps not so much a matter of
the definition of a subsidy, but rather which box it fits into. Certainly,
government funds going into research, into export development, is acceptable.
Research and development, environmental spending, are also acceptable, but we
just do not currently happen to have many programs that deal with those issues.
That is where we are looking at trying to develop any new spending, of which we
gather there may be some.
If we are to develop any new programs, they must be developed in such a way that
they will be green, and not only because 136 other countries are telling us
that, but because that is the way to make the system work.
It is just like Canada, where we have 10 provinces, and at some point we all
must agree so we can all move ahead. There is no doubt that Alberta has more
money than other provinces, but that is the kind of situation that we are
trying to avoid with our proposed farm income program, so we are not setting up
a situation where provinces can actually buy sectors or support them
unnecessarily. However, we will never end up with a situation where every
province is equal to every other.
Senator Whelan: In the United States, agriculture is totally controlled by the
federal government under their constitution, and the individual states are
nothing more than extension services. We do not have that here, and so you have
the provinces running around helter-skelter.
We have done a check with our conservative resources on commodity prices and
what consumers pay. The most blatant robbery today is in the pork industry,
between what the farmers receive and what the consumer is paying for that
product on the shelf. There is hardly a noticeable reduction at all, and the
same situation exists in cereals and cooking oils. Have you done any study on
this at all?
Ms Rutherford: We have not done any study, but we have been talking to some
people in a preliminary way to try to find out who is making the money. So far,
we cannot find anyone who will admit that they are making money out of this.
Without looking at the packer's or the retailer's books, it will be difficult to
try to determine who has paid what for what and what kind of a margin they are
making. The only thing we are sure of is that farmers are not receiving
anything for their pork, and the consumers are paying. They were paying for it
six months or a year ago, so someone in the middle is making the money.
Mr. Villeneuve from Ontario has made an issue of this, and considering the
number of packers in that province, we hope that he has the opportunity to
continue. It is something we are working on and that we want to take to our
Senator Whelan: If they were making money before, they must be making a bundle
now. It is a little bit disgraceful, the profit they must be making. What they
are doing at the present time for their pork is a big disgrace. It should be
good for their shareholders, for the packing companies, but at the expense of
Senator Hays: Four years after the Uruguay Round, would the stakeholders,
particularly producer groups, agree today on an opening position that simply
achieving the objectives of that round would be an adequate outcome of the next
Ms Rutherford: That would be a really bottom line. There are some other issues
that have risen in prominence and importance, like sanitary issues, for
Senator Hays: On that issue, did we not have success with the use of hormones in
Ms Rutherford: Yes, but again, it is a matter of application.
Ms Higginson: Beef still is not moving into Europe. We have had the panel, and
we have had the appellate body rule. Now we are waiting 18 months for them to
do another study. We need to look at what was agreed to and we need to look at
how the enforcement will work on some of these issues.
Senator Hays: Do you think it is a realistic objective for the next round to
have countries set aside sovereign rights not to accept the outcome? Is that
something we might realistically try to achieve?
Even if we took the hormones out, we could still not move the beef.
Ms Rutherford: We are not looking for a country to set aside its sovereign
right, but we are looking for ways of applying and enforcing the rules that are
real. One challenge facing the WTO is the same as we have in Canada presently,
in terms of finding that pivotal point where science and the rest of life
actually come together and everybody can move ahead, if not comfortably, at
least with some level of assurance. That is essentially where we are.
What they have done in Europe with the hormone issue is interesting. It is no
longer a trade issue. It was a trade issue, but then they moved it to a
consumer issue, and no one is trying to say that they do not have the right to
do that. What Canada and other countries must determine, because it will affect
us all, is what exactly are the rules for how you move those things around. How
do you determine what is actually a health issue?
The whole issue of non-tariff trade barriers will be a growth industry. That
will come even after the end of this next round, and it will be huge. Anybody
who is seriously looking for something to consult on, there will be all kinds
of countries looking for help on how to develop non-tariff trade barriers.
There may be second or third careers out there for many of us.
Senator Fairbairn: I would be remiss if I did not encourage you in your
education efforts with the Americans to make sure that you have the sugar
industry, the very viable beef producers in southern Alberta, the other
companies in Canada, constantly battling for some element of a fair chance.
Please keep them on your list of things to educate Americans about, push
Canadians about, including our government, and never let up.
Ms Rutherford: The sugar producers are members of CFA and we work very hard for
them. We have some questions and answers concerning the design of the proposed
farm income program. I thought it might be of some interest to some people.
The Chairman: In closing, I will quote from The Ottawa Citizen: "As a
medium power caught between two economic giants, the only sane course for
Canada is to rally an international attack on agricultural subsidy."
That is quite a positive statement on what Canadian farmers are facing and the
problems of the international crisis before us. Thank you for appearing before