Skip to Content
Download as PDF

Proceedings of the Standing Senate Committee on
Agriculture and Forestry

Issue 28 - Evidence


OTTAWA, Tuesday, December 11, 2001

The Standing Senate Committee on Agriculture and Forestry met this day at 4:32 p.m. to examine international trade in agricultural and agri-food products, and short-term and long-term measures for the health of the agricultural and the agri-food industry in all regions of Canada.

Senator Leonard J. Gustafson (Chairman) in the Chair.

[English]

The Chairman: Honourable senators, I see a quorum.

We have before us this afternoon Mr. Bruno Jean, President of the Canadian Rural Revitalization Foundation.

Please proceed, sir.

[Translation]

Mr. Bruno Jean, President, Canadian Rural Revitalization Foundation: I am President of the Canadian Rural Revitalization Foundation and a professor at the Université du Québec à Rimouski, where I am interested in rural development issues.

Accompanying me are Peter Apedaile, from Alberta, a farmer and Professor Emeritus of Agricultural Economics at the University of Alberta, David Bruce, from Mount Allison University in New Brunswick, who is head of a research program, the Rural and Small Town Program, and Diane Martz of the University of Saskatchewan, where she works at a rural research centre based at St. Peter's College.

In addition to telling you about the foundation, I will elaborate on three or four points. First of all, I would recall that the development of the capabilities of rural communities is definitely a necessary condition for the development of rural Canada today, but that condition may not be sufficient.

Second, it is my view that, as a result of the concentration process in agriculture, a number of rural communities in Canada are in danger of disappearing and that new economic approaches must be put in place to revitalize the economies of those areas.

Those approaches must be based on the production of specific high value-added products, not generic products. This will lead me to the issue of the multifunctionality of rural areas which Canada should promote. Lastly, I will state a number of other winning conditions that I think are important to develop. I will state the proposition that, in view of the current structure of the economy, rural activities are not sufficiently remunerated. A system of taxation, particularly of food, designed to return those resources to farmers should be contemplated.

The Canadian Rural Revitalization Foundation is probably the only national organization that, for roughly the past 14 years, has dedicated itself to promoting research on rural issues and the spread of research activities in rural areas.

The foundation is convinced that original solutions may emerge from research and knowledge sharing so that there can be an end to the long series of economic, social and environmental crises affecting rural Canada. The foundation contends that Canada's global competitiveness can be developed without sacrificing the incomes of farming families, the quality of life of rural inhabitants or the rural heritage and security of populations.

With respect to its activities, the foundation holds a national conference each fall. Over the years, we have travelled to a number of rural regions in the country. The conference is preceded each spring by a smaller seminar. Through public funding from the HRCS and similar agencies, we have launched a major research initiative on the new rural economy.

Through this initiative, we have observed what is actually going on at the local level in 32 communities across Canada. I will note a few of the foundation's challenges which I think it is important to mention today. The first challenge we have set ourselves is to try to clarify the links between technological change, the globalization of markets and the transformation of local economies.

The foundation believes that success is not a matter of chance. To date, rural Canada has generally been excluded from the prosperity generated by the Canadian economy's overall performance. In regions more exposed to the globalization of markets, depopulation has been even more prominent. The social economy has played a major role in enabling the various generations living in rural areas to adapt to the economic situation.

Private investments, appropriate pricing and satisfactory public policy cannot replace the grain elevators that have disappeared from the Prairies or the consolidation of commercial and financial activities and government services in rural areas.

The second challenge we have taken on is to reinforce the development capabilities of persons who live in rural areas by designing and implementing bankable projects. The research we have conducted shows that social capital levels vary considerably across rural Canada.

To sum up, our organization's objective is to develop knowledge of the various aspects of the restructuring process under way in rural Canada and to ensure that that knowledge is disseminated to rural leaders.

With respect to the development of capabilities, rural development researchers and public decision-makers have to face one fact.

Some rural communities are winning, while others are losing and seem locked in a vicious circle of devitalization. We realize that, to explain this phenomenon, the traditional development factors such as the allocation of resources and localization have proven sufficient or unsatisfactory.

Some communities seem dynamic, while others lag behind. We have attempted to gain a greater understanding of the role of certain intangible factors such as social capital. As a result of the surveys we have conducted, we have observed higher social capital levels and better regional governance among dynamic communities. This may be measured by a certain number of indicators of the population's openness to new ideas and ability to work together and to invest in the community's collective projects and the ability of community leaders to establish effective networks in and outside the community.

However, while a good social dynamic is important, a number of rural communities are losing their base. We must look at the possible solutions. In rural areas in crisis, the solution stems from a recognition of the multifunctional nature of rural areas. Rural areas are not only production areas. This is a well-known fact. They also have a territorial function. People who live in rural areas occupy the territory, develop the land, preserve the countryside and ensure that we can continue to develop natural resources. The social function contributes to employment.

Everyone will agree that the approach that must be developed today is a sustainable rural development approach. We must harmonize - and that word is very important - three major components: respect for the environment, which is essential, the search for economic viability and responding to the expectations of rural populations.

I will summarize the issue. When we look at how the rural economy functions, we see that, by and large, in the Canadian economy, the price paid for goods that come from rural areas is constantly declining. This means that, for example, in the agricultural sector, Canadian populations at the start of the century had to spend 40 to 50 per cent of their disposable income on food. Today, the average Canadian family spends 15 to 17 per cent of its disposable income on food. Agriculture is highly competitive and has brought about an excessive transfer of productivity gains such that people who live in rural areas can no longer afford to live.

It must be stated and understood that we do not have a choice. We need a strong rural policy that gives us a number of tools to work with. Since resources are limited, this seems to me to be a matter of social fairness, as a result of which food products, for example, would be taxed at low rates. The proceeds of such taxes would be allocated to actions taken under a rural policy. Those who live in cities, to whom that tax would have to be clearly explained, could be defenders of the rural world. There is a great deal of work to be done. It is somewhat our mandate to explain to the urban world how it can and must support rural areas and that a minor tax will make it possible to compensate and remunerate those who live in rural areas for all the services they render to society as a whole.

In the market system in which we live, we see that people who live in rural areas render a certain number of services to society as a whole for which they are not remunerated.

[English]

Ms Diane Martz, Director, Centre for Rural Studies and Enrichment, St. Peter's College: Honourable senators, I would like to thank you for the opportunity to speak today about work that we have been doing at the Centre for Rural Studies and in conjunction with the Canadian Rural Revitalization Foundation, CRRF-supported research projects.

Our work has taught us that farms, farm families and rural communities are in a state of tremendous uncertainty. They are subject to decisions made by governments and corporations usually far removed from their locations. Those decisions create the necessity for farm families to also make decisions. One farmwoman told me this summer that it felt like major decisions had to be made every day. That caused tremendous stress in her family.

Rural people realize that they are vulnerable, and they also realize that they must adapt to a changing world. Many are actively seeking change and that change could mean leaving the farm and their rural communities. It could mean diversification on the farm, and in many cases, it has meant that. It could also mean working off the farm, which is very common for many farm families today, or trying to convert community assets into new economic or social functions.

The ability of communities to deal with change depends on certain characteristics of communities that make them more or less able to adapt to change, to manage change, or even to create change to have a desired outcome.

Understanding why certain communities are able to survive or even thrive while other communities fade away is central to some of the research that the New Rural Economy Project is doing in 32 sites across Canada.

All four of us here today have been involved to some extent with this project. Over the past four years, a team of researchers has been studying various aspects of these sites including small and medium-sized enterprises, co-operatives, the volunteer sector and community capacity. This summer, we conducted almost 2,000 household interviews in 20 of the 32 sites. We will have lots of data with which to deal and we will have many interesting things to say in the future.

Today I will focus on our recent thoughts on community capacity. We have a team that has focused on community capacity for the past couple of years. This is the state of our art at the moment. I will also refer to my other research projects to illustrate some of these ideas.

When we talk about the ability of a community to adapt to change, we are talking about community capacity. A formal definition of community capacity is: The collective ability of a group to combine various forms of capital within institutional and relationship contexts to produce desired outcomes. I will try to thin that down a bit.

The first element of that is that the community must have access to a variety of capitals, assets or resources. Those capital or resources must be mobilized through different kinds of relationships or networks that the community can develop and those efforts must have some specific outcome that the community desires.

The assets and capital resources include such things as economic capital - money and infrastructure for the community's roads, communications systems, buildings, schools, water and sewage treatment systems, municipal budgets, savings and cash flow for businesses.

The second type of capital is social capital, which Mr. Jean mentioned. We are defining social capital as relationships between individuals. This type of capital is positive where there are people in communities who can work together to achieve a positive outcome.

The third capital is natural capital, which includes the natural environment of traditional natural assets such as agricultural lands, soil and water, which we have tended to combine with other capitals to create finished, intermediary or primary products and that includes clean environments. That is one of the elements of rural living that many rural people value highly.

The fourth capital is human capital. This is the education, skills and health of people. Human capital is developed through both formal and informal education, to which we sometimes do not give enough credit.

These capitals are put into play through various types of relationships and networks. The networks that we think are important are market relationships that bring together economic, natural, human and social capital in the production of goods and services. This is a fairly traditional economic approach to the combination of land, labour and capital.

The second of these relationships is bureaucratic relations. These focus on public institutions such as government departments or corporations. They are more formal networks. Communities try to access these networks. If they are trying to operate in this sphere, they may seek to access resources, expertise or licences to particular resources that the state controls.

The third relationship is associative relations. These arise when people get together to produce outcomes that the market or the bureaucracy do not provide. Voluntary groups, church organizations, recreational clubs and many more, where people get together to create something in their community that does not exist.

The fourth relationship is reciprocity relations. These are typified by kinship relationships, or networks of friends and neighbours. This is something that we do not often consider as very critical, but the family farm functions on reciprocity relations. One of our studies at the Centre for Rural Studies is to examine the work of farm families and how all members of the family combine their work efforts, both informal and formal, to keep those farms going. The reciprocity relations in that context are critical to the success of family farms.

These four types of relationships do not work in isolation. They tend to overlap. A community that has high capacity is able to put the various capitals together and access the various relationships to achieve a desired end or a desired project. I will illustrate the first two elements of this with an example of a project that we assisted at the Centre for Rural Studies.

Partners for Rural Family Support is a group in Humboldt that was set up by a mental health worker who was working in a bureaucracy that did not deliver an adequate service for victims of domestic violence. That person stepped out of her bureaucratic institution and pulled together a group, which would be an associative relationship, whose membership included representatives of many different service provider organizations. They were people who are interested in domestic violence. Associative relationships tend to form around a common interest.

People within the associative and reciprocal relationships were able to access a number of different capitals by virtue of the people that they had in that group. They had social capital because they had a working relationship that could move in a positive direction; they had human capital because there were people with different types of expertise, including research expertise, and they were able to access financial capital through a research grant. All of this went to improve the knowledge about, and the response to, domestic violence. From this, we learned that you will move faster toward success if you can access more of these different capitals and networks. Community capacity involves having access to all of the capitals and all of the relationships.

Another thing we learned about this is that the solution is not necessarily to create the same type of capital or service that is offered in urban centres, or has been offered in the past. The solutions must be innovative. We must come up with ideas that build on the strength of rural communities and we must build on the things that still exist such as volunteerism, attachment to the community and broad-based skills.

Our solution in this situation was a family advocate - someone who acts as a highly visible intermediary to assist women and families to access needed services, regardless of their location. That is a broad-based skill and it functions on volunteerism.

After mobilizing capitals through various relationships, the third question that must be asked is: The capacity to do what? For what are you trying to mobilize all of these capitals? Communities seek to mobilize capital to maintain economic viability. Through the sustainable community planning process that we have done in Saskatchewan, this is the number one concern of communities. It is the tradition of community development orientation to generate wealth and create jobs.

Another capacity might be to maintain or create a vital civic culture, where there would be participation within the community by many people who are willing to become involved in local government and where people vote. This is closely related to social capital as well.

There are a couple of other outcomes that people may seek to access. One of those is to do a better job of accessing funding and resources from the state and to find people who can write grant proposals for you to access government infrastructure funds and other such programs.

The last one of these, which is probably the least desirable, is to simply subsist or persist. This might be the situation where there are dramatic disruptions in society or natural disasters or wars.

Capacity can be built, but it can also be eroded. We think that capacity can be built by creating additional capital stock, for example, by improving access to financial capital in rural areas, through education, development of leadership skills and facilitation of the creation of social capital. Capacity can be strengthened by enhancing those relationships and networks that I spoke about.

Capacity can also be eroded. That has happened in many rural communities. On the Prairies this has happened through the loss of various forms of capital from the community - declining municipal and infrastructure grants, the removal of services, the closure of schools, hospitals and businesses, depopulation and many other things. It may also happen in the breakdown of relationships. Sometimes when there is a community in crisis and you try to respond to outside interventions such as the closure of hospitals and schools, you end up with community conflicts. You may end up with fewer volunteers, because the volunteers are simply burned out - they have been running virtually everything in the community.

Capacity is also cyclical. A positive capacity outcome may generate new forms of capital that lead to additional positive outcomes. Success breeds success. A community that is successful in generating a project that brings jobs into that community will probably consider further opportunities and projects.

On the other hand, a negative outcome may erode capital stocks or relationships and it may lead to a reduction in community capacity. One of our New Rural Economy, NRE, communities lost both its school and its hospital. Even though the community was mobilized - people came together on a common front to fight that loss - that community has lost significant capital through the loss of the school and the hospital and also a significant capacity has been lost: it has virtually no one interested in local government any longer and people are complacent.

To maximize the ability of communities to adapt, we need strong community capacity. Strong capacity is not just leadership skills. It involves all four capitals: social capital, economic capital for the community, human capital, through education, and natural capital, through clean and sustainable environmental policies.

A strong capacity will emerge from high levels of economic, social, natural and human capital along with strong market, bureaucratic, associative and reciprocal relationships. Rural areas are still high, in many cases, in social and natural capital. Rural residents will tell you that they definitely value the natural environment. They feel that they live in a clean environment. They are also still fairly strong in associative and reciprocal relationships, but these are being eroded by current trends.

Our goal must be to stop this erosion and also to regain economic capital and build human capital, as well as to improve our market and bureaucratic relationships.

Mr. David Bruce, Director, Rural and Small Town Program, Mount Allison University: Thank you very much for the opportunity to be with you this afternoon.

I would like to begin by offering my perspective on a critical problem facing rural Canada: More and more rural people are finding it more difficult to live in the communities where they live because of the erosion and absence of economic and community structures.

Self-organization is critical at the level of communities, regions, the nation and internationally. The ability to self-organize is largely based on the capacity of the local community.

I want to put before you three interrelated ideas or concepts that I think might be worthwhile to consider when talking about new policies for rural Canada.

Very few economic activities occur in the absence of a community context, complete with some range of human and organizational infrastructure. Self-organization or self-organized community groups need sufficient capital and operational money in order to work in that context. One way to do this is by increasing the availability of capital and operational money for existing organizations such as the Community Futures Development Corporations and their equivalents in Atlantic Canada, which in turn produce a number of important community activities and events, invest in local businesses and other community organizations.

The notion of a collective identity in action, or the notion of social cohesion, is also a critical, underlying factor in rural development. It, too, however, has been eroded by individual, collective and government actions. The question is: Can we rebuild our community interests in some shared sense of stewardship among our citizens in the rural community so that they have that sense of collective identity and action?

Perhaps one way to approach this is to consider a more attractive package of tax credits for individuals and community organizations that invest in the multiple functions that rural communities play, whether that be the creation of amenity spaces, through the protection of environment, the enhancement or rehabilitation of environmentally damaged areas and so on.

We also need to build capacity in our communities to more effectively participate in the economic market in which we find ourselves these days: the global economy. One critical element of that is to support the entrepreneurial efforts of community individuals and organizations that try to take advantage of the opportunities. They often lack access to financial capital.

We could explore the possibility of reworking the Canada Small Business Financing Act, for example, to make it more available to community non-profit organizations such as Community Futures Development Corporations, CFDC, which are currently excluded from the benefits provided by that act. Another example would be to examine the Community Reinvestment Act in the United States to determine the possibility of having a similar act in Canada. We should also deal with some of the loss and the out-migration of real money from our rural communities in view of bank closures and the consolidation of financial interests.

Let me explore each of these in more detail before wrapping up. As I mentioned, most economic activity happens within a community context. Farmers farm, fishermen fish and people perform IT-based services for others in a community setting, typically defined by a municipal structure with some level of local, and even provincial and federal services.

For many people, non-economic aspects of the community context are extremely important. These include community voluntary organizations and civic institutions, including local government, education and health services and community events. The absence of these creates a significant gap or void in our rural communities and prevents people from self-organizing and taking advantage of economic activities that they might want to pursue.

These institutions play important roles in building social capital and social cohesion in our communities and provide the fundamental building blocks for community economic development processes in our communities. Voluntary organizations, in particular, through our research have been shown to do significant and important work in providing a range of services and programs and serve as important partners for their civic institutions, namely, the local governments and education and health care providers.

However, they are suffering from a lack of funding, membership challenges and volunteer burnout. Again, these place critical barriers to using these important civic and voluntary organizations as tools for community development.

Civic institutions also provide important services. Local governments provide needed infrastructure. Ideally, in the best of all worlds, you effectively plan for future economic development in partnership with regional development organizations such as the CFDCs.

Education and health facilities are critical because they also provide direct services to individual citizens in their communities. They are part of the community asset base that is used by all for community meetings, gatherings, events and other activities.

There is a high degree of networking and partnership within our rural communities particularly between voluntary organizations and the civic institutions. Some of these partnerships are placed in jeopardy as voluntary organizations struggle with their membership challenges, funding issues and jumping from project to project rather than considering long-term activities. The institutions themselves, the local governments and the education and health care organizations, struggle with declining budgetary issues, staffing challenges and much more.

Finally, rural communities benefit from a high degree of informal and teamwork approaches that make things happen and achieve results. While the circle of participation is sometimes small, we do know that is characterized by an individual willingness to pitch in and help out in times of crisis and by a strong sense of community identity.

Our program at Mount Allison has examined households in small communities and towns over the years. We found that people do not chose to live in these areas because of the particular economic benefits they offer, lower taxes or job location.People chose to live there because of the quality of life that is available to them in that kind of setting. These include, among other things, safety and security, access to quality health care, access to quality education for children and much more.

Furthermore, people are more likely to live in these rural communities and small towns because of extended family and friendships available to them in these communities: These are important elements that provide people with non-economic resources to function in their communities.

Most of our communities in rural Canada have a good number of resources to work with, whether we are talking about the physical land base, the economic activities, individual skills at the human level and societal relationships. The challenge, of course, is how to put those together in a community context in a way where all of us work toward the same goal.

Our research has shown that we seem to have a lack of capital in the financial area. With the withdrawal of banks from many of our communities, we have lost the capacity for local reinvestment. New tools, such as the ones I suggested a moment ago, must be developed to respond to this situation. In the absence of capital being available for local investment, we often find fewer businesses and fewer entrepreneurs interested in doing business in rural communities. We often turn to the voluntary sector, the community non-profit organizations, for action on this front to take advantage of the economic opportunities that might exist.

As I mentioned, the voluntary sector is suffering from burnout. The most recent federal and provincial practices of short term, project-based funding poses significant problems for considering beyond six months or a year of providing services to the community. We are losing capacity within those individuals and organizations that become frustrated with the processes and lose interest.

Voluntary organizations are critically important, particularly those that have demonstrated entrepreneurial thinking and exhibited entrepreneurial values. They often exhibit these in the realm of providing service to individuals in the form of social services and other ways. Many others, particularly those who have been sponsored by or operate within the umbrella of the Community Futures Development Corporation structure, are investing in significant economic activities in their communities. These must be supported in a significant way.

To summarize, I would like to come back to the three main points that I touched on at the beginning: We must consider changing the way we fund our rural economies and provide access to capital. My policy suggestion would be to examine the Community Reinvestment Act in the United States to determine how it can be reworked in the Canadian context. We should couple that with a reworking of the existing Small Business Financing Act in Canada to provide a greater access for the non-profit sector.

We must examine how we can support our non-profit organizations to exhibit entrepreneurial interest and entrepreneurship development. We can do that by supporting the existing Community Futures Development Corporations and others by providing them with more loan capital and more operational dollars to do the good work that they are doing.

We must consider how we can support individuals and community organizations that are supporting and exploring ways to examine how our rural communities function in a multiple way, beyond simple economic return.

Again, I draw the attention of honourable senators to the possibility of how we might consider more attractive tax credits for these individuals and registered non-profit entities to reward their efforts in protecting the environment, rehabilitating the environment and providing the necessary amenity spaces that urban citizens, particularly in our country, deem worthy in our rural setting.

Mr. Peter Apedaile, Professor Emeritus, University of Alberta: Honourable senators, thank you for inviting us and for thinking we might have something useful to say.

I would like to take you along a path in thinking from one point to a possible destination. It is a path with which you may not be too familiar, although it is ongoing in the economy.

The starting point is our current economic policy, which was designed for what is now an aging industrial economy. This was based on a so-called "staples" concept in which rural areas produced the raw materials, the generic commodities, which fed into the industrial processing system and then, through very economic food and fibre, boosted Canada's competitiveness in all kinds of markets, now especially in global markets.

Value added on this old model consists of more industrial activity, more manufacturing. However, we can predict from the economic theory, and the economic theory tells us, that with this kind of policy approach, we get low rural asset values. In fact, a member of the lower mainland British Columbia real estate association at one of our conferences in Nelson, British Columbia, was actually advocating a capital gains tax on all property transactions in the lower mainland. He wanted to dedicate that revenue to remote and rural British Columbia. The success of the rural economy in British Columbia has resulted in higher land values in the lower mainland.

This policy also creates farm income problems. We know what those are about. There is no surprise that we have these issues in which your committee is particularly interested. Our policy people know that this is the kind of outcome you get with this kind of economy.

The destination that I would like to take you to is a rapidly emerging area of research and economics that addresses property rights in the context of a knowledge economy. The rural economy would be an economic and social organization that is constantly rebundling and repackaging its property rights to produce wealth and income. This is based on a lot of thinking that PeterDrucker has been putting out on the knowledge-based economy and on papers from the OECD on economic review and research by our foundation.

In taking you along this path, I want to point out that many of the people who we hire in our government departments, such as the Department of Agriculture and Agri-food, believe that farm income should not be increased because it would increase land values and that by increasing land values, you only benefit the present generation of landowners and hobble future generations.

That is a fallacy because better equity in our rural economy and our enterprises provides the basis for financing. We only have the property tax in rural Canada, in most places. You want to have a strong equity base. That is the foundation for a strong rural economy.

Let us proceed down this path. We are not suggesting that there is only one option. This foundation does not advocate anything beyond the idea of a stronger rural bottom line. We are a research and continuing education organization. We are considering options and choices for people like you to think about and put in place.

The four concepts are outlined in this paper, of which you may have a copy. It is entitled "New Paths for Agriculture and Rural Economies in Canada." It is my contribution to this afternoon's event. I will not be reading from it.

There are four concepts in there. The first is that rebundling property rights is the way to improve efficiency in an economy such as agriculture that has more than one function. It has more than just the function of producing wheat, dairy, canola and so on. I produce wheat, canola, barley and things like that. However, I have other functions as a farmer, which I will go into this a minute.

The second thing that you will hear about is the idea of an equity risk premium. An equity risk premium is the extra surcharge that rural investors must make when they consider investing in their own equity, as opposed to investing it somewhere like a motel in Burnaby. If an offshore investor or an urban investor wants to invest in a rural area there is an equity risk premium. It is the same kind of concept, with which the Governor of the Bank of Canada is trying to deal by successively pulling down interest rates.

After September 11 there was a huge premium for borrowing funds. As you saw, all the money moved out of the equity markets and into safe places like Treasury bills and so on. Investors parked their money because the rate of return was not there. The same kind of thing happened leading up to the Second World War. We have a chronic issue of equity risk premiums for getting money to find its place in rural Canada.

The third concept is rural governance. Rural governance is not just local government. The markets are one of the primary governing institutions for rural Canada. The justice system is another because we have to deal with property rights and family violence issues in rural Canada. In Mr. Jean's rural community several days a go, a 15 year-old boy from a perfectly normal, well-placed rural family decided it was time to end his life. That boy was a close friend to Mr. Jean's daughter. Not only is Mr. Jean's daughter totally blown apart by this, the family and the school are extremely upset about this. In 25 years, I have had a suicide on every fence line. We should not forget some of these issues.

Rural governance is markets, governments, social capitals, and justice. I refer to all of that as local government. I apologize for that excursion, but some of these issues just happen to be emergent.

The fourth concept is "bracketing." That is the company store syndrome, whereby you are dealing in a community and the company store is providing your inputs and also buying your outputs. We now have that through mergers, acquisitions, global alliances and networks. For example, in the Prairies we have an alliance between Cargil and Monsanto. They are pretty efficient organizations. I like and use the Monsanto products. The point is that these organizations do supply those inputs, they do price them, they do assemble my grain, they do handle it, they do feed it to cattle and they also slaughter it - when they do not have a major fire like that south of Calgary a night or two ago.

I will state the main policy objective because it is a way to bring us onto the same wavelength as we move to the main points to conclude. The main policy objective is viable farming. That means that when I invest my own equity, I need a rate of return that is somewhere near the market rate of return. In Alberta, out of 38,000 farmers, we have only 2,000 who are earning the market rate of return on their equity, or better. The mainstream family farm - the one that has agricultural sales in the $200,000 range - is earning less than the market rate of return. That means if lifestyle were not important, you would not have those producers. Lifestyle is essentially subsidizing our competitiveness. Those guys are getting less than market return, so why do they not fold up, sell out and invest their money in equity, Canada savings bonds or GICs? Viability is important, and that means an equity return that is the market rate of return.

The second point is less collateral damage. We want less collateral damage from public policy, which always creates some collateral damage. However, at some point, you have to assess whether that collateral damage is beyond ethical limits. It should not only be politically manageable collateral damage; it should also be something that is reasonable in a democracy where one of the fundamental principles is that you do not deliberately and knowingly do violence to your citizens. We want less collateral damage.

The third is that we want our policy to be WTO "green." We believe that trade liberalization brings many advantages to all Canadians.

The last objective that I would suggest is that we want to make a contribution to long-run global security. Those words, "global security," are very much in the news these days, but I think of them in terms of food security and environmental security. That is my definition of global security.

How does all this work in terms of a knowledge-based economy, rural organizations, the not-for-profits, small businesses, corporate organizations and local governments? We want all our institutions in rural areas to be able to convert knowledge to profit, to equity value, to lifestyle, to a secure environment and to all the objectives that I have just laid out. To help us move along this path, we must think in terms of knowledge assets, hard assets and an orderly framework for putting these together.

On knowledge assets, we are talking about intellectual property. This is a fundamental issue. Our rural businesses, especially our farms, are net users of technology. It should be of no surprise to anyone that the pricing of this technology extracts the rents associated with those rights. That comes as no surprise. When I pay $15 an acre to Monsanto in a technology-use agreement, I know that I am paying for that. It is their technology; I did not invent this method of growing canola.

If I am a net user of technology that comes from the global side and from the urban side, I should not be surprised when I hear that big sucking noise, if you like, as the rents and revenue move out of my rural economy and are not available for reinvestment at home.

Proprietary rights are all about organizations. The reason we have so few grain handling corporations globally - only six or seven - and the reason we have the Canadian Wheat Board and debate that Canadian Wheat Board's existence, is because the way you organize the handling and marketing of commodities becomes a proprietary asset. You just cannot do it well with a small organization. Technology has huge economies built into it.

Real property, of course, is what we are familiar with. It is the land, the bricks and the mortar and so on. Incidentally, the proprietary assets that I spoke of a moment ago include social capital, which Ms Martz spoke about. Finally, we have a framework for national, global security about the environment, food and justice, et cetera.

I will end with six action points that would be useful as options to think about. First, enabling legislation to de-concentrate rural policy into not-for-profit, joint, rural-Metro development corporations. There is a model in the new infrastructure foundation that was announced in the budget yesterday. This would embrace all the "farmscape," as it is now called, territory in Canada. It is 10 per cent of our territory. For example, we might have an Edmonton and area rural development corporation, jointly managed by a rural-urban board and raising its revenue through market activities, and probably some agency activities, to finance the capital for the continuance of schools where closure was threatening for want of an extra $100,000, and for dealing with income issues.

The second element that I would suggest as an option is to eliminate the Department of Agriculture and Agri-food, eliminate the Department of Natural Resources and eliminate the Department of Fisheries and Oceans. As you search for the logic in this and are thinking of making the political arguments, eventually, for this, consider also that this is difficult for farmers because we think the Department of Agriculture and Agri-food defends our interests at cabinet. However, I am not so sure about that.

If you want to see the arguments, read the OECD economic review for 2000. Dr. Mario Pezzini, who is the Director of the Territorial Development Service at the OECD, has indicated clearly that these are outmoded ways to govern the issues that face this whole concept - from the national and provincial levels. They are part of the problem, not part of the solution any longer.

The third action point would be to move as rapidly as possible to a multifunctional approach for rural policy, again, delivered through these development corporations.

This is based on the principles of a knowledge economy, a joint product economy and the organization and governance that is needed to administer property rights and to allow owners of property rights to constantly repackage them and put them together. It allows us to reduce some of the collateral damage that happens when we have one policy and so many different circumstances across the country. We can be more adaptive.

We have commodities, amenities, environmental and food security and the habitat for demographic growth. People are living in rural areas because of the habitat and lifestyle, which offers all kinds of nice features. It is now possible to do that. After September 11 we heard many predictions that there will be a movement of people.

The fourth point is that we must beef up our competition policy. Conrad needs more power to work with and he needs more jobs than just working with Air Canada. We have to work to eliminate the company store outcome for rural Canada, especially for top-end farming. I am talking about the 2,000 successful farmers in Alberta because they are the ones most exposed to the bracketing problem. We need more competition in transaction services such as railways, telecommunications, insurance as well as in the handling and assembling of our commodities.

The fifth point is to continue to merge our rural and urban social safety nets. This has been happening. We need one safety net system. We do not need different safety nets with one for agriculture and different ones for forestry, fishermen, Aboriginals and so on. We should be merging these further and this should be done according to standards. This is very important to lessen uncertainty.

My last point is that the research and development that we fund publicly should not be focused on increasing productivity for the private sector, but should be focused on doing the research on the environmental, ecological and social long-term impacts of the private sector productivity research. For example, with cloning or genetic modification, Agriculture Canada should be working on how that is likely to affect the ecosphere on our farms. We should not have Agriculture Canada researchers still researching a better canola variety. That does not seem to be the best way of using our public funds for research.

Those are my six points, senators. Let us have enabling legislation to do the following: first, de-concentrate our rural policy; second, restructure some of our sectoral interests at the cabinet table; third, move as rapidly as possible to a multifunctional approach for our rural policy which recognizes more value being done out there; fourth, beef up our competition policy; fifth, continue to strengthen our safety nets along national standards rather than sectoral standards and, last, put our publicly supported research and development into some of the long-term consequences of the productivity technology that we do want to take up to make us more competitive.

The Chairman: Thank you for an excellent presentation, Mr. Apedaile, which, I might say, would be quite radical to implement. I will explain it this way to determine if I heard you correctly: rural industries such as water, oil and gas, lumber, mining, fertilizing, agricultural, fisheries, potash and feedlots all concern rural people, located in rural areas. Governments are faced today with the problem of keeping the urban centres going and to do this they keep taking more and more out of the rural areas. You also talked about the manufacturers, the processors and the Monsantos of the world.

How will you change that when politically you make up only 2 per cent of the people? How will you get that to happen? Our committee has struggled with the problems of agriculture for around five years and we really have not seen any change. If anything, it is getting more severe. Senators Sparrow, Wiebe and I come from Saskatchewan. The situation is probably more critical there than in some other regions of Canada. Ms Martz comes from Weyburn, where I come from.

How can we make this happen? If Agriculture Canada and the federal bureaucracy has an idea on how the farms should be run, how many should be left and what is most beneficial for the population of the country, and each provincial government has the same idea, how will we change that?

Mr. Apedaile: Part of the change will happen from the current WTO negotiations. I was trying to outline new ways of thinking that we should start to consider when we are reading about the agricultural industry. We are moving into more and more of a knowledge economy. That is not just information technology; it is the fact that we bring wealth to our communities when we are active learners, when we put together knowledge and can organize it to make money and to bring jobs. It is important, Mr. Chairman, to start thinking in new terms because we have been rearranging the deck chairs on the Titanic for a long time. I do not think that will continue to wash.

A few years ago, the Policy Branch of Agriculture and Agri-Food Canada was disbanded, but many were hired back. There is too much influence from an ideological line of reasoning that says rural areas should be providing commodities at the lowest possible cost because that is the way Canada will be competitive. You cannot argue against that if you only go that far. However, the WTO will change that somewhat.

We work actively with the Institute for Rural Revitalization in the 21st Century in Japan - I am told that the name is much shorter in Japanese. We also have active research links in Europe and in the United States. It seems quite clear that multifunctionality will carry the day in four, five or maybe six years time when the next trade agreement sorts itself out.

Multifunctionality means that agriculture is valuable because of the other functions it performs, not only because of the food it produces. Food security should not be viewed in terms of an accounting balance right now, for example, we have ten people here and we have ten bags of potatoes there. That is not the way it is. Food security is about sustaining our capacity to produce food in the future, globally. This means that we must sustain a very active and viable agriculture industry. Even though we may have surplus capacity today, we must look after that capacity so that, when we need it, it is there to use. The world could not cope with a food crisis. That would be so explosive in terms of global economic security that it would make September 11 look like a minor event.

The Chairman: Would you suggest that we should be doing what the Americans did 20 years ago? Should we save grain so that if a chaotic situation came up, we would have a surplus?

Mr. Apedaile: The American policy is centred on self-reliance. As the global power, America cannot be short of food, any food. Therefore, it will produce its food within its boundaries. It cannot even rely on our granary to any major extent. That is the context for our trade policy. Certainly, we should maintain stocks. The main thing is to maintain a capacity to go into production if we need it.

I remind all of us around the table that Eastern Europe is now coming out. The wall went down in 1989. In 2001, the Eastern European grain belt started to produce. It has an enormous crop this year. It is rediscovering the capacity that everyone knew it always had.

Capacity is not measured in acres, Mr. Chairman, as you well know. It is measured in the way you organize your farm business to use the new technology that is available. That is what has taken Eastern Europe more than ten years.

Senator Phalen: Mr. Apedaile, under main points in rural governance, you said that the CRRF describes three rural Canadas coexisting in every rural community. Rural Canada I has maybe five per cent of the population, is financially profitable, globally competitive, politically connected and carries a gold card.

Rural Canada II is about two-thirds of the population, prefers profit but not at the expensive of life style and is oriented to domestic markets, is politically active in constituency organizations, volunteers and carries a debit card.

Rural Canada III is about 15 to 30 per cent of the population, lives in poverty, is marginalized from markets and politics and has no credit.

What the Department of Agriculture and Agri-foods says differs from what you say in respect to numbers. It says that one-third has a gross revenue of less than $10,000, one-third has a gross revenue between $10,000 and $100,000 and one-third has gross revenues in excess of $100,000 annually.

The main point is that there is a group that is doing well. There is a group that is making it and is doing okay, and there is another group that is not making it.

Although the bottom one-third may not be significant in terms of agricultural output, is it important in maintaining a critical mass in agricultural rural communities? If so, what would happen to the rural communities in terms of education and health care infrastructure if this one-third were to cease operations?

Mr. Apedaile: Some of my colleagues can answer as well, so I will be very brief on this. The rural Canada III, as I outline it, is a dead weight around the neck of rural Canada. We do not have the fiscal base to handle the costs of carrying that group. It is very important to deal with the processes that marginalize them and keep them in poverty. They cause an awful lot of difficulty by ending up like that.

The Agriculture and Agri-food Canada numbers are based on gross sales, not on the number of farms. All farms have employment from off-farm income in investments or labour. The rural Canada II group that we studied is the heart and soul. It is the mainstream, the main street, the main farm, the church congregation, a political constituency organization, the volunteer group, and the rodeo committee.

If you do not have rural Canada II, you do not have the social capital any more, and you do not have the governance. It is absolutely critical to deal with that.

Rural Canada II is very ingenious. They are employed in multiple jobs - husbands, wives, kids. There are all kinds of ways that they are earning money to keep themselves there. That is at the expense of being able to really provide the leadership in our volunteer organizations because their night jobs and their day jobs are taking all of their time. It once was that the day job brought in the money and the night job was running all the volunteer organizations. The night job is now needed for money, too. That is my short answer to your question.

Senator Phalen: Are you saying that that population of people making $10,000 or less, should be cut adrift?

Mr. Apedaile: I would say that some of that group belongs in rural Canada III. They are now becoming chronic welfare cases. They are part of the degradation of our communities. They are so discouraged and disillusioned from being blindsided for several generations that they do not show any initiative. They are into substance abuse. Essentially, they are almost annexed to some of the Aboriginal populations where there is so much discouragement there is just substance abuse and suicide. That is a serious issue. Let us not forget that Aboriginal people in the Prairies make up a huge chunk of our rural population.

Mr. Bruce: To follow up on that, I do not think it is a question of cutting adrift a block of people. It is a question of re-examining the social policies and the changes in social policies that have created that mix of people in those sets of circumstances and the extent to which those policies could be reworked to address some of the issues.

You see an equivalent population in an urban setting. It becomes more pronounced in a rural setting where the total population is smaller. That population is more visible, particularly in some of our isolated rural communities. They are more visible.

Senator Tunney: I must confess that I am shocked by some of the things I have heard. I made a few notes at the start of the presentation on the subject of stress in regard to family problems.We all know that there are all kinds of family breakups, mental stress and suicides. I understand some of the things that have brought this about. It is called globalization, but it is not just that; it is the need to adopt more competitiveness and a substantial reduction in government support for agriculture.

I am not talking about financial support. I am talking about service support. I am a dairy farmer from Ontario, located between here and Toronto. In Ontario, we have 54 counties. We used to have 54 agriculture offices in Ontario. Our provincial government saw fit to close most of them and cut adrift the good, dedicated, skilled people who served our industry. They have gone in all directions. Some of them have gone to offering management consultation. They are struggling to keep going because there is not the response they had hoped.

Price pressure for raw commodities is horrendous. The processors are doing very well, and so are the retailers. In that total, there is much profit, but there is none for the agricultural producers. It is not there. The processors and the retailers do not mean it to be there, except to just keep us surviving and continuing to produce. Farmers are such that they want to produce. They want to farm and they want to produce. They try to get better at it, and many of them do and many of them do not.

In the dairy industry, rationalization has been a phenomenon. When I started in 1968, there were 27,000 dairy farmers in Ontario. There are now fewer than 6,000, producing more milk. They know that for the milk they produce, they will be adequately paid. They would not be paid if the processors and the retailers had their way. The processors have their way in red meat, in horticulture and in the grains that provide our cereals.

I am not, but many farmers are captives of the like of what you call "Monsanto."

The Chairman: Senator, do we have a question?

Senator Tunney: Yes, we have a question.

The question is: Can farmers survive if they do not have some kind of united support in organizations that will adequately pay them for their produce? They cannot continue to produce and sell for less than the cost of production. When you talked about Peter Drucker, it scared the hell out of me. Diane Francis would be another one. If you are our economists and you are our planners, you must come up with something to save these producers. Otherwise, our food will be produced offshore.

Mr. Apedaile: I do not think we can say producers, as such, and especially not with an agriculture policy. Perhaps an industry-technology innovation in trade and commerce policy for the really commercial commodity-oriented farmers would be more appropriate. The stronger option for dairy farmers, as with other farmers, is to build the bridges into the metropolitan areas and go for the hearts and souls of urban people. In Japan, this is being done actively by the institute with which we work. It does research, but it also does a job of competing for the hearts and minds of urban people.

In Muenster, Saskatchewan the other day, I suggested at our first rural university, in response to a question, that rural communities should seek to partner with urban neighbourhoods. That could be done with a rural community association and a community league, for example in Edmonton, or a Catholic parish in the city, or an interdenominational group from a rural community with a neighbourhood in the city. We should start working closely with those folks, because they have the political power. They are also the consumers and they are also the taxpayers who are needed to support the environmental security. I am sure all dairy farmers contribute to that and to the amenity value that makes the Eastern Townships, for example, what they are. The Eastern townships in Quebec would not be what they are, compared to Northern New York State, without the dairy industry.

The Chairman: You mentioned the churches. That is a good example. I was talking to the pastor at my church in Calgary. The congregation is building a new church costing $13 million. We, in rural Canada, have an awful time keeping a little community church going. The capital drain to the cities is incredible. The church is just one example of that. The banks are also an indicator of that drain and there are many other examples. There are many such organizations that are centralized in the urban setting. How do you turn that around? There have been generations where this has happened and there seems to be fewer and fewer of us all the time. I know there are different examples, but they are few.

Mr. Apedaile: I am hearing the same comments. When you make a partnership with an urban community, or a church in this example, you are not going there to sell them on how wonderful you are. You are going there to learn intelligence that will allow you to differentiate your products by the region they come from, or by the environmental practices that you use, or by some kind of identifying factor that makes your product attractive and not the same as someone else's.

By working with and in that community on a steady basis, you will come to understand the demand side. You really must go as far as you can on the market options. It is an intelligence operation that you want to mount when you are partnering with urban people.

Senator Hubley: It is estimated that 125,000 farmers will retire in the next decade. With about 280,000 farmers in Canada at this time, these retirements could have a significant economic and social impact in rural communities. They could also create a need for special health care and other services, should the retirees decide to remain in the rural community. In short, these retirements have a potential to drastically change the way of life in many rural communities. Is that something that your organizations have considered? Is it factored into some of your decision making? How will you then look to the future of farming in Canada?

Mr. Bruce: On the second issue of the potential impact that the aging rural farm population would have should they choose to retire and remain in rural communities, concerning the range of services, demands on health care and so on, we often think about the doomsday scenario of too much burden on a particular system. Another way to consider it is the extent to which this creates new opportunities and new demands for new and yet unthought of labour opportunities for young people to provide services. There is an opportunity to make use of existing community health assets, which right now are underutilized in many rural settings. I do not see that as a potential problem.

There would be an opportunity to create employment opportunities for younger people to provide those services and make use of some the assets. How that spills over into the actual public health care expenditure, I am not sure. I cannot recall any particular studies that have identified that issue.

I do not know whether others want to touch on the first part about the regeneration of the farm when those people retire.

Ms Martz: On your second point, when we were interviewing in communities we found that many communities do not necessarily consider retired people as a drag on a community. Rather, they look upon them as a substantial portion of their voluntary sector because people are living longer and so they are active for a longer period of time. At the age of 65, people still have much that they can contribute to communities.

Senator Hubley: Do you feel that there will be any impact from losing probably over 40 per cent of your farmers? Who will fill that void? Will that be filled? Is there something positive that we could hear on that issue?

Mr. Apedaile: We did a number of studies with the USDA back in the mid-1990s. In 1995 I published an article with a colleague in the United States. In that article I said that within five years in the Prairies we would lose 25,000 mainstream farms. In fact, that was the major story earlier this year.

We did not lose them in the sense that they abandoned and declared bankruptcy.We lost them because they now were almost entirely involved in non-farming activities. They were essentially rural residents. They rented out their land, or did something else with the land, and they commuted to jobs or did something else.

When we say we will lose 40 per cent of our farmers, it may happen in ways that do not actually jeopardize the community. These people become urbanized. They will probably not return to agriculture. They may provide the link that allows businesses to locate almost anywhere. It does not have to be in my hometown any more. In fact, I would rather it were not there. I would rather live in my hometown and commute to another town where the business is located.

There is a mixed issue here and it is not clear that losing 40,000 farms is necessarily a crisis situation. This last stage of consolidation from the industrial age will certainly be one of the hardest for us to go through in Canada. We must put this into a public forum and have debate on just what we are shaping with our policies.

Senator Hubley: I have a hard time imagining that we would lose that number of farmers and that even though they are integrated into the same community that is not considered a loss.

It is also important that we encourage young farmers to consider agriculture as a career. There will be a major impact from losing that sort of expertise in the farming community over the next 10 years, which seems to me to be quite a dramatic change in the structure of the farming community.

Mr. Apedaile: To give you an example, in response to your question, in our area there is a large farm operation north of Vegreville. This year it grew to 30,000 seeded acres. That operation moved into an area just across the river from me. It has gone from farm to farm and rented the land. All the active farmers of an intermediate size there suddenly lost their rented land base because this guy was offering cash right up front, and more cash. Last year, when he went to pay his fertilizer bill at Agricore it was a $750,000 bill and he offered them $250,000 or nothing. He is so big for Agricore that it accepted. I am an Agricore shareholder and I was sure not happy to see my dividends going into a written-off receivable like that.

There are real issues there. That is why our president is so strongly advocating the multifunctional approach. Many of the operations that we have on the farm do other valuable things that they are not being remunerated for, and they are asked every day to take on new costs for which they are not compensated.

The Chairman: That same approach is snowballing in our area. In the last year or two years it has basically snowballed where farmers are taking on 100 quarters, cash rent. They are renting from farmers who are retiring or quitting. The issue is whether they will survive. It takes a large amount of machinery and high costs to operate a farm like that. You just made the point.

Mr. Apedaile: I believe that the farmer I referred to owns two sections out of the 30,000. He owns no equipment or anything else. He has no assets to be seized or for security.

The Chairman: Does he rent the equipment?

Mr. Apedaile: Yes.

The Chairman: What will happen when he collapses? This farmer who cash rents his land has machinery that is probably worn out, he is probably worn out, and he will not go back into farming. Will someone fill that gap?

Mr. Apedaile: This is why we are calling for research and development -and research especially at public expense - to examine these long-run circumstances. This stuff is happening but no one is considering those consequences at all. I think it is a temporary phenomenon. I do not think it is sustainable.

The Chairman: There will be some fallout.

[Translation]

Mr. Jean: It must be clearly understood that agricultural policy has been put in place in Western countries to solve two problems: security of the food supply - particularly in Europe following World War II - and low-cost access to food. Agricultural policy is not designed to solve the problems that the senator has just mentioned. It is an urban development policy designed to increase productivity and security of the food supply and to keep food prices low. The question asked clearly demonstrates the need for a rural policy that considers all these issues, which must be separate from agricultural policy.

I would like to return to the previous point. If the present economy is changed to an agricultural economy guided by the research and development structure we previously had, it is very important that each agricultural region be able to conduct its own agri-food research and development with farmers. This problem exists in a number of regions in the country. There is a great deal of interest, but there are no longer any organizations conducting research and development as was done in the past.

[English]

Senator Oliver: My impression is that Mr. Apedaile was hinting at uncompetitive behaviour when he was talking about beefing up the competition policy. He said, "Conrad needs more power." Are you thinking that if there were changes in our current Competition Act that might be one of the ways in which we could leave more money at the farm gate and help to economically strengthen rural communities? If so, what particular changes would you like to have in that act?

My second question was to Mr. Bruce, who spoke about the U.S. Community Reinvestment Act. If we were to apply that to Canada, what would that do to economically strengthen our rural communities? My questions relate to two statutes: one in Canada and one in the United States.

Mr. Apedaile: I am not a specialist on competition, but we have been preparing a paper in connection with the rural dialogue process and Rural Secretariat on the degree of concentration upstream and downstream of the farm. These concentration rates are high, but it is not a new phenomenon.

Senator Oliver: Can you talk specifically about concentration of who and what?

Mr. Apedaile: For example, the top five producers of fertilizer handle approximately 90 per cent of the supply of fertilizer. We say that concentration is starting to interfere with competitive outcomes that actually distribute revenue fairly to where the costs are being incurred. In grain handling, input processing and farm machinery, there are very few buyers for our products any more. It is somewhat back to the territorial days when we only had one hardware store to deal with because the roads were so bad that we could not go anywhere. We had territorial monopolies. As soon as we could buy somewhere else, of course, we went where prices were lower.

The competition phenomenon is that few firms account for almost all of the inputs to agriculture, and almost all of the handling, transaction and processing services are downstream from agriculture, particularly, the offshore alliances like the Cargill-Monsanto alliance. That is something the Competition Commissioner should examine. He has told me anyone can write him a letter, and he will examine anything that anyone raises. He says he has not received any letters regarding the rapid concentration of grain handling facilities in Western Canada. Perhaps someone simply must write him a letter.

Senator Oliver: Perhaps the statute does not have to be beefed up so much as it is an issue that some of the people who are impacted could write a letter.

Mr. Apedaile: The problem that we face is that agriculture, collectively, is somewhat like a public utility. There are so many economies of size that, in technical terms, you never get an upward sloping supply curve. It is very hard to get a price determination when supply and demand do not intercept. If anyone tells you, "It is a case of supply and demand, so just accept it," you can ask where the supply curve is because we do not have an upward sloping one. Therefore, there cannot be an interception. It is often also the case that our global services to agriculture operate as technological public utilities. They rapidly concentrate and form alliances to put their proprietary assets together and they can price the rents out of rural.

Mr. Bruce: The Community Reinvestment Act in the United States, in case honourable senators are not familiar with it, requires financial institutions to take a portion of their annual profits and put those profits to use in distressed or disadvantaged - primarily urban - neighbourhoods. You can think about downtown East Side in Chicago or the Harlem area of New York, for example, where it is seen as a way in which the private sector must bear some share of responsibility for some of the so-called collateral damage that has resulted from some of our initiatives in business practices. Many of those funds tend to go to building affordable housing or providing loan capital for small entrepreneurs and so on. That is in the context of the American model.

How would that work in Canada? We could consider a variety of different things, including having the major banks invest in certain resource sectors. For example, in areas where bank branches have been closed, banks might be required to continue to supply a certain amount of loan capital to that community for investment purposes by, or for equity purposes for community non-profits or for private entrepreneurs to access.

We have examined some statistics. Rural citizens provide a fair share of the business volume and the savings that the major banks have. However, how much of the profits and the business activity is actually going back into those communities? It is disproportionate. There should be some way to perhaps redress that through an examination of something like the Community Reinvestment Act.

Senator Wiebe: Mr. Apedaile, you mentioned the importance of food security for Canada. You also mentioned the fact that there is not much need to spend more research dollars on finding a better canola.

In terms of producing food, there is no one better in the world than Canada. We have a tremendous capacity to produce food. Let me give you an example. A few weeks ago, I spent a few days in Essex County. That county produced more agricultural products than all of the Maritimes combined, and more agricultural products than the entire Province of Saskatchewan or the entire Province of Manitoba. That county is 40 miles wide by 60 miles long and it has that capacity. The land base and everything is there. If we need to produce food, we can.

Instead of the government spending research dollars on the production of food, where would you like it to spend all of its research dollars? Could each of you could comment on that?

[Translation]

Mr. Jean: Your question is an interesting one. It is people who produce wealth. A certain number of Canadians live in rural areas and are not in a position to produce that wealth. Consequently, the abilities of those individuals and of their communities must be developed to make them more productive. Available money should be granted to the organizations that can do this work. In this way, we might have more enterprising rural owners in various emerging fields in response to the emergence of new needs.

I work in Quebec. I know that there are enormous financial resources in the banking system for all types of initiatives developed by individuals. But people are not sufficiently organized or trained. Available money should be directed to those individuals.

[English]

Mr. Apedaile: I would give you two suggestions. The first and most important one is to work on new market innovations so that we can handle the rural amenity and environmental issues in markets. For example, we are making a lot of progress on markets for carbon sequestration, where farmers can contract to contribute to carbon.

We have markets for wind power that hitherto have not been opened to farmers because companies have not been able or willing to take on electrical generation that came from a farm.

The third is an initial public offering that happened early this year in Australia, where a wildlife management corporation floated shares for preserving wildlife that were snapped up, I am told, by urban Australians. Why on earth would people buy shares in that? It turns out that they buy shares in the business plan side of it, but they also buy because they like to feel that they are participating in saving endangered species. There may be ways to deal with rural amenities or environmental issues in agriculture in farming that are as innovative. The point is we must do the research.

The second point is that I would like to see more research that, as a farmer, enables me to be more responsible ecologically and environmentally. I am using Round-Up Ready canola, but I am worried about the long-term effects of using it and how tight I can do it in my rotation. I am not worried about food safety; I am worried about environmental safety. I do not have enough information on that.

My Round-Up technology package does not even tell me to be careful not to use it more than twice on the same piece of land in three or five years. I happened to be talking to a Monsanto scientist about this, strangely enough, at a wedding, and he said, "You do not want to use Round-Up more than twice in four years on the same piece of ground." That was for that part of it, let alone the volunteer canola issue.

I would like to see a lot of public money directed to those aspects of using the new technology because I, as a farmer, want to be responsible in my use of technology, as do most of the farmers I know. We do not have a clue how to do it because no one is telling us. It is not in the 50 pages of "How to Wash Your Hands" instructions that you receive with your chemicals.

Mr. Bruce: Mr. Apedaile touched on my suggestion but I will elaborate. There is a lot of work still to be done on issues and opportunities related to on-farm diversification. Electricity is one example. Recreation provision opportunities is another example. There is work to be done there. It also spills over into feasibility and marketing research that must be done to capitalize on untapped opportunities. That is where some research dollars can be directed.

Ms Martz: If you consider where research dollars have gone in the past, they tend to be allocated disproportionately into certain areas. In the university that I have been involved with, there is only one rural sociologist in that university. We have tended to put research dollars heavily into the production aspects of agriculture and in the economics of agriculture. That is not to say we should pull all of our investment out of one area and put it into another. There is a need for a balanced approach. We must examine some of these other aspects.

The other point is that there must be more effort put into the dissemination of results. Probably research has been done, but we are not doing a very good job of getting it out to people in a way that is understandable.

Senator Wiebe: Ms Martz, when you travel between the University of Saskatchewan and St. Peter's College, you drive through a community called Humboldt. I have been to that community a number of times. Humboldt and the surrounding area was considered the model in terms of trying to build our rural community. It has been so successful that it is no longer a town and has become a small city. I had the privilege of attending the rural conference at Muenster some time ago and took the tour that afternoon. I was excited and impressed with what I saw going on in some of the smaller communities with such things as the feedlots, hog operations and ethanol plants.

Two weeks ago we heard from representatives of Statistics Canada. Our interest was what was happening with the rural population throughout Canada. Saskatchewan, unfortunately, was the only province in Canada that showed a decline in rural population. The rest of the provinces showed an increase in rural population.

Statistics Canada presenters showed a map that had different colours depending on the rate of increase or decrease. Red was the colour that showed the area where there was the most rapid decrease in rural population. Humboldt and the surrounding area was in bright red, along with other areas of Saskatchewan and some other parts of Canada. Are the jobs that we are creating in our small communities pulling people from smaller communities to become a bit larger? Are we creating larger communities by doing this rather than keeping the communities that we have at present?

Ms Martz: The population of Humboldt and its surrounding villages is not declining. It is actually increasing. Perhaps Statistics Canada is colouring a much larger area than the Humboldt area.

Senator Wiebe: How large an area would that be?

Ms Martz: I think that map goes all the way to Yorkton.

Senator Wiebe: It would be within about a 30-mile radius of Humboldt.

Ms Martz: The places where there is population decline is in the rural municipalities. People are moving into the smaller towns, partly because women are working. Men can make the choice to commute, while women have their jobs in town where their kids potentially are in school and things like that. As people retire - we also have an aging rural population - they are moving into these small towns too. The city of Humboldt and the towns in that area, with two exceptions, are not decreasing in population.

Senator Wiebe: There are less people on the farms though.

Ms Martz: Yes.

Senator Sparrow: Mr. Apedaile, you mentioned that your advice from Monsanto was not to grow Round-Up Ready canola more than two years in a row. That has nothing to do with Round-Up though, does it? You do not grow canola because of the disease aspect. Is that not correct?

Mr. Apedaile: The advice from the Monsanto scientist was not to use Round-Up more often than two years in four on the same piece of ground, on the same territory. It was not about Round-Up Ready canola.

Senator Sparrow: Is that new advice about Round-Up?

Mr. Apedaile: That is what Monsanto scientists understand. I have read the material on using Round-Up that I get when I buy a 10-litre jug and I have not seen that written on it. That warning is as important to me, as a user, as is the advice on what to do when I get it on my hands.

The Chairman: In reality, that is what is being done. I have neighbours and we are doing it ourselves. You spray with Round-Up and save the crop. Then the next year you spray with Round-Up and save the crop again. That is what is happening.

Senator Sparrow: You were talking about canola and Round-Up. I am not aware that you cannot use Round-Up continuously. That is an interesting side issue. There are no such indications anywhere in the Round-Up information. You are giving us evidence, but there may be very little evidence to back up that statement. Was that just a general comment?

Mr. Apedaile: Company research shows that it modifies the wheat population of the biodiversity on that particular field if you use it too often.

Senator Sparrow: However, you are saying the company is not distributing that information generally. Is that what you are saying?

Mr. Apedaile: No, they are not. I had just finished using it three times on the same canola crop and in preparing that land to get rid of some quack grass patches. I was really alarmed when I heard that.

Senator Sparrow: It would be interesting to know whether that company is making that type of observation. It would be important for our agricultural community to know, if it is true, that Monsanto has that information and is not providing it to the public.

Turning to the partnering aspect that you referred to, Mr. Apedaile, between the urban community and the rural community, the urban community is not interested farming. They may be interested in living in a rural setting for whatever reason, but that does not assist the agricultural industry because when we move into the rural community we destroy much of the farmland and replace it with industrial development, housing developments, small acreages and so on.

The partnering aspect with the urban community concerns me because, in concert with the agricultural community, the urban community will always win. It has both the funds and the background. The funds from provincial and federal governments go to the urban communities for universities, schools, hospitals and infrastructure. At some time, it would be an interesting concept to have a breakdown of the per capita money that is directed to rural settings in comparison to the per capita funds that go to urban settings. Without some fairness in that, obviously, our rural communities will disappear because of the loss of schools and hospitals and so on. People tend to move into the urban areas.

I want you to further explain partnering to me. What benefit is that to the rural area?

In the context of agriculture, we need four or five agricultural policies. Basically, one policy is not practical. If you talk about the Atlantic provinces, or rural Ontario, or the Okanagan Valley, or Saskatchewan and the wheat, or Alberta and so on, we cannot have one policy that covers all. We must zero in on individual areas.

You said about one-third of the farming population is living in poverty. That might well be true in Atlantic Canada, but it is not true in Saskatchewan. Speaking facetiously, we are all in poverty now, but that is because of the situation there. We lost that third poverty level a number of years ago. Our basic Saskatchewan farmer is efficient and can produce and make a living on the farm - that is, the cost of production plus a little - if the value of his product is maintained and if the world markets are maintained. We have no other problem, except losing the rural structure itself.

Basically, we can lose all our farmers. We talked about this before. We can lose our farmers, but the land will still be there. Big operators will come in, as you mentioned, and they will farm the land. When the need arises, they can quickly move in and have all that land back into wheat production within a year if a market is there for them. In the interval, however, we have taken away that total agriculture structure in rural communities.

Do you have an answer to the question that I just asked?

Mr. Apedaile: Senator Sparrow, will you permit me to be selective in my response? I would like to talk about partnering. You raised that issue, and it is important.

Rural areas need allies. It cannot be a zero-sum game because rural areas will lose politically. This is the point of these joint urban-rural development corporations that I was talking about before. The demand for environmental security is a citizen's demand, not a taxpayer's demand. Most of the citizens are in metropolitan areas. We want to have equitable treatment as a farmer. Urban citizens are demanding their property rights for environmental security. I do not think our right to pollute and destroy the soil was ever privatized.

That kind of joint function - the metro-rural structure - will find out what is important and how to pay the costs of realizing the vision of the urban people. The means to pay for it will come out of the workings of that kind of structure. Every region has a slightly different kind of issue to face. For example, Toronto and Montreal have totally different kinds of issues to face with their rural economies that surround them than, say, even Edmonton or Halifax. That is why the idea of deconcentrating - not decentralizing, but deconcentrating rural policy is an important principle in making a step forward to resolve these issues. The point here is that urban economies will not always win. If you have urban allies, they will fight your cause for you and they will see that things are done right because it is in their interests for them to be done right.

It is very upsetting when we encounter urban issues pitted against rural issues. Some departments have actually been doing polls to ask whether urban people still support paying money in subsidies to agriculture. When you load the question like that, as taxpayers, urban dwellers in Toronto, who are trying to struggle along with mortgages, will find it difficult to agree to continue putting subsidies into Saskatchewan. We must structure it in a different way so that there is something in common that people want to achieve. That is the idea of partnering, not only in this kind of not-for-profit structure but also on a neighbourhood-to-neighbourhood, parish-to-parish, rural school-to-urban school basis. You do that not because the urban people or the urban kids will necessarily want to farm, but because you need them as allies down the road. They like to enjoy the kinds of things that the rural area still offers. That is the nature of the partnering that I was trying to explain.

The Chairman: How will you get that to happen?

Senator Sparrow: Will we live that long?

The Chairman: The average urbanite today - and this is also true even in rural areas - wants to buy high-tech shares and futures in communications. It does not matter if they lose the whole works in the stock market, that is where urbanites will invest. They did lose, and very few of them, strangely enough, are saying anything. They lost half their savings and they never said a word. They bought Nortel shares that went from $127 down to $7. How will you get them to invest in a farm that is just breaking even?

Mr. Apedaile: There is an answer to that. In Quebec, there is a significant amount of innovative stuff going on with local development corporations, not-for-profit and volunteer organizations to solve problems that come up between rural and urban. It involves what I am calling "rebundling property rights and entitlements." For example, a rural school was to close in Baie St-Paul, near where Mr. Jean leaves, because it was down to 50 students. The local people formed a development corporation. They went to the school board and asked, "Can we rent the school from you for $1? Otherwise, it will just be empty." The school board said, "We will rent it to you for $1 but you have to pay the utilities and it can only be used as a school." They went to the Department of Education in Quebec and asked for permission to open a school there. The Department of Education said it would entitle them to open a school but they had to follow the provincial curriculum. They restructured the curriculum around ecology and environmental issues of education for youth and soon the school buses were going full - out of Rimouski to St. Paul, instead of the other way. That little school is a viable school with urban kids in it.

You can have socially organized entrepreneurship as well as privately organized entrepreneurship. You really need both for revitalizing.

Mr. Bruce: To add to that, there are two other angles. One is building a long-term set of what I will not call "sympathetic ears," but a long-term relationship with others who have a vested interest in and who are willing to support the kinds of things that we have in our rural communities even if they do not live there. If they can be part of the process of helping to make decisions that are in the best interests of the region or the nation and they happen to be in urban areas, that is great.

Another example follows up on Mr. Apedaile's example. There are several areas in the Annapolis Valley of Nova Scotia where farmers are more or less selling cooperative shares, or shares in their farm, to people living in towns even as far away as Halifax. The farmers have a guaranteed income stream at the beginning of the year, and those people have a share in the farm and get a portion of the foodstuffs that come off the farm. Those things are happening on a small, localized basis. Some of these relationships are being built.

The Chairman: The point that Senator Sparrow makes is that the rural situation varies in different regions of the country. I could not envision that working in Macoun, Saskatchewan. My son complained, "I go into Regina. The kids have everything. They have uniforms. They have the best buildings to play basketball in." He said, "In our little school, we have a hard time keeping one basketball." Yet, the kids coming out of that school have carried the highest marks in the comprehensive school in Estevan for a number of years and were identified by the University of Saskatoon as far as education is concerned.

Mr. Apedaile: With respect, it can happen in Saskatchewan. The community of Lessard in Alberta had a volunteer fire department with a problem. It was almost dead. The area built an alliance with a Calgary fire hall, and it has consistently got the equipment from Calgary as Calgary has upgraded with its better financial resources and the professional-level standards in Calgary. Now the Lessard fire department is a very active fire department that is enrolling high school kids as cadets. When it has fire drills and goes out to fires, a bunch of adolescent youths from the high school in Lessard are on those emergency calls. It provides an enormous amount of self-respect to those adolescents when, on rodeo parade day, they ride down the street on the fire truck. That kind of alliance between the Calgary Fire Department and the Lessard Fire Department is exactly the type of partnership that can work even in our remote communities in the Prairies.

Senator Wiebe: I have a request. Mr. Apedaile, this is directed more to you. I would like to hear your comments, or those of any of the witnesses, if you could take the time to write me on the paper that was presented by a fellow professor at the University of Calgary. I believe Professor Roger Gibbons is a Professor of Political Science at the university there. He made comments in Regina about two weeks ago to the rural conference. I would certainly recommend reading that paper - and not because it is good reading. I would love to have your comments on that. Time does not permit now. He is certainly taking a radical approach to rural Canada.

The Chairman: He more or less tells people to join in with the urban centre nearest and hang in there. I heard him on the radio.

I thank our witnesses. You bring some positive solutions. We do not hear too many of those from rural Canada today. I am not sure that I am convinced they will all work, but it is good to have the type of discussions that we have had and to work at these things. I will read your papers with interest. Thank you for appearing before the committee.

The committee adjourned.