Agriculture Committee on June 15th, 2006

[The Chair, Conservative, Gerry Ritz]

Good morning, ladies and gentlemen. We'll call this meeting to order. We're actually missing two of our gentlemen. They must have decided they were in the second hour or whatever, but as soon as they get here, we'll give them their 10 minutes of fame and glory and then move back to questions at that point.

Welcome, everyone, to the table this morning. We're going to have a good, fulsome discussion on the WTO, what's happening, what's not happening, what should be happening, and where we go from here--all of those aspects. I know we'll have a good discussion and some great questions.

We'll start right in. On my list as I have it here, we have Canadian Dairy, Poultry and Egg Producers, who were to go first.

They are here. Good. I'll have you guys go first.

We have 10 minutes for the presenters. There are two of you from each group. Break it down any way you want. You have the 10 minutes, and then we'll move into the questioning round.

Gentlemen, please go ahead and lead off.

[Laurent Souligny, Chair, Canadian Egg Marketing Agency]

Thank you, Mr. Chairman, for giving us this opportunity.

We are entering the final phase of the WTO agriculture negotiations. The chairman of the WTO agriculture negotiations, Crawford Falconer, issued a comprehensive paper on market access on June 9, 2006. The WTO objective is to agree on modalities by the end of July 2006 with a view to concluding the Doha Round of negotiations by the end of the year.

Canada entered these negotiations with a balanced position. Canada's dairy, poultry, and egg farmers supported Canada's initial negotiating position in 1999, as it represented the best opportunity to provide a win for all Canadian agriculture. Canada's mandate is to eliminate export subsidies, significantly reduce trade-distorting domestic support, substantially increase market access, and defend the import measures that are needed for effective supply management. To date, the gains secured for Canada's non-supply-managed agriculture sectors are positive.

In Hong Kong, WTO members agreed to eliminate export subsidies by 2013. Trade-distorting domestic support will be reduced by up to 70%, with the biggest cuts being made by the EU, U.S.A., and Japan. According to Falconer, “the real zone of engagement” of the tiered tariff reduction formula would substantially cut regular tariffs by 45% to 75%. The same cannot be said for Canada's supply-managed sectors, as there remains a high degree of uncertainty regarding sensitive products. The only chance for the survival of supply management depends on the positive outcome within the sensitive product category.

Canada's dairy, poultry, and egg sectors actively supported the Canadian strategy to pursue aggressive tariff reduction in the regular formula on the understanding that there would be no connection between that formula and the treatment of sensitive products. However, there is now a direct link between the general tariff reduction formula and what is required for sensitive products. As a result, we are facing a 15% to 25% cut in over-quota tariffs. While our over-quota tariffs seem high, in many cases they are already dangerously low and not doing the job they were intended to do. Simply put, we have no room to reduce our over-quota tariffs.

Cuts in over-quota tariffs would take away our ability to predict the level of imports coming into Canada. In turn, we would be unable to match supply with demand and would thereby be unable to ensure there are enough Canadian-grown products to meet the needs of Canadians from coast to coast. This could destabilize food prices that Canadians pay and that we receive for our work. The fact that all countries are prepared to take a cut in their over-quota tariffs only indicates that they have sufficient room to lower these tariffs without risking any additional access to their markets.

It is these countries that are aggressively defending, not expanding TRQ access. Why? Because expanding TRQ access would mean providing real market access. Canada already provided real access in the last round of negotiations. In fact, we already allow greater access than do other countries. They aren't even willing to provide real market access by coming up to our access levels. If these countries are not prepared to provide the access that they should have in the last round, Canada must not increase minimum market access to its supply-managed markets.

Now I will complete my presentation in French.

The fact that Canada has stood firm for supply management has been recognized in the Chairman's text.

It is in this regard that the government has been criticized within Canada for being isolated 148 to one. Let's explore this so-called isolation.

First, it is not really 148 against Canada because there was no vote. The text was the product of one person—Chairman Falconer. At best one can say that the 25 or so countries that are actively involved in the agriculture negotiations might not fully support Canada's position.

Second, what happened was far from being detrimental. If Canada was recognized by the Chairman, it was because Canada has a significant issue that needs to be addressed. This provides Canada with negotiating leverage. It is similar to the European Union being singled out on market access, the US on domestic support, India on services and the G10 on sensitive product selection.

In addition, with respect to the general tariff formula, Falconer singles out certain G10 members and warns them that they may block consensus. The fact is that there are over 200 square brackets in the market access text alone representing areas where there is no consensus. Each of these brackets involves issues of importance to WTO members that need to be addressed in the negotiations.

I am a little perplexed with regard to recent comments attributed to the Western premiers. On one hand, they are reported as saying that Canada has isolated itself and positioned itself as a deal taker. On the other, there are further reports that they are arguing that Canada is poised to single-handedly derailed the Doha round. Claims have been made that the government is now putting aside the interest of non-supply managed commodities. In fact, the firm position of Canada will only serve to enhance the ability of Canada to secure real market access globally and preserve supply management at the same time.

If the government is to deliver on its mandate for these negotiations, supply management interests must be the overarching priority for sensitive products. There is no way to consider anything less than this as a “win” for Canadian agriculture but very clearly the alternative is a significant loss.

For several years, Canada's dairy, poultry and egg industries sought to have the way countries use tariff rate quotas cleaned up. This would have delivered for all sectors of Canadian agriculture. This being impossible now, we are left with the unfavourable option of putting our products into the sensitive products category. Now, there is no longer room for adjustment. Let us be clear: unless the government sharpens its focus, this round will be a disaster for supply management.

Note that our brief also includes the economic contribution of the dairy, poultry and egg sectors to Canada.

That ends my opening remarks.

[The Chair, Conservative, Gerry Ritz]

Thank you so much.

You have a couple minutes left of your 10.

David, do you have anything to add at this point?

[David Fuller, Chair, Chicken Farmers of Canada]

No. We're prepared to answer questions now.

[The Chair, Conservative, Gerry Ritz]

That was an excellent presentation. Thank you for being so concise.

Serge Lefebvre and Serge Lebeau with the UPA have now joined us.

Thank you, gentlemen, for coming.

We'll move to the Canadian Cattlemen's Association for 10 minutes.

Darcy and John, which of you will be presenting?

[Darcy Davis, Chairman, Alberta Beef Producers, Canadian Cattlemen's Association]

Thank you, Mr. Chairman. Thank you for holding this hearing on international trade and inviting us to advise the committee on trade policies, which are needed by Canada’s nearly 100,000 cattle producers.

My name is Darcy Davis. I am an elected member of the Canadian Cattlemen’s Association’s board of directors, and I am the vice-chair of our foreign trade committee. I own a cow-calf operation near Acme, Alberta.

With me is John Masswohl, who runs CCA's Ottawa office.

Canada's cattle producers are highly dependent on international trade for our livelihood. We learned very vividly how the loss of access to international markets impacts our industry. When we lost every single one of our export markets for both cattle and beef on May 20, 2003, we lost the outlet for nearly 60% of our national production. Until the United States and Mexico resumed limited imports of Canadian beef in the fall of 2003, our industry was losing approximately $11 million every day.

We have gradually fought our way back into the international market with a series of steps. The public might recall a major milestone being reached when some live cattle exports to the U.S. resumed last July, but there is still a long way to go. Today, we estimate that the industry is still losing $1.2 million to $2 million every day from lack of full access to the U.S. Globally we have partial access to five of what were the top 10 export markets in 2002.

But cattle producers are a strong-willed and determined bunch. We are determined not to be as vulnerable as we were back in May 2003. Firstly, we learned that we have to be less dependent on exporting live cattle, so we have increased slaughter capacity in Canada from 72,000 to a little over 100,000 head per week.

Rather than just export all that extra beef to the United States, the second lesson we learned is that we need to be more diversified in our markets. That leads us directly into the importance of the WTO negotiations. Excessively high tariff protection and non-tariff barriers in several countries impair Canada's ability to export our high-quality beef to their markets.

Europe effectively prevents Canadian beef producers from accessing a market that consumes eight million tonnes of beef per year. Japan’s beef tariff is 38.5%, which can be increased up to 50% whenever they want to protect their domestic market. Korea's beef tariff is 40%. Markets with huge future potential, such as China and India, have beef tariffs in the 25% to 35% range. Either access to these important markets must improve, or Canada will need fewer beef producers.

We understand that Europe, in particular, intends to designate beef as a so-called sensitive product. For this reason, Canadian negotiators must be charged with placing a high priority on ensuring that sensitive products are not exempt from making significant increases to market access. To be very specific, Canadian beef exports to Europe are subject to a minuscule 11,500-tonne quota—shared with the U.S.—at a 20% rate of duty. Beyond the 11,500 tonnes, Canada beef attracts an additional duty in excess of €3,000 per tonne, equating roughly to some 140%.

Canadian negotiators must seek an outcome that does three things to the European beef tariff: first, we have to expand the size of the quota for North American beef up to some 300,000 tonnes; second, we have to eliminate the 20% in-quota tariff; and third, we have to get a significant cut in the over-quota tariff rate.

I also want to note that any beef exported to Europe must meet European standards. The cattle must be raised without using certain growth promotants, and the beef must be processed in a facility configured in a particular manner. If as a cattle producer I decide to produce for the European market, I have to commit to raise my herd according to European standards, and that takes approximately two years for each animal. It is more expensive to raise an animal that way, so I will do it if and only if the market access is there. The 11,500 tonnes isn’t enough access for the cattle producer to make the two-year commitment, and it isn’t enough for the slaughter facilities to make the capital investment.

Overall, we believe Europe should permit some 10% to 15% of its domestic beef consumption to be imported. Currently, they allow about 2%.

I would like to spend a moment to comment on some bilateral free trade initiatives that are currently under way or may be under contemplation, namely with Japan and Korea. These were Canada's third and fourth largest beef export markets in 2002.

We would welcome duty-free access to these markets and support free trade agreements with both, for that reason. However, we have concerns that neither Korea nor Japan are living up to their existing sanitary and phytosanitary obligations. The World Organization for Animal Health, the OIE, requires the acceptance from BSE countries of beef animals up to 30 months old. Japan is currently accepting Canadian boneless beef only from animals under 21 months old, and Korea is providing no access at all.

I hope the prospect of free trade agreements will help to resolve these outstanding issues and create even greater access than we had in 2002. But before Canada signs off an eventual agreement, we have to make an assessment as to whether existing obligations are being respected.

On the beef import side of the equation, Canada's WTO obligation is to allow 76,409 tonnes of duty-free beef imports from non-NAFTA countries. Imports above this quantity are supposed to be subject to a 26.5% duty. However, prior to the BSE crisis in 2003, the Minister of International Trade would routinely authorize supplemental imports so that imports in the neighbourhood of some 130,000 tonnes were annually coming in duty-free from Australia, New Zealand, and South America.

Without supplemental imports, Canadian beef users have utilized domestic beef coming from our new slaughter capacity. If we want to keep the new slaughter capacity, the discontinuance of supplemental imports must be permanent. That said, we would not stand in the way of reciprocity and improved access coming as a result of trade negotiations.

Although my presentation today has focused primarily on market access, I do want to state that the beef industry depends a great deal on a sustainable grain-growing sector. Where there is corn, barley, or wheat, we all know that many factors, including trade-distorting subsidies, have had their impact on Canadian grain growers.

I see three potential futures available to them: one, the WTO will succeed in significantly reducing production and trade-distorting subsidies around the world; two, grain farmers will be protesting on Parliament Hill every year, looking for you to match what others do; or three, there will be fewer grain farmers.

Growing less grain in Canada is not what Canadian cattle producers want. The future of Canada's nearly 100,000 beef producers truly is global. Without exports, approximately 50,000 to 60,000 of us would have to find another way of making a living.

Please ensure that the Government of Canada pursues ambitious export-oriented trade policies that enable Canada's beef sector and the majority of Canadian agriculture to grow.

We'd be pleased to answer any questions. Thank you.

[The Chair, Conservative, Gerry Ritz]

Thank you, Darcy.

There are a couple of minutes left, John. Do you have any other points to raise?

[John Masswohl, Director, Governmental International Relations, Canadian Cattlemen's Association]

I have just one housekeeping matter. Our statement is currently in translation and should be circulated to all the members some time today.

[The Chair, Conservative, Gerry Ritz]

Good. Thank you.

We'll now move to the UPA from Quebec. Serge or Serge, you have 10 minutes, gentlemen. Please begin.

[Serge Lefebvre, President, Fédération des producteurs d'oeufs de consommation du Québec, Union des producteurs agricoles du Québec]

Thank you, Mr. Chairman.

I would like to begin by thanking the committee for having us today. I think it is important that time be taken to listen to all the comments of everyone affected by these negotiations that have reached a crucial stage.

The Union des producteurs agricoles, the UPA, as well as the other federations involved with supply management in Quebec, that is, those from the dairy, poultry, turkey, table egg and hatching egg sectors, would like to begin by thanking the Standing Committee on Agriculture and Agri-food for having invited them to express their positions on the WTO agricultural negotiations and to attend its sittings.

Today's presentation will focus specifically on three areas. We will begin by presenting the reasons that led to Canada establishing the supply management system 30 years ago. We will then delve into the more technical reasons underlying our greatest concerns with respect to the current negotiations, which affect our supply-managed commodities more directly. We will then touch upon the Canadian government's position on this file.

I will now give the floor to Mr. Serge Lebeau.

[Serge Lebeau, Senior International Trade Manager, Union des producteurs agricoles du Québec]

Thank you, Mr. Chairman.

Members of the committee, I would like to begin by recalling why Canada established the supply management system 30 years ago. Over 30 years ago, the Canadian and Quebec supply management systems were originally set up to stabilize farm incomes and end the massive injection of government funds to support them, two objectives that were achieved over time and are still applicable today.

Now that the WTO agricultural negotiations have reached a crucial stage, namely establishing a set of modalities, we are urging Canada to move in favour of supply management in this area. The UPA has some concerns regarding the significance, speed and direction that the current agriculture negotiations are taking in this regard. These concerns involve the negotiations themselves and several technical points, as well as the Canadian government's position on this file.

Allow me to present some of the technical issues being covered by the current negotiations.

I will begin with the treatment of sensitive products and the principles in the July 2004 Framework Agreement. It stated, and I quote, “The reforms in all three pillars of the negotiation form an interconnected whole and must be approached in a balanced and equitable manner.” This principle, documented in the July 2004 Framework Agreement, is very important for Canada. While the G10 countries, the European Union and the United States directly subsidize farmers, thereby enabling them to lower costs and tariffs, which ultimately protects their marketplace from imports, Canada must maintain supply-managed sectors by ensuring that they preserve the only protection available to them, that is, tariff barriers.

Why should we have to do more in terms of market access than other countries? Mr. Pascal Lamy, the Director General of the WTO, during a meeting that we had with him on June 5th, told us that in order to maintain our supply management systems, all we had to do was use the blue and green boxes. However, in the same breath, he admitted that in order to protect the whole market, the shortfall had to be made up by direct payments, which is exactly what the Europeans, the Americans and the G10 countries are doing. We are not particularly interested in that.

The second technical point is that of the selection of sensitive products. Canada needs at least 7% of the tariff lines to cover the roughly 100 over-quota tariff lines of supply-managed products. Proposals put forth to date vary this rate from 1%—that's the American proposal—to 4%—that's the European position—and to 15%—the G10's position. We are concerned about the selection of sensitive products being expressed as a percentage. Europe, for example, apparently needs the same number of tariff lines as Canada does, namely 100. This number, expressed as a percentage, is 4% of the European tariff lines, which covers the sensitive products that Europe wants to register with the WTO. If percentage of tariff lines is the method chosen for selecting sensitive products, there will have to be sufficient flexibility so that countries can go about it equitably.

Let us move on to tariff quotas. Let us recall that during the Uruguay Round, the countries established guidelines setting minimum market access at 5% of domestic consumption. However, not all those countries applied those guidelines in the same way. For example, Canada allows imports of approximately 4% of domestic consumption of dairy products, 7.5% for poultry, 5% for turkey, 5% for table eggs and more than 20% for hatching eggs.

The United States allow only 2.75% for dairy products, whereas Europe allows .5% in the poultry sectors. Altogether, those countries gave 2% market access under the tariff quotas. For reasons of fairness, we feel that what is required first is reaching an equal minimum level of access before contemplating expanding access to our markets.

I will now talk about exporting state trading enterprises. Given that our state-trading enterprises are the only tools available to farmers for competing with the large private sector players internationally, in all segments of the chain, we believe it is important to preserve what was learned from the Hong Kong Ministerial Conference, namely that it is not the state-trading enterprises or their monopoly power that are in question, but rather their practices.

In terms of the government's position, the federal Minister of Agriculture, Mr. Chuck Strahl, stated on May 31, with respect to the negotiations, that when the vote is 148 against us, we have the choice: we can give up or we can defend our interests in supply management.

In light of that comment, we are worried that Canada will sign an agreement, regardless of whether it is in the interest of agriculture supply and management. It is also important to remember that, while the Canadian economy as a whole relies heavily on exports, the same cannot be said of the agricultural sector, in spite of what is often claimed. The domestic market is, by far, the principle market for Canadian farmers and processors. Canadian farmers and processors generate more than $91 billion in sales annually, the vast majority, 70%, of which are domestic sales. The same trend can be noted across the world, as only 10% of the world's agricultural production is traded internationally. Why then should we sacrifice our agriculture for that 10%?

Canada must therefore take a firm position on agriculture and, like Norway did in July 2004, invoke the exception if necessary to ensure the survival of its supply management systems. Moreover, a Léger Marketing survey, commissioned by producers themselves and conducted between May 16 and 21 among 1,500 respondents, revealed that 85% of Canadians agree that the federal government should support the supply management approach to dairy, poultry and egg farming. It also revealed that 83% believe that supply management is a better approach to ensuring a stable income for farmers and taxpayer-funded subsidies.

According to our sources, Cabinet has recently renewed the mandate of its negotiators. It is imperative that this mandate be crystal clear in order to ensure that current negotiations do not result in a reduction in non-quota tariff or an increase in tariffs quotas. This objective should be considered before supporting any amendments to the WTO agriculture trade rules. Supply-managed sectors must be able to continue to provide producers with a fair return from the marketplace. It must also be ensured that consumers continue to have access to high-quality products in sufficient quantity and at reasonable prices; that processors benefit from a very stable supply and achieve an advantageous bottom line; and that the state, and therefore taxpayers, no longer pay subsidies to support the incomes of the farmers concerned.

Thank you very much.

[The Chair, Conservative, Gerry Ritz]

Thank you so much, gentlemen.

We'll now move to the Canadian Agri-Food Trade Alliance.

You folks have 10 minutes to give us your presentation, if you care to proceed.

[Alanna Koch, Vice-President, Canadian Agri-Food Trade Alliance]

Good morning, Mr. Chair and committee members. Thank you for the opportunity to be here today. We congratulate the committee on holding this hearing on the WTO.

I'm a grains and oilseeds farmer from Saskatchewan, and I am vice-president of the Canadian Agri-Food Trade Alliance. With me here today is Tyler Bjornson, who is with the Canola Council of Canada. The Canola Council is one of the 15 members of CAFTA.

CAFTA is a coalition of 15 organizations made up of farmers, processors, marketers, and exporters, as well as input suppliers. We represent the majority of the farmers in Canada, and we represent all of Canada's important agricultural export commodities. We also represent value-chain partners. We are the only trade advocacy organization that represents the entire agricultural value chain.

Our members do about $50 billion worth of business annually, and we provide half a million Canadian jobs. It's important to note that 91% of Canada's farmers depend on international markets, either as international price-takers on their products that are sold domestically or more directly as exporters of product.

We have circulated a submission. Today I'm just going to be making a few comments as an overview of the submission we have circulated to committee members.

Canada is the most trade-dependent of the G-8 countries. Canada is the world's fourth-largest exporter of agriculture and agrifood products. One in three jobs in Canada depends on exports.

CAFTA's members are highly dependent on international trade, and we continue to be forced to compete in a market that is highly distorted by subsidies, prohibitive tariffs, and non-tariff barriers. If Canada’s agriculture and food sector is to make a growing contribution to the Canadian economy, we require a solid set of international rules that will address these distortions.

A more open trading system would mean increased opportunities for Canadian farmers, processors, and exporters. Estimates of the benefits of more open trade for Canada and for the world are as high as $56 billion U.S. annually.

The Doha development round of the WTO, launched in 2001, is a chance in a generation for countries to address unfair subsidies and access barriers, to create a better trading environment for trade-dependent countries like Canada, and to provide a development tool to lift millions of people in the world’s poorest countries out of poverty.

Canada was a strong supporter of the ambition prescribed in the Doha mandate in 2001, where three outcomes were outlined: substantial reductions in trade-distorting domestic support, substantial improvements in market access, and reductions of export subsidies with a view to phasing them out completely,.

Then Canada went further in 2004 by signing on to the framework. There were three commitments there: it committed countries to an end date for export subsidies; we committed to the harmonization of domestic support cuts by ensuring higher subsidizers make deeper cuts; and we committed to substantial improvements in market access for all products, including sensitive—meaning politically sensitive—products.

This would lead us to believe that Canada is committed to an ambitious WTO deal and, as one of the world's largest exporters, may even be a leader at the WTO table. I'm here today to tell you nothing could be further from the truth. While we have one of the best teams of negotiators in the world, their work has been complicated and conflicted by messages and directions from our politicians.

I will give you three examples of this. Last November, a motion unanimously supported by members of Parliament in the House of Commons called for Canada not to accept any reductions in over-quota tariffs or expansions in tariff rate quotas, and this seriously impacted Canada's negotiation position.

Then in December in Hong Kong, ministers from around the world were prepared to accept language on agricultural market access that would have moved negotiations forward on sensitive products. Canada’s minister stood alone in rejecting the language, ensuring that no progress was made and putting the WTO process at risk.

The third and perhaps most alarming example is from only a few weeks ago. On May 5, Canada’s negotiator stood alone in a session on sensitive products to block an emerging consensus that would have seen at least minimum reductions in over-quota tariffs. We stood in the way of progress at this critical stage of negotiations, and Canada stood alone—148 to 1.

Let us be clear why Canada's current position on sensitive products is a problem. Canada's two largest exports are meat and grain or grain products. Meat and grain are the two most sensitive products in the world. Canada's resistance to negotiations towards any compromise on sensitive products sentences Canadian farmers and processors to continue to face prohibitive tariffs and tariff quotas in the majority of WTO countries, because in these countries our major exports are considered sensitive.

Canada's isolation in the agricultural market access negotiations poses other risks for our international trade interests.

Firstly, it puts at risk our ability to play a strong role in other areas of the negotiations, in export competition and domestic support.

Secondly, it threatens overall progress in the entire round of negotiations, since progress in agriculture will determine the level of ambition in services, rules, industrial tariffs, and other areas where Canada has strong interests. It threatens progress and it threatens the round due to critical deadlines being pressed.

Thirdly, it puts at risk Canada's ability to participate fully in the post-modalities phase of the negotiations, where small group negotiation sessions will determine schedules.

Improved trade rules are vital to the majority of Canada's farmers and the industries that depend on them. We must remove some of the distortions in the international marketplace and improve the futures of Canadians who rely on it.

CAFTA asks this committee to direct the government to take three specific actions. One, clearly and publicly state its commitment to the Doha Round and to an ambitious outcome in all three pillars of agricultural negotiations, including improved access for sensitive products. Two, give clear direction to Canada's negotiators to seek ambition in all three pillars of the negotiations, including agricultural market access. Three, take a leading role in these negotiations by participating fully in all ministerial level negotiations in a way that will help to build consensus on an ambitious outcome.

Thank you very much for your attention. I look forward to your questions.

I'm now going to turn it over to Tyler to speak about canola, which very clearly has some good examples about the damage I've spoken about.

[Tyler Bjornson, Director, Canadian Agri-Food Trade Alliance]

We thought we'd use canola as a bit of a live example of some of the issues that Alanna just talked about, and in particular how Canada's isolation on certain issues in the WTO can have a serious impact on its ability to push for ambition in other areas.

As most of you know, canola is a highly trade-dependent sector. That's not unique in Canada, as we've heard; we're part of that 91%. Seventy-five per cent of our annual production is exported. So what makes canola special? Well, it just so happens that 75% of the world's trade in canola products actually originates from Canada; 80% of the canola seed exports are from Canada. No other country has such a vested interest in canola. So that means that if Canada isn't at the table, pushing hard for ambition in tariff reductions, canola gets left behind.

This isn't just a hypothetical scenario; we have some experience with this. In 1994, the WTO agreement actually left canola behind in a large number of areas, three in particular. We're left with systematic discriminatory tariffs in all of our key markets--Japan, China, India, Pakistan. In every one of those markets we have higher tariffs than all of our competitor products, such as soybean and palm.

The second issue is that we face tariff escalation. In most of the countries around the world, they have higher tariffs on value-added products in comparison to the raw product. That means value-added canola exports simply don't make it into most of those major markets.

Thirdly, we face unbelievably high subsidies that our competitors put on their products. No greater example exists than the soybean industry in the United States.

So by way of example, I thought it would be useful to just give you those figures and tell you that if Canada isn't at the table pushing for ambition, canola will lose, because nobody else is interested in it.

Thank you.

[The Chair, Conservative, Gerry Ritz]

Thank you, presenters. You're all well within your 10-minute allotment. I really want to congratulate you for that. We see so many folks stretch it out and out, but you have very concise opinions and directions you want followed, and it comes through in the speed with which you can get them out there.

We'll now move to our round of questioning. The opening round is seven minutes per person.

Mr. Easter, please.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you, Mr. Chair.

I want to come to the supply management group, but first, Ms. Koch, I'm absolutely amazed at your statement on Canada's isolation, that Canada's minister stood alone on sensitive products. Could you tell us your information base?

I was there. I was in Hong Kong. We didn't stand alone. We got fairly good support in terms of sensitive products. I think that statement hurts us, as does the statement that the premiers made in terms of our balanced position.

So if you could tell us your information base, I would like to know that, because that is just absolutely incorrect.

[Alanna Koch]

With respect to Hong Kong, I was there too, and we certainly were informed by many that in fact Canada did stand alone with respect to sensitive products and did stand in the way of seeing progress on sensitive products. So I'm not sure who each of us is speaking to, but I can tell you that several nations indicated to us that Canada was very alone and put the entire WTO process in jeopardy.

As exporters, we came home from Hong Kong quite alarmed that Canada had taken the position it had, considering that 91% of our farmers depend on international markets. So that would be our experience in Hong Kong.

With respect to the balanced position that Canada has taken, I would say that we would look forward to a balanced position that Canada would take. Right now, we don't really feel as if it's balanced. We hope that when our negotiators and our government go forward with negotiations, they remember all of Canadian agriculture: that we are the fourth largest exporting nation in the world and that 91% of our farmers are dependent on international markets.

You speak to how dependent we are. Tyler spoke about canola and how much is exported. The majority of our production is exported.

[Wayne Easter, Liberal, Malpeque, PE]

I don't want to cut you off, Ms. Koch. I understand how important international trade is to the farmers in this country, and our balanced position can in fact get us there. But I am absolutely surprised that CAFTA would allow itself to be led down a path to jeopardize Canada's positions by listening to the enemy, who want to get that information out there. I'm surprised at that.

Anyway, we've got a different information base, and I can tell you unequivocally, Mr. Chair, that Canada is not isolated in its position on sensitive products. Anybody who expresses that point of view is giving an advantage to the enemies of Canada's position.

Turning to the—

[Alanna Koch]

Mr. Easter, may I speak to the enemies question?

[Wayne Easter, Liberal, Malpeque, PE]

I have only seven minutes, Madam. If we get a chance, we can address it later.

[Alanna Koch]

All right, I'll address that later.

[Wayne Easter, Liberal, Malpeque, PE]

The impression to the supply management groups in this country has become that because of supply management, we're a protectionist nation. In your presentation, you alluded to our not allowing imports with supply management in place. In fact, we allow more imports, even in the supply management industries, than most of the free-market countries.

Could you expand on that somewhat? Supply management is used against us consistently, giving the impression that we're protectionist, by the likes of CAFTA and by other nations that want to break the supply management system.

In your second point, can you explain, “Unless the government sharpens its focus”?

[David Fuller]

Through you, Mr. Chairman, I'll speak first on the market access issue.

Mr. Chairman, supply management does in fact allow imports into this country, well above many other nations and what their access levels are in many different commodities. I need only look at the poultry and the dairy industries. Dairy is around 5%, the turkey industry is around 5%, and the table egg industry is around 5% as well. The chicken sector is around 7.5% over domestic production, and our hatching egg producers allow 21% market access.

In fact, Mr. Chairman, supply management is not a closed shop. We allow more market access than many countries around the world. I need only look at the EU, which only allows 0.5% of poultry, or the U.S., which allows less than 2.5% of dairy products. So Canada's supply management system is not closed, and we do allow a significant amount of imports into this country.

To give you an idea of the magnitude, in the chicken industry we allow enough imports to match what Atlantic Canada and Saskatchewan produce on an annual basis.

That's the level of imports to our industry, so it is not a closed shop.

[Wayne Easter, Liberal, Malpeque, PE]

The second question was about the government sharpening its focus. This round will be a disaster for supply management, and I expect that potentially for the whole round. Can you expand on this? What does sharpening the focus mean?

I am very worried about the minister's statement, saying we're 148 to 1. That's not correct. What worries me, with the minister making that kind of statement out there, is that it sends a signal that the government is prepared to sell out. It's not 148 to 1. I believe you mentioned it's potentially nation 25 nations that don't support Canada's position, and the other 125 nations really don't give a darn about supply management; they're kind of neutral either way.

[David Fuller]

I think what is extremely important is that Canadian agriculture must win at the WTO. This is what it's about. It's about a win for Canadian agriculture; it's not about one sector versus another sector. When we look at the agriculture negotiations--and I was part of those deliberations before Canada set its initial negotiating position back in 1999--Canada came out with a very balanced position.

Their objective is clear, Mr. Chairman. The objective is to make sure we manage to maintain an effective supply management system in Canada and also to provide as much opportunity for our non-supply-management industries through the different avenues, through the negotiations.

When I look at the negotiations and I look at the export subsidies pillar, I see we have a clear win for our non-supply-management industries when we have an export deadline of 2013. When I look at the domestic support pillar in agriculture, I see again a clear win for our non-supply-management commodities. We have proposals on the table that are going to cut some of the high-spending countries such as the EU, the U.S., and Japan--again, a win for Canada's non-supply-management commodities.

And when I look at the third pillar in agriculture under market access, Canada has been very focused on a general reduction formula that has been very aggressively pursuing that to again allow our non-supply-management industries an opportunity for more market access around the world.

Mr. Chairman, for Canada to maintain its balance, it must focus solely on sensitive products for supply management because it is the only area we have left for those industries. If the government is successful in that area, it will have brought back a win-win for Canadian agriculture, a balance for supply management as well as for our non-supply-management farmers. And that, Mr. Chairman, is what this round has to be about: a win for Canadian agriculture.