Agriculture Committee on June 15th, 2006

[The Chair, Conservative, Gerry Ritz]

Thank you, Mr. Fuller.

Mr. Bellavance, seven minutes, please.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

Thank you, Mr. Chairman.

Thank you for your presentations.

The Doha Round of WTO negotiations constituted a turning point for Canadian and Quebec agriculture. Indeed, the further negotiations progress, the more concerns we have.

Mr. Lebeau, Mr. Lefebvre, you often find yourselves in Geneva for these negotiations. You are not there on holiday or to have fun; you are there to closely monitor the negotiations, and that involves a lot of work. We are very grateful to you for what you do for Quebec agriculture.

As you spend more time than we do on site, you are doubtlessly better informed than we are. All of the other countries are exerting pressure on Canada, and the very survival of supply management is at stake. In fact, other countries are not the only ones to be pressuring Canada. This morning we heard some fairly enlightening testimony from Canadian producers. In addition, the Manitoban, Albertan, and Saskatchewan ministers of Agriculture have written to the Minister of Agriculture and Agri-food to argue the case for greater market access. Pascal Lamy, the Director General of the WTO, came to Montreal to tell us that we had to make compromises, starting with supply management. On May 30, when we raised the issue of WTO negotiations, the Minister of Agriculture and Agri-food, Mr. Chuck Strahl, told us that Canada was isolated, a lone voice against 148 other countries, and that, at the end of the day, WTO membership was important and an agreement should be signed. To my mind, making such a statement publicly can only significantly weaken Canada's position.

As you are on site, you have the opportunity to speak with the Canadian negotiators and consult the preliminary text. That is why I am interested in your opinion. What direction do you see this taking?

[Serge Lefebvre]

Mr. Chairman, in answer to Mr. Bellavance's question, I would first like to say that we go to Geneva as a team. We are mandated to defend supply management, and several of us are in Geneva at any one time. That is an important point.

I will let Mr. Lebeau speak about the more technical aspects, but I would like to point out that Canada voluntarily provided more access to its supply-managed markets during the last rounds of negotiations. That was the directive of the day, although there was no official, written text to that effect. I think that this shows that Canada opted for fair play and cooperation, believing that other countries, in turn, would increase access to their markets.

However, that is not what happened. I think it is important to mention that, as it often gets ignored. The common perception is that we acted out of obligation, when in fact that was in no way the case; it was a voluntary measure. It was a case of Canada and producers of supply-managed products choosing fair play.

In some areas, we ceded more than had been requested. Seven point five per cent and 20% on hatching eggs is a lot more than had been asked.

Obviously, I was in Geneva with several of our colleagues. A lot goes on there. We have the opportunity to talk with people from other countries who were in Geneva to negotiate. This allowed us to realize that, on certain questions, we have some allies. Unfortunately, we also have foes, and there is also disagreement within Canada on this issue.

Like Mr. Fuller, I believe that a balanced position, such as the one we are suggesting, is in the interests of all Canadian farmers. Bear in mind that if all countries were to increase market accessibility by 5%—as the directive proposed—world trade in agricultural products would double. That is not to be sniffed at. That is what we are asking. It is a matter of bringing other countries around to Canada's starting point; then we can negotiate. Think about it: if all countries took the same measure, we would double world trade in agricultural commodities. That is not to be sniffed at.

[Serge Lebeau]

Allow me to add to my colleague's answer.

There is no doubt that we have allies on the question of sensitive products. Several European countries, as well as Japan, are members of the G10. These are all countries that are determined to protect certain commodities.

The Europeans and the Americans also have sensitive products. I think that we now have unanimous consensus on sensitive products; the principle was agreed to in July 2004. Now it has to be decided how sensitive products will be treated. The July 2004 framework agreement provided some assurance. However, it now feels as if the issue of sensitive products is being downplayed, and that concerns us.

As I explained earlier, the reason why some countries, especially European countries, downplay the matter of sensitive products is that they have dropped their guaranteed price. They have reintroduced direct subsidies and, consequently, are able to reduce their tariffs. It is very important to understand that the US and Europe, especially Europe, are playing smoke and mirrors; they are not going to increase access to their markets. People in the know have told us that the Europeans will not give an inch, particularly on dairy products, and that we will not gain greater access to these markets.

As I said, it is a case of David against Goliath. The firepower is unequal. They have reintroduced their subsidies, while we are left with tariffs. That is why I spoke about the interconnected nature of the three pillars of the negotiation. This is something that has to be understood.

The last point I would like to make is that we should follow in the footsteps of Norway. Norway was given special treatment regarding the blue box, because it was found to be full of subsidies. They asked for reductions, the timeframe was reduced, and concessions were made. Legend has it that the Norwegian negotiators slept at the doors of the meeting room because they were not allowed in to make their case. However, one day, they met the American negotiator and argued their point. Perhaps we should do the same. If we cannot reach an agreement with the other countries, I think we should probably do as Norway did and invoke the exception.

[The Chair, Conservative, Gerry Ritz]

Your time has evaporated.

Mr. Bezan, seven minutes.

[James Bezan, Conservative, Selkirk—Interlake, MB]

Thank you, Mr. Chair.

Thank you, ladies and gentlemen, for coming out and making presentations today. It's a timely topic, as you well know, with the negotiations that are going on in Geneva right now.

We don't have a lot of time, but there's a number of areas I want to cover.

There seems to be some conflict at your end of the table as to the issues surrounding the sensitive products side of it. A comment was made that we're isolated on this topic, and another comment was that we're not isolated on this topic. If we're not isolated, who do we have as allies at the table who are supporting our position, when the outcome in Geneva last month was fairly overwhelming against a Canadian position? Does somebody from SM5 or UPA want to deal with that? Who do we have as allies for our position that we're putting forward?

[Serge Lebeau]

I would basically reiterate what I have already said. The principle of sensitive products was recognized in 2004. The countries most closely aligned to our position are the G10 countries, including Norway, Switzerland, Japan, Israel and Korea. All continents are represented in the G10 membership. These countries really are our best allies.

Let us take the example of the Japanese. When they set their tariffs for rice in 1994, for example, they set them in absolute terms, that is to say in dollars per kilogram or yens per kilogram, while we used a percentage system. When their rice tariff is expressed as a percentage, and not as dollars per kilogram, it is 700%. They were not too smug, but they must have been saying that it would not really matter if their tariff were reduced by 50%. Inequity already existed in 1994.

The Japanese would be far less affected by a 20% tariff reduction than would Canada. At 299% on butter and 238% on chicken, we are already at the limit of what we can accept.

Due to the strength of the Canadian dollar, it is almost possible for Brazilian chicken to enter the market. At one point, skimmed milk powder and butter were able to enter the Canadian market, because of currency fluctuations. Although these countries are our allies, for the reasons I have just mentioned, it is nonetheless difficult for Canada to be on an equal footing with them. What happened in the past has given them an advantage and allows them to weather tariff reductions in a way that we cannot.

[James Bezan, Conservative, Selkirk—Interlake, MB]

I appreciate that.

I want to go back to this issue that the G-10 might be allies, but it definitely doesn't correspond with some of the positions they're putting out there on what we want to accomplish in grain, oilseeds, and red meats.

Alanna or Darcy.

[Darcy Davis]

No.

[Alanna Koch]

I would comment on that with respect to our isolation. As Mr. Bellavance indicated earlier, even the director general of the WTO has indicated that Canada is isolated in our position with respect to sensitive products. As further proof with respect to our isolation, two times we've been cited in Chairman Falconer's reference papers--that one country is standing to the side of an emerging consensus with respect to market access for sensitive products.

Clearly we're isolated, and clearly that is damaging our ability to influence the negotiations, not only with respect to the export interests of our country but in fact with respect to being there to support all of our Canadian industries. As was indicated earlier, this deal needs to be there for all of Canadian agriculture, and being isolated is not helping Canada's position at all.

[James Bezan, Conservative, Selkirk—Interlake, MB]

I'm a cow-calf producer just like you, Darcy. The comment was made that only 10% of our exports right now overall in agriculture are going to non-NAFTA countries. Do you think that's because of the trade rules that we have in place right now under the WTO, that we have better access to the NAFTA markets than we do to other worldwide markets because of red meats being considered a sensitive product and highly protected in those other markets?

[Darcy Davis]

I certainly think it is. The fact that we share this 11,500-tonne quota into Europe is a huge factor. If we had larger access to that eight-million-tonne market that is a market for our kind of product, which is a grain-fed product.... An over-quota tariff of 3,000 euros per tonne is an incredible penalty to pay for access to that market. As well, there are the Asian markets. If we want to access these markets in free trade agreements, I think we have a tonne of work to do. We have to put more effort into each one of those than we are putting even into the WTO right now.

As for our standing alone on sensitive products, as beef and red meat are listed as sensitive more around the world than most other products—as well as grains—as we stand alone.... As I understand it, the discussion was to be around over-quota tariffs. Canada said we would not discuss them. The other countries were willing to discuss them—even members of the G-10. That's my perception of it.

My other perception after having been in Hong Kong was that the text said one thing and the text was changed at the request of Canada. That's my perception. As far as what happened and what didn't happen is concerned, I think we have to keep going forward. I've been in Geneva myself. I've been there for a missed deadline. I would like to see our country get going and get to be a part of the solutions.

I'm a cow-calf producer. We've seen over 19% of our domestic consumption filled by imports, but we've exported over 40% on a value-added basis, so our producers understand trade and want to continue it.

[James Bezan, Conservative, Selkirk—Interlake, MB]

You've been dealing a lot with sensitive products. One thing I've always been concerned about is whether we are spending enough time at the negotiations talking about non-tariff trade barriers, the phytosanitary and sanitary trade barriers?

[Darcy Davis]

I think a lot of those negotiations have happened at the OIE, and a lot of countries have the liberty to look after their own food safety rules in each nation. Much of this is a lot of hard work. I know Ag Canada is working hard at this in countries such as Korea, trying to deal with their concerns, even when some of those concerns seem pretty disingenuous. The WTO may be an avenue for us to use some discipline with Korea.

[Tyler Bjornson]

Let me add to that. Actually, in this round of negotiations, from a non-tariff-barrier perspective we have to make sure we get the rules right on the dispute mechanism, so that countries actually abide by the outcome of the panels. Beef hormones provide a great example of that, and I suspect that the moratorium on genetic modification...hopefully it isn't an example of that. But these sorts of things arise, and it's important that Canada push hard for countries to abide by the rules.

[The Chair, Conservative, Gerry Ritz]

We have consensus on the dispute mechanism. That's something to start from, folks.

Mr. Fuller, you have one last point. Mr. Bezan's time is up.

[David Fuller]

Mr. Chairman, it's just one point I want to clarify.

I don't want the group around the table to have the feeling that Canada is holding up sensitive products. There was one issue under the sensitive product category on which Canada, as has been said around this table, is isolated. There are a number of issues around that table on which other countries are in exactly the same boat. The G-10 has clearly said under the sensitive product category that a cap is a “no go” for them.

Does that mean the G-10 is isolated on sensitive products? What it means, Mr. Chairman, is that sensitive products are still under negotiation. There are several members who have concerns with different areas and aspects of the sensitive product category, and it is yet to be determined.

[The Chair, Conservative, Gerry Ritz]

Thank you, Mr. Fuller.

Mr. Atamanenko, you have seven minutes, please.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

Thank you very much to all of you.

Here is a general question, and maybe everybody could give me just a quick response.

The western premiers wrote the letter. They want more increased market access for grain and oilseeds. My first question is whether that is possible without any move on supply management.

The second question in that regard is this. When I spoke with the Minister of Agriculture from Saskatchewan, he was adamant that Saskatchewan wants to protect supply management but at the same time wants more access to markets, but he suggested that we are somehow physically not at the table. I want to clarify that. Are we physically at the table, even though we have this position on supply management? Also, do we get a deal imposed on us if we're not there? That seems to be the concern they have.

I'd like you to comment on that one, please.

[Tyler Bjornson]

Thank you very much for the question.

With respect to the first question related to increased access for grains and oilseeds, I'll give you a live example where, as we've heard a number of times, I think Canada is in a 148-to-1 position on a particular area under the sensitive products category.

At the same time, Canada is pushing very hard for a paper on tariff escalation. This is extremely important to canola products. It relates to the higher tariffs on value-added processed products in comparison to raw products.

The problem is credibility. If Canada isn't able to play in part of the negotiations in one area, they have a credibility problem in pushing other areas. So if Canada is perceived by other countries as being isolated and not willing to move in that area, they really don't want to talk about what Canada wants in other areas.

[Alanna Koch]

With respect to the question, you indicated that Minister Wartman had said that we're physically not at the table, and you asked whether that has an impact on the deal that Canada may get. To further emphasize Tyler's point, the problem is that once you are unwilling to move on one point and you're completely standing alone on that, not only does it put into question your credibility, it also excludes you from some small group discussions where some very critical issues are being negotiated.

So yes, we're part of the group discussions, certainly on the broad issues, but when it comes to some specific issues, in fact our negotiators won't be part of those discussions because we're unwilling to talk about other issues; we're completely unwilling to move on another issue.

It does exclude us. In fact, I believe it does physically remove us from the table. My view would be that Canada's ability then is very limited in being able to influence what the deal might be with respect to other market access issues.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

Maybe we could go to this side of the table.

[David Fuller]

Thank you, Mr. Chairman.

I do believe that we have some potentially significant opportunities to increase market access for our grains and canola and our non-supply-management commodities. If I look at domestic support, we see an opportunity for countries that will have to start to erode some of that domestic support. That hopefully gives an opportunity for the world market price to increase, which will benefit our non-supply-management commodities.

When we talk about Canada being isolated, the United States must be isolated, because they are on their own when it comes to a base period for AMS on domestic support. When I look at the G-10 countries, they're on their own, too, for the cap on sensitive products. And the EU was on its own for market access on the flexibility they were looking for. To say that Canada is isolated by being on its own, I think, is really inaccurate.

You have a number of groupings of countries, whether it be the G-20 or whatever. I look directly to the G-6--the European Union, the United States, Australia, Brazil, India, and China--of which Canada is not a member. In my opinion, that's a core group that is running this negotiation. The other groups are all falling in behind.

To say Canada is not at the table is inaccurate. By everything I have been told in Geneva, Canada is seen as a bridge builder to help move the negotiation forward. I heard that in Hong Kong, I heard that in Cancun, and I have heard it in Geneva a number of times.

In my opinion, Canada is not isolated. They are a team player working to try to build bridges to move these differences very close together. In my opinion, there is opportunity under domestic support, export subsidies, and the general reduction formula for increased market access for our non-supply-management commodities. Canada is still very much part of the negotiating team in Geneva, as well.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

What do you think, Mr. Lebeau?

[Serge Lebeau]

Can we improve access to the market without changing supply management? We should certainly be able to.

Earlier, we heard that, according to a serious study, there would be an 80% increase in agricultural commodities trade, provided that everyone complied with the Uruguay round agreements, which forecast a net 5% increase in market access. Unfortunately, there was no such compliance. I think there is room for improvement there.

However, I believe that Canada should—and I believe has—put a strongly focus on support. For example, we looked at grain prices in Canada. The issue is not the markets, but rather the subsidies that US farmers get. The result is that it becomes very difficult for us to continue producing, and to be competitive. There are major gains we could make there, and Canada should be making an effort in that direction.

There is also the general formula for reducing tariffs. I believe we have some margin for manoeuvre there too. Tackling that issue as well would lead to additional market access.

Sensitive products are the exception, and we should work on them.

You also asked whether Canada was still at the table. Yes, it is. The proof of it is that there will probably be a ministers' meeting at the end of June, and Canada is among the 30 countries invited. To date, I have never heard of Canada being excluded from meetings, even when the meetings are among 25 to 30 countries, or even meetings in green rooms that are even more restricted. So far, I do not believe that Canada has been isolated. I am confident that Canada will remain at the table.