Agriculture Committee on Oct. 18th, 2006

[Gary C. Groves]

Sure thing.

[Robert Thibault, Liberal, West Nova, NS]

If you could let us know what the situation is, please do so through the chair.

On the second question, I know you were asked by Mr. Boshcoff about the water level and that it's not your area of expertise. Let me assure you, though, that the whole committee would be interested in any water cooler talk you can share with us.

My final question to you would be on your perspective, being experienced in matters of international trade, as to the future of the WTO round and the GATT rounds. Do you have hope that they will be resuscitated and that we will come to a better leveling of the playing field, giving us easier, profitable access in international markets while helping developing countries and at the same time protecting both your and our producing sectors?

[Gary C. Groves]

On the WTO, obviously we've been very disappointed about not making more progress on that, but I think all of our trade officials, including Secretary Johanns, are saying that they still believe we can get an agreement. Now, that agreement could be six months, they just don't know, but they do consider it more “when” than “if”. That's a bit like our experience with the Uruguay Round, which certainly went into hiatus for a while.

There are some difficult issues here. In the U.S. it's not like we can come up with another proposal that's going to bring this thing back on track. We stated clearly from the start that we have to have significant market access in countries like Japan, and the EU, and in the developing world. When we looked at what was on the table, it just did not provide that.

When some of the developing countries can protect 95% of their sensitive products, or of their agriculture products--not just sensitive products, since they could basically call everything sensitive--that's not market access. Look at some of the EU proposals for beef. They were talking about access to 160,000 tonnes of beef. Well, I think Canada imports more than that. We import over a million tonnes.

So the access they were offering was just not worth paying the price for in terms of what we were willing to offer. We are willing to go however far we need to go on the side of domestic subsidies, as I think they have said. But we have made a very ambitious proposal. Some people try to shoot holes in it, but if you really look at the proposal we made, there are serious reductions in U.S. farm support programs. There is no way we could have the farm support programs in the shape or form they are in now if that proposal were done.

In this case, overall, our interests are really aligned with Canada's. As you said, we have basically the same objectives. We want to get at, first of all, the most egregious practices, the export practices. We want to bring down the domestic subsidies in terms of the trade-distorting subsidies. We want real market access. Obviously we want to be able to maintain our farm safety net for our farmers, in whatever form we each do that.

So I think our interests are very closely aligned. We have to keep trying to move this forward, realizing that we're on the same side rather than undermining the position taken by the other. We have been very supportive of each other. Canada was very supportive of our proposal. This is the only way we're ever going to get....

But as for prospects, no one knows.

[Robert Thibault, Liberal, West Nova, NS]

As part of that safety net, another sensitive project that we seem to protect is the supply management side. We've all been asked by the supply managed sector to use article XXVIII, because we have some imports that come in falsified--the sugar mill plans and all sorts of other ways that you can get around our restrictions.

There's been some reluctance to do that, with a preference for working through WTO and GATT to do those things. Now we end up in a position where that's going to have to be seriously considered. I'm not on the government side, I'm opposition, but the world government is going to have to consider those things. My fear is that this will happen internationally, without a framework, and people will have to be more rigid to protect their interests, or negotiate a billion bilaterals, which becomes difficult to work also.

I just wanted to hear your perspective on these things.

[Gary C. Groves]

Yes, I think that would be our perspective as well on Canada going article XXVIII. I mean, you're opening something up here that other countries are going to look at, that producers in other countries are going to look at, so you really need to carefully consider this in terms of whether or not it's really in your interests overall to do this. It certainly wouldn't be something that...you know, we would be opposed to that. It's your legal right, but we would have concern for the precedent it would set.

But you're right on the preponderance now of bilaterals. For us the bilateral option is an option--a lot of countries around the world want to sign bilaterals with us--but that's not really the way we want the world trade system to go.

[The Vice-Chair, Liberal, Paul Steckle]

We'll now move to the government side. Mr. Devolin wants to speak. But before we do that, I need the unanimous consent of the committee, because Mr. Devolin doesn't have a substitute form signed.

Is it the wish of the committee to allow him to speak?

[Some hon. members]

Agreed.

[The Vice-Chair, Liberal, Paul Steckle]

Unanimous.

Mr. Devolin.

[Barry Devolin, Conservative, Haliburton—Kawartha Lakes—Brock, ON]

I thank my colleagues for their indulgence.

Thanks for being here today, Mr. Groves and Ms. Anderson.

I want to talk a bit about the BSE issue and make an observation. There seems to be a gross disconnect between the impact of the decision to close the border and the actual level of the risk. This is true not just in the United States, but also in other countries.

With regard to the actual BSE risk to people, I expect that if you were to walk two blocks to a steakhouse, the odds of being run over by a car are much greater than the odds of catching something from eating that beef. There is a lack of proportionality between what actually happened to Canadian farmers as a consequence of this decision and the actual risk presented by the handful of animals that were found.

My riding is in eastern Ontario, about halfway between here and Toronto. It contains some prime agricultural land, but also lots of rolling farmland that's good for pasture. I had a significant number of small cow-calf operations in that area, full- and part-time. Most of them had their equity wiped out through this process, so there was a big social and economic displacement in the community.

I have lots of dairy producers in my area. Because of the supply management system in Canada for dairy, farmers don't try to maximize their milk output. They try to maximize the efficiency of producing a certain amount of milk. This has caused a lot of dairy farmers to spend time on developing high-quality genetics that are exported around the world as breeding stock. I have a significant number of dairy farmers who have been impacted by the closure of the border. This is a less obvious impact, but they have lost this secondary revenue stream derived from exporting high-quality, live dairy animals into the United States and elsewhere.

A third group that was affected were sheep farmers. I have some sheep farmers in my area, one in particular who is very well known. He also developed high-quality genetics and was on the verge of starting to export significant numbers of sheep into the United States and Mexico, which, forgive the understatement, also got sideswiped in the border closure.

There is obviously a connection between BSE and beef cattle. I guess you could make an argument that there's a connection between BSE and dairy cattle, if at some point down the line they entered the food chain. But there's no connection with a sheep farmer.

As someone who is experienced in these matters, do you have any ideas or observations on what needs to change so that when something arises like a case of BSE, we don't use a sledgehammer to kill a fly? The collateral damage is unbelievable. Can you tell us, as someone who has been around this business for a long time, whether there are lessons we can learn from what has happened in the last three years that would allow us to protect food safety without causing unnecessary and widespread damage in other parts of the agricultural community?

[Gary C. Groves]

Yes, very much so. There are many lessons. We're a lot smarter about BSE now than we were three years ago.

Three years ago, if another country had one case, they couldn't ship anything to either one of us. Canada had to act just like the United States. So when Canada got the first one, that was our reaction because that's what we thought the science was telling us. We've learned a lot about the science of BSE and what can be done, and we are taking those lessons to heart.

We've had some collateral damage in the United States too, from three animals now. We lost a multi-billion-dollar market in the Far East that still has not come back for us, in terms of exporting there. There were producers, I'm sure, in the U.S. who would like to have access to the genetics you're talking about to help them become more efficient and more competitive. So it's very much so; there is collateral damage.

I know the impact this had on the Canadian industry was just phenomenal, but the answer to that is that I think we're not there yet, even on the BSE side. We still have this rule to go. This rule should take care of much of what you're talking about in breeding cattle and so forth, like that, but we still have to work on the sheep, the alpaca, and so forth, to get fully in line with what we now believe should be the standard, which we have been pushing for in the OIE.

So ultimately that's the answer, to develop international standards that we can all live with. When it happens to us, we learn pretty fast in terms of what the science is that we didn't realize, and then we have to work on other countries together. I think we're making real headway on this.

[Barry Devolin, Conservative, Haliburton—Kawartha Lakes—Brock, ON]

I serve as the government's liaison with the Korean community here in Canada. This summer there was a group of Korean legislators who came to Ottawa for a visit to talk about issues. It was interesting. I knew they had arrived the day before, and I said, “I understand you were at the ambassador's residence last night. His chef is the best Korean cook in town and I'm sure you had a wonderful meal of bulgogi.” They said yes. I said, “That's great. You've already eaten Canadian beef since you arrived here and obviously you're feeling fine today.” Somewhat in jest, I pointed to the ambassador and said, “And your ambassador eats Canadian beef regularly and look at him. He's the picture of health.”

It was just for a moment, but I thought we'd actually penetrated what I call the absurdity of some of these rules. Even those who are travelling to other countries, supposedly defending the food safety of their own country, if you offer them a nice porterhouse steak here somewhere in town, they'd be more than happy to eat it, right? So it belies the notion that the risk that was posed was such that it required this kind of a response.

I take what you say at face value. I guess I have more of a comment than a question, which is that I really think that on both sides of the border we need to figure out a way to deal with things in a more reasonable and proportionate way.

One of my colleagues—I can't remember who it was—made the reference to R-CALF and other groups in the United States clearly taking a political opportunity to make, what I would call, mischief, which had an enormous cost to so many Canadian producers. I hope that in the United States and in the government there's a recognition of that, and it is clearly a situation we hope never recurs.

[The Vice-Chair, Liberal, Paul Steckle]

Thank you.

Mr. André, do you have a question?

[Guy André, Bloc, Berthier—Maskinongé, QC]

I will dare ask a question even if I just arrived and I am still feeling my way around in this discussion.

I read this document and I heard about the customs tariffs the Americans will levy in a near future on imports from our country. Was this question already asked? I do not want to be repetitive. Did somebody already asked this question?

[The Vice-Chair, Liberal, Paul Steckle]

The question, Mr. André, was asked previously.

[Guy André, Bloc, Berthier—Maskinongé, QC]

I was wondering about this. Could you tell me whether this will be implemented after November 24?

And also, will we be able to levy the same kind of fees? Since the Americans can do it, why could we not? Do the Americans levy this kind of fees on products from other countries also?

[Gary C. Groves]

In terms of the user fee, yes, as it is scheduled now, the interim rule is still on the books and is scheduled to go into effect on November 24.

Last month, Agriculture Minister Strahl went down and talked with Secretary Johanns, and they agreed to collaboratively look at this issue and see what other options there might be, and that process is under way now. We don't have, yet, anything to announce or whatever, but it is something that is being actively considered.

In terms of the user fees themselves, the basic goal is cost recovery. I believe that Canada has a cost-recovery system now for inspections, but I think it only applies to a very few products and that the amount they collect is very small. But Canada has that system and has the right to impose that system.

I'm sorry, was there another...?

[Guy André, Bloc, Berthier—Maskinongé, QC]

I might have another short question about the BSE issue. You know that Canadian and American cattle travel both ways at the border. Right now, the American market is open to other countries.

I was in Taiwan recently, and I could see that they let in the American cattle but not our beef of less than 30 months. Is this just a matter of political lobbying, or are we looking at something different?

[Gary C. Groves]

Are you talking about our restrictions regarding Canadian...? No. Are you talking about Taiwan?

[Guy André, Bloc, Berthier—Maskinongé, QC]

I am talking about restrictions in Taiwan on American and Canadian beef. Our beef is still banned. We cannot export beef in Taiwan, for example.

[Gary C. Groves]

Canada still cannot export to--

[Guy André, Bloc, Berthier—Maskinongé, QC]

It would seem that restrictions are tougher for us than they are for the Americans.

[Gary C. Groves]

Our position with all countries, I think, just like Canada, is that we urge them to adopt the now adopted OIE standards. So we would urge them to allow the same standards and product coming from Canada as from the United States. We aren't over there saying to take our beef but still be concerned about Canada's.

Are they legitimate? I think we would say no. We believe that with the OIE standards, you can pretty much trade in beef with the SRM removal and under certain conditions. So we are really urging all countries to do that, just as in the case of Canada. It's perfectly safe.

So it's very frustrating. Japan has twenty months. There's no basis, scientifically, for the twenty months. We are trying to get them to go, because right now what they're finding is that the consumer wants the American beef or the Canadian beef. Your exporters have found the same thing. They can't, frankly, get enough of it to supply their demand for those cuts by doing what they're trying to do and limiting themselves to the twenty-month-old animal.

So we find that the Japanese consumer still has confidence in North American beef, and we are very much urging that they.... Again, we feel that we in North America have a unique product here in terms of many things, but particularly in terms of beef, grain-fed beef that is not produced as abundantly in other countries. So whether they buy it from the U.S. or from Canada, the more we can get consumers overseas to want that type of beef, the more we're both going to benefit. So we very much want to get beef from North America into the Asian markets--all of them.

[The Vice-Chair, Liberal, Paul Steckle]

Now it's Mr. Bezan, for five minutes--we're going to cut it down. Then it's back to Mr. Boshcoff.

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

Thanks, Mr. Chair.

I want to follow up on what Mr. Thibault started talking about, which is that in the program of WTO, things aren't looking good. As you said, Canada and the U.S. are very close in our position that we want to have more trade liberalization. It's important to our red meat sector and to our grain and oilseed sectors. But it doesn't look good.

You mentioned bilaterals, and of course as a Canadian government we're moving forward with more bilaterals. You do gain market access, under most favoured nation status, when you sign these bilaterals. The problem, though, is that this still doesn't deal with all the distorting subsidies out there, whether they be in trade or production. It doesn't deal with phytosanitary issues that keep getting thrown at us, such as the European beef hormone ban.

How do we resolve this? If we can't get them to the table now, what do you figure the next step is going to be, from a WTO standpoint? Or is WTO going to become irrelevant?

Secondly, how do you see this all playing into the U.S. Farm Bill? You guys are in the process of bringing forward a new bill and you mentioned you were going to be very ambitious and roll back support, that it was production and export distorting. What framework are we looking at coming out of the U.S. administration? And are we going to see an actual reduction in the overall dollars spent, or are you just going to spend them differently?

[Gary C. Groves]

Bilaterals just cannot deal with these multilateral questions. We just don't see a way to get at some of the topics you're talking about, in terms of subsidies, on a bilateral basis. That's what we did in the Canadian-U.S. free trade agreement. We just set aside a lot of the areas and said, we can't deal with this. That's pretty characteristic. There are some...and certainly we can get some openings for products; we've run into it with Mexico on the sugar side, and so forth. But by and large it's very difficult.

So the WTO is the answer. That's why we support the WTO process so strongly. We don't think it's going to become something irrelevant, or something that is set aside, or whatever. Our expectation would be that eventually some of these other countries are going to realize it has to be in their interests to go forward with a WTO. I think as this process unfolds in the months ahead, they are going to realize that they want it to go forward. They want the United States and Canada to make these concessions—they're valuable to them—and they realize they have to also offer something substantive. It's a hope maybe, but it's also I think our expectation. Again, whether it takes six months or six years, we're not really sure, but eventually it is going to come along.

As for the WTO and the Farm Bill, it has obviously complicated our world in terms of the Farm Bill. But our intention is that we're going to go ahead and write new farm legislation. Our Farm Bill is not going to be written in Geneva; it's going to be written in Washington. That's the approach I think of the administration and of the Congress. It expires roughly at the end of September of 2007, by and large, or with the next crop. That is the kind of timeframe they have to deal with.

There are still certain other constraints. There are budget questions: how much do we have available for it? There are questions the secretary is raising regarding equitable treatment of different products. Under the current Farm Bill a few products receive most of the support. There are a lot of questions. There are questions on biodiesel and biofuels; there are questions on the environment and conservation. There are too many things out there in rural development that we have to deal with in this Farm Bill. We can't wait for some WTO agreement to be concluded. We really have to go forward, and I think that's very much the intention of what they're going to do.