Agriculture Committee on June 1st, 2006

[The Chair, Conservative, Gerry Ritz]

Good morning, ladies and gentlemen, and welcome to our sixth meeting.

Today our hearing will continue our investigation into the imports of milk protein concentrates. We have a number of witnesses before us today. Of course, the table is full, and we also have some people back in the cheap seats, who may be called forward as we require them.

I won't take time to introduce everybody. Certainly, you will respond to questions in your field or purview, if you would. We'll keep our opening statements as short as we can. We do have two hours, but it always goes by so darn quickly. We will have a seven-minute opening round of questions, followed by five-minute rounds.

How many opening presentations have we got?

[Graham Barr, Director, Multilateral Trade Policy Division, Department of Agriculture and Agri-Food]

We're just doing introductions, so they'll all be brief.

[The Chair, Conservative, Gerry Ritz]

Okay, that would be great.

Mr. Boshcoff, you wanted a moment at the beginning?

[Ken Boshcoff, Liberal, Thunder Bay—Rainy River, ON]

Thank you, Mr. Chairman.

Yes, I'd like to apologize to Monsieur Bellavance for the remarks at the last meeting. There's no doubt that as Canadians we all expect that all of our material should be in both languages.

Thank you.

[The Chair, Conservative, Gerry Ritz]

Very good.

Thank you, Mr. Boshcoff.

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

I accept your apology.

[The Chair, Conservative, Gerry Ritz]

Thank you, André. Gracious as always.

All right, ladies and gentlemen, we'll now proceed.

Who is going to do the kick-off? Mr. Barr? Thank you.

[Graham Barr]

Mr. Chair, thank you for the opportunity to appear here today.

My name is Graham Barr, and I'm the director of the multilateral trade policy division at Agriculture and Agri-Food Canada. We're the division that's responsible for providing analytical and operational support to Canada's chief agriculture negotiator. In this capacity today, I'll be responding to any questions you might have concerning milk protein concentrates relating to Canada's international agriculture trade policies, as well as past or current GATT and WTO agriculture negotiations.

I'm joined today at the table by my colleague, Richard Tudor Price, the director of the supply management division in the strategic policy branch of Agriculture and Agri-Food Canada. That's the division that provides advice to the minister and senior management on matters relating to the supply managed subsectors of Canadian agriculture, including, of course, the dairy sector. He'll be happy to address any questions you have concerning the domestic policy implications of the MPC issue.

As you see, in addition to AAFC, there are a number of federal departments and agencies involved in this issue, and all of them are represented at the table this morning. We have the Department of Finance, the Department of Foreign Affairs and International Trade, the Canadian Food Inspection Agency, and the Canada Border Services Agency. Given the number of organizations represented at the table, it was agreed for purposes of this meeting that I would be the lead for the government representatives, and I would refer your questions to the appropriate person for reply. Hopefully, this way it will expedite our process this morning.

Now I'm going to turn it over to each one of the organizations, so they can introduce themselves and explain their role in this issue. Perhaps we'll start with the Canada Border Services Agency.

[Darwin Satherstrom, Acting Director General, Trade Programs Directorate, Admissibility Branch, Canada Border Services Agency]

Thank you, Graham.

Thank you, Mr. Chairman and members of the committee, and good morning. My name is Darwin Satherstrom. I'm acting director general of the trade programs directorate in the admissibility branch of the Canada Border Services Agency.

I should start by explaining the role of the CBSA. The CBSA is an integral part of the key national agencies within the Department of Public Safety portfolio, dedicated to protecting Canadians and evaluating information from domestic and international sources in assessing a whole range of risks that Canada faces. Our mandate is to provide integrated border services that support national security and public safety priorities and to facilitate the flow of persons and goods that meet all requirements under the program legislation, which is vital to our national economic vitality.

The CBSA has approximately 12,000 employees, including: customs officers; immigration officers responsible for ports of entry, detentions, removals, investigations, intelligence, and immigration control overseas; officials inspecting animals, plants, and food imports; and marine inspection officials. They provide services at some 1,200 points across Canada and in 39 international locations.

On average, we collect $8.3 million in import duties and $68 million in GST each day. The value of cross-border trade with the U.S. alone averages $1.9 billion a day. On average, 18,400 trucks arrive from the U.S. every day, with 10,500 of them processed through southern Ontario border crossings alone. In fiscal year 2004-05 there were approximately 104,000 commercial and courier shipments and releases handled every day nationally.

The CBSA administers more than 90 acts, including regulations and international agreements, some of which are on behalf of other federal departments and agencies, the provinces, and the territories. One of the statutes the CBSA administers is the Customs Tariff Act, or, as it is known, the customs tariff, which falls under the responsibility of the Minister of Finance and which is the trade legislation respecting the classification of imported goods.

The role of the CBSA is to ensure the proper classification of imported goods, and we follow a process adhering to classification principles that are internationally mandated under what is known as the harmonized system for goods classification, as well as national subdivisions within that system. Once classified, an imported good is subject to a rate of duty that's set out in the legislation and that may vary depending on the origin of the good. In cases where there's disagreement between the CBSA and an importer, a dispute resolution mechanism exists to resolve these issues.

In conclusion, Mr. Chairman, we administer legislation that governs the admissibility of people and regulates and controls or prohibits the import and export of goods. We promote Canadian business and economic benefits by administering trade legislation. We detain people who may pose a threat to Canada and remove people who are inadmissible to this country. We interdict illegal goods entering or leaving the country, and we protect food safety and the environment by stopping prohibited or hazardous products arriving at our air, land, and sea ports.

Thank you, Mr. Chairman. I look forward to the committee's questions.

[The Chair, Conservative, Gerry Ritz]

Thank you.

[Graham Barr]

Thank you, Darwin.

Now the Department of Finance will introduce itself and explain its role.

[Carol Nelder-Corvari, Director, International Trade and Finance, International Trade Policy Division, Department of Finance]

Thank you, Graham. Thank you, Mr. Chairman.

My name is Carol Nelder-Corvari. I'm the director of the international trade policy division at the Department of Finance. With me is Mr. Dean Beyea, who is the chief of tariff policy.

The Minister of Finance is responsible for Canada's customs tariff; that's the law that sets out the tariff rates for imported goods. We're pleased to answer your questions on the customs tariff.

As well, the Minister of Finance is responsible for other import policy legislation, including the Special Import Measures Act, which sets out the rules for addressing dumped and subsidized imports.

Thank you.

[Graham Barr]

Thank you, Carol.

Now the Department of Foreign Affairs and International Trade will introduce itself and explain its role.

[Marvin Hildebrand, Director, Tariffs and Market Access Division, Department of International Trade]

Thank you, Graham.

Good morning, Mr. Chairman and committee members.

My name is Marvin Hildebrand. I'm the director of the tariffs and market access division at the Department of Foreign Affairs and International Trade. DFAIT's responsibilities with respect to the MPC issue are actually on two levels: overall trade policy, and secondly, the administration of tariff rate quotas.

At the policy level, the department is responsible for the broader international trade elements of the issue, and specifically with respect to article 28 of the GATT; that is, DFAIT deals with the intersection of this agriculture-specific issue with Canada's international trade obligations and our engagement with WTO members as a whole.

While Agriculture and Agri-Food Canada is responsible for agricultural trade policy, DFAIT is the lead agency on Canada's overall trade policy and as such deals with the implications of the MPC issue and any government action on it from the perspective of Canada's overall trade relations.

I will turn it over to my colleague, David Usher, to briefly address the tariff rate quota administration dimensions.

[David Usher, Director, Trade Controls Policy, Department of Foreign Affairs and International Trade]

Thank you, Mr. Chairman and members of the committee.

Bonjour, tout le monde.

I am the director of the trade controls policy division within the Department of Foreign Affairs and International Trade. Our division is responsible for the administration of Canada's agricultural import controls, one of which deals with the tariff rate quota for natural milk constituents.

I'd be pleased to answer any questions you may have later on.

Thank you.

[Graham Barr]

Thank you, David.

Now I'll turn it over to the Canadian Food Inspection Agency to introduce itself and explain its role.

[Greg Orriss, Director, Bureau of Food Safety and Consumer Protection, Canadian Food Inspection Agency]

Thank you, Graham. Thank you, Mr. Chairman.

My name is Greg Orriss. I am the director of the Bureau of Food Safety and Consumer Protection for the Canadian Food Inspection Agency. I am pleased to have an opportunity to appear here today and provide some brief opening remarks.

The CFIA is the Government of Canada's key science-based regulator for food safety, animal health, and plant protection.

The Canadian Food Inspection Agency is mandated to safeguard Canada's food supply and the plants and animals upon which safe and high-quality food depends. In carrying out this mandate, the CFIA is committed to serving Canadians by providing protection from preventable health risks, delivering a fair and effective regulatory regime, sustaining the plant and animal resource base, and promoting the security of Canada's food supply. In fulfilling its mandate, the agency works in partnership with other government departments at the federal, provincial, and territorial levels, as well as internationally and with industry, consumers, and other stakeholders.

To deliver its broad regulatory mandate, the CFIA verifies compliance with 13 federal acts and their respective regulations, which promote food safety, consumer protection, and animal and plant health. Products that may be subject to inspection or certification by the CFIA range from agricultural inputs such as seeds, feeds, and fertilizers, to fresh foods--including meat, fish, eggs, dairy products, fruits, and vegetables--and prepared and packaged foods.

I'll be pleased to answer any questions the committee may have.

Thank you, Mr. Chair.

[The Chair, Conservative, Gerry Ritz]

Thank you.

[Graham Barr]

Thank you, Greg.

Mr. Chair, we're ready to address your questions.

[The Chair, Conservative, Gerry Ritz]

That would be great.

Our opening questioner is Mr. Easter, for seven minutes.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you, Mr. Chair.

Thank you, folks, for coming.

On this issue, Mr. Chair, I think we should cut to the simple fact that we have a system of supply management in the country that works. I'm of the opinion that many of the bureaucracies in Ottawa do not really understand that system and how it works, and that there's a tendency to let the market decide.

Regardless of that fact, the supply management system has brought stability to a number of commodities in the agriculture sector, and in my view, it is a model for rural development that we should be promoting around the world.

But the MPC issue, as it relates to supply management in dairy, could in fact end up destroying the system, because it reduces the amount of market and basically undermines the system.

The original intent was to be able to prevent dairy products from coming in. That can now be broken down into components, and the rules don't apply the same as before.

Each of your departments has been looking at this issue for some time. We have heard the positions of the Dairy Processors Association of Canada and the Dairy Farmers of Canada.

First, I wonder if you could provide us with what you're recommending to your ministers from your various departments.

Second, we have the CITT ruling and the Federal Court of Appeal decision. I'd appreciate knowing what analysis you folks have done on those issues.

I think that will give us the background we need to move forward.

[The Chair, Conservative, Gerry Ritz]

Mr. Barr.

[Graham Barr]

Thank you for the question.

Over the past several years, the government's commitment and support in defence of supply management has been very clear, whether it was in the WTO agriculture negotiations or defending our dairy practices in the trade dispute with the United States and New Zealand. Our minister was here the other day and made the government's supports for supply management crystal clear.

Yes, this issue has been around for several years. Government officials have consistently provided the same advice and pointed out the same implications for various actions that could be taken to address this issue.

In your question about analysis, can you be more specific as to which particular issue regarding supply management you'd like us to address?

[Wayne Easter, Liberal, Malpeque, PE]

There's the CITT ruling and there's the Federal Court of Appeal decision, basically as it relates to milk protein concentrates. Do you have any analysis of those decisions from each of your departmental perspectives that you can table with the committee?

[Graham Barr]

As you know, in a ruling upheld by the Federal Court earlier this year, we were told by the CITT that the correct classification for a particular milk protein concentrate—a concentration of 87.5%—was in chapter 35. Canada does not have a TRQ for milk protein concentrates in chapter 35. In order to have one, we would need to undertake an article 28 process, so when the question is posed as to what are the implications of undertaking an article 28 process to establish a TRQ in chapter 35 to cover such products, again, our advice has been consistent over the years as far as what those implications would be.