Agriculture Committee on Dec. 2nd, 2010

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Go ahead. You have five minutes, Mr. Shipley.

Thank you to the witnesses for coming out.

Mr. Verheul, I have to tell you, it's great to see you again. I did business with your father, and your mother was part of that business for many years, and I have to tell you that I think your integrity comes in the genes, in the DNA. Thank you for the work you have done, not only on this one--this is to both of you--but certainly also on previous agreements.

That's why I think Canada is moving ahead: we've had good agreements. We are a trading nation and an exporting nation, and these are so significant to it. Part of it is that since I was in supply management, the confidence has always been there, not only with the direction of this government but certainly with our negotiators in taking a positive position on that and recognizing the amount in subsidies that are in the other countries we're negotiating with.

I wanted to talk a little bit about the biotechnology challenges that were mentioned. It is an incredible opportunity for Canadians and Canadian farmers. You also talked about the regulatory cooperation. I'm surprised that this has just come in at this time. I'm always wondering what we can think about ahead of time to prevent something from being a big problem and ending up as a challenge.

I had a motion that went through Parliament talking about how we can work with other countries, maybe the United States, maybe Australia, but certainly Europe. We're getting the regulatory process and the licensing, but whether it's for pesticides or animal health or medications, is this something that would fall within that regulatory cooperation, so that you could work ahead to help smooth the trail so that we aren't actually on separate pages? Now the globe is such a small place that we can actually work through it so our farmers aren't disadvantaged because somebody else has the upper hand in getting something licensed ahead of our country. Maybe we don't have the population to get it done, but is that something that would fall under the regulatory cooperation?

[Steve Verheul]

Absolutely. I think we've been putting a lot of effort behind the whole area of regulatory cooperation, because we see this as providing a lot of benefit over the longer term.

It's always easier if you can prevent a significant difference from occurring rather than having to deal with it once it has already happened. It is far harder to change a regulation once it's in place than to have agreed beforehand on the direction you're going to go in.

The more we go in that direction of getting our regulators together, and getting them on the same page, and going towards either similar regulations or complementary regulations, those barriers will never even come up and you'll have a much more smoothly functioning trade system. We're putting a lot of emphasis in that area.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

One of the other things you talked about, which came up in terms of biotechnology again, was about being able to market, about being out there ahead of the game, so that we know that there will be environmental benefits, that the farmer will get a benefit, that the consumer will get a benefit. How do those get determined?

We often get caught up, sometimes, because somebody jumps in and says, well, we've got this emotional issue, or we've got some myth that says these aren't good.

Is it science that actually will be the thing that moves us ahead? How do we make those arguments to other countries so that when we say it to one country, they actually know that it will be true for the next one in terms of our basis?

[Gilles Gauthier]

I think your question is very well put.

Clearly for Agriculture Canada, Minister Ritz has devoted tremendous effort over the past couple of years to foster the notion of a science-based approach to trade rule so we can ensure that when we devise trade rules in an agreement, they are rooted very solidly in a science approach.

There is already that to some extent in the WTO context under the agreement on sanitary and phytosanitary measures. In order for a country to impose an import barrier, it has to be substantiated by scientific evidence. If not, then you are in violation of your commitment, and you have to provide for compensation. That's precisely the outcome that we have achieved in the beef hormones case, where in our view there is no scientific evidence to prevent the export of hormone-treated beef. For various reasons the European Union maintains their ban, but as a consequence we negotiated a settlement that will now allow us to have some new access for our beef.

So I think the principle of a science-based approach is very important to our trade agreements.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

I will just to follow up on that, because in my riding and Ontario generally, beef and pork are key industries. You talk about the improvement in beef. Obviously, in those negotiations, being able to go back and always being able defend it with science is important.

You talked about only 1,000 tonnes of pork. What is the opportunity there for our Canadian pork producers?

[Gilles Gauthier]

Well, as I said before, the European Union is a very large market for pork products. They consume around 20 million tonnes per year. It is a closed market, though. Their import penetration level is very small. There are some countries, mainly in Latin America, that have some access to the European market. But we feel, given our international competitiveness in the pork sector, that if we were to get preferential access to that huge EU market, it could represent huge opportunities across the whole sector.

Currently, not only does the sector face tariffs ranging from 30% to 70%, which eat up all of the profit margins you can anticipate, but we also have to work on some of the regulatory approval processes. We currently have only two processing plants that have been approved. I think we need to continue with that and work with their sanitary and phytosanitary experts in Europe to get these matters resolved.

[The Chair, Conservative, Larry Miller]

Okay, Bev, you're well over your time, thank you.

Mr. Eyking, for five minutes.

[Mark Eyking, Liberal, Sydney—Victoria, NS]

Thank you, Chair.

I thank the trade negotiators for coming here today.

My question is for you, Steve.

You've been doing this job quite a while in representing Canada. I don't know if it's been 10 or 15 years, but as long as I've been around, you've been doing negotiations for us. You have participated in many trade deals or negotiations around the world, in different areas and places. When we look at Canada, it seems that all political parties are for supply management; farm groups are, and even consumers are quite favourable toward supply management.

We realize that you and your group get marching orders from our trade and agriculture ministers to protect our supply management. What we see are the negotiations taking place.

I'm asking you, what's your sense when you're not at the table, when you're having a coffee with your colleagues or lunch, whether it's in Geneva or wherever it is? What are they saying? Are they jealous of us? Are they angry with us? Are they interested in our model? Or are some of the emerging economies and African countries who are worried about food security thinking, “You know what? These Canadians might have it all right: is there a way we can have their system?”

I say this because I think the more allies we have or the more people who are thinking about using our system, the better the chance we're going to have to protect it. But if we're always standing there alone with this system that people don't understand....

So what is your sense, beyond the table, when you talk with and repeatedly see your colleagues? Maybe you're the most senior guy up there now, so they're asking you the questions. But tell us what it's like away from the table, when you're talking to all these other countries or representatives.

[Steve Verheul]

Well, I think when you talk to any trade negotiator from another country, what he or she is mainly interested in is access to your markets, particularly if you have higher-priced markets. They are much less focused on the kinds of systems you might have in place, such as supply management; they just want access to the market. So that's why countries like New Zealand and Australia, the U.S., and also in Europe have interests primarily in our dairy market. They just want to see more access to our market.

But we're hardly unique in that. Virtually all developed countries and many developing countries have sensitive commodities they're protecting as well. We all come to the table with areas in mind where we're looking for more from other countries, and areas we're looking to protect, so it all works out in the end. Just as we're being pressured in areas like dairy, we're pressuring others in areas that are of sensitivity to them—and, in the case of the European Union, beef, pork, and a number of other products.

So it comes down to a negotiation. But we've been making it clear for years that, in our case, supply management is something particularly special, and we're going to defend it.

[Mark Eyking, Liberal, Sydney—Victoria, NS]

What about these other countries, the emerging economies--let's say the Thailands of the world--who want to protect their food? Are they more supportive of us? How do they see us? Or do they see the system maybe working in some of these countries? The African countries, they're also at the table, aren't they?

[Steve Verheul]

Gilles may want to add a bit to this, but I would say from my experience, from the perspective of most developing countries they're looking at us as a wealthier developed country and, again, they want access to our markets. They're not really in a position to be able to replicate our system in many cases, because they don't have those kinds of structures, but they're mainly looking outward and have different approaches with respect to protecting their own domestic sensitivities.

Gilles, you may want to add to that.

[Gilles Gauthier]

Just briefly, in the WTO context it's quite clear that the vast majority of developing countries are seeking increased access to the Canadian, the U.S, the EU, and Japan markets. That's where they can sustain their growth, sell good products at high price, and therefore expand their economies.

[Mark Eyking, Liberal, Sydney—Victoria, NS]

At these meetings, it's more that somebody else is trying to eat your lunch, and you have to protect it and you're trying to eat it. So it's not that everybody is all excited about your system. That's what their marching orders are there for.

On the topic of marching orders, when European negotiators come to the table, is a common agriculture policy not even brought forward? Are they told that it's not part of any negotiation?

[Gilles Gauthier]

The question of subsidies is very difficult to tackle in a bilateral context. It is more suited to a multilateral framework, because the European Union is not going to embark on reforms of their regime vis-à-vis Canada. They have to do it vis-à-vis the entire world. That's why the question of subsidy discipline is more suited to a negotiation at the multilateral level than in the bilateral context. What we're trying to do in the bilateral context at a bare minimum is to establish some level playing field in terms of export subsidy. You cannot provide export subsidy to ship to your other partner, because that would be unfair competition. But the broader question of subsidies ought be addressed in a multilateral forum.

[The Chair, Conservative, Larry Miller]

Okay, Mark--

[Mark Eyking, Liberal, Sydney—Victoria, NS]

So it's not on the table.

[Gilles Gauthier]

Apart from seeking some commitment on export subsidies, the rest of the subsidy issue is not really relevant in a bilateral context.

[The Chair, Conservative, Larry Miller]

Okay, thank you.

Mr. Storseth, five minutes.

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

Thank you, Mr. Chair.

To follow up on that for a second, Mr. Verheul, you represented Canada at the WTO before this current posting, is that correct? How did we get to this current regime of subsidies? I always get the question from my producers that the U.S. and the European Union are allowed to subsidize so much more than the Canadian government is allowed to.

How did we get into that position? When did that happen?

[Steve Verheul]

I think that's happened over a long period of time. Certainly the European Union and the United States have a lot of resources at their disposal to provide support to agriculture, and have done so with enthusiasm over the years. What the U.S. and the EU have done in particular, particularly in the EU case, is move away from systems of price support, by and large, and moved more in the direction of direct payments, that are considered to be less trade-distorting than price support. This has given the EU the flexibility to offer reductions in subsidies of 80% to 85%, trade-distorting subsidies at the WTO; in the U.S., it's 70% or so.

It was actually a Canadian idea that would have countries like the EU and the U.S. cut their subsidies by a much greater percentage and margin than Canada would have to do. That idea has been accepted. That was a significant gain on our part.

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

When was that idea presented?

[Steve Verheul]

We originally presented that idea I think back in 2006 or so, but it has been adopted and has appeared in all of the texts that have been drafted since then.

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

I think it has been a great success for our agriculture sector.

I have a quick question for you on the importance of science. I know we've talked about it, but I want to emphasize it. You guys agree, do you, that it's important that we stick to a science-based approach and science-based outcomes rather than move into market-based or anything else?

[Gilles Gauthier]

Absolutely. It's fundamental for the agriculture sector that we have to rely on a science-based approach too.

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

I agree. I agree 100%.

What is your perception of the opportunity here? When I go around, I talk to local producers in my riding. We talk about a European free trade agreement. They're very excited about it.

One, are you getting the same feedback from the national farm organizations? And two, what is your perception of the opportunity here for our agricultural sector?