International Trade Committee on June 12th, 2006

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Friesen.

Mr. McCreery.

[Liam McCreery]

I'm just going to go back to the Doha mandate. Part of the Doha mandate is substantial improvements in market access, and clearly, for exporters who face huge tariffs, we need this addressed on our behalf.

The goal of the WTO is trade liberalization. That is the reality of it, and that is very, very positive for Canadians because this country is so dependent on international trade.

[The Chair, Conservative, Leon Benoit]

Mr. Laforge.

[Jacques Laforge]

I have just a few more comments on Bob's point. As far as market access is concerned, if I look at hatching eggs, they're up to 20% or 21%...that they give market access. Dairy is around 6%. That is besides all the other imports of butter oil, sugar blends, and milk protein concentrates. Turkey is 5%, and poultry, meaning chicken, is even higher than that, at 7.5%.

What we're saying is we're tired of giving while everybody is minimizing. This is not a fair way to deal. Let's clean it up. Let's go up to the same level from a consumption perspective and then we'll see what we have and the kind of trade we have. That's the concept we're toying with.

[The Chair, Conservative, Leon Benoit]

Mr. White, did you want to respond? Go ahead, please.

[Rick White]

Yes, just quickly.

Our views are pretty well known. We have to get these tariffs down, not up. That's the bottom line with us. We can all come to a commonality going down, possibly, if everybody comes down, down, down, as opposed to people coming up to a higher common denominator. That's going in the wrong direction.

Responding to your question about biodiesel and whether it will help, canola oil is priced alongside soybean oil and palm oil, and all around the world veg oils in general are based on a world market. Biodiesel production in Canada will allow us to sell to a different market for the same price. We still have to tackle the issues of trade-distorting practices in the world market to enable the world price of veg oil in general across the board to come up.

Biodiesel will help, but it won't help very much in and of itself. The law of one price holds, and a biodiesel producer will not pay one cent more than a food market offshore.

[The Chair, Conservative, Leon Benoit]

Thank you.

You have about one minute left.

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

Finally, it's my understanding, then, that we can gain market access only by compromising or changing our supply management system. Is there no other way that we can gain more market access and bring those other subsidies down, other than fooling around with our current supply management system, just to be blunt?

Mr. McCreery.

[Liam McCreery]

The WTO is about trade liberalization and tariffs coming down, and every commodity will have to adjust to the new rules of the game.

Let's put it in perspective from my point of view. I grow corn, soybeans, and wheat in southern Ontario. I sit about 250 kilometres away from the American border. The United States subsidizes their grains and oilseeds sector to the tune of $15 billion. That product comes across into Canada with zero tariff: no over-quota, no under-quota, no peaks, no caps, nothing--zero percent. That's what I compete against on my farm in southern Ontario.

So when you talk about a common end point, the goal of the WTO is eventually to have zero tariffs. That's the common end point.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Atamanenko. Thanks for coming to our committee. I've enjoyed having you here.

Now to the five-minute round, starting with the official opposition, the Liberals, Mr. Temelkovski.

[Lui Temelkovski, Liberal, Oak Ridges—Markham, ON]

Thank you very much, Mr. Chair, and thanks to the presenters.

I had a meeting with the dairy farmers in my riding recently and they were informing me about how difficult their job has become, especially with summer coming and ice cream being so popular. They tend to think that not all of the problems are on the trade issue; there are also internal problems, in terms of labelling and identifying ingredients in products.

Can you give us a little bit more on that?

[The Chair, Conservative, Leon Benoit]

Who is the question directed to?

[Lui Temelkovski, Liberal, Oak Ridges—Markham, ON]

Mr. Laforge, I believe--the dairy group.

[Jacques Laforge]

As far as the dairy issue is concerned, there are quite a lot of internal issues. There are import issues also, but I think you were referring to the internal issues.

There has been a lot of dialogue with the Minister of Agriculture, Minister Strahl, and there's been a lot of dialogue between the processing and the producer sides of the industry in the last two months. There has been a table set up for the producers and processors to sit down and negotiate to resolve some of those issues. We all committed to that. It starts in the first week of July, when we're going to be looking at some of these issues.

The minister won't be involved throughout the whole meeting, but at the end of those negotiations the minister will take time to sit down with us, with both sides together, to see what we have accomplished and look at all these domestic issues.

They've been dragging for awhile, and we're trying to address them. They're basically around compositional standards, labelling, and the use of dairy ingredients and milk in dairy products.

[Lui Temelkovski, Liberal, Oak Ridges—Markham, ON]

Is it also true that most of these ingredients come from across the border? Again, I go back specifically to ice cream. Over 70% of the ingredients used come from the States and are therefore cutting the availability of Canadian dairy.

[Jacques Laforge]

We could provide you with very precise information on that, but when you talk about ice cream it's one issue, and imported milk protein concentrate is more cheese-related, so the two are not together. Imports on ice cream are more the butter oil-sugar blend that they import in bypassing the tariff line and replacing butter or cream, which really affects the revenue of producers. There's nothing we can do about this. It has been going on for nine to ten years now and has never been addressed. We've lost over 60% of the ice cream market from a domestic perspective. We're still looking at how to resolve that, but once it's lost, it's lost.

On the milk protein side, there have been tremendous differences of opinion on what you're able to use in the making of cheese, like raw milk, and what kinds of ingredients are legal and not legal. We also have two acts, the federal drug act and the CAPA act, which contradict themselves. This is what the industry has to come up with, in terms of an agreement on both sides, on how to resolve these issues.

[Lui Temelkovski, Liberal, Oak Ridges—Markham, ON]

Moving to Mr. Friesen, could you maybe give us some sort of definition of what you would define as a win-win for us when we're negotiating as well as pushing to the wall? These are fairly sexy words, but I'd be interested in finding out from you a little bit more on this.

[The Chair, Conservative, Leon Benoit]

Mr. Friesen, you have one minute to answer.

[Bob Friesen]

Thank you.

Win-win would be significant market access improvement for exporters, profitable market access, and market access that makes a real difference. A win-win deal is one that would ensure that supply management in Canada is recognized for the transparent market access commitments that have been made, and it would be a deal that doesn't undermine our ability to maintain supply management as well as other orderly marketing structures.

On domestic support, this is a very important issue with regard to market access as well as with regard to it costing our industries a lot of money to compete against subsidies in other countries and with regard to achieving equity when it comes to domestic support. And here I go again to the example of product-specific, where a country like the U.S. will be capped at a very high level, whereas Canada disciplined itself, didn't flow a lot commodity-specific support, and they will be capped down here. So we need equity there as well.

[The Chair, Conservative, Leon Benoit]

Thank you.

Now to the Bloc, Monsieur André, five minutes.

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

Welcome to all.

First, I would like to point out how important your work is. The Doha round of negotiations is important and difficult. On the one hand, we want to preserve our agricultural market, and on the other hand, we want to export more of our products into other markets. I think that each country is more or less in the same situation, because each country has its own sensitive products and wants to export more while maintaining their domestic systems.

As all of you said, when we compare European and American farm subsidies with Canadian ones, it's obvious that we are at a clear disadvantage. We want to protect our supply management system at any cost because it is important for our own agricultural sector. We want to maintain a certain degree of food autonomy. It's all very well and good to sing the praises of global trade, but we must nevertheless maintain a certain degree of protection of our own food supply and not export it all beyond our borders. So it's not an easy situation. And that is why the Doha round of negotiations is difficult.

What, in your opinion, should we be willing to let go? In the course of negotiations, it's all a matter of give and take. That's what negotiations are all about. So what should we give and what should we take? What is it that each of you has to do in your respective sectors in the course of these negotiations? You can all answer in turn.

[Jacques Laforge]

I can answer first and can tell you what we are willing to give and what we have already lost in the dairy sector. I've already told you what we have lost. For instance, as I mentioned a little earlier, we are willing to reduce the applicable tariff rate within the quota limit to zero for all countries. We hope that all the other countries will follow suit, including Europe, Norway and Japan. As we've said in the past, this we are willing to do.

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

But that would not apply to sensitive products.

[Jacques Laforge]

Yes, it would also apply to sensitive products. I'm talking about the applicable tariff rate within the limit of the quota, but not regarding the off-quota tariff rates. In other countries, the rate is fairly high, but they are not bringing it down and they are not even talking about it right now.

We know that subsidized exports will be phased out by 2013. This represents a decrease in production between 2 and 4% for the dairy industry. We appeared before a panel with the United States, and this panel said that the domestic price was different from the export price and that this meant that exports were therefore subsidized. We were told to eliminate between 2 and 4% of our production. I believe that is enough. We know that we have a 5 or 6% access to the market, and there are other countries, such as the United States, which are at 2.5%. I'm just telling you what we are willing to give, but we do not want to give anymore because we have already done enough.

[The Chair, Conservative, Leon Benoit]

Mr. White.