International Trade Committee on Dec. 5th, 2006

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Yes, and the other countries have already done that.

[Yves Leduc]

The United States and Europe have already implemented these measures.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

That's incredible.

That is important, since it will be discussed in coming days. It will involve another industry sector, but I do hope that the government representatives who are here today are listening.

[Yves Leduc]

What we must not forget is that Canada has that right.

[Jacques Laforge]

Canada is always timid when faced with this type of situation. It hates to do anything that is not within the realm of free trade, while all of the other countries are doing it. We have to wake up.

The damage caused to the dairy industry in the case of butter oil and milk protein has a cumulative effect. There is no way to ship these products to the United States or to Europe. They decided to stand up for themselves and take the situation in hand.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Thank you.

Last year we met with the Canadian government's chief negotiator. He said that Canada's position on supply management was to maintain supply management within the dairy sector, but that the United States wanted the sector protected by supply management to be reduced by 90%.

The chief negotiator said—and I found this somewhat worrisome—that in the end, negotiations should lead to a compromise, meaning that half of the sector that was protected by supply management would loose that protection.

What would happen if this were to come about?

[Jacques Laforge]

When the United States speaks, we have to sit up and take notice—

[Peter Julian, NDP, Burnaby—New Westminster, BC]

But our own negotiator talked about meeting them half-way.

[Jacques Laforge]

Yes, but the United States have a tendency to always adopt an extreme position. They have the power to do that. They won't take it all the way, they want all of the other countries to defend their own interests. In this case, our own negotiator is saying that he will defend the interests of the United States. He will start with their extreme position and bring it back half-way.

With their subsidies and their decoupled payments, and so on, the United States can manage this type of situation; that is not the case for Canada. The conditions are not the same in the two countries.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

So what will the consequences be?

[Jacques Laforge]

We can already see what is happening in the dairy industry. We are losing $2 million a month on the milk protein concentrates, and these loses a constantly growing. We are working on a solution to the problem. I think it can be done within the industry as a whole. With respect to eggs, I will only say that the exchange rate will certainly have an effect on producers' income.

[The Chair, Conservative, Leon Benoit]

Thank you, Monsieur Laforge.

Mr. Julian, your time is up.

We'll now go to the second round. We'll go to Mr. Maloney, please.

[John Maloney, Liberal, Welland, ON]

Mr. Shauf, I believe in your presentation you indicated that the United States, Mexico, and Australia were undertaking bilateral agreements with other countries to our competitive disadvantage. Should we also be doing bilaterals, either by ourselves or with the United States? If so, why aren't we?

[Marvin Shauf]

Canada should be doing bilaterals and Canada is doing bilaterals. We're suggesting that there be more resource and more energy put to it, because there's a great deal of energy being put to it by other countries. There's a lot more energy being applied to it since WTO was discontinued.

There is, however, a problem with a lot of bilaterals, and that is that bilaterals never deal with domestic support issues. It is what makes WTO the best place to be able to deal with this. Domestic support, as I said before, underlies much of the problem relative to trade today. It was what created surpluses. It was what caused countries to say they can't allow our subsidized product to come in. It created oversupply, and it caused countries to use export subsidies to pump it into the world marketplace.

There does need to be a very strong focus on domestic support resolution. I think that is the most solid argument for doing it through WTO. We should be spending considerable resources on bilaterals, just because other countries are.

[John Maloney, Liberal, Welland, ON]

With the Doha Round being in a state of uncertainty, although it may be preferred, should we again proceed to the less preferred route with the bilaterals?

[Marvin Shauf]

We should be keeping abreast of the rest of the world, certainly, in that context.

[John Maloney, Liberal, Welland, ON]

Mr. McCreery, did you have a comment?

[Liam McCreery]

I absolutely agree, Marvin. Bilaterals do not address the $360 billion in trade-distorting subsidies and usually do not discuss sensitive products. So bilaterals are a noble goal, but they need to be built on a strong foundation of the WTO.

I have to do a quick plug for the pork producers in Saskatchewan and Alberta, who are members of CAFTA as well. They need lower tariffs to get their quality product into Europe.

Mr. Julian, you talked about special safeguards; the Europeans are using NTBs and mischievous applications of tariffs to keep quality Canadian pork out of their markets. So, yes, let's go after the bilaterals, but never at the expense of the WTO, especially for agricultural problems.

Thank you.

[John Maloney, Liberal, Welland, ON]

The dairy farmers have been advocating that we should be implementing article XXVIII of the GATT with respect to milk protein concentrates. We've seen examples of other trading blocks, for instance the EU, which did that with poultry recently.

You would advocate that, Mr. Laforge. What is the reluctance of the Canadian government to pursue article XXVIII in relation to the milk protein concentrates, and would we have to give something up? Would there have to be some compensation?

[Jacques Laforge]

Historically it basically works that compensation is 10% above the average three years of imports at the level they have been coming in. When it comes to Article XXVIII, it's one of the approaches we recommended. The minister raised some concern, because we were engaged in bilateral deals, on how article XXVIII would impact. That's his opinion and the legal advice he's getting.

We've looked at the overall situation of dairy in Canada and actually committed to a working group that the minister wanted to take place. We did that, and we're looking at how to move the industry ahead in a global situation from a Canadian perspective, meaning global from Canada, how producers and processors can work collectively together in addressing some of these issues and also maintaining the market share that we have in Canada and growing it. The working group is a lot broader, but article XXVIII is a tool that exists for all countries. Again, we come to a point that we're hesitant on article XXVIII, we're hesitant on special safeguards. Nobody wants to touch something that looks to be protectionist, if you want to call it that. We shouldn't be shy about that, though.

[Yves Leduc]

Very briefly, if I may add to that, the WTO is not only about obligations; it is also about rights, and we should not shy away from using our rights.

[The Chair, Conservative, Leon Benoit]

Thank you.

Thank you, Mr. Maloney.

We'll now go to the Bloc Québécois, Mr. André, for five minutes.

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

Good morning. I am happy to see you here this morning.

I must, of course, say a few words about protecting supply management. Take, for example, the Doha Round negotiations. I think that in the coming months, we will have to work to protect supply management. We have to think about food sovereignty, which is quite important. I do not think that agriculture products should be treated as a currency in the same way as other commodities. However, we should remove some of the barriers for wheat and other grains, as we know that those producers are suffering.

We should negotiate within these safeguards, in other words, we should protect certain sensitive products while allowing other sectors to remain open. I would like to know how you would negotiate within these safeguards.

The Bloc Québécois adopted a motion on milk protein. While supply management is supposed to be protected, milk protein is being imported and this costs our producers dearly. A motion was adopted in the House of Commons. The Conservative Party, which claims to support supply management, voted against it.

As you mentioned, Mr. Laforge, we are prohibiting a practice that is used by other countries, through article 28 of the GATT, for example. Why are we reluctant to protect our own interest when other countries are doing it? We need only refer to the measures adopted by Europe, in the case of Brazil and Thailand for poultry imports.

[Jacques Laforge]

I can tell you what I think, even though I may not be entirely right.

Canada is a net exporting country, which means that it does not operate like the United States or the European Union. Whenever Canada wants to deal with a sector that is protected, these countries go on a frenzy, because there are worried about how that might affect their other commodities, or about retaliation and that type of thing. These mechanisms are good to have, but when the issue is black and white, then we have to know how to take a stand.

It is not the international community that causes us to loose our markets for protein concentrates and butter oil; it is our own Canadian International Trade Tribunal. As is the case with many other similar bodies, the CITT is under review. We have to wake up and take a position on our WTO negotiations. It is undoubtly a tough job to defend supply management at the WTO since it is a unique system. However, the system does work. We are not getting buckets full of cash in subsidies, and the consumers are not paying anymore—in fact they pay less—than the people in Europe and the United States.

Are we going to abandon or allow this successful mechanism to be eroded? That is what Canada has to consider. We have to take a stand and say that it is not negotiable. How do we do that? Well, that is Canada's job.

We know that, unlike Europe and United States, Canada does not have the means to subsidize the dairy and poultry industries. If it were to begin to do so, it is obvious there will be less money for the other industries. The International Dairy Industry is subsidized on a regular basis, and what it produces is constant. It stays in Europe. The European countries are the largest dairy exporters in the world: they export about 15% of their yield so, they can put up with it a lot longer.

In our opinion, it is up to Canada's negotiators to find the tools that they need. We can help them to find these tools and explain what is needed to avoid eroding our markets. Those tools do exist, and the Canadian negotiators must simply be open minded enough to explore the possibilities. It can be done.

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

Mr. McCreery, I would like to hear what you have to say about the opening up of the green market, about wheat, corn, etc. I am concerned with this question. We are protecting supply management and trying to open new markets. What is our negotiating range?