International Trade Committee on Dec. 5th, 2006

[Marvin Shauf]

Thank you.

I believe there are some significant differences in agriculture relative to other products that move around in the world in the context of trade. When you start with plant production, and recognize that as the basis for agriculture in that it provides an opportunity to add value, that's a raw commodity. It's vulnerable to weather. It's vulnerable to government policies. It vulnerable to subsidies. Weather in any part of the world can have an impact on Canadian producers. If there's a government policy change in another country, that also has an impact on Canadian producers. So a lot of base-level vulnerabilities happen in agricultural production that don't happen with other products.

For instance, between Europe and the United States, the subsidies they put in place are designed to overproduce that marketplace demand. They have effectively created a market failure in commodities, in grains and oilseeds commodities. Inside their country, they provide a great deal of advantage to the rest of their supply chain with that overproduction. For Canadian industry, all of our value chain--from producers through the value added in feeding or processing, whether it's milling or malting--is disadvantaged by the Farm Bill.

So I think there are some huge differences between what Canadian agriculture, from top to bottom, has to deal with compared with other products and services that trade around the world. I don't think it should be treated in the same way. There are substantial differences in agriculture products whether or not they are food related, really.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Shauf.

All four groups would like to answer, so perhaps we could have brief answers.

Mr. White.

[Rick White]

Thank you for the question.

From a canola perspective, I guess it is a commodity, for the base commodity anyway. As such, it should be treated no differently from most other commodities around the world. We're looking for open markets, free markets, non-market-distorting practices on production and prices.

If we have clear and undistorted free market signals out there, then I'm confident our producers can survive. The way they will survive is not to fall into the commodity game that some commodities have. With canola in particular, we rely heavily on technology and keeping our product differentiated, keeping it healthy, and keeping it ahead of the curve in terms of its competitive value out in the marketplace so that it does not become just a basic raw commodity.

I think that would apply to just about any commodity, but specifically to canola, that is how we are competing, or trying to compete, in the world market. To do that we need clear and unambiguous market signals out there so that we know what to produce, when to produce it, and how much to produce.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. White.

Mr. Laforge.

[Jacques Laforge]

I think that is a fundamental question.

During the Second World War, we came to realize the importance of food production during war time. Europe could no longer feed itself: everything had been destroyed. One of the greatest concerns was how to feed the troops, how to provide food when Europe was being bombed, particularly during the last two or three years of the war. We learned a great deal from that experience. Europeans could tell us quite a few things about tit.

When it comes to our global trade approach, we must take care when comparing metal exports to exporting food or our food products. When it comes to food commodities, when we talk about milk, wheat and canola, these are very different things. For example, the milk must leave the farm to be processed after two days. I can't stock it in a warehouse for five years. In an era of globalization, we have to look at things differently: there are sensitive commodities and non-sensitive ones, for various reasons. We must also respect every country.

[The Chair, Conservative, Leon Benoit]

I'm sorry, I must get you to wrap your answer up very quickly. We're running out of time. Then we'll go to Mr. McCreery.

[Jacques Laforge]

Each country's demand should be respected. That is why we are not making very much headway with the WTO. Everyone has sensitive commodities, not only Canada. We are not talking about supply management, but about these perishable commodities.

Thank you.

[The Chair, Conservative, Leon Benoit]

Thank you very much.

Mr. McCreery.

[Liam McCreery]

Thank you, Mr. Chair.

That was an excellent history lesson, Jacques. After World War II, our country sat down in 1947 and developed the General Agreement on Tariffs and Trade as a way of getting countries to work together, because, as Cordell Hull said, “If goods can’t cross borders, armies will.”

The success of the GATT for industrial products has allowed tariffs to go to 4%. The average tariff we face as agricultural producers in the agriculture sector is 60%. So, yes, Monsieur André, we would like to have a trading environment that is much closer to industrial products so that as exporters we have an opportunity to compete in a fair world.

[The Chair, Conservative, Leon Benoit]

Thank you very much, and thank you, Mr. Cardin. Your time is up.

We will now go to Mr. Menzies.

[Ted Menzies, Conservative, Macleod, AB]

Thank you, Mr. Chair, and thank you, gentlemen. It would have been nice if we'd had some women representing these organizations. I know that CAFTA now has a lady as its president--and, Liam, thank you for filling in, because we know it is a long way from Saskatchewan for her. We do appreciate your comments.

I had the privilege on the weekend of visiting with Mr. Lamy, and this seems to be the topic of focus today, as to whether or not we are going to restart the negotiation. He refers to the challenge that he put out last week as a soft start to the negotiations, so I am softly encouraged, I guess. We have a long way to go. We know we're facing a deadline with the trade promotion authority in the U.S. There are some deadlines there, but he suggested that he will try to encourage, not necessarily a ministerial meeting but getting some leadership back to the table and talking about it.

One interesting discussion that he raised that Supachai probably would never have dared raise was the issue of aid for trade. This is a bit of a different focus, and I'm not sure if all of you are up to speed on it. It is a method of building capacity in least developed countries so they can actually participate in this multilateral trading arena that we are so fortunate to be able to trade in.

I am encouraged by that because it actually brings it back to the reason the Doha Round was started, that being development. We all seem to cocoon ourselves in protectionism--and certainly Canada is not exempt from that--in trying to protect our interests. We absolutely forget about the fact that we're spending $360 billion a year in protecting our farmers around the world, yet we only spend $60 billion in helping out the poor people. How can we get off this protectionist mode and allow other countries to participate?

I would like a quick comment from all of you, if I may.

[The Chair, Conservative, Leon Benoit]

Let's go down the line, starting with Mr. McCreery.

[Liam McCreery]

Thank you, Mr. Menzies.

It is an interesting concept, aid for trade, but you wonder how it would actually work if we, say, set up a developing country's infrastructure to trade and yet they still couldn't leap over the prohibitive tariffs of the most developed countries in the world, the G-10, the EU, the United States, Korea, Japan.

If we set them up, we have to give them the opportunity. The way you give them the opportunity is through the Doha mandate, which is lowering tariffs. It's going after those subsidies, so that when people are exporting cotton from Africa, they don't have to go up against the American cotton subsidies.

Absolutely fundamental to the Doha Round is to help development, and it is doing it by providing the real tools--market access and getting trade distortions out of the market--to all countries of the world.

That is an excellent statistic. We spend over $350 billion a year to give subsidies to farmers and distort markets. That's the richest of the rich doing that. Then we say to the poorest of the poor, “Here's $50 billion to deal with your devastated economies. Here's $50 billion to deal with the economy that doesn't have an opportunity to compete because you're getting produce exported into your market from the subsidized richest of the rich countries.” So the whole idea of the Doha mandate is to provide those opportunities.

Thank you.

[The Chair, Conservative, Leon Benoit]

Mr. White.

[Rick White]

I don't really have a lot to add to Liam's comments. The Doha Round was meant for and focused on developing countries and helping them get into the game per se. If we ratchet down the trade-distorting support and ratchet down the tariffs, that is not only good for our farmers as exporters, but developing countries are more able to get into the game.

They cannot compete with foreign treasuries. We can't compete with foreign treasuries, let alone the developing countries. So the answer really is, as Liam said, more open free trade markets; developing countries will have their best shot through that venue.

[The Chair, Conservative, Leon Benoit]

Thank you.

Mr. Laforge.

[Jacques Laforge]

I think that's a very good question. The more you do trading across nations—I mean, in a balanced way—probably the better off countries are overall.

Our point, Mr. Menzies, is that we all relate it back to farm income. Trade is one thing; farm income is another thing. Right now, farm income is balanced through payments—call them export subsidies and so on.

If we take a pure approach, coffee farmers around the world should be millionaires, and they're one of the poorest groups—I'm talking about at the farm level. And coffee trades.... There's a theory out there, and there's the logic of what's happening.

We really have to make sure this is addressed properly, and in a fast manner. That's why the Canadian position on trade for CFA was, let's give clean market access. Remember that? Let's get clean market access: let's eliminate all the in-quota tariffs.

We don't have any problem eliminating in-quota tariffs. Let's see how trade does, and we'll learn from that. Let's see if those export subsidies all go down; we'll learn from that.

We have to be extremely cautious, because Canada is sitting in a very vulnerable position when it comes to those issues. We say, be careful and make sure it's legitimate when we adapt these policies.

[The Chair, Conservative, Leon Benoit]

Thank you.

Mr. Shauf.

[Marvin Shauf]

Thank you.

I think the key to this is going to be to recognize that market signals are made in government policies. If we continue to try to open market access without dealing with that domestic support issue, we open the world up for market access, with reduced tariffs, to fill up with subsidized product out of countries that have high domestic support.

Ultimately, what we do then, or if we provide them with aid at undervalued values, is ensure that they never will become profitable in those countries. That isn't development. That's about de-development.

What we need to do is get some true market signals, which means that we have to do away with the domestic support that is so trade-distorting. Once we get that.... The reason we have tariffs in most countries is that they don't have the ability to provide domestic support, and the only way they can protect their producer is with a tariff to make sure they don't just flood with subsidized product.

When we start to deal with those things in real terms, then I think we will have countries be able to provide themselves with sufficient income to become buyers in a real marketplace.

The underlying key to a lot of the issues that we have in trade problems is completely related to domestic support that allows for the overproduction that depresses commodity values globally. Producers in undeveloped countries can't compete in that marketplace. Producers in Canada can't compete in it. It is the key to resolving trade issues, I think.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Shauf.

Mr. Menzies, your time is up. I thank you all for giving a short, concise answer.

Mr. Julian.

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

Thank you, Mr. Chair. I always like following Mr. Menzies.

It's important to note that if the Doha Round was really about helping the poor, there wouldn't be many progressive democracies in the third world who are very much opposed to the direction the WTO is taking.

I'd like to thank each of the witnesses for coming forward today, particularly the Dairy Farmers of Canada. I particularly was interested to see in your brief that the bulk of revenue from Canada's agriculture and agrifood production--over 70%--comes from the domestic market, that the Dairy Farmers of Canada do not believe in an unregulated marketplace, and that trade liberalization will not improve the overall economic welfare of the dairy farmers; that in fact a USDA-sponsored study demonstrates the opposite is true.

Certainly we've seen that the approach the previous and current governments have taken in trade has led to devastating losses in many of the manufacturing industries; we've seen the softwood lumber sellout, in which we've lost 4,000 jobs just in the past few weeks, so it's important that any steps we take in agriculture be appropriate to avoid devastating agricultural communities in the same way we've devastated softwood communities, textile communities, and manufacturing communities across the country.

It's interesting to note that most Canadian families are earning less than they were 15 years ago in real terms, so something is fundamentally wrong with how we are approaching our economic development.

I'd like to come back to the Dairy Farmers' presentation. You mentioned very specifically that the government should be putting special safeguard measures into play. It's something that we're actually discussing now in terms of the apparel industry. I'd like to know more specifically what you believe the government should be doing in putting into place safeguard measures to protect our agricultural communities and the families that depend on the agricultural sector.

[Jacques Laforge]

Maybe I'll answer in a short version, and maybe Yves will want to add to this.

From a dairy perspective and even on eggs right now, what we're saying is to start talking to us. Let's put a policy in place on special safeguards, because we don't have a clue. They defend it at WTO. They should be there, but when it comes to applying them in Canada, they're not doing anything.

This is not just for supply management. There might be other commodities that want to use special safeguard measures, but since the last WTO round, they have done hardly anything to put that policy in place. We don't even have a clue about how they're looking at it.

Maybe Yves wants to add to that.

[Yves Leduc, Director, International Trade, Dairy Farmers of Canada]

Mr. Julian, at the end of the Uruguay Round, Canada essentially negotiated through the tariffication process in which, for the most part, supply-managed products were tariffied and TRQs were established. That's also the case for a number of beef and grain products as well. That right was negotiated at the end of the Uruguay Round. It's part of the WTO obligations and rights that Canada negotiated, and we're simply asking that these rights be made operational here in Canada. It's a regulatory process that needs to be put in place.

There are discussions currently taking place within the Department of Finance and within the Department of Agriculture and Agri-food. There has not yet been any recommendation by the Minister of Finance, who is responsible at the end of the day to make these measures operational, to go ahead and operationalize them. There's been a request from the supply-managed industries to go in this direction, and we're awaiting a decision from the minister right now. It's a right we have.

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

When did you request that of the government?

[Yves Leduc]

Officially, we began our talks a little over a year ago with representatives of Agriculture and Agri-food Canada. They, in turn, spoke to the people at the Department of Finance.

We were told that the technical aspect of the implementation had been studied, but that the minister had not yet decided to move on these measures. Until the recommendation is made, these measures cannot be operational. We want to improve Canada's international credibility, but before asking for the special safeguard measures to remain in place, we must do our own homework.