Bill C-40 (Historical)

An Act to amend the Canada Grain Act and the Canada Transportation Act

This enactment amends the Canada Grain Act and the Canada Transportation Act to implement a decision of the Dispute Settlement Body of the World Trade Organization relating to the handling and transportation of foreign grain and grain products in Canada.

Canada Grain Act

[Don Boudria, Liberal, Glengarry—Prescott—Russell, ON]

Madam Speaker, it is my pleasure to speak today to Bill C-40, to amend the Canada Grain Act and the Canada Transportation Act.

I would like to start with the grain related provisions in the Canada Transportation Act. The revenue cap is shipper protection that places a limit on the revenues that CN, Canadian National, and CPR, Canadian Pacific Railway, can earn from certain Prairie grain movements. The revenue cap provisions came into effect in August 2000, and the revenue cap replaced the maximum rate regulation that had been in place for over 100 years.

First, I will provide a brief historical review to help illustrate key aspects of the revenue cap. In the late 19th century, the Government of Canada asked the CPR to provide reduced rates on certain railway movements, as a condition for funding the construction of a rail line from Lethbridge, Alberta, through the Crow's Nest Pass to Nelson, British Columbia. Among other things, the reduced rates applied to eastbound grain and flour shipments from the Prairies to what is now Thunder Bay. I think it was called Fort William at the time. These reduced rates became known as the “Crow rates” and only applied to the CPR shipping points existing at the time of the agreement.

In the 1920s, the Crow rates were expanded and applied by statute to shipments from all existing and future points in the Prairies on all railways and to both western and eastern movements. The statutory rates for eastbound movements applied regardless of whether grain was intended for domestic use or export, and were imposed as far as Armstrong and Thunder Bay, Ontario, the two shipping ports.

The statutory rates for westbound movements applied only to exports through Vancouver and Prince Rupert. In 1931, the rates were further extended to include northbound export grain shipments to Churchill, Manitoba. Shipping from Manitoba, especially to northern Europe, involved shorter distances for ships.

In 1984, the Western Grain Transportation Act introduced a period of cost-based rate setting. The WGTA applied to the same essentially eastern and western movements of grain, but replaced the fixed statutory rates with a system that established maximum rates based on railway costs. In essence, it was designed to allow the railways to recover their variable costs plus a full and fair contribution to their constant or fixed costs, that is, system costs that did not vary with traffic. The WGTA included government subsidies to the railways to offset the full freight rate.

In 1995, the WGTA was repealed and superseded by new western grain transportation provisions, which were incorporated into the CTA when it was implemented on July 1, 1996. This second regime continued maximum rate regulation based on the maximum rates in place but eliminated the government subsidies.

On May 10, 2000, the government announced reforms to its grain handling and transportation policies to promote a more commercial, competitive and accountable system.

The policy reforms followed extensive consultations led by Justice Willard Estey in 1998 and by Arthur Kroeger in 1999.

One of the major policy reforms was an amendment to the CTA that replaced maximum rates with a cap on railway revenues from grain movements. Other amendments included grain-dependent branch line rationalization improvements, and refinements to the Final Offer Arbitration process. As well, there were other reforms related to grain handling and transportation system monitoring, Canadian Wheat Board tendering, and funding for roads in the Prairies.

I would like to speak briefly about these latter reforms before I discuss the revenue cap. The 2000 amendments to the branch line provisions facilitated the transfer of grain-dependent branch lines to community-based shortlines, and required the railways to provide transitional compensation of $10,000 per mile annually for three years to affected municipalities when a grain-dependent branch line is closed.

To respond to a long-standing concern from shippers, a faster Final Offer Arbitration process for disputes under $750,000 was introduced. The time frame for this process was set at 30 days versus 60 days for larger disputes.

The 2000 policy reforms also saw the introduction of a program to monitor and report on the grain handling and transportation system. The program is providing key information to the federal government and other interested parties on the impact of grain handling and transportation reforms, and the overall performance of the system.

The Canadian Wheat Board committed to tender an increasing portion of its shipments to the ports of Vancouver, Prince Rupert, Churchill, and Thunder Bay.

Finally, recognizing that the new reforms would increase pressures on rural roads, a five-year, $175 million funding program was established.

I would now like to address the revenue cap.

The goal of the revenue cap is to provide the two major railways, CN and CPR, with greater flexibility to price their services based on commercial considerations, thereby promoting more innovative railway service offerings and generating better market signals for grain to move more efficiently.

The revenue cap applies to grain grown in western Canada and to processed products of grain grown in western Canada. There are over 50 types of grains defined in the legislation as eligible grains under the revenue cap. These include the six major grains—wheat, barley, canola, oats, rye and flax.

The revenue cap applies to the same movements previously covered by the regulated maximum rates. Western grain movements must originate in western Canada, that is, from any point of origin west of Thunder Bay or Armstrong, Ontario, and be destined to the Port of Vancouver or Prince Rupert, British Columbia, for export, or Thunder Bay or Armstrong, Ontario, for domestic consumption or export, or Churchill, Manitoba, for export.

In practice, the cap does not apply to movements to Churchill, Manitoba, because traffic moving to Churchill is inter-changed with a shortline railway that is not an eligible railway under the Act.

As you are aware, grain is exported from Vancouver and Prince Rupert by ship to world markets.

Both CN and CPR serve the Port of Vancouver, while Prince Rupert is served exclusively by CN.

I will continue my remarks after oral question period.

[Tony Martin, NDP, Sault Ste. Marie, ON]

Madam Speaker, I agree that we need these organizations and we need to strengthen them and make sure that they actually do the job they were set out to do.

The problem is we are seeing over and over again that these organizations are being influenced unduly by bigger interests, well funded, well heeled interests, to the detriment of the smaller countries, smaller interests, small farm producers in Canada. We, as a government, duly elected by the people, need to have more backbone. We need to be willing to stand up more often and say, “Hang on here. We are moving too quickly. We do not fully understand the whole consequence of this ruling on us. We want to have some time to take a look at it and see it through and understand the impact that it will have”.

Every time the World Bank or other organizations that direct investment and development around the world meet, they are being targeted by civil society, by groups of ordinary men and women who understand that these organizations, and in some instances duly elected governments, are being unduly affected by well heeled and resourced organizations with tremendously narrow self-interests. That is my concern.

Canada in this instance under Bill C-40 has to consider absolutely everything, including the timing in terms of what we do. We do not want our grain system contaminated in any way and our farmers affected negatively; just as we do not want this terminator seed introduced into our country or third world countries so that it affects the industry and actually decimates it.

We want to see countries like the U.S. brought to heel and have them, as well as us, respond in a respectful way to some of these rulings. We do not want it to seem that it is always the big guys who are winning at the expense of the little ones.

[Tony Martin, NDP, Sault Ste. Marie, ON]

Madam Speaker, I appreciate the opportunity to rise in the House today and put a few thoughts on the record concerning Bill C-40 and the protection of Canada's right to identify what grain is coming in, what grain is moving across our land and what grain is making its way into all of those industries in our country that make product and supply consumers. This is so that all of us are confident and convinced that our health is protected, our economy is protected and, most important in this instance, our farmers are protected.

Having been here for the last eight or nine months and having listened to debate in this House, I have to say that I get a very uneasy feeling that the government does not really understand in a fulsome way the challenges faced by farmers across this country, challenges faced by farmers in my own riding of Sault Ste. Marie, in constituencies across Ontario and in other provinces.

We have had at least three take note debates in this House about the issue of BSE and the impact it is having on producers across this country. People and families invest their life savings and every ounce of energy they have to bring their best game to the table, yet at the end of the day decisions are made at higher levels by governments and organizations that do not seem to understand the priority of the small farmer in this country, and they continue to make decisions negatively.

We have some concern that this is in fact what is happening again in Bill C-40. In some ways we are putting the cart before the horse here. In other ways we are being hauled around by the nose by these organizations out there on the world level, organizations that continue to protect the interests of the most powerful against the smaller entities, the smaller countries that simply want to have a level playing field where these kinds of things are concerned.

BSE continues to rage as a huge challenge to farmers and to farming. The family farm is affected very directly by this. We still cannot get our product across the border because, from everything that I have read, the Americans have decided that it is in their best economic interests not to do that. There is nothing in that decision about health or science or good farm practices. It is all about politics and power and influence. This concerns me. It concerns me in that instance and it concerns me in regard to Bill C-40. I will certainly talk more specifically about the bill in a few minutes.

Just a few minutes ago, we heard the member for Joliette talk about the impact of a decision that came down last week on milk products and supply management. Supply management is a very important vehicle in this country to protect farmers and to protect the dairy farm. In constituencies across this country and in my own riding, particularly out in East Algoma, supply management is what keeps producers viable where dairy farming is concerned. It is what keeps them from falling into the very difficult circumstances that we see in the cattle and beef industry at the moment in this country. As a matter of fact, dairy producers are certainly affected by it, both directly and indirectly.

Let us not start meddling with the supply management template that is out there now. As has been spoken of, 20% now is going to be taken away because of new imports coming in, a ruling by the WTO that affects Canada negatively, and this government does not have the intestinal fortitude to stand up and call on article XXVIII to be put in place so we can actually go to the table and appeal that ruling and decision.

All we have to do is look at the effectiveness of the United States, the American farmers. When they see absolutely anything coming down the pipe, by a WTO ruling or something the Canadian industry or government does, they immediately use every vehicle at their disposal to challenge those decisions if they think it will affect negatively their industry, their farmers, their economy and their communities.

In Canada we seem to always be timid, almost afraid, to stand up to the powers that be. In the instance of supply management, it seems the country we are most concerned about somehow insulting or affecting in some negative way is New Zealand. Apparently calling on the World Trade Organization to appeal the decision would somehow affect negatively our relationship with New Zealand.

What about our relationship with our farmers? What about our relationship with those communities that depend on farming as their prime industry? What about the relationship of the government with its economy overall, recognizing that farming is one of those pillars of the economy that has served us so well for so long? We now are so ready and so easily willing to say that there are bigger priorities that we have to be concerned about and that we have to play on a national playing field. We have to be concerned about the temperament of other countries and what they do.

The government has a responsibility to have some backbone. It has a responsibility to stand up whenever a sector of our economy, our country, our industry is challenged and affected. It has a responsibility to say no, to hang on for a minute and look at it. It should not be afraid to appeal decisions by organizations like the World Trade Organization.

The purpose of the bill before us is to amend the Canada Grain Act and the Canada Transportation Act to bring them into compliance with the WTO ruling that decided Canadian grain handling and transportation practices violated Canada's national treatment obligations under GATT. Here we go again. The government wants the bill passed before the current crop year of July 31 in order to coincide with the WTO deadline of August 1. We do not want to attract retaliation from the U.S. We want to avoid paying compensation, but there should be some way for us to put on the table some of our very real concerns about the bill.

We have to understand that even though the purpose of the changes affect grain shipments west of and not including Thunder Bay, this is a national issue, something about which all farmers need to be concerned. It could be another block in that wall which will expose the Canadian farming and agricultural industry to all kinds of attack by big U.S. and European interests and organizations that do not readily, if we do not challenge them, recognize the impact all this will have on Canada and Canadian farmers.

Within the framework of the WTO ruling, these changes need to happen before August 1. However, there are a few areas of concern that are not addressed in the new legislation. Some concerns are on the implications in treating imported grain differently than Canadian produced grain.

The proposed amendments will repeal or amend existing provisions in the two acts which treat imported grain differently from Canadian produced grain. This includes removing the requirement that authorization be sought from the Canadian Grain Commission before foreign grain can enter licensed grain elevators. They remove the requirement that operators of licensed terminal or transfer elevators must seek Canadian Grain Commission permission to mix grain and extends the railway revenue cap to imported grain.

The first concern with the bill is with the provision of reporting U.S. and other grain imports into Canada. The proposed amendments allow for reporting, but there is little direction or evidence it will be effective as it now will come after the act instead of before. It is like closing the gate when the horses are already out

To fill the gap, the amendments to cause the process of reporting, the government has stated that it will put in place a regulation that will require elevator operators to report to the CGC, the Canadian Grain Commission, the origin of all grain and if they mix Canadian with foreign grain, to identify them as mixed.

However, it is our understanding that the CGC, CFIA and CWB are only now drafting the regulation. The timeframe allows for it to not be put in place until August 2006, a full year after Bill C-40 has gone through the House. This again brings us back to the point of closing the gate after the horses are out.

The second concern with the bill is the differentiation between imported grain and in transit grain. The legislation does not seem to be clear whether these will continue to be treated differently, or how the requirements might be different or if they will become one and the same. Currently, most grain coming into western Canada from the U.S. is simply in transit, being shipped to one of the ports. The WTO ruling seems to allow for in transit grain to be treated just as that so it does not need to receive national treatment. However, the legislation seems to redefine all grain coming in from the U.S. as imported.

Our party believes it is very important we define that in transit grain should not receive national treatment, otherwise we are left vulnerable and with very little recourse should American producers choose to take advantage of our rail line and our elevators.

Our party does not see a real problem with amending the two acts so we are in compliance with the WTO ruling. The government has already stated clearly that it will not appeal the decision. If we take too long, farmers might end up facing retaliation from the U.S. and WTO, which will not help them at all. However, the government should be making these changes with care. We do not want to leave western grain producers without regulations or protections. Those in the field have pointed out that previous protocols or regulations established by the CGC have had questionable results. This cannot be allowed to happen with the mixing of grain as it could call into question the quality of Canadian grain.

We are hearing that most producers are okay with the amendment to be in compliance, but are concerned that there be a defined difference between the treatment of in transit and imported. As well, there is the worry of the loss of reporting and what that will mean in keeping out unregistered varieties or even genetically modified grain or seed.

This brings me to another point that was raised in the House, which still has not been addressed by the government. It is an area where the government is being weak-kneed again and not taking a stand. What will we do about genetically modified seed and what is referred to as the terminator seed?

The WTO wants to allow big seed corporations and multinationals to introduce the terminator seed which will, after a seed is used once, render it useless again. The impact that will have on our own farmers, particularly small farmers who go from year to year wanting to reuse their seeds, and on developing countries and smaller third world countries, not to speak of a crime against nature, is it will decimate those economies and farming operations. We are afraid that Bill C-40 will have an impact too where we might not have the facility to recognize and know what is crossing through our territory, particularly where GM grain and seed is concerned.

We have some concerns about the WTO, an unelected body. Why does Canada have to endanger the quality of its grain because an unelected trade body says so and do so in a timeframe that is obviously too rushed for the government?

As well the U.S. consistently chooses to ignore WTO rulings, as well as those through NAFTA. Why do we have to follow through to make trade easier for American producers when the U.S. is violating such trade obligations, such as those under the GATT, with impunity?

Again I raise and point out what is happening with BSE and cattle. It is not a big stretch to talk in the House about the impact on our industry with regard to softwood lumber and the tough stand that the Americans have taken. Why can we not have that kind of backbone and intestinal fortitude?

The government is going along with globalization, but is not dotting the i 's and crossing the t 's. If we are not careful when we change legislation like this to create compliance, we could be allowing a back door where problems like unregistered seed and GM crops could get in and contaminate Canada's grain supply, which is certainly not something Canadian farmers need.

We have consulted with a fair number of western farm organizations, as well as with the Canadian Wheat Board. All in all, most producers are okay with amending to be in compliance, but are concerned that there be a defined difference between the treatment of in transit and imported, as well as the worry of the loss of reporting and what that will mean in keeping out unregistered varieties or GM grain or seed. The Wheat Board in particular believes that without regulatory changes that coincide with the implementation of the bill, Canada's reputation for providing high quality, value added grain will be diminished because imported grain will not be reported properly.

[Pierre Paquette, Bloc, Joliette, QC]

Madam Speaker, it is my pleasure to participate in this debate on C-40, although the bill has little impact on Quebec and Quebec agriculture, I have to say right off. However, it allows us to look at a number of matters pertaining to agriculture and WTO negotiations.

I must say right off that we will support the principle of this bill, as it arises from a decision by the dispute settlement body of the WTO. In addition, we believe that international trade law must apply. We wish the American authorities were as vigilant as the government in this specific matter. I would point out that the WTO ruled against the American government with respect to the Byrd amendment. Since then, the U.S. government has still not budged, and we have been obliged therefore to implement a series of retaliatory measures, with the help of other countries, in order to force the Americans to move.

Obviously, we consider it entirely reasonable for the Canadian government to make the adjustments necessary pursuant to the decision by the WTO. In this context, we will support the principle.

That said, we want to hear from witnesses in committee on the financial repercussions of this bill, in order to find out the western grain producers' concerns. As I mentioned, Quebec is not involved, but it will be important for us to hear what westerners have to say.

I am rather surprised, this morning, opinions are not unanimous with regard to the Canadian Wheat Board, as I had thought. We therefore think it important for the committee to hear witnesses so the Bloc can get a clearer idea of whether to support or reject the bill. At this point, however, I repeat, we support the principle.

Having said that, while we support the principle of the bill because this legislation results from a decision of the World Trade Organization, the Bloc Québécois intends to continue to defend producers' ability to choose how they want to market their products. As hon. members know, in Quebec it is possible for producers to have mixed plans. The decision to set up these plans is made through discussions by the agricultural sector involved. When a majority of producers wish to set up a mixed plan, this plan applies to the whole sector. This seems perfectly reasonable, because it not only allows farm producers to have a better balance of power with the companies that buy their products and which, incidentally, are often multinationals, it also allows them, by negotiating as a single entity, to get better prices for their products. Moreover, this gives them some stability in terms of revenues, while also allowing processors to have access to quality products that are also safe.

Therefore, in the negotiations that are taking place at the World Trade Organization on agriculture, we must ensure that this ability to market agricultural products is protected. In this regard, we are somewhat concerned by the Liberal government's behaviour. There is this lax approach by the government and a lack of determination in its positions. There is also the fact that, sometimes—as least based on what we can read on its Website—the government is not taking very firm positions on issues such as supply management or the protection, as I was saying, of an agricultural model that we can call our own.

I want to point out to the House that the Bloc Québécois has given its support to a movement called Maé-Maé. This is the acronym for the Mouvement pour une agriculture équitable. This movement for fair agriculture caught on in Quebec with the union of agricultural producers, particularly the chapter dealing with international development, which is enjoying a great deal of success in francophone African countries.

This movement stands for a number of principles, including the capacity of individual countries to adopt an agricultural model that not only suits their needs in terms of food security but also ensures adequate incomes for farm producers, particularly those operating small or family farms.

We hope that, while acting on the WTO decision, Canada will take a much firmer stand for fair trade agriculture, that is agriculture as determined with complete autonomy by the producers in each country.

In this context, it is extremely important that the Liberal government take note of the motion unanimously passed in this House on Friday. This motion calls on the government not to agree to any concession with respect to the supply management system during the World Trade Organization negotiations. In light of this unanimous decision of the House, we would not want the government to continue to act as if no vote had been taken here. In this context, we expect the Government of Canada to raise its voice in defence of this supply management system which, as I said earlier, reflects the choices made by a number of producers in specific agricultural sectors.

We know that supply management is extremely important for the milk sector, particularly in Quebec, but also in Ontario. It also applies to table and breeder eggs as well as to poultry. I will come back to that later.

We are in favour of Bill C-40. As I indicated, since its purpose is to implement a decision of the World Trade Organization, a number of principles will have to be defended much more firmly by the Government of Canada, a Liberal government for the time being.

We know that in the United States, New Zealand and Australia, there is a real guerilla war being waged against the agricultural system in Canada and Quebec. The agricultural model used in Canada and Quebec is misunderstood and repeatedly challenged on the grounds that it violates the WTO rules. In fact, there is a similar misunderstanding among the Americans right now in relation to softwood lumber.

Interestingly enough, the WTO decision, which led to Bill C-40, does not call into question the fact that the Canadian Wheat Board is the exclusive exporter of wheat in western Canada. That is not at issue whatsoever. Other things are. Therefore, we must build on the positive points in the decision handed down by the WTO's dispute settlement body. In my opinion, this is a very clear message, which is valid for the Canadian Wheat Board, as well as other marketing boards and practices in Canada and Quebec.

In essence, three practices used to date have been ruled inconsistent with WTO policies. Canada has been asked to comply with these policies by April 1, 2005. Bill C-40, then, is very timely.

The first practice is the rail revenue cap. A cap currently limits transportation costs for local grain; there is no such cap for foreign grain. The Canada Transportation Act must therefore be amended so that foreign grain can have the same access to the rail network as Canadian grain. Consequently, the word grain will be redefined. Clause 3 (b) of the bill makes reference to this. The same cap will apply to the transportation of local and foreign grain. The WTO had considered this practice a form of export subsidy.

The second practice is grain entry authorization. Currently, the Canadian Grain Commission must allow foreign operators to store foreign grain in licensed facilities.

The World Trade Organization felt that this section gave Canadian grain an unfair advantage, thus, subsection 57( c ) of the Canada Grain Act was simply dropped.

One final aspect contested by the World Trade Organization was the authorization to mix grains. Before domestic grain could be mixed with foreign grain, authorization was needed from the Canadian Grain Commission. This was thought to be a way of hindering foreign grain import.

Thus, clauses 1 and 2 of the bill are being replaced to address what the WTO considered anti-competitive conduct, that is, requiring operators to inform the Canadian Grain Commission when there is a mix of several grains, of foreign grains and Canadian grains. Paragraph 72(1)( b ) of the Canada Grain Act was kept. It ensures that purely Canadian grain is properly labelled in order to preserve the excellent reputation of Canadian grain in international markets.

These are extremely specific changes. As I have been saying since the start, it is interesting that in this World Trade Organization decision there was no dispute over the legitimacy of collective marketing for grain. Farmers in the west can say what they want about this, but personally I think it is perfectly reasonable for farmers to form groups to sell their products collectively to processors.

Earlier, there was discussion over french fries and how there is no marketing office in the west. In Quebec there is no potato marketing office, but there is a joint plan. I can tell you, there are some intense negotiations between potato farmers and chip makers over the price of potatoes. I was the executive director of CSN when I left, and I used to provide training to potato farmers on how to achieve a strong bargaining position and how to negotiate with multinationals.

This is one thing that is done, then, and a choice Quebec producers have made. American multinationals and Canadian ones, which do more business in the west and in Ontario, fail to understand it, however.

I think it important to note that, while the Americans have often contested the role of the Canadian Wheat Board at the WTO, the organization has never found fault with it. I would like to draw members' attention to the fact the decision provides these principles are not infringed when a state trading enterprise acts on the basis of commercial considerations. I will read some passages from the decision by the WTO dispute settlement body.

First, it provides that the Canadian Wheat Board is controlled by the grain producers whose grain it markets. Second, it provides that the fact that the Canadian government does not oversee the selling operations of the Canadian Wheat Board increases rather than decreases the probability that the Canadian Wheat Board will act in the commercial interests of the producers. Therefore, the special body concluded that, given the structure of the management of the Canadian Wheat Board, the Board is motivated to maximize the income of the producers whose products it markets.

In other words, the Canadian Wheat Board acts as a corporate selling agent, but within the context of market mechanisms, that is, the law of supply and demand intended to maximize profits. Its aim then is to maximize profits for producers. I believe therefore that the government would do well to take note of the considerations of the dispute settlement body, especially in the area of supply management.

I am going to take the time to go into some detail on this, as it is vital to us in Quebec. In the region I represent, the Lanaudière region, there are a lot of dairy, poultry and egg producers operating under supply management.

As you know, what is interesting about supply management is that its decisions are made by producers and it ensures a continuous supply to processors, fair revenues to producers and high product quality.

There are three pillars that must all be maintained if this is to be accomplished. The first is production planning, which is why it is called supply management. The second pillar consists of a pricing mechanism that ensures a fair income without government subsidies. This is very important. When supply is managed as a function of demand, this ensures proper income and proper prices for the product. There are no government subsidies.

There is a serious problem at the present time and Canada needs to start taking notice of it. At the present time there is a debate under way at the WTO on import duties and, as far as subsidies are concerned, it is a free for all. The Americans and the Europeans are heavily into agricultural subsidies. This disadvantages the developing countries in particular, but Canada as well, since it has decided to place more emphasis on administering its domestic market.

In order to administer that domestic market, a third pillar is needed. This third pillar deals with import quota control. Since the Marrakesh accord, these have been controlled by import tariffs to discourage foreign exporters from entering the Canadian and Quebec markets.

The problem is that the federal Liberal government is guilty of totally unacceptable laxity with respect to this third pillar, despite the statements made over and over again by the Minister of International Trade, the Minister of Agriculture and Agri-Food, and the former Minister of International Trade now Minister of Foreign Affairs. Dairy substitutes or products containing dairy substitutes are still being let in.

Last Friday, I gave the example of butter oil. In fact, 49% of dairy products are not covered by the list of commodities subject to quota by Canada. A policy decision absolutely must be made to add butter oils to the definition of dairy products, in order to ensure that these enter our market at rates compatible with supply management and with the third pillar, that is limitation of imports aimed at better coordinating supply and demand.

Even more serious is the fact that the Liberal government seems to be living in a bubble. Despite its rhetoric, it does not notice the extremely important technological changes that now allow us to separate the various components of milk. First, it was lactose, proteins and fat. Now, it is possible to break these by-products down even further and import them as separate products. In a few years, nothing will prevent someone from importing these products to Canada without any restrictions, reconstituting the milk and then selling it on the Canadian and Quebec markets. This undermines the very foundations of the supply management system. That is the problem.

Currently, the WTO does not have any problems with supply management. This is reaffirmed, in a way, in this ruling on the Canadian Wheat Board's practices regarding grain. However, the federal government does not seem to be taking into consideration the new reality of milk substitutes entering the market made up of 49% milk components. Indeed, it is now possible to break milk down into various components that can enter the country almost without being subject to quotas.

As I mentioned earlier, under the Marrakesh agreement, it was decided to substitute import controls. This means that we are now using tariff quotas, instead of import quotas. So, the government must take the necessary steps to change its tariff lines, so that these products are deemed to be, on the one hand, milk products and, on the other hand, products that are subject to the protective tariffs that apply to imports.

I will conclude by providing a very concrete example that would require two changes. In tariff item No. 2106.90.93 and in the following one, instead of saying “containing 50% or more by weight of dairy content”, we should say “containing 10% or more by weight of dairy content”. These products would then be subject to tariff duties of 274.5%, which would allow us to maintain that system.

Again, the only thing preventing us from taking such a measure is the government's lack of will. Let us hope that the federal government will wake up and ensure that our producers, particularly our dairy producers, are better protected.

[Garry Breitkreuz, Conservative, Yorkton—Melville, SK]

Madam Speaker, I listened with great interest as my colleague outlined some of his concerns with regard to Bill C-40. I wish that he would complete his remarks and give me a little bit of the feeling of what his constituents are saying with regard to this. I will give him an opportunity to complete his remarks that he was unable to do in the time allotted. I feel it is very important to get some of these comments from the people in Alberta, Saskatchewan and Manitoba on the record. I hope the member will comment on some of these things.

[Ted Menzies, Conservative, Macleod, AB]

Mr. Speaker, I welcome the opportunity to speak to Bill C-40. I would like to acknowledge the tremendous work that my hon. colleague from Haldimand—Norfolk has done in providing support for this piece of legislation.

I am having a great deal of difficulty supporting the bill. However, I will support it. Once again the Liberal government has dragged its feet for so long on something that should have been fixed a long time ago, but it will not be the Liberal government that suffers if we do not pass this legislation. It will once again be the taxpayers, and in this case it will be farmers. It is with some disgust that I have to support Bill C-40 in its present condition.

I am glad that the hon. member for Haldimand—Norfolk is recommending an amendment to the bill. It is very critical that we address the fundamental workings of the archaic Canadian Grain Commission which is in place for all of Canada but which certainly plays a leading role in western Canadian grains and oilseeds.

This bill to amend the Canada Grain Act and the Canada Transportation Act would never have come into play if we had taken the recommendations of a study that was done back in the mid-1990s. Justice Willard Estey travelled across the country and consulted with farmers and people in the transportation industry to find out what was wrong with the system.

The Canadian Wheat Board monopoly, not necessarily the Canadian Wheat Board itself but the Canadian Wheat Board monopoly, the single buyer of wheat and barley for human consumption in western Canada, and I emphasize in western Canada alone, was found to be very flawed when Justice Estey put forward his recommendations. These recommendations were backed up by a follow-up process by a very well-respected former deputy minister in many portfolios in the government, Arthur Kroeger. He agreed with all of Justice Estey's findings.

Justice Estey would like to have seen the monopoly gone completely, but his recommendation was that we go to a commercial transportation system where the Canadian Wheat Board took ownership of the grain at port. What a wonderful, novel idea, but would the Liberal government adopt that? No. It chose to maintain the monopoly that provides no benefit to western farmers. The emphasis needs to be placed on the fact that it is western farmers alone who are under the control of the Canadian Wheat Board monopoly.

There have been similar systems around the world. The Australians had a wheat board. They chose to privatize it. Those who want to participate in it buy shares. It is run like a publicly traded company. It works wonderfully. Can we do that in Canada? No. The Liberal government said that farmers should not have control of their own destiny.

There are a lot of things the Liberal government could have changed so we would not be scrambling at the last minute to change a piece of legislation which, if we do not change it, will once again impact western Canadian farmers. Indeed, it probably will impact farmers all across the country if we do not make these changes.

A lot of what the WTO panel ruled on was impacted by the Canadian Wheat Board's monopoly. It was not the first time it had challenged the Wheat Board and it will not be the last time. It will simply tweak the system to make it fit for the present time and I am sure we will be dealing with this again in the future.

I represent the riding of Macleod in Alberta. The majority of farmers in my riding and in fact the majority of grains and oilseeds producers in western Canada are way beyond requiring a monopoly market their own grain. Wheat and barley are only a minor part of production in western Canada. Every other commodity we grow on our farms we market ourselves.

We have heard in the House today about what a wonderful job the Canadian Wheat Board has done by providing excess returns to Canadian farmers. That is not a fact. Our returns have actually been reduced.

We are also faced with the issue of the rail revenue cap. Justice Estey recommended that we move to a commercial system. The reason we have a rail revenue cap is because the Liberal government did not want to adopt the recommendations Justice Estey put in place. Once again we are paying for the ineptness of the government.

As was mentioned previously by the hon. member for Haldimand--Norfolk, the Canadian Grain Commission is an outdated system. I had an opportunity to question the chief commissioner who was before the standing committee a week or two ago, and I asked her why we do not have a Canadian french fry commission if the Canadian Grain Commission is so wonderful? Canada has a huge industry that turns potatoes into french fries, but we do not have a commission to market those french fries. We do not have a commission that grades french fries.

We do have however a grain commission that puts an arbitrary grade on grains. That is part of the reason why we are going to have issues with grain mixing. This piece of legislation attempts to address that problem through our elevator systems.

I need to raise one other concern along these lines. The northern tier states in the United States are captive shippers. There is one railway company that provides delivery for them to the west coast. Their freight rates are not quite double what ours are in Canada, but they are certainly in excess of ours. If we were to include the import of grains, then the way this legislation reads, we would see a huge influx of American grain coming through Canada because it would be cheaper to truck it into Canada, load it on rail cars, and send it to the west coast. What is going to happen to car availability for our western grains?

Farmers in my riding are concerned because their bins are still full from last year. It is a question of whether or not the Wheat Board will actually sell the grain or whether or not we will be able to move it to the coast. Farmers are putting in new crops for this year and yet their bins are still full from last year. We can ill afford to take on a larger capacity of grain to be moved to the west coast.

I wish I had been able to address Bill C-40 as well as the hon. member for Haldimand--Norfolk did. I did want to raise the concerns that farmers in my riding have raised with me. As I have said, we will be supporting this bill, but only with amendments and only with the provision that we take a serious look at the Canadian Grain Commission.

[Diane Finley, Conservative, Haldimand—Norfolk, ON]

Mr. Speaker, last summer a World Trade Organization panel ruled against Canadian policies affecting the importation of grain from the United States. The panel ruled that Canada should not treat imported grain differently from Canadian grain when it is mixed or authorized for entry into the system. The panel also found that the rail revenue cap treated imported grain less favourably than western Canadian grain.

The Conservative Party recognizes that implementing the WTO's decision is critical if we are to respect our international trade obligations. We understand it is important to treat foreign products the way we would want Canadian products to be treated in foreign countries. We recognize that there is a tight timeline regarding passage of this bill. However, if the Canada Grain Act is going to be amended, then the concerns of farmers and others in the grain industry should be formally recognized.

The Canadian Grain Commission is integral to our country's system of grain handling, but unfortunately the commission has been unable to keep up with changes in the industry both in Canada and abroad. The result has been a restrictive approach to regulating Canada's grain industry, an industry that demands that it has influence in establishing and maintaining a seamless grain handling system.

The Western Grain Elevator Association, an organization that represents major grain handling companies, has described in detail to the Standing Committee on Agriculture and Agri-Food how the grain commission is not enhancing the international position of Canada's producers; rather, it has become an obstacle to growth. In order to put the commission back on track to keep pace with the industry, simple amendments to its governing legislation, the Canada Grain Act, are no longer a viable option.

The obvious place to start would be to focus on the single barrier to realizing change, that being the governance structure of the grain commission. It is obvious that the role of the chief commissioner and the entire governing board must be looked at. The current governance structure of the grain commission has created a reporting relationship of commissioners that does not take into account the best interests of the industry. We would like to see the commission led by a more accountable body whose objective would be to serve the industry.

Those of us on this side of the House care about accountability. We recognize that a democratic process requires accountability to ensure that those who are subject to the decisions of a governing body are treated fairly.

This may be shocking to hear, but the regulatory decisions of the Canadian Grain Commission are not subject to appeal. These decisions can and do have far-reaching consequences for producers as well as for the entire grain sector. Nearly all commercially oriented transactions have dispute resolution mechanisms, so why does the Canadian Grain Commission leave industry participants without recourse? The answer is to amend the act to give members of the industry the ability to appeal decisions of the grain commission in a quick and cost effective manner.

The mandate of the Canadian Grain Commission must also be addressed. The principal objective of the commission is clearly stated in the Canada Grain Act. Clearly, it leaves out the interests of participants that handle grain after it has entered the system.

A key role of the grain commission is to protect primary producers from the risks of industry participants going belly up. The commission requires that all elevators post a bond to the commission, an amount equal to the value of the grain they are handling, but a frequent complaint in this regard has been a lack of enforcement on the part of the grain commission. Rather than address the lack of enforcement, the commission instead warns producers that the onus is on them, that they should only deal with licensed grain dealers.

Unfortunately we have seen that despite the licensing regime, the bonding system does not necessarily protect producers from the financial failure of grain elevators. Even if an elevator is bonded, the security held by the grain commission is occasionally not sufficient, and producers are still left with the loss if a company goes under. A requirement that results in such a major lack of operating capital within the industry should at least work.

Last but not least is a serious concern which the minister is well aware of but has not corrected. The issue is surrounding the certificate finals which are issued by the Canadian Grain Commission. These certificates are issued to grain companies identifying the grade of grain stocks that are destined for port. They are not so final. In some instances the grain commission has carried out tests of grain stocks after they have left for port, or even after they have left port. At that point certificates have actually been withdrawn and revised certificates have been issued. As the Western Grain Elevator Association puts it, this is like making an offside call in a hockey game and adjusting the score once the game is over.

Companies cannot manage their risk nor their business under such a system. The issue is so serious that it ended up in a federal court. The court recommended that either testing be done on a timely basis, or that a system of insurance be implemented so that grain handlers are not exposed to unreasonable liability due to no fault of their own.

Unfortunately, the court also pointed out that the commission can simply enact new regulations that allow it to cancel inspection certificates and issue new ones. That is exactly what the Canadian Grain Commission intends to do. This will not fix the problem though. It will simply allow this unacceptable situation to continue. This is indicative of the government's approach to agriculture policy. It is a top down approach with a certain disregard, if not outright contempt, for Canadian agricultural producers.

As previously mentioned, we recognize that there is a tight timeline regarding passage of this bill, but the current state of the Canada Grain Act must be formally recognized. The concerns of producers and others in the grain industry cannot continue to be ignored.

That being said, opening up the Canada Grain Act would be like opening up a can of worms. The worms are the concerns of primary producers and elevator operators, disgruntled participants in Canada's grain handling system. Opening up this legislation would present an opportunity to address many needed changes to the Canadian Grain Commission which is mandated by this act.

From a pragmatic point of view, the reforms needed cannot be made within the timeframe allotted to pass Bill C-40. That is why the Conservative Party of Canada will, among other things, propose an amendment that upon passage of this legislation the government initiate a mandatory comprehensive review of the Canada Grain Act and all organizations mandated by the act to be completed within one year of the bill coming into force.

Our amendment would draw attention to concerns raised both by primary producers and the grain industry. It would ensure that the concerns of the industry were formally recognized in a timely manner, paving the way for a comprehensive bill that would legislate much needed reform for the Canadian Grain Commission. We will be asking for the bill to be amended to reflect our party's concerns and those of the Canadian grain industry.

[Diane Finley, Conservative, Haldimand—Norfolk, ON]

Mr. Speaker, I rise in the House today on Bill C-40, an act to amend the Canada Grain Act and the Canada Transportation Act. Before I continue, I would seek the unanimous consent of the House to split my time with the hon. member for Macleod.

[Carolyn Bennett, Liberal, Minister of State (Public Health)]

Mr. Speaker, I am pleased to rise in support of Bill C-40, an act to amend the Canada Grain Act and the Canada Transportation Act.

This bill amends the Canada Grain Act and the Canada Transportation Act in order to bring them in line with a decision by a special panel of the World Trade Organization, whereby certain practices of grain handling and transfer in Canada do not comply with Canada's obligations of national treatment under the 1994 General Agreement on Tariffs and Trade.

When we look at all the tremendous accomplishments of the Canadian agriculture and agri-food industry over the past 100 years, the Canadian grain sector stands out as a great success story in its own right. Today Canadian wheat, barley and other grains are known by our customers all over the world for their outstanding quality, consistency, cleanliness and innovation.

Each and every year Canada's grain industry does $10 billion worth of business here in Canada and around the world. Those dollars create jobs and prosperity for Canadians here at home. They support our rural communities, which are the lifeblood of Canada's economy. Canada's grain growers sustain our health and well-being as Canadians by putting the very bread on our tables. We must never forget that; to quote the old saying, “If you ate today, thank a farmer”.

Canadian grain is about much more than bread. It is about a large number of products, such as durum wheat in pasta, oats in porridge, barley in beer, and so on.

Whatever the product in question, when Canada's global customers purchase Canadian grain for processing, they can count on getting the same high levels of quality and cleanliness that they have come to expect, load after load. They can count on knowing exactly how that grain will perform during processing, load after load.

This world class reputation that our Canadian grains enjoy around the globe has been earned. It has been earned in large part through the hard work first and foremost by our farmers. It has also been earned by grain handling companies, by research scientists, and by organizations such as the Canadian Grain Commission, the Canadian International Grains Institute, the Canadian Wheat Board and others.

Today and for the future the Government of Canada will continue to stand behind both the Canadian grains and the Canadian oilseeds sectors. In March we announced a $1 billion farm income payment program of which we estimate about $480 million will help grains and oilseeds producers with immediate cash flow pressures brought about by a number of factors, including weather losses, low market prices and unfavourable exchange rates. These funds will help our producers as a long term strategy is put in place to help the sector deal with a projected continuing decline in grains and oilseeds commodity prices.

Part of the strategy is growing and expanding our export markets for grains. We are working in partnership with the Canadian grain sector to do that. We are also working to secure and maintain the world class grain quality assurance systems that continue to open new doors in marketplaces around the world.

As members of the House will know, Canada's marketing system for wheat has been challenged by the United States on a number of occasions in recent years. Each time the major issue has been the Canadian Wheat Board, and each time the ruling has gone in Canada's favour. Both at NAFTA and the World Trade Organization, panels have consistently upheld Canada's position that the Canadian Wheat Board is a fair trader and that its mandate, structure and activities are consistent with our international trading obligations.

In April 2004 a WTO dispute settlement panel ruled that the Canadian Wheat Board was consistent with Canada's international trade obligations. The U.S. immediately appealed. In August 2004 the appellate body of the WTO upheld the original ruling, namely, that the U.S. had not provided any evidence whatsoever that the Canadian Wheat Board had acted contrary to Canada's international trade obligations.

Once again that ruling confirmed that the Canadian Wheat Board operates within the rules. It further supports Canada's position at the WTO negotiating table, namely, the Canadian Wheat Board is a fair trader.

The WTO did find against Canada regarding certain grain handling and transportation policies. In response to those findings, Canada decided that changes to Canadian legislation could be made that would both serve to meet our international trade responsibilities and at the same time maintain our world-leading grain quality assurance systems.

To summarize briefly, the WTO ruling requires action by Canada on three particular grain policies currently in force under the auspices of the Canadian Grain Commission and Transport Canada.

The first is entry authorization requirements. Under the Canada Grain Act, permission must be sought from the Canadian Grain Commission before foreign grain can enter licensed Canadian elevators.

The second is mixing of foreign grain. Under the Canada Grain Act, permission must be sought from the Canadian Grain Commission before a foreign grain can be mixed with domestic grain.

The third is the rail revenue cap program. Under the Canada Transportation Act, a maximum is imposed on the revenues that railroads may receive on certain shipments of Canadian domestic grain.

To comply with the WTO rulings in these areas, the government is proposing amendments to the Canada Grain Act and the Canada Transportation Act. First, to address the issue of entry authorization requirements, the amendments to the Canada Grain Act remove the requirement that Canadian Grain Commission permission must be sought before foreign grain can enter licensed Canadian elevators. Instead, a regulation will be added requiring licensees operating grain elevators to report to the CGC the origin of all grain.

Second, to address the issue of mixing of foreign grain, the amendments remove the requirement that CGC permission must be sought before foreign grain can be mixed with eastern Canadian grain. The new regulation will also stipulate that if licensees operating elevators mix Canadian and foreign grain, they must identify that grain as mixed.

Further, all licensed elevator operators will be required to maintain the origin of grains at all times to ensure that grain is never misrepresented. It is essential that Canada continue to have the capacity to assure our buyers that they are getting what they pay for, namely, the consistent high quality they have come to expect from Canadian grain. The Canadian Grain Commission is confident that these changes in no way compromise our ability to do this.

In addition to the amendments to the CGA, amendments are required to the revenue cap provisions of the Canada Transportation Act in order to bring the cap into compliance with the WTO decision. One option would be to simply repeal the revenue cap provisions. Let me assure western Canadian grain farmers that the government has no intention of repealing the cap. It will function as usual for Canadian grain industry stakeholders.

Instead, the revenue cap will be extended to foreign grain that is imported into Canada. It will not apply to foreign grain that is in transit through Canada to some other destination. The government believes this change will not have a significant impact on the grain handling and transportation system.

At the same time, by implementing these changes, Canada will comply with our obligations under the WTO in the same way as we would expect other WTO member nations to do were they in our position.

The deadline for Canada to act in these matters has been negotiated with the U.S. It has been agreed that changes to the acts and associated regulations will need to be implemented by August 1, 2005.

Canada's grain quality assurance system is designed to ensure that the varieties of grain produced in Canada meet the strict quality specifications that customers have come to rely on.

We are confident that the amendments we are proposing today in no way compromise Canada's ability to fully protect and safeguard the integrity of this system, which has won and continues to win so many loyal customers the world over. We believe that Canada can conform with the WTO panel findings in a way that will have little practical impact on the Canadian grain handling and transportation system.

I can assure everyone that the grain sector is on side in the course of action we are taking. In fact, in January the parliamentary secretary for rural affairs held extensive consultations in western Canada with a wide range of stakeholders, including farmers, producer organizations, general farm groups, elevator operators and private grain companies. Overall, stakeholders were broadly supportive of the government's proposed approach and believed that the changes would have little or no impact on the current system.

There was also strong support for Canada to meet its WTO obligations. It is important to note that while indicating areas of non-compliance, the WTO panel nonetheless recognized Canada's fundamental right to maintain our own quality systems.

The WTO panel in no way ruled against grain quality assurance. In fact, the panel clearly articulated Canada's right to segregate grain to ensure the quality of grain shipments. Nothing in the ruling changes, compromises or dilutes Canada's fundamental right to safeguard the integrity of our world class grain quality systems.

The panel rulings back up Canada's position in the WTO negotiations, namely, that no disciplines on state trading enterprises, like the CWB, are needed beyond those agreed to by the WTO members in the July 2004 framework on agriculture.

It also supports our position that CWB is a fair trader, that its mandate, structure and activities are fully consistent with commercial considerations. It is Canada's hope that the decision by the WTO and our compliance in the areas I have outlined will lead other nations to turn the page and put our collective focus where it should be, namely on levelling the international playing field so our producers and processors can compete fairly and effectively in the global marketplace.

As the Doha round proceeds, Canada will continue to work closely with the Canadian grain sector and the entire range of agrifood stakeholders to achieve an outcome that is positive for the entire agrifood sector. We will continue to defend the ability of our producers to choose how to market their products, including through orderly marketing structures such as the CWB.

The whole of the agrifood sector and of the Canadian economy stand to gain from these negotiations. We are seeking prosperity for Canadians through secure access to markets around the world and we are seeking a stable and predictable business environment and a level playing field that will allow Canada's grain industry to leverage its competitive strengths to the maximum.

I am confident that the amendments to the Canada Grain Act and to the Canada Transportation Act which we are introducing today support those goals. That is why I support it and urge other members of the House to do the same.

[Mauril Bélanger, Liberal, for the Minister of Agriculture and Agri-Food]

moved that Bill C-40, an act to amend the Canada Grain Act and the Canada Transportation Act, be read the second time and referred to a committee.

Business of the House

[Tony Valeri, Liberal, Leader of the Government in the House of Commons]

Mr. Speaker, this afternoon we will continue with the opposition day.

On Friday, we will return to Bill C-43, the budget bill. If it is completed, we will proceed with Bill C-40, respecting the WTO.

The first item of business on Monday will be Bill C-40. If necessary, we would then return to the budget bill, which contains all the initiatives that I know Canadians support from coast to coast to coast, like the Atlantic accord, the new deal for cities, and the increase in payments to seniors through OAS.

We will then return to the second reading debate of Bill C-38, the marriage bill, which will be the first item on Tuesday. When that business is completed, we will return to departmental bills: Bill C-23, Bill C-22, Bill C-26 and Bill C-9.

Next Wednesday shall be an allotted day.

Canada Grain Act

[Andy Mitchell, Liberal, Minister of Agriculture and Agri-Food]

moved for leave to introduce Bill C-40, an act to amend the Canada Grain Act and the Canada Transportation Act.

(Motions deemed adopted, bill read the first time and printed)