Agriculture Committee on Feb. 20th, 2007

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

Mr. LeBlanc, you say “soon”. The minister recently made the announcement to dairy producers. I'd like to know whether we have a very specific timetable and exactly how that works. Moreover, it's somewhat for that reason that we wanted a briefing session.

We understand very well that we have to be careful because this is a public meeting. Other countries must not be able to use anything that we might say here against us or against the use of article 28. Nevertheless, from a technical standpoint, exactly how does that work? At what point is the process started, and what is the timeframe?

We have a minority government. Could a spring election call cause problems, for example? When can we know the effective date of article 28? To what countries are we speaking exactly?

[Gilles Le Blanc]

I've just briefly explained the process. As regards notification, we first have to resolve certain technical questions. When we give notification, some information must appear on it, like the trade for the products concerned. We're working on that right now. We can't send notification without having these basic elements. We hope to be able to present notification in the near future. I can't really commit to giving you a date.

As regards the time that a negotiating exercise might take under article 28, as I said earlier, we have to negotiate with our trading partners and try to come to an agreement whereby the parties are mutually ready to move forward with the change we've made. The ultimate goal is for our trading partners to accept the modification of the concession we've made. As discussions and negotiations have enabled them to obtain compensation, they came to the conclusion that the concessions had been rebalanced. Following that agreement, we'll be able to put the measure into effect.

Two or three parties, even more, are taking part in these negotiations. So we really have no control over the time the negotiations can take.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

The countries are Switzerland, Germany, France, New Zealand and the United States?

[Gilles Le Blanc]

The countries are those of the European Union, Switzerland, New Zealand and the United States.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

New Zealand has already reacted badly. So we can expect the negotiations to be quite long.

[Gilles Le Blanc]

New Zealand has expressed its disappointment. Its representatives acknowledge that we have a right under article 28, but they have also clearly indicated that they would fully exercise their right under that same article 28. We'll see how the negotiations turn out, but we can't presume to know when they'll be complete. In terms of process, once we've presented our written notice, the members or contracting parties to the WTO will have 90 days to make their interest known. Those with whom we'll negotiate are those who were given an initial negotiating right when the concession in question was original negotiated. There are principal suppliers and also major suppliers. We have an obligation to negotiate with those who had an initial negotiating right and with principal suppliers.

As regards major suppliers who are not principal suppliers, we have an obligation to consult. At the end of the process, if they are not satisfied with the outcome of the negotiation, they also have a right of reprisal.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

Mr. Easter raised a very important point. I also wanted to remind the committee that we received the dairy producers and processors last May and June. They were already talking about the possibility of using article 28 at the time. The government was utterly opposed to it, the departmental people as well. One of the main arguments we were given was that, under NAFTA, we would in any case be stuck with imports from the United States and Mexico.

So, since the minister recently made the decision to use article 28, what about that argument? Indeed, even though the dairy producers of Canada gave us a clear legal opinion on the subject, the department's officials told us that we would be stuck with imports from the United States and Mexico. What do you say about that, now that we've decided to invoke article 28. Is the position the same?

[Gerry Salembier]

Unfortunately or not, I wasn't in my present position at the time of the decision you refer to, last May or June. From our standpoint, the most accepted legal opinion is that NAFTA prohibits the creation of a new tariff contract, as I explained to Mr. Easter. Nothing has changed in the NAFTA provisions since that time. That's what we consider the most accepted legal opinion.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

So, in your view, the argument that the department used at the time, that the use of article 28 would vastly limit the effects, since the processors could just as easily go and supply themselves in the United States and Mexico, still stands. The minister's decision therefore didn't serve much of a purpose. That's what you've just told us.

[Gerry Salembier]

You're talking about reactions in the market that can happen or not happen. That's a possibility that has to be taken into account. At this stage, I can perhaps mention that what the minister announced two weeks ago consisted of two parts: one was article 18, and the other was the compositional standards.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

Compositional standards.

[Gerry Salembier]

Perhaps it's this second component that may be important for those who think there would be a market reaction in favour of exports from the United States.

[The Chair, Conservative, James Bezan]

Sorry, the time is up, Mr. Bellavance.

Just to follow up on that, aren't the compositional standards actually going to have a longer-term effect on making sure that we do reduce the imports of milk protein concentrates versus article XXVIII, which is kind of an immediate fix—or hopefully it's an immediate fix—but the standards will have the bigger impact and will include the NAFTA countries?

[Debra Bryanton, Executive Director, Food Safety, Canadian Food Inspection Agency]

The compositional standards that were recommended by the moderator at the dairy industry working group do include provisions that relate to the milk ingredients as well as the milk itself. As a result of that, there will be specific provisions in the compositional standard that will relate to the ingredients that go into cheese.

The use of these ingredients depends on the product that is being produced, but the compositional standards are not oriented specifically around limiting the imports of modified milk ingredients. They are oriented around being an understanding of what amount is permitted in making up the different cheese categories. So we are looking to action the recommendations that were made by the moderator at the dairy industry working group through our compositional cheese standards.

I think the question was oriented around whether this would have a longer-term impact. Those cheese standards would be in place in regulation until a regulatory amendment was made in the future. So they would stay in place until otherwise changed.

[The Chair, Conservative, James Bezan]

Mr. Miller for seven minutes, please.

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

Thank you very much, Mr. Chairman, and thank you to all the witnesses for appearing here today.

I heard your comments on parts of article XXVIII in regard to NAFTA. Mr. Bellavance just insinuated that the industry knew, basically, what could happen with an article XXVIII in regard to NAFTA. In your opinion, was the industry aware of what they could and couldn't do as far as article XXVIII was concerned and what it would do as far as NAFTA was concerned? Anybody?

[Steve Verheul]

As I think members of the committee are aware, this issue of a potential article XXVIII has been on the table in various forms for a number of years. We have been consistently provided with legal advice that we would not be able to apply the results of an article XXVIII against the U.S.

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

What you're saying, then, is that the industry was quite aware of that as well, or it should have been.

[Steve Verheul]

That issue was discussed extensively in various different places.

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

Okay.

In your professional opinion, knowing that, then, why would the industry still push ahead with that? I believe that was still their wish or their demand, or whatever, right up to that.

[Steve Verheul]

Well, first of all, I think the industry has had a different view on that issue. They think we should be able to apply the results of an article XXVIII against the U.S., and they have some of their own legal advice that supports that, so they've maintained that view.

There have also been discussions about the possibility of having a separate negotiation with the U.S. to try to address the issue, and they have at some times suggested that might be an avenue to follow. So we've had fairly extensive discussions about this.

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

So I guess it would be fair to say also that any former ministers of agriculture, maybe even the parliamentary secretaries to the minister, would have known what could and couldn't happen as far as article XXVIII with NAFTA was concerned. Would that be a fair statement?

[Steve Verheul]

This has been a long-standing view, all along the way, since article XXVIII discussions have been—

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

Well, thank you very much, because I was kind of dismayed, myself, at my colleague across the way, at his dismay about it.

In your opinion, why did MPCs skyrocket between 2005 and 2006? And if an article XXVIII were enacted earlier, would that have stopped that? Have you any opinion on whether it should have been done sooner?

[Steve Verheul]

We're still going through some of the statistics to determine exactly what the milk protein concentrates out of that category are and what the other products in that category are, including soy protein and all kinds of different things. Once we get that kind of information isolated we'll be able to tell whether there has been an explosion or a skyrocket, as you mention.

We suspect, just on the basis of things we've been hearing, that it has increased over the past year. I think some processors have wanted to import more during this period when there has been some discussion about possible constraints.

There's still a demand for the product, and it's likely to increase in the absence of any action. But when we get into an article XXVIII negotiation--Gilles might want to speak to this more--we're not generally looking at one year of trade. We tend to look at a longer period, so a recent increase is not going to make that much difference over a three-year average.