Agriculture Committee on Feb. 20th, 2007

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

In addition to protein concentrates, we have other ingredients, like caseins, caseinates, and butter oil/sugar blends. Would any one of you in your professional capacity ever recommend to the minister that an article XXVIII be enacted toward those? Do you have any comments?

[Steve Verheul]

On the issue of caseins and caseinates, we've actually seen very low imports of these products over the last little while, so it hasn't been one of the more important issues in front of us.

When there was discussion about butter oil/sugar blends in the past, there was no article XXVIII action taken. At this point there's probably not a lot of value to pursuing that on those products, given the makeup of the market now. We're also starting to see those imports flatten out somewhat.

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

I think I heard you correctly that there's no agreement on compensation. I think exporting countries affected by article XXVIII will be able to impose sanctions against Canada. Would those sanctions be placed strictly on agricultural products, or could they be on basically any product they import from Canada?

[Gilles Le Blanc]

In an article XXVIII you're trying to reach agreement through compensation. That's the first objective. But in the end, if agreement cannot be reached and the country that wanted to modify a concession decided to go ahead, the other party could take retaliatory action. It's not limited to the products that were the subject of the modification. If it were in the agricultural area, the retaliation could be in any other sector. They are not limited in their choice of product.

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

Do you have any inkling of what area they might target if it ever got to that point? Do you have any opinion or comment on that?

[Gilles Le Blanc]

I would be misplaced to speak about that because I'm not a representative of those countries, but usually they will try to hit products of which Canada is a significant supplier or the main supplier. These actions have to be done on an MFN basis, and that's usually what they aim for. It's where Canada would be the main supplier.

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

Just to carry that out a little further, could you give an example of a country and what product they might use? What product in the British Isles do you think they might target, for example? I know this is just hypothetical.

[Gilles Le Blanc]

I cannot really answer that question.

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

That's all I have. I know I'm out of time.

[The Chair, Conservative, James Bezan]

In the case where an agreement on an article XXVIII isn't achieved and a country can take actions against us, of what value would that be? What is the value of the milk protein concentrates coming in that we're trying to prevent under article XXVIII?

[Gilles Le Blanc]

It will have to be commensurate with the impact of the change that you've done, essentially.

[The Chair, Conservative, James Bezan]

Any idea on dollar value, though?

[Gilles Le Blanc]

This is not an issue that we have started thinking about, as we are still yet to start negotiations. We're not there yet.

[The Chair, Conservative, James Bezan]

No, I appreciate that.

[Gilles Le Blanc]

And we hope not to get there.

[The Chair, Conservative, James Bezan]

Mr. Boshcoff is kicking off this round. Five minutes, please.

[Ken Boshcoff, Liberal, Thunder Bay—Rainy River, ON]

Thank you, Mr. Chair.

Dairy farmers in my riding, and farmers in general, have a really basic, straightforward question when it comes to these negotiations, so perhaps this can go between the five of you. They feel that they themselves can compete because of our quality standards, our environmental regulations, our strict definition of what constitutes certain products, our protections through our inspection systems, legislative safeguards, plus they feel they have some good marketing and they cooperate when they're selling, and above all it's efficient production.

So they ask this one question, and this is what troubles them, I believe, as it does me: when we negotiate, why would we allow imports that do not meet those same standards of production, of safety assurance, of quality inspection, environmental security, and even the definitional consistency, so that what we would hold to be milk-like ends up being not milk or the definitions are obviously contrary? They know what they have to do to produce a quality product. They want to know that if they have to compete, what comes in has to meet the same standards and rigour, the same level playing field, in essence.

[Debra Bryanton]

The regulations that apply to the safety, quality, and labelling provisions for food in Canada apply equally domestically and for imported products. On a domestic basis, of course, we are able to actually experience the conditions in our establishments and are able to verify that the reputation Canada has for safety and quality of food is, in great part, because of the efforts of our industry in producing safe, high-quality foods.

For imports, we do have an import regime that focuses on the importer as the responsible party for the imported product. And we have a program that looks at the imported finished product, where we do review the labelling components and the compositional components, but also, of great importance, the safety components of those products. So that does include a comprehensive sampling program that looks at chemical residues, including veterinary drugs and microbial issues that may relate to certain cheese categories. The overall compliance rate of imported cheese products, in particular, is very high.

Now, we also must take into account that the dairy products that are imported into Canada do come from countries that do have effective food safety systems in place. We certainly take that into account when we're identifying and targeting areas for specific attention.

[Ken Boshcoff, Liberal, Thunder Bay—Rainy River, ON]

Mr. Verheul, when you are negotiating in other situations, do you keep that as a philosophy in your mind, that this is something that has to be rigorously adhered to? And then supplemental to that would be, is the only qualitative difference one of, essentially, subsidies to other products at which they compete, at which they unlevel the playing field?

[Steve Verheul]

Certainly that is an issue that's part of the context of the negotiations. We're not dealing directly with health and sanitary issues in the negotiations. It was decided that we wouldn't address those issues this time around. But clearly in our approach to the negotiations, competitiveness and those kinds of issues are front of mind.

It is a fact that with respect to our dairy industry, for example, our domestic prices are two to three times what world prices are, so we have producers out there in other countries who can produce at a far lower value than our own producers are producing. Much of that is because of the high value of quota in Canada, which makes up somewhere between 40% and 45% of most producers' asset value. That's a cost that producers in other countries don't have. It's a feature of our system, and they don't have that kind of system.

So there are various factors that go into our ability to compete with others. What we are trying to achieve is a level playing field, to use that commonly used phrase, that allows our producers to compete under the same kinds of rules and conditions as others to the extent we can.

[Ken Boshcoff, Liberal, Thunder Bay—Rainy River, ON]

Would that apply not only to milk and dairy products, but also to vegetable produce, fruits, and other types? Is it generally something that doesn't bear many exceptions? Is it essentially the same across the board, from supply management to beef and to all those kinds of things?

[Steve Verheul]

I would say that it's actually quite different from commodity to commodity. Because of the nature of supply management, our supply-managed commodities are in a situation that is different from some of our other commodities; most of the rest of our commodities are quite capable of competing on the world stage in other markets.

[Ken Boshcoff, Liberal, Thunder Bay—Rainy River, ON]

How do you keep all those things in your mind when you're doing all this?

[Steve Verheul]

When it comes to things like standards and health and sanitary requirements--Debra may want to speak to this more--clearly those are very important in terms of whether we get real access or not. At the WTO we can negotiate the tariffs and the conditions at the border, but even if you remove the tariffs and get through that, you might still face, as we frequently do, some kind of sanitary or health barrier that is going to block your access.

Ongoing efforts through the Canadian Food Inspection Agency and others are trying to address those issues at the same time, even though they're not directly part of the negotiations.

I should probably give Debra an opportunity to add to that, if she'd like.

[Debra Bryanton]

Perhaps one of the benefits of the WTO agreement and the provisions that relate to sanitary and phytosanitary measures is that they do provide transparency and more predictability in our international trade environment. Certain rights and obligations also contained in those agreements permit us to more effectively take action when we do feel that a measure is inappropriate; for instance, if there is a food safety measure that we don't feel is adequately based on risk, we are in a better position to be able to work with our trading partners to resolve those issues.

Certainly the food safety and animal and plant health system we have in Canada serves as a very strong basis for trade internationally, and on the basis of that system we're able to more effectively work with trading partners to make sure product from Canada is accepted on the basis of the Canadian regulatory provisions.

When we do have a specific issue that needs to be addressed, of course, we put our efforts into demonstrating that the system we have in Canada and the products that come from Canada do meet the provisions of the particular country when those provisions are demonstrated to be soundly based true safety provisions, as opposed to being more oriented toward being a trade barrier.