Agriculture Committee on Feb. 27th, 2007

[The Chair, Conservative, James Bezan]

I call this meeting to order.

We are privileged to have Minister Emerson, Minister of International Trade, with us today; and Minister Strahl, Minister of Agriculture and Minister responsible for the Canadian Wheat Board.

We have Steve Verheul back again. It's good to see you. And John Gero, who is with the Department of Foreign Affairs and International Trade, is also here today.

Welcome, all of you, to the committee table.

We're going to keep things flowing quite smoothly today. We're going to give the two ministers fifteen minutes total time to make a presentation, and we're going to go with five-minute rounds so that we can get in as many questions and as many questioners as possible in the time we have allocated.

With that, I'll turn it over to Minister Emerson for his opening comments.

[David Emerson, Conservative, Minister of International Trade and Minister for the Pacific Gateway and the Vancouver-Whistler Olympics]

Thank you very much, Mr. Chair.

It's a great honour and a privilege to be with this group of parliamentarians today.

As was mentioned, Minister Strahl and I are joined by our chief trade negotiator, John Gero, and Steve Verheul, the chief agricultural negotiator.

I'll make some brief remarks and then take some questions, once my colleague Chuck Strahl has made some brief remarks.

Let me just begin by saying that Canada as a trading nation and its economic success, which means our jobs, our prosperity, our social programs, and our whole quality of life, have historically depended, depend now, and will depend for the foreseeable future very much on our ability to sell goods, products, and services throughout the world. This is true of agriculture, true of manufacturing, true of natural resources, and true of services.

We also know, and many of you know, that Canada's farmers can compete with the best in the world, but they need access to markets. That's really why Canada supports the open markets, the liberalized trade, and the level playing field for farmers that the World Trade Organization framework provides. It's a stable, predictable, rules-based system that is fair to all trading nations, whether they're large, small, developed, or developing.

Our exporters depend, in other words, on the World Trade Organization as the cornerstone for our international trading strategy. And that's also why Canada has been such a strong proponent of an ambitious conclusion to the Doha Round of trade negotiations.

Fundamentally, we must achieve increased access to world markets for our goods and services. We must achieve improved trade rules on anti-dumping, countervail, and subsidies, and we have to achieve a reduction of red tape at national borders. Fundamentally, we're fighting for a level playing field for all countries to compete fairly.

As you know, development is the centrepiece of the Doha Round, and again, an ambitious, balanced outcome is absolutely essential for reducing poverty and integrating developing nations into the world trading system.

Canadian farmers also have a lot to gain from a successful Doha Round, which is why we've lent our full support to the objectives of the agriculture negotiations; namely, the elimination of all forms of export subsidies, a substantial reduction in trade-distorting domestic support, and real and significant improvements to market access.

At the end of January, Minister Strahl and I attended an informal WTO ministerial in Davos with ministers from about 30 countries. We emerged from that meeting with a clear consensus to try to get the negotiations back on track, and as a result, WTO Director General Pascal Lamy immediately relaunched full-scale negotiations in all of the negotiating groups.

Since the restart, the pace of informal negotiations has picked up in Geneva. In parallel, key players, including the U.S., the EU, Brazil, and India have been engaging in bilateral discussions to try to narrow their differences.

But time is running out. Substantive results must come soon in order for the U.S. administration to push Congress for a renewal of trade promotion authority. Without an approval or an extension of trade promotion authority, a Doha deal is very unlikely for years to come.

It should also be clear to all of us that Canada has a big stake in an aggressive international trade agenda. In that context, I'd like to make a few comments about the government's commitment to supply management.

In comments last December, which I suspect are the reason you've asked me here today, I talked about the real opportunities for Canada internationally, but also about some of the pressures we face in the international marketplace.

Across our international trade agenda, Canada has both offensive and defensive positions. Like all countries, we seek to both advance and protect important economic interests. This means we are seeking a fair, more rules-based international trading system, are seeking to expand market access, and are pursuing a strong defensive position in some areas, including that of supply management.

My remarks in December were candid, but they were fundamentally intended to convey that negotiations by their very nature are about give and take. As Canada seeks to achieve enhanced economic benefits either through the WTO or through regional and bilateral agreements, we will face pressures to make concessions ourselves. That is just common sense; I think we all know that.

Nevertheless, this government is resolutely committed to Canada's supply management system. That has been and it remains this government's position. As Minister Strahl has noted many times, we've gone to the wall on this issue.

We're also moving on other fronts. In January we requested WTO consultations on U.S. agricultural subsidies provided to American corn growers, as well as on the total level of trade-distorting agricultural support in the U.S. and certain export credit programs. We believe these subsidies create unfair market advantages. We want to see the U.S. live up to their WTO obligations, especially as they rewrite the Farm Bill this year.

Earlier this month we announced that the government will be initiating negotiations under GATT article 28 to restrict imports of milk protein concentrates from our trading partners. This was in direct response to the wishes of Canada's dairy producers.

We're also working to ensure Canada's future economic prosperity through regional and bilateral trade initiatives. Here again, we'll act in the best interests of both export-oriented and supply-managed agricultural sectors.

As I said at the outset, our farmers can compete with the world's best. By pursuing an ambitious agenda at the WTO and by moving forward on a robust defence of our agriculture industry, this government is laying the foundation for a strong, sustainable, and competitive farming industry for generations to come. We look forward to working with Canadian farmers and with parliamentarians across party lines to reach this goal.

I'd now like to turn the floor over to my colleague, Minister Strahl, so that he can make a few remarks.

Thank you, Mr. Chairman.

[Chuck Strahl, Conservative, Minister of Agriculture and Agri-Food and Minister for the Canadian Wheat Board]

Thank you, Mr. Emerson and Mr. Chair, and thanks to the committee for devoting some time to this critical issue. It's an important one and it gives us an opportunity to once again stress our government's strong support for supply management.

I want to strongly echo the comments made by Minister Emerson and I'd like to focus my own observations today on my portfolio and the range of initiatives and positions the government has taken specifically in support and defence of the supply management system.

We understand, as I know the people around this table understand, the enormous value that the supply management system brings to those sectors that have chosen to market this way.

The system has served producers, processors and Canadian consumers well for many years and will continue to do so.

As Minister Emerson has made clear, we have not only been active on behalf of our farmers in the domestic community, but we've been working hard internationally as well. Mr. Emerson has already spoken about our trade negotiation agenda and our recent initiative to pursue formal WTO consultations with the United States regarding their trade-distorting subsidies for agriculture.

We've taken other recent measures as well. For example, as you know, in response to dairy industry concerns, three weeks ago I announced we will be initiating negotiations under article 28 of the GATT to restrict imports of milk protein concentrates. As you are aware, the increased use of milk protein concentrates in dairy products has posed significant challenges to producers for several years, and we took aggressive action on it.

In a separate initiative in support of supply management, I also announced that I would ask the Canadian Food Inspection Agency to launch a regulatory process related to compositional standards for cheese. This process should result in the further harmonization of the relative federal regulatory instruments and will be designed to protect consumer interests and promote choice in the marketplace.

Mr. Chairman, Canada's farm leaders have commended this government for taking action on behalf of the dairy sector. They have also said very clearly that they recognize this government's strong commitment to measures that support their vital marketing tools, such as supply management.

These are important government initiatives that will help the industry move forward. However, the discussions in the dairy industry working group we established last spring made it very clear these actions alone cannot achieve the long-term solutions required to ensure profitable growth for producers and processors. That's why I've also urged producers and processors to renew their discussions under the dairy industry working group framework. We're committed to supporting the industry and to tackling the key challenges it currently faces, but long-term solutions can only come from producers and processors working together.

I want to thank both of those groups for putting so much effort already into those negotiations and discussions, and I urge them to continue them wholeheartedly.

The theme of close collaboration with our industry, and indeed of leadership in collaboration within and across our agricultural industry, is also relevant to our work in international trade negotiations. In that regard, I'd like to close my remarks today by briefly returning to Minister Emerson's observation about our position at the WTO. I want to strongly reiterate Minister Emerson's point that Canada has much to gain from a successful outcome in Geneva. For Canadian agriculture to thrive and to compete effectively, we need to achieve an ambitious result and strengthen the rules that currently govern world agricultural trade.

We are continuing to seek substantial reductions in trade distorting domestic support, as well as significant improvements in market access and the elimination of all forms of export subsidies.

There's absolutely no doubt this government has mounted a very strong defence at the WTO of interests important to supply management. The record on this is very clear. We continue to take a very hard line on these issues. At the same time, it's important to recognize that all other members of the WTO are willing to accept at least a degree of over-quota tariff cuts and tariff quota expansion.

We have no allies for this position. So what does this mean for Canada? This government's commitment to supply management is strong. Our negotiating position in Geneva remains aggressive in defence of supply management, but as Minister Emerson has explained, we're also committed to the WTO; it is the cornerstone of our trade policy.

So this reality presents Canada with a challenge. We have a very strong interest to remain as effective and influential as we can at the negotiating table so we can achieve the best possible outcome for our whole agricultural sector, including exporters, but also for supply-managed industries. Our agricultural industry will have an important role to play here.

As we move forward, we need to continue to work very closely with the provinces and a full range of our agriculture stakeholders, including supply-managed industries, to make sure that we can deliver the best possible result for Canada. We will be listening closely to their views.

It's always preferable to be a deal maker than a deal taker at any negotiation, and that's why we will continue to work together collectively with industry and collectively between departments to ensure an effective approach for Canada.

With those remarks, I would think we're ready to take questions.

Seeing there are no questions, I think you're ready to leave.

[Some hon. members]

Oh, oh!

[An hon. member]

Well, thanks for coming!

[Chuck Strahl, Conservative, Chilliwack—Fraser Canyon, BC]

Oh, there are a couple of questions.

[The Chair, Conservative, James Bezan]

Thank you, ministers, and thank you for staying under your time limit.

I want to remind members that we are going to stick to a five-minute round, and I will enforce five minutes on all so you respect it. Also, we're talking about supply management, so let's keep our comments to the topic.

With that, I turn it over to Mr. Easter.

[Wayne Easter, Liberal, Malpeque, PE]

Well, the key question here, Mr. Chair, is really the government's commitment to supply management and orderly marketing, and whether it's real or an illusion—because they do go hand in hand.

Given the fact that there's no question you're basically undermining orderly marketing with your tactics at the Canadian Wheat Board—

[The Chair, Conservative, James Bezan]

We're talking about supply management.

[Wayne Easter, Liberal, Malpeque, PE]

We are.

[The Chair, Conservative, James Bezan]

Orderly marketing is different from supply management.

[Wayne Easter, Liberal, Malpeque, PE]

And that's what I'm talking about, as they both apply, Mr. Chair, because the world is watching. They're watching as you talk about choice under the orderly marketing concept of the Canadian Wheat Board. So my first question is really for Mr. Emerson.

Mr. Emerson, I just want to be sure you're still standing by this statement. I'll read a quote of yours:

We've got sector sensitivities and we've always deferred to this industry or that industry that felt that they couldn't cope with free trade and so we tended to put aside agreements that were largely in this country's best interests but because of narrow sensitivities—

That was attributed to you in The Western Producer. I take it you're not withdrawing that statement. Do you stand by that?

[David Emerson, Conservative, Vancouver Kingsway, BC]

Let me just state right off the bat that this government's position is that we are committed to supply management. But there is no doubt, when I made those comments, which I do not withdraw, I was talking about the long run, and I was talking in the context of Canada being a highly trade-dependent economy. There are many sensitive sectors, not including supply management. We have, as a country, over the last five to ten years, since NAFTA, not entered into sufficient trade agreements to keep up with the competition. Our exporters are now being disadvantaged because other countries are forging bilateral free trade agreements, and we're not part of them.

[Wayne Easter, Liberal, Malpeque, PE]

The key question for us here—and we've seen it in all the other agricultural commodities that aren't under supply management—is that very often producers are disadvantaged. The fact of the matter is that in the dairy system, for example, under supply management, we're a heck of a lot freer traders than are the Americans. We allow more product in here than they allow in there. So it is a system that works.

You made a comment that you have to look at the long run, and that's true. I recognize that. That's what worries me. Just going with an article 28 doesn't necessarily signify that you're strongly supportive of supply management. What is happening with offering choice on the Canadian Wheat Board is that, based on that principle, if a number of producers want to produce and sell outside the supply management system, that's their choice. If they want to do that in Quebec, outside the single-desk selling system, within those commodities, which you really don't have jurisdiction over, would you allow that to happen, as well?

It's the same principle. If you're going to allow choice to individuals to undercut the single-desk selling of the Canadian Wheat Board, are you going to eventually, in Mr. Emerson's long run, allow choice to undercut the supply management system itself, by individuals?

[The Chair, Conservative, James Bezan]

I would suggest that since we're talking supply management, we talk about supply management with article 28, as it applies to the discussion at the table today.

[Chuck Strahl, Conservative, Chilliwack—Fraser Canyon, BC]

Okay, thank you, Mr. Chair. I'll try to restrict my comments to that.

Looking at the long run for supply management, the long run is not simply to use article 28, although I would point out that our government's the first government to use article 28 to protect supply management. It was something that was asked for for many years of previous governments and was never used. We have gone further than previous governments. We've put our money where our mouth is. We were pleased to do that. The comments that we got from the Dairy Farmers of Canada, for example, showed that they were very pleased. They made comments about there being no doubt now in producers' minds that this government supports supply management, which is true, and they recognize that.

The longer run, though, does require more than simply an article 28. That's why I've been very pleased with the work of the Dairy industry working group. My hat's off to both the producers and the processors for taking a long-term view in the work they did on that committee. It would be easy for everyone just to hunker down and say “It is the way it is, and everybody just has to live with it”. Instead, they said, “Well, let's look at the long-term viability of the industry and, more than that, let's look at growth opportunities for the industry”.

To get everybody bearing down on that question in the industry, the industry leaders of both the farm community and the processing community, and to talk about these long-term steps that are necessary to restore growth—because there's been retracting in recent years—that's getting the right group of people asking the right questions with a government that is keen to do our part to make sure that we can restore growth.

The longer term is not simply article 28. That isn't the longest term. The longer term includes things like the Dairy industry working group, which started off talking about cheese compositional standards, but has other things on its agenda, and I look forward to its getting to them. I'm hoping it's going to talk about things like yogourt and butter oil, and how to restore growth to the industry. That is the long-term solution.

[The Chair, Conservative, James Bezan]

Mr. Bellavance, go ahead for five minutes, please.

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

Thank you.

Mr. Emerson, we wanted to hear your views on supply management. That is why I requested that you testify here. You granted an interview to the Western Producer which appeared last December 21. This interview generated a great deal of concern amongst supply-managed farm producers. The national presidents of the five supply management sectors asked to meet with you, but this meeting has not taken place to date. You're here, and these are public debates: these people will therefore be able to hear your responses.

You could try to sweep this interview under the carpet, but the fact remains that this is not some little quote given during the course of an interview on some other subject. The entire interview pertained to supply management. In addition, you were interviewed by an experienced reporter. He has been attending all of the agriculture committee meetings since I came here. In other words, he knows the subject. I personally read the Western Producer as I read all of the other newspapers and magazines dealing with agriculture, and I know that you were not facing a new recruit. I believe that he reported your words accurately. Moreover, as you yourself said, you are not denying what was written.

In your opening remarks, you said that with this type of negotiations—and this is how things are occurring in the Doha Round—, you have to give and take. You also said that concessions were necessary, and therein lies the source of some serious concerns.

You're talking out of both sides of your mouth by saying that we will be supporting supply management while at the same time making concessions. What do you mean by that? You were there in November 2005 when we voted unanimously in favour of a Bloc Québécois motion stating precisely that there were to be no concessions. This motion clearly stated that there would not be tariff reductions or increased market access. And yet, you said in your opening remarks that concessions were required.

I would like to know what type of concessions you're prepared to make.

[David Emerson, Conservative, Vancouver Kingsway, BC]

Yes, thank you, colleague.

Let me just say that the Western Producer interview that I did was actually a larger context on a discussion of Canadian trade policy, and the big picture looking forward many years was not fundamentally focused on supply management. Nor, in fact, when I spoke about sensitive sectors, was I specifically focusing on supply management. That came in as almost an afterthought, as the reporter asked me whether sensitive sectors also included supply management. I said yes, indeed they did.

I supported the motion in the House—I guess it must be close to two years ago—on supply management. Our government has respected that parliamentary motion. We are absolutely rigid in terms of supporting supply management. Our negotiators have been rigid, clear, and unambiguous, and when I say we're going to have to engage in some give and take, we have given nothing on supply management. What we are doing is taking whatever steps we can, in whatever negotiating context we can, to ensure that sensitive products and the treatment of sensitive products are such that we will preserve our supply management system.

We have given no concessions. We intend to give no concessions on supply management. Having said that, I think everyone in this room knows that it is inconceivable at the end of these negotiations, if there is a successful WTO Doha Round, that Canada would opt out. So we have to think about how, given our strong position on supply management, we ensure that this position is preserved at the end of this round of negotiations. When there is no room to engage in discussions, that will be a challenge.

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

Nor must we—

[The Chair, Conservative, James Bezan]

You have a few seconds left, André, so very short questions.

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

The chief negotiator for Canada, who is in attendance today, said more or less the same thing when we met him the last time.

At any rate, our position was stated clearly in this motion. You're saying that you will defend it, and you are currently defending it internationally. However, we are left wondering whether Canada should sign this agreement at any cost, should the case arise where we are asked to make concessions with respect to supply management. Other countries are following quite rigid rules in their negotiating process.

[The Chair, Conservative, James Bezan]

Please keep your response really short, Minister.

[David Emerson, Conservative, Vancouver Kingsway, BC]

As I say, I do not now, nor will I ever, recommend that Canada withdraw from the World Trade Organization. It is the one mechanism that gives Canada a fair shake in international trade talks. It means that geopolitical power does not drive the outcomes. It gives us a fair, neutral, transparent system that governs international trade. For Canada to contemplate getting out of the WTO would be inconceivable to me.

[The Chair, Conservative, James Bezan]

Thank you.

Mr. Miller.