Agriculture Committee on May 30th, 2006

[The Chair, Conservative, Gerry Ritz]

I call this meeting to order.

This morning, for meeting five, it is our distinct pleasure to have the Minister of Agriculture and Agri-Food, the Honourable Chuck Strahl, et al.

You've brought quite a contingent with you, Chuck. I'm sure we'll have the answers to everything we could possibly want this morning. It's great to have you here.

Of course, we'll start off with opening statements, then we'll move to our questions round. I will limit questions this morning, folks, to five minutes. We'll be fairly tight with the time. We want to have as many interventions with the minister as possible.

That said, Mr. Minister, I'll turn the floor over to you.

[Chuck Strahl, Conservative, Minister of Agriculture and Agri-Food]

Thank you, Mr. Chairman. It's great to be here.

Greetings to all the committee members as well. It's my first time before the committee. Actually, it's my first time before a committee in this capacity, as a witness. I'm sure you'll be gentle.

At any rate, I appreciate the work that you folks do on behalf of agriculture. In my experience, the work of the agriculture committee is like the work I see in the department; it's done by people who obviously have a passion for the issue. I know that the farmers in our agricultural organizations appreciate your work and the passion you bring to it.

I just want to talk for a few minutes about what we've done in the last few months and then talk a little more about the future. After that I'll take your questions.

As you know, the government committed $1.5 billion to the agriculture sector in our May 2 budget. That's triple our original election promise. It's in response, really, to what we heard from farmers and farm organizations about the need that's out there. We have addressed some short-term needs and have at the same time tried to lay the foundation for longer-term stability. We've been very busy over the last couple of weeks with some announcements on how to benefit our producers now and into the future.

We were very happy to have made three announcements on May 18--the farmers' hat trick, if you will--that put about $1 billion into farmers' hands this fiscal year. The biggest announcement was the change to the CAIS inventory valuation system. We all know that CAIS hasn't been as responsive to farmers' needs as it should have been, and through this change we'll be putting an extra $900 million into producers' pockets. Administrators will be recalculating producers' CAIS applications for the 2003, 2004, and 2005 program years. If producers are entitled to more money by using this new method, they'll be getting a payment.

I should just add that if the old method of calculation is better for the farmers, we'll just keep that one. We'll give them the best of the two methods. Also, there's no additional paperwork, since this will be done automatically. We're trying to keep the paperwork to a minimum all around.

Also connected to CAIS, we're working with the provinces and territories toward expanding the eligibility criteria for negative margin coverage to help viable farms with deep losses. That will provide another $50 million from the federal portion into that program.

We're also committed to replacing CAIS with a program that separates disaster relief from income stabilization. Those negotiations are ongoing with the provinces right now. In the meantime, we are making changes to the program that make it more responsive to producers' needs, as a down payment on our future objective of separating those two programs. In addition, we've gotten rid of the deposit requirement and have replaced it with a fee for this year. We've also deferred collection of overpayments, the clawback provisions. We've deferred that for now and cancelled interest charges on those overpayments until January 1, 2007. We think all of these are commonsensical initiatives that will help meet farmers' needs.

Two other related announcements on May 18 will help farmers now and in the future. First, the tabling of amendments to the Agricultural Marketing Programs Act, the AMPA legislation, will improve existing cash advance programs by making them, again, more responsive to farmers' needs. The second part is the introduction of the enhanced spring credit advance program, or ESCAP, which will also provide assistance to producers as early as this year. We'll be doubling the interest-free maximum for spring credit advances to $100,000, and extending the repayment period until September 30, 2007, in order to help farmers market their products to their best advantage. We are anticipating that will make an additional $500 million available to producers this spring.

The AMPA legislation, which will make those changes from ESCAP permanent, is also expected to provide an additional $600 million a year in cash advances. That's because the coverage will be expanded, of course, to include more agricultural products, notably livestock; to increase the overall limits on advances to $400,000; and to increase the cash amounts to producers, interest-free, from $50,000 to $100,000.

In addition to these, I was in Manitoba last week to announce our new cover crop protection program. That's to help the farmers whose land was damaged by flooding over the last couple of years to plant a cover crop and get back into production. We've committed $50 million for this year to fund the initial year of this national program. Most of that money this year will go to Saskatchewan and Manitoba just because of the flooding there and the excess moisture. This will provide producers on moisture-affected land with one-time payments of about $15 an acre.

In future years I would like to move to provide producers who have crop insurance with a per acre payment that's calculated to cover the average incremental cost of planting cover crops on land that's coming back into commercial crop production. This year it covers all land that has been flooded or has excess moisture, whether they're in crop insurance or not.

Earlier announcements. Of course we did accelerate the payout of the grains and oilseed payment program. About $590 million of the $755 million has been paid out. We've also announced that the Farm Improvement and Marketing Cooperatives Loans Act, the FIMCLA act, will continue. It was scheduled to be wrapped up, but it will continue, and consultations are taking place with industry on how to make the program more effective, especially for young farmers. All of these changes are to hopefully give tools to farmers to run their businesses more effectively, more profitably, and in a more predictable financial environment.

What is equally important is that we set out some changes for the future, or at least some options for the future for farmers and for producers. I wonder if the way to do that is by helping farmers diversify their marketing opportunities and options. One of those options is contained in the government's commitment to ensure that all motor vehicle fuel in Canada contains an average of 5% renewable fuel content, either ethanol or biodiesel, by 2010. We believe this is an important initiative that will provide short-term and long-term benefits not only to our agriculture producers but also to players throughout the value chain, as well as to our environment and to Canadians in general. There's potentially a huge new market for grains and oilseeds with this initiative.

I'm working with my colleagues from Environment and Natural Resources, and with industry and with provinces to make sure the commitment is implemented in a way that allows producers the opportunity to get involved in the value chain and to derive the maximum possible benefits from this 5% target that we will create.

Consulting with the provinces and industry now on how best to support our producer involvement in this new opportunity is ongoing. It started last week. We had a biofuels conference in Regina with the provinces, a bilateral agreement with the provinces. We want to move ahead quickly, but we want to do it right, and I want to do it in a way so that producers can make the business decisions to get involved where it makes sense for them.

In the longer term, biofuel is really only one aspect of the range of industrial chemical and other products that can be derived from the agricultural biomass generally. We want to support science and research and development to get there, and there are provisions in this budget for that as well.

I just want to update you a little on the WTO negotiations. As I'm sure you know, the WTO members did not reach an agreement on detailed rules and commitments in the agriculture negotiations by April 30 as originally planned. That being said, the WTO members are determined to resolve outstanding issues. We're currently involved in some pretty intensive negotiating in Geneva aimed at reaching agreement on detailed commitments at the earliest possibility. Canada is continuing to push for a more level international playing field for our producers and processors, which we believe can be accomplished by eliminating export subsidies, substantially reducing trade distorting subsidies, and by significantly improving market access.

We want an ambitious outcome for Canada. At the same time—like all WTO members, we have both offensive and defensive interests. For example, it is clear that key issues important to our supply management system continue to be under very significant pressure at the negotiations.

In response, we have gone to the wall to aggressively defend our interests. Canada's active participation at the WTO is crucially and critically important for the prosperity of this sector. For this reason, I can tell you that we will remain at the table to fight hard for all of Canada's interests. We must be a deal maker, I believe, not simply a deal taker at the WTO. We want a deal that benefits both our supply-managed and our export-oriented interests.

There are a few words I'd like to mention, too, about the CFIA.

As Canada's regulatory agency for safeguarding Canada's food, plants, and animals, CFIA has a very important role to play in contributing to the quality of life for Canadians. In this world of globalization, where borders become very sensitive to problems of disease and animal health and so on, I believe it is imperative that we remain on top of the pressing issues that CFIA deals with so we can better respond to emergencies as they arise and, better yet, prevent them from taking place to begin with. If we are to continue to be recognized as having one of the most comprehensive food safety and animal and plant health systems in the world, CFIA, as I've said many times, will often be as responsible for keeping borders and opportunities for our producers open as anything else we may do. If we handle our regulatory system well, that will continue to make market access possible for our producers around the world.

There are provisions in the budget for pandemic preparedness and for AI, or avian influenza, preparedness, and I'm happy to talk about that as well.

Finally, I just want to be clear that we are working toward long-term sustainability and profitability for our agricultural sector. That also includes the rural communities that are dependent on a healthy farm sector for their own economic strength. In the May budget, we provided a number of measures for non-agricultural-related sectors that are important to rural Canada, including, for example, some tax changes for fishermen, on either coast, when transferring property to their children. Money for the forestry sector, infrastructure development, and access for farmers and others to the Pacific gateway funding are other examples.

We believe it's important not only to support our agricultural sectors, but also to look after rural communities. We believe that where families grow and raise their children in those rural settings is the cornerstone, the backbone, of our country. We want to support that and make sure they have as many facilities as possible and as much access to opportunity as the rest of the country has.

I think that's probably enough for me, Mr. Chairman. I'm happy to take questions and try to answer them.

I'd just like to thank the president of the CFIA, François Guimont, and associate deputy minister, Christiane Ouimet, for being here this morning. If the going gets really tough, I'm just going to punt the ball to one of them.

Thank you.

[The Chair, Conservative, Gerry Ritz]

Thank you, Minister.

We'll start with the questioning. We'll work with five-minute rounds.

Mr. Steckle, for the first five minutes.

[Paul Steckle, Liberal, Huron—Bruce, ON]

Thank you, Mr. Chair.

And thanks to you, Mr. Minister, for appearing here this morning. Obviously, this was high on our agenda, to meet with you as early as possible in the mandate.

One of the concerns that the general populace of farmers has in this country is your plans for CAIS long term. I realize there are many concerns in his room this morning, but I want to start there.

During the election campaign a few months ago, your party suggested that we get rid of CAIS. I haven't seen any overtures on your government's part to speak to the provinces in terms of getting them to the table to sign off. You are using this program as the delivery mechanism for the current program of $950 million. I'm just wondering what, in the long term, your plan is. Is it to continue to use CAIS as the delivery mechanism, with modifications, or is it to get rid of it but use this as a short-term carrier for programs?

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

That's a good question. It's on people's mind. I have encouraged farmers, of course, to stay in the CAIS program and use it as best they can. Even if it's an imperfect vehicle, it is a flagship delivery system for income stabilization. I encourage farmers to continue in it, because you never know where it might go. Also, it is the program we have.

At our March 18 bilateral meeting that I had with the provinces, we did discuss--because it is a shared federal-provincial agreement, of course--the possibility of replacing CAIS. I put that on the table. I told them that we would like to move to a program that creates separate income stabilization and disaster relief programs. We issued a communiqué at the end of that meeting saying that we were investigating those options and that at our federal-provincial meeting at the end of June I'd be presenting options to the provinces that involve a separate income program and a separate disaster relief program. We're working with the provinces behind the scenes right now to see if we can come to a consensus on it. So there is ongoing work.

Obviously, I don't want to duke it out with the provinces in a public way. It's a bilateral agreement, and we have to work with them. I think it's wise for farmers to know that we're not going to do any knee-jerk reactions. They should stay in the program. We are making some fairly radical changes to the program. I guess at some time we'll have to decide at what stage the incremental changes make it something quite different or whether it is simply modified.

The provinces have been pretty firm that they want to stay with some sort of a whole farm program. What I've been insisting on is that we have to separate disaster relief and make some pretty radical changes to the current system if farmers are going to accept it.

[Paul Steckle, Liberal, Huron—Bruce, ON]

Regarding the $950 million, it was formerly $1 billion. You took $50 million out of that. I heard you say, and I think I've seen it in press releases, that the $50 million is.... Is that the $50 million that's going towards compensation for the extension into the area of negative margins? Is that where that's coming from, or is that $50 million of the original $1 billion gone?

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

The way it worked out is that when we got into the details of making these retroactive changes, we had a certain dollar amount we could work with, because we had other programs yet to announce, which were announced in the throne speech and in the budget. It turned out that the precise number, with the changes to CAIS, was $950 million. That's what it worked out to, including our portion of the negative margin changes.

[Paul Steckle, Liberal, Huron—Bruce, ON]

So the $50 million is not taken out for negative margins. Where has that $50 million gone? Has that gone to Manitoba for flood relief? Where has it gone? Where is the $50 million coming from?

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

We announced another $50 million last week for flood relief, and the majority of it will go this year to Manitoba because of the Red River flooding.

[Paul Steckle, Liberal, Huron—Bruce, ON]

But where is it coming from? Where is that $50 million coming from?

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

It's just part of the $1.5 billion incremental spending increases we announced in the budget. The amount going to CAIS changes, both retroactive and forward looking, because the negative margins thing is this year forward, is $950 million. We announced another $50 million for the cover crop program, and there will be other announcements that deal with some of the other things in the budget, as well. Some will flow more quickly than others, but some of those other details are yet to be announced.

[The Chair, Conservative, Gerry Ritz]

Thank you, Mr. Steckle.

We move to Mr. Bellavance for five minutes, please.

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

Thank you for being here today, Mr. Minister.

Since we don't have much time, I'll immediately get to the heart of the matter. I did a tour of the agricultural community during the parliamentary break week, and a number of concerns were brought to my attention, particularly regarding the budget and funding allocation.

During a question period in the House, you said that Quebec would receive its fair share of that budget. In addition, I have here a copy of the newspaper La Terre de chez nous, in which you were reported as saying that Quebec would have its fair share.

Can you tell us today how much money Quebec will receive out of that $1.5 billion? When you say fair share, I'd like to know what amount of money that means.

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

That's a fair question. When we made these changes to the inventory evaluation system, of course, Quebec already had the P1-P2 inventory system in place. They already had the better system in place, because they administered their own program.

What we are doing is working with the Quebec government to get their numbers. They have the numbers we'll need to make a retroactive payment based on what the federal government's share of those payments would be. So in other words, the 60% is divided 40-60 between the province and the federal government.

We're getting the numbers from the provincial government. We'll calculate those based on the numbers they give us. I don't believe they're completed yet, but they're working with our officials, and then they'll get 60% of what they would have got if they had never been in the P1-P2 evaluation system.

I'm not sure how many dollars are going to be involved in that, but of course that's only part of what the province is going to get. As we roll out the rest of our budget promises, including the low family farm income program, which is a fairly large piece of the $500 million yet to be announced, Quebec is going to get a fairly large share as well, according to our initial calculations.

I don't have the exact figures, because we're waiting on some of them yet, but I think that in the end it will be very close to the traditional amount of money, if you will, that Quebec gets as a portion of the agricultural budget.

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

With regard to the method for calculating inventories, you said earlier that it wasn't very important whether the new or old method was used. Is that what you meant in your presentation? You said that, regardless of the method, you would take the best method for ensuring that the provinces and Quebec get their fair share. Did I understand correctly?

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

Yes. What I was talking about is that the individual producer will get the best of the old system evaluation, the system that the rest of Canada has been using, which is just a one-time evaluation system that in many cases, especially when there are declining commodity prices, has not given them the true value or the true effect--as is shown--of declining inventory evaluations.

So under the P1-P2, most farmers are going to benefit from that twice-a-year evaluation system that allows a more accurate evaluation of their current inventory. However, some farmers, depending on how their markets are and depending on the products they're dealing with, will benefit from the old system. Whichever system benefits them the most, they will receive that amount. So they will receive either the old system, if that's best for them, or we'll do the calculations, and if that's better for them, they'll get the P1-P2 evaluation system. Either way, they won't get a clawback on it; they'll get the best of either world.

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

Another concern I was told about was the current WTO negotiations. I'd like you to clarify the negotiator's mandate for us. The preliminary documents raise some concerns, from what we've been told. I know they're only preliminary documents, but we were told there would be a potential increase in market access, and we know all the concerns surrounding supply management. You also talked about them in your evidence, but we'd like to know the negotiator's mandate.

Is he still bound by the motion that was introduced in the House by the Bloc québécois last November 22 and unanimously passed? That's mainly what our people would like to know.

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

Certainly the details of a negotiator's mandate are difficult to make public, because if you put the bottom line of your mandate in the public realm, then the negotiator's no longer negotiating; all he has is his bottom line. It's very difficult to discuss tactics or strategy for the negotiator day by day, because there's going to be a lot of give and take in these negotiations and a good negotiator is going to have to do his best--and I believe we have a very good negotiator--to get the best deal for Canadian agriculture.

That being said, what has been clear over the last month or so, for example, is that Canada stood firm when a proposal came forward to expand tariff rates, TRQs, for example, which would affect our supply-managed system. And I'm going to be blunt about this, and I think we have to be honest about this. The problem for us is that the vote in that situation, where we refused to accept any changes to the TRQs, was 148 countries to 1. We completely stand alone on that. All other countries, including Japan and the European Union and others, say they feel there had to be some changes to the TRQs and other tariffs.

The question we have to ask ourselves and the question that supply management has to ask themselves is this. What's the best strategy now, given that we're completely isolated, 148 countries against 1? What's the best strategy now to get the deal possible for Canada? If we continue along a voting pattern of being completely isolated against all other countries of the world, then we're not going to be at the table to defend the interests of supply management. We'll be on the outside, wondering what's going on inside the room. The question then is, who's going to defend supply management if not us?

So the difficulty in negotiations becomes this. What strategies and tactics do you use to make sure that supply management and the rest of the agricultural community don't end up with a deal at the WTO that other countries have crafted, that haven't included our input? So that's the difficulty, and I'm just being honest about it.

The other thing that's clear is that in the end we will be in the WTO. The associations that say if we don't get the perfect deal or if it's not just what we want, we should walk away from the WTO are not dealing in reality. We simply are going to be in the WTO when this is over, and to think otherwise is to play a very dangerous game. We will be in the WTO. That's why it's important that we be a deal maker and not just a deal taker...that other countries might want to craft on our behalf.

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

Even if we're alone, I believe we must continue to defend supply management and keep it as it is.

[The Chair, Conservative, Gerry Ritz]

Thank you.

We'll get to you in the next round.

Mr. Bezan, for five minutes, please.

[James Bezan, Conservative, Selkirk—Interlake, MB]

Thank you, Mr. Chair, and thank you, Mr. Minister, for coming in today.

I can tell you that the farmers in my riding--and across Manitoba when I was travelling around last week--are very appreciative of the job you're doing. The announced changes to CAIS, the commitment to replacing CAIS has been extremely well received. The cover crop program that you announced really comes into play for our farmers across southern Manitoba and into Saskatchewan, as well, who had flood damage last year and this year. The commitment to disaster assistance is also something that farmers want to see. They want to see that decoupled and delinked from CAIS.

One thing that keeps coming up, though, as I travel around talking to farmers--and I am a farmer--is how well we're doing from the competitiveness side in dealing with our competitors in the United States and around the world. Their access to pharmaceuticals, to animal health products, to herbicides and pesticides...they're priced a lot cheaper than they are here in Canada. Own-use import permits to bring in things like ivermectin, like glysophates, are of a concern to agriculture in general.

So I was wondering if the department is looking at that and how we can make sure that our producers stay on an even playing field when dealing with their competitors in the global market.

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

I would agree with you. That question comes up repeatedly and in almost every sector of agriculture, whether it's horticulture, or grains and oilseeds, or animal health. A common concern is how to get access to leading-edge health products, or pesticides or herbicides, and how to do it quickly and at a reasonable cost.

The own-use permits have been used extensively, as you know. That has been the one saving grace, really, that has allowed a lot of the grains and oilseeds folks to keep things moving, but on other products and in other sectors of the industry it has been more difficult.

There has been some progress on a couple of fronts. One is, of course, that the PMRA is under Health Canada. We might want to debate whether it should be there or under Agriculture, and I know that's a common debate and maybe a good one, but the current head of the PMRA, Karen Dodds, from what everyone tells me, is doing a much better job of being receptive to farmers' concerns. She is listening well; she is trying to work the system to get them products more quickly. So I think there are some good-news stories there. She has been good to work with and has taken the farmers' side on this in a lot of ways. That's going to help quite a bit, because the management of that kind of an agency makes a big difference.

The second thing is that when we make up our own priority lists from the agricultural side and share that with the PMRA, the turnaround time on that has improved greatly. There are, again, some good success stories on that. The problem is that it's only a short list. So we put together the top 10 priorities and share that with the PMRA. That tends to go more quickly. The problem is that a lot more than 10 are required. So we're working with the CFIA and with the Americans—especially the Americans, because that tends to be where the products come from—to try to find ways to not only harmonize approval processes but harmonize the testing process itself so that when programs or tests are designed, we can actually use those results and it will pass muster in Canada as well. Those talks are ongoing, to try as much as possible to move that so that Canadians can get them as quickly as possible.

It's an ongoing problem, though, but we are working on that with PMRA, CFIA, and our own officials to try to get the bottlenecks out of it.

[James Bezan, Conservative, Selkirk—Interlake, MB]

I have a short question as a follow-up.

There are still quite a few cattle producers in my riding and across the country who are concerned about whether or not export to the U.S. of over-30-months-of-age animals is going to be opened up. Do you know anything on that?

Also, they feel that harmonizing our standards--referring to bluetongue and anaplasmosis--may aid in opening that market.

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

I have spoken with Secretary Johanns about that several times. I've gone down to Washington, D.C., and have spoken with him in person. I've had a meeting with him about it and I've had several telephone conversations, as I have had with Secretary Mayorga from Mexico, who also, of course, wants the border open, especially for breeding stock for heifer replacements, and so on.

It seems that Secretary Johanns is keen to get the border open, but with the second case of BSE--which happened, unfortunately, in my riding, of all places--when we had two cases in quick succession like that, there's no doubt that it set it back a number of months. Secretary Johanns is still hopeful we can get the border open this calendar year. He still thinks that can happen. That has been his objective all along. He was candid that those two cases, which came one, two, like that, mean they're going to have to do their due diligence on it from their side, but certainly from the administration side they're keen to open the border. They're pleased with the R-CALF decision in Montana. They are working with our folks.

When I was down there last time, the comments from the secretary were that Canada is doing a very good job, that we have a very good system, and that he expects the border to be open. He was very public about it with his own American audience. So I'm hopeful it will still happen this year.

[The Chair, Conservative, Gerry Ritz]

Thank you, Mr. Bezan.

Mr. Atamanenko, for five minutes, please.