Agriculture Committee on June 1st, 2006

[Richard Tudor Price]

No, Mr. Chairman, with respect, because MPCs are entirely solids, not fat, they do not affect domestic disappearance of butter fat. What they do is to displace solids, not fat, in cheese milk, which then goes into the skim milk powder surplus. So if the skim milk powder surplus is 60,000 tonnes, if you had further imports of MPCs, you'd expect to see that surplus increase. But it doesn't reduce the amount of production; what it does is to force more skim milk powder into low-priced markets, such as animal feed.

[The Chair, Conservative, Gerry Ritz]

Mr. Bezan, you have five minutes, please.

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

Thank you, Mr. Chair.

Ladies and gentlemen, we've been throwing around this issue and talking about what you can't do when you're dealing with MPCs and trying to address the concerns that dairy farmers have across this country. I'm wondering if there's anything you have talked about among yourselves to help mitigate the problems.

You're saying that article 28 doesn't work and that you have concerns about NAFTA and how we approach it with the Americans. So what can we do, from a regulatory or policy basis, that would meet some of the concerns that have been brought forward by Dairy Farmers of Canada?

[Graham Barr]

Thank you.

Throughout the course of this appearance today, we have outlined several possibilities, most of which have been brought forward by the Dairy Farmers of Canada as well. There's been discussion on article 28. There's been discussion on changing our domestic legislation to make a clarification that chapter 4 has a 90% concentration. I also spoke about other possibilities, including a WTO case, global safeguards, and an anti-dumping or countervailing investigation. I'll just repeat, by naming those I'm not in any way implying any potential success of those measures. There are many possibilities out there.

As I said a little while ago, the government recognizes this is an issue of serious concern to Canada's dairy industry. As we've said, that was part of the rationale for Minister Strahl extending the invitation to the processing and producing sector to work together to come up with solutions, so that we can have a stronger dairy industry in the long term.

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

When the government and staff are sitting around talking about these issues, whether it's at the WTO or NAFTA, CITT, or the U.S. International Trade Commission, if there are challenges coming forward, who's in the lead role here?

We have five different agencies and departments represented here. Who provides the scientific and policy advice? Somebody has to be in charge, and I'm just wondering who that is when we start making the decisions.

[Graham Barr]

As with many important issues before the government, this is one that's managed horizontally among departments. In our opening remarks, each of us explained our more specific role in this file, for example, from a policy angle, as with my colleague, Mr. Richard Tudor Price; the Department of Finance; and me, from Agriculture and Agri-Food Canada.

You mentioned scientific, and I think clearly the exchange between Mr. Orriss and Mr. Easter demonstrates that the scientific expertise rests in large part with the Canadian Food Inspection Agency. We've also heard from the Canada Border Services Agency. Obviously, they take a lead role in administering the policies and rules that are given to them.

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

Nobody's operating in isolation. Everyone's communicating.

[Graham Barr]

Absolutely.

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

Who's in charge of making sure that the communication lines are open, that nobody is going off on their own and creating hardship for the dairy industry?

[Graham Barr]

The communication lines between all five organizations represented at this table are very open.

[The Chair, Conservative, Gerry Ritz]

Thank you, Mr. Bezan.

Mr. Bellavance, go ahead, please.

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

Today, we have representatives of the Canadian Borders Services Agency. Allow me to give you some background concerning what happened in 1999.

Milk proteins, or the protein Promilk 872b, had been classified in tariff line 35.02, which is not subject to tariff quotas. Obviously, it was noted there was a problem because in 2003, the protein was reclassified in tariff line 04.04. This was followed by a challenge before the Canadian International Trade Tribunal, the Court of Appeal, and so on.

We would like things to go back to what they were with the 2003 decision. I would like the CBSA representatives to explain why, in 2003, it was decided to put Promilk 872b into tariff line 04.04. There must have been good reasons for it. It was not because the CITT overturned the decision that we, as elected officials—obviously the government has the last word—could not go back to the really good 2003 option, which was to put 872b into the right tariff line, as the U.S. did without hesitation.

I would like the representatives of the CBSA to answer. In 1999, did we make a mistake by putting the protein into tariff line 35.02? In 2003, was that mistake corrected by putting the protein into tariff line 04.04? Should we go back to the 2003 situation to fix the problem we have today?

I know this makes you smile, but what I have said does frame the question. If I'm wrong, please feel free to say so.

[Darwin Satherstrom]

Thank you for the question. Perhaps I will deal with the end of the process first. As a consequence of the Federal Court decision to dismiss the appeal of the Canada Border Services Agency and of the Dairy Farmers of Canada, we are now classifying product with a milk protein content on a dry weight basis of over 85% in chapter 35.

I can't answer the question of whether we were in error or not. As you know, at some point we look at importations, and importers have a right to appeal importations. The Canadian International Trade Tribunal, which is a quasi-judicial body, issued a decision on the matter, and as a consequence of the final decision of the Federal Court of Appeal, we are now in the position of having to administer the provisions as we do.

I'm not in a position to say whether what was happening in 1999 was right or wrong. That was the situation at the time, and we always reserve the right in the case of any--

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

You can tell me that you changed the tariff line in 2003. This means there must have been good reasons to do so. But please don't tell me that—

[Darwin Satherstrom]

In classifying certain products, we believe we're right. Obviously we believe we've made the correct decision. But it's always open to importers to appeal those decisions. We therefore then have to follow court decisions if the court decision disagrees with our interpretation.

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

At present, the government can, through regulations, remedy the situation and bring things back to what they were after the 2003 decision.

[Graham Barr]

As we said, yes, it is possible. Our role here is to explain the process and the implications.

[Carol Nelder-Corvari]

It's possible to do that through legislation. No decision has been made to move forward. As was explained, the working group has been established, and I understand that it is looking at this issue, among others. The departments represented here are awaiting input from that discussion.

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

If the government decided to take the regulatory route to put those milk proteins into the right tariff line—earlier we did hear this was possible—would it be a long and complicated process?

[Dean Beyea]

It would be through the process of passing legislation. As Carol pointed out, there's no regulatory means; there's no order in council authority and there are no regulations. So a bill would need to go forward supporting this legislation. It could be part of a tax bill or separate legislation, but there would need to be a piece of legislation going forward as you pass a law through Parliament.

[The Chair, Conservative, Gerry Ritz]

Thank you, Mr. Bellavance.

Mr. Boshcoff, for five minutes, please.

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

Thank you, Mr. Chair.

The Federation of Canadian Agriculture provided some information regarding a 2.65% cutback in quota volumes and only a 1.5¢ increase in fluid milk pricing. They feel this is a direct result of the imports of milk products.

When people are giving you hard data from the field like this, how does it come into your policy decisions in terms of trying to adapt the dairy industry?

[Richard Tudor Price]

I think I already said, Mr. Chairman, that the national level quota is set by the Canadian Milk Supply Management Committee, on which dairy producers and processors and provinces are represented, and it's their best judgment of what the market requires or what the domestic requirements for dairy are. So if you have consumers reducing their purchases, that will be reflected in the quota.

I think you're talking about the recent quota cuts that have taken place, which reflect a fall in demand on a butter fat basis. Obviously the level of domestic disappearance of butter fat is affected by imports of butter-fat-containing products. I think you talked earlier about butter-oil-sugar blends, for example.

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

No, it wasn't me, but I was more concerned about the departmental perspective of these things happening out there. Several people have mentioned it, Mr. Devolin for one.

I think the feeling of these people who are trying to be effective producers and to make good food for good people, and to produce quality product, is that it's like death by a thousand cuts. These components come up on a regular basis, and it's like someone designs a new process or a synthesis of processes and we are left to fight it.

We seem to be more reactive than trying to determine that there may be something else in the future similar to this that's going to occur. Should we not be trying, first of all, to step back and say, these things are going to be happening with increasing frequency, whether it's genetic modifications, or whatever, that will essentially substitute components on a regular basis, and then design a plan that meets it in a general and food sovereignty or food security way?

[Richard Tudor Price]

I think that is something that we hope will be discussed by the dairy working group that the minister has established, involving producers and processors. I think it would be very helpful for the future stability of the industry to have a plan to which all of the sector could subscribe.