Agriculture Committee on June 1st, 2006

[Graham Barr]

The Dairy Farmers of Canada have put forward other options. One that we've hinted at around the edges so far this morning, and that I imagine we'll get into a little later, is this issue of what is called harmonizing the protein concentration at 90% with the United States. Carol was just talking about the domestic legislative changes that would be needed.

In continuing to respond to your question, please understand that I'm merely indicating theoretical possibilities and in no way implying any likelihood of success. Certainly, Dairy Farmers could petition for anti-dumping or countervailing duties to be placed on these products if they thought they had evidence these imports were subsidized or dumped into Canada. The Dairy Farmers could also gather evidence in support of a WTO challenge, if they had evidence, for example, that imports of MPCs from other countries, such as the European Union, benefited from export subsidies. Another way a country can limit imports—again, I'm pretty sure that's not applicable here—is through a global safeguard action.

As I said at the beginning, due to technical or other reasons, it's unlikely those options will be applicable in this case.

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

Okay, carrying this a little bit further, how do you explain that in the U.S. the 90% protein content requirement virtually blocks all imports of milk proteins, again because of the technical difficulty of it? So why does Canada not have the same requirements?

[Graham Barr]

I'd like to take this opportunity to clarify something about the 90% cut-off point for milk protein concentrates in the United States. That cut-off point actually has very little practical significance for American dairy farmers. Unlike in Canada, the United States has no TRQ in chapter 4 to cover milk protein concentrates; as a result, milk protein concentrates below 90% are imported in the U.S. at an extremely low tariff rate. American dairy farmers have been lobbying their government for several years to create a TRQ, but they have had no success. As I said, whether the MPCs are classified under chapter 4 or chapter 35 in the United States has no practical impact.

As far as the trade in these products is concerned, if I recall correctly, from 2001 to 2005, imports into the United States of milk protein concentrates increased by 50%. On May 11, when they appeared before you, the Dairy Farmers of Canada provided their own trade data of imports of milk protein concentrates into Canada. Our data, which is from Statistics Canada, is consistent with the Dairy Farmers of Canada's data, and also shows that imports of these products have been stable at approximately 6,000 tonnes in the last few years.

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

Okay.

What are the tariffs, if any, imposed on milk protein concentrates imported into the United States?

[Graham Barr]

The extremely low tariff rate I referred to equals .37¢ per kilogram, which basically works out, if I do my math correctly, at one-tenth of 1% of the value of the product.

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

One-tenth of 1%.

[Graham Barr]

That's my understanding, yes.

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

That's all I have to say.

[The Chair, Conservative, Gerry Ritz]

Mr. Devolin.

[Barry Devolin, Conservative, Haliburton—Kawartha Lakes—Brock, ON]

I have a quick question. You're saying that the quantity of the milk protein concentrates coming into Canada has been stable for several years and has not increased significantly in the last couple of years?

[Graham Barr]

I merely refer you to the trade data that the Dairy Farmers of Canada provided to the committee on May 11. What that data showed—and we agree with it—is that imports of milk protein concentrates under the tariff line in chapter 4 have been relatively stable for the past few years, at approximately 6,000 tonnes.

[Barry Devolin, Conservative, Haliburton—Kawartha Lakes—Brock, ON]

The Dairy Farmers basically suggested that if nothing happened, the collapse of supply management was imminent. I don't think I'm overstating their case. Do you think they are being alarmist or shrill in making that observation?

[Graham Barr]

Mr. Chair, that's a question I can't answer.

[The Chair, Conservative, Gerry Ritz]

Thank you, Mr. Barr.

Mr. Atamanenko, you have seven minutes, please.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

Just before we move back to this topic, in British Columbia, for example, the fruit growers are considering anti-dumping regulations for the apples coming in. Who would that go through, or who deals with that? What's the process if, for example, the fruit growers feel there's dumping going on with apples coming into British Columbia? What's the mechanism for putting in anti-dumping regulations?

I think it's your department, so I'd like to get an answer from you on that.

[Carol Nelder-Corvari]

Thank you for the question.

The Special Import Measures Act is the responsibility of the Minister of Finance. It sets out the rules for implementing Canada's rights to impose anti-dumping or countervailing duties against injurious imports. The process is that domestic industry would file a complaint with the Canada Border Services Agency, who would investigate the dumping or subsidy allegations, and then the Canadian International Trade Tribunal would investigate the injury allegations.

You need both a finding of dumping or subsidization, plus an injury finding, in order for the duties to be put in place, and that's all done through an independent process. So if those findings from both the Canada Border Services Agency and the Canadian International Trade Tribunal are that there's subsidization and dumping, then injury duties are imposed to protect domestic manufacturers or producers.

In the case of British Columbia, there's been a history of such regional cases, where they're showing injury only to a regional market. So that would have to be explored with the CBSA in terms of initiating a case.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

To your knowledge, has this been done recently?

[Carol Nelder-Corvari]

I don't have that before me. I think there was an apples case in the past, maybe over a decade ago, but I can provide that information to the committee.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

Thank you.

I guess I still have some time left and can continue.

[The Chair, Conservative, Gerry Ritz]

Yes, you do.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

Okay, I'll ask one of the questions I have here in front of me.

Since Canada's dairy farmers are responsible for certain costs associated with the storage of skim milk powder, the more imports there are of dairy ingredients that displace skim milk powder, the more farmers' costs increase. Should not the processors also cover the costs associated with surpluses of skim milk powder? It is well known that in Europe and the U.S., governments play a huge role in eliminating skim milk powder surpluses, thereby subsidizing the dairy farmers. Could the Government of Canada not do the same thing?

I guess what I'm reading in this question is that if things don't change, is there something we can do here, rather than changing the way imports are coming in, to help our dairy farmers so they can continue to make a profit? That's how I read it. Could I get your comments on that?

[Graham Barr]

Thank you for the question. For the answer I will refer to my colleague from Agriculture and Agri-Food Canada, Richard Tudor Price.

[Richard Tudor Price, Director, Supply Management, Department of Agriculture and Agri-Food]

Thank you, Mr. Chair.

With regard to the honourable member's question, it is quite correct that if increased MPC imports did displace solids, not fat, in cheese manufacturing, it would increase the skim milk powder surplus that has to be dealt with in the system. It's already a substantial surplus and it would be increased.

For some years, the storage costs for that have been the responsibility of the dairy sector. With regard to the sharing of those costs between producers and processors, that's a matter that's worked out between provincial boards and provincial processors in the negotiation at the provincial level, and it's not something that the federal government directly intervenes in.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

Thank you.

[The Chair, Conservative, Gerry Ritz]

If you are finished, I will use your last two minutes.

I'd like to direct a question to Mr. Orriss.

Could you give us a quick thumbnail sketch of the safety regime that's in place when you're checking these imported MPCs? How do you verify the percentage so that it falls within the calculated amount? I understand that's a bit of a tricky procedure. Do you do that on a poundage basis or is it just a random check? How do you do that, sir?