Agriculture Committee on May 17th, 2007

[Martin Dufresne, President, Fédération des producteurs de volailles du Québec]

Thank you, Mr. Chairman.

My name is Martin Dufresne, and I am the President of Éleveurs de volailles du Québec. I live in Saint-Félix-de-Valois, northeast of Montreal, where I produce poultry and eggs on a family farm, which has existed for generations. Like all Canadian poultry farms, this operation owes its existence and prosperity to supply management.

As you already know, supply management relies on three pillars: import controls—the two other pillars could not exist without this one—implementation of a level of production that corresponds to market needs, which in turn allows for the third pillar, namely adequate remuneration for all links in the chain, including producers and processors.

Supply management is a social covenant, in accordance with which consumers give the industry—producers and processors—the assurance that they will be the poultry suppliers for the Canadian market, in exchange for a stable and abundant supply of quality products at a reasonable cost.

Under international trade agreements, the threshold for Canadian imports is 7.5% of the previous years' production. This represents 72.8 million kilograms in 2007.

Of all industrialized countries, only Russia, Japan, the European Union and Hong Kong imported more than Canada in 2006. In spite of the social covenant that is the Canadian supply management system, the Canadian poultry market is clearly already quite open.

And yet, the Minister for International Trade, as a result of his decision on tariff quotas in 2007, is opening up the Canadian market even more. While the tariff quota should be set at 72.8 million kilograms, the Minister has authorized an import quota of 81.5 million kilograms for the industry as a whole. In other words, the threshold has been increased to 8.4%.

What is the reason for this decision? In our opinion, the 13% rule is much too flexible and comprises a significant loophole. Development and marketing of new products have given the industry a chance to adapt to the new regulations.

Allow me to explain what the 13% rule is. Chicken breasts to which bacon has been added are a good example: a chicken breast, which is slated to be prepared as tournedos, which contain only 13% bacon, are no longer subject to import regulations. Yet, the product contains 87% chicken and is considered a direct substitute for the type of chicken breast normally consumed by many Canadians and Quebeckers.

The potential shrinkage of the Canadian poultry market as a result of the arrival on the market of new products made with imported meat calls for some adjustment to the regulations. Import permits for products that could compete could be issued in order to give Canadian businesses the chance to compete with certain foreign products currently available on the Canadian market. In the case of chicken tournedos, for example, there is no real market competition for products of this nature, since neither Brazil nor the United States produce or sell chicken tournedos at present. However, those countries could easily enter the market because of the generous 13% rule.

All in all, a product that faces no true competition on the market, or faces only marginal competition, can be made with a chicken breast produced abroad and processed in Canada. Each chicken breast imported into Canada is one less from Canadian producers.

The products in question have been specifically introduced to bypass import rules, at the expense of chicken production in Canada.

They meet neither the spirit nor the letter of the social covenant that is supply management. Who benefits from this situation?

Certainly not producers, who are kept from producing 8.7 million kilograms. Not consumers either, because if these products were not imported, they would be produced here. The supply and demand situation would be identical in both cases.

The only party that stands to gain from higher import levels is the industry, by virtue of the profits that will be generated.

Canadian society comes out on the losing end. It deprives itself of economic activity, to the benefit of a minority.

The imported meat provides no comparative advantage to the meat produced in Canada. Production could very well occur here in Canada.

It is imperative that the Government of Canada assume its leadership role and enforce previously agreed to trade agreements. Recourse to Article 23 could result in changes to Canada's commitments with regard to the WTO. We believe this option should be explored in order to cap chicken content at 20% in non-quota import products, rather than leaving it at the current 87%. In fact, a broad coalition of industry representatives, growers, processors and further processors supports this demand.

This condition is essential to the maintenance of supply management systems, as well as to our commitment to the social covenant.

Thank you.

[The Chair, Conservative, James Bezan]

Merci.

Urs, you're next.

[Urs Kressibucher, Second Vice-Chair, Chicken Farmers of Canada]

Thank you very much.

In public school my teacher told me that repetition is a good way of teaching, so I'm going to repeat some things that Monsieur Dufresne has said today, and hopefully some of it will stick.

My name is Urs Kressibucher. I'm second vice-chairman of Chicken Farmers of Canada. I farm and reside in Beaverton, Ontario. I have a mixed farming operation, which consists of chicken farming and grains and oilseeds. I have my feet on both sides of the fence, so to speak, when it comes to farming.

Rather than repeat a lot of what Martin has said, I'm going to skip forward to my presentation and talk about the 13% rule.

The root of our problem in the chicken industry is the absurd 13% rule defining products that are not subject to the import controls, i.e., non-ICL products. The genesis of this 13% rule stems from the conclusion of the Uruguay Round, when Canada's WTO schedule of commitments was created with the intent of reflecting Canada's existing concessions under the Canada-U.S. Free Trade Agreement.

Unfortunately, the phrase “lost in translation” applies here, as the 13% rule has a much broader definition than the Canada-U.S. Trade Agreement non-ICL list.

With the creativity of the industry, meat products were introduced by adding items such as bacon or vegetables to a chicken breast, for example. This made the standard chicken breast no longer subject to import control, simply because 13% of another ingredient was added.

Consequently, the 13% rule has resulted in an expansion of a variety of non-ICL products. If a manufacturer's recipe conforms to the 13% rule, regardless of whether foreign competition exists, they are now eligible and receive an import allocation. By expanding the variety and thus recipes of non-ICL products, the Canadian manufacturers of these products request increasing levels of chicken import quota.

This has resulted in the non-ICL allocation growing from 10 million kilograms in 1998 to 33 million kilograms in 2007, a 230% increase, compared with 25% growth for domestic chicken production.

Let me refer you to the graph on page 5 of our presentation. You will see that the blue line there represents the allocation of imports to Canadian manufacturers of non-ICL products. You see how it's been rising exponentially. The red line represents imports of these same products from foreign sources. The allocation of these special imports to Canadian manufacturers has risen much quicker than the imports of these products.

Modifying the 13% rule by restoring the original intent to the 1994 trade negotiation will not only limit the non-ICL product list but will also alleviate the pressure on the TRQ. Furthermore, the claimed requirement of Canadian manufacturers to have access to U.S.-priced imports will be diminished by limiting foreign competition and by creating a more level playing field. This will not in any way diminish the economic activity of these manufacturers.

This generous 13% rule has not only created exponential demands on the TRQ allocation, but has the potential to significantly erode the Canadian chicken market through imported products not subject to import controls.

This loophole must be corrected before there is further erosion of the Canadian chicken market by imported products. These non-ICL products are not considered chicken for the intent of Canada's import controls, but in reality represent direct substitutes for chicken.

There are reasons why since 2002 Chicken Farmers of Canada and its industry partners have asked the government to modify the 13% rule. In order to avoid abuses and prevent further erosion of the market for Canadian chicken products, it is proposed that all products containing more than 20% chicken, instead of the more generous 87%, be subject to import controls. In the case of products coming from the U.S., an exception could be made to recognize historical access.

This solution, approved by most industry stakeholders, was presented to the government in 2002. The government decided not to proceed at that time because they were in the midst of WTO negotiations. Today, industry's desire to modify the 13% rule still stands. In fact, in August 2006 and January 2007, Chicken Farmers of Canada and other industry partners, including the Canadian Poultry and Egg Processors Council, the Further Poultry Processors Association of Canada, and the Canadian Association of Regulated Importers and Food Processors of Canada each sent a letter to both the Minister of Agriculture and Agri-Food and the Minister of International Trade requesting a reconsideration of the 2002 industry proposal.

Last year, the European Union also modified its WTO obligations to control the import of some of these chicken and turkey products. I might remind you that this was in the midst of negotiations also.

The Canadian government needs to seize this opportunity and modify its 13% rule for chicken products. This would demonstrate support for an essential pillar of supply management, as my colleague has outlined.

l understand that unfortunately, officials representing the department will not be able to contribute to our discussion during the present session. However, l am sure that in the next session they will be able to help the Canadian chicken industry and the members of the Standing Committee on Agriculture and Agri-Food advance these important Issues.

In summary, CFC asks the Canadian government to use its domestic powers to allow a chicken import allocation in line with our international obligations of 7.5% access. The path to this desired outcome is for the Canadian government to act in the national interest and to proceed with the modification of the 13% rule, as requested not only by CFC but by a wide spectrum of industry stakeholders.

Thank you very much.

[The Chair, Conservative, James Bezan]

Thank you.

Laurent.

[Laurent Souligny, Chair, Canadian Egg Marketing Agency]

Thank you, Mr. Chairman.

My name is Laurent Souligny. I'm chairman of the Canadian Egg Marketing Agency, and I'm also an egg producer and a grain and oilseed producer.

First of all, I would like to thank you for making the change in your agenda to give us the opportunity to make our presentation today. I would also like to thank you and the committee for providing me and the Canadian Egg Marketing Agency yet another opportunity to share some important information about our industry.

I have provided you with two documents today. The first is a copy of my presentation, and the second is a background document with a more detailed overview of the agricultural special safeguard and the case of the Canadian egg industry.

As I told you last week, the Canadian Egg Marketing Agency represents the egg farmers on 1,050 regulated farms. Our industry has producers in all provinces and in the Northwest Territories.

As you know, our industry operates under supply management. This system has allowed egg and poultry and dairy producers to obtain fair prices for their products without relying on financial support from the government. The supply management system relies on three pillars, namely producer pricing, import controls, and production discipline. All of these pillars are equally important, and when one is threatened, the system as a whole is placed at risk. Unfortunately, our import control pillar is currently threatened.

Canada has tariff rate quotas on all supply-managed products, including eggs and egg products. A tariff quota consists of a low “in quota” tariff and an “over quota” tariff. As agreed in the Uruguay Round, countries allow a set amount of imports at the low in quota tariff rate. For imports beyond that set volume, the over quota tariffs apply.

The job of the over quota tariff is to limit imports to the volumes agreed to during the last round of negotiations. The effectiveness of our over quota tariffs, however, are dependent in large part on two factors: world commodity prices and changes in currency exchange rates.

Specifically, given recent historically low egg prices in the United States and the fact that the Canadian dollar is stronger than it has been in more than 30 years, the effectiveness of Canadian over quota tariffs for eggs has been weakened. They have been weakened to the point where they are no longer doing the job they were intended to do.

What that means is that the over quota tariff is not limiting imports to agreed-upon levels. In fact, in the past several years, eggs have been coming in over the tariff wall, and at an increasing rate year over year.

Just to give you an example, in 2006 more than 3 million dozens of eggs came into Canada over the tariff wall. That's almost 15% of what we agreed to import at the low in quota tariff rate. The ability to match production to demand and to control imports is fundamental to supply management, and these additional eggs are making it increasingly difficult to operate an efficient system.

Thankfully, the special safeguard, also known as SSG, is a tool Canada can and should use to deal with this serious problem. The safeguard allows countries to impose additional duties on certain agricultural products in the event of an import surge or a decline in world commodity prices.

In other words, it is an additional tool that can be used if and when the over quota tariff isn't doing the job. During the Uruguay Round, many countries reserved the right to use the SSG. Canada reserved the right to use the SSG for all of its products covered by tariff rate quotas. That includes eggs and egg products.

Ultimately, the SSG can only be used by a country when it has been rendered operational. This means that in order to activate the SSG, the Canadian government must provide volume and price triggers to the WTO for each tariff line where a tariff rate quota applies.

While the EU and the U.S. activated their safeguard within 12 months of signing the Uruguay Round agreement, it's now more than 10 years later, and Canada has yet to act.

Although significant work towards making the SSG operational was initiated by Agriculture and Agri-Food Canada and then passed on to officials at the Department of Finance, the decision to operationalize the SSG has yet to be made.

We feel this issue must be addressed. Under our international trading agreement we must remember that we not only have obligations, but we also have rights. Canada must not be afraid to exercise its rights in the same manner that other countries, such as the United States and the European Union, do on a regular basis.

The special safeguard can and should be used to deal with the “over access” import of eggs and the tariff of over access imports in the other supply-managed commodities. We believe operationalizing the SSG is a step in the right direction towards ensuring that the import control pillar essential to all supply-managed systems remains effective.

Specifically, then, our recommendation is as follows: that without further delay the Minister of Finance make operationalizing the special safeguard for Canada a priority.

Thank you for your attention.

[The Chair, Conservative, James Bezan]

Thank you.

Mr. Lefebvre, please.

[Serge Lefebvre, President, Fédération des producteurs d’oeufs de consommation du Québec]

Thank you, Mr. Chairman.

I'd like to introduce myself: my name is Serge Lefebvre and I am an egg producer from Saint-Ours. I operate a family farm along with my wife, my sister-in-law and other members of my family. I am here today as the President of the Fédération des producteurs d'oeufs de consommation du Québec. I have been an egg producer since 1993.

Firstly, the Fédération des producteurs d'oeufs de consommation wishes to thank the House of Commons Standing Committee on Agriculture and Agri-Food for the invitation to participate in their deliberations and to express our opinions. The Federation is very concerned by the many questions regarding agricultural trade and it is with great pleasure that we present our dissertation today.

To begin with, we would like to say a few words about the Fédération des producteurs d'oeufs de consommation du Québec (FPOCQ). Established in 1964, the FPOCQ represents 103 producers who have 3.6 million laying hens with an annual production of nearly 86 million dozen eggs. The annual revenue generated at the farm level is in the order of $124 million. This sector creates, on its own, almost 1,000 direct and indirect jobs in Quebec.

Quebec is the second largest egg-producing province, with a 17.6% share of the Canadian market. We believe that the FPOCQ's demands, as presented in this paper, fall within the jurisdiction of the federal government, as related to maintaining the prosperity of the sectors of the industry under supply management in Quebec and Canada. Moreover, a portion of these responsibilities can be attributed to Agriculture and Agri-Food Canada.

Therefore, we ask that Agriculture and Agri-Food Canada intervene specifically with regard to the following three issues: the special safeguard measures that affect the table egg sector, in particular; the WTO negotiations on agriculture; and the agriculture policy framework.

Over the past several years, egg imports have exceeded the tariff limits at an ever-increasing rate. They progressed from 150,000 dozen in 2004 to over 3 million dozen eggs in 2006. The situation has become critical since egg imports over and above the tariff limits contribute to an erosion of the domestic production and to a reduction in revenue and profitability for egg producers in Quebec and Canada. More specifically, these additional imports increase the number of eggs destined for processing, which in turn generates extra costs for egg producers.

In addition, if this continues, these imports will render the administration of the marketing agreement difficult, if not impossible. In fact, supply management depends on the predictability and complete control of production. The absence of control on production, which is due to indeterminate import fluctuations, renders the application of the supply regulating mechanisms inoperative, and consequently, the supply management null and void.

Furthermore, as the value of the Canadian dollar continues to rise, these imports could increase even more. It goes without saying that this problem affects Quebec producers as well. As in the rest of Canada, imports exceeding the tariff quotas have accelerated since 2004. They have gone from 22,550 dozen eggs in 2004 to 1.4 million dozen in 2005 and 2.9 million dozen in 2006.

Another distinct feature about Quebec is that the FPOCQ has the responsibility to redirect eggs from one grader to another and to cover the costs if there is a surplus. The extra imports therefore increase business costs.

In addition, by not having adequate information on the volume of eggs being imported, this causes complications in the smooth operation of the joint plan and its related management tools, such as the egg marketing agreement with the graders. Several times over the last year we have filed access to information requests to find out who was importing the eggs. To this day, we have received no positive answer to our requests.

Furthermore, there are no benefits to consumers either, since they do not know the origin of the eggs. By virtue of the Marrakech Agreement, members have the right to invoke special safeguard provisions found in the Agreement on Agriculture (article 5) for products subject to tariffs. Up until now, 38 members have invoked their right to use these provisions. For example, the European Union and the United States put this measure into effect 12 months after the signature of the Uruguay agreement, but Canada has yet to do anything.

The special safeguard provisions allow a country to impose an additional duty, or tariff, on the condition that certain criteria are met.

These criteria may be either a specific increase in the volume of imports, known as the trigger level or, for a particular shipment, a drop of the import price below a specific reference price. For the egg imports cited above that concern us, these conditions seem to have been met. Currently, efforts to implement the special safeguard provisions have been initiated by Agriculture and Agri-Food Canada and have been transferred to the Department of Finance. Since the decision to proceed has not yet been made and imports continue to escalate, egg producers are of the opinion that this situation must be addressed without delay.

I'm now going to speak briefly about the WTO negotiations on agriculture. Following the latest proposals recently tabled by the chairperson of the agriculture negotiations, Mr. Falconer, we feel that it is important that we take this opportunity to discuss this issue with you. We do not hide the fact that we are worried about the direction that the current negotiations regarding agriculture seem to be taking at the WTO, notably concerning their impact on supply management.

Our worries are focused, in particular, on the question of sensitive products. In fact, the proposed terms and conditions presented in the reference document by Mr. Falconer on April 30 are incompatible with maintaining our Canadian supply management system. If these conditions were applied, they would have the effect of not only considerably limiting the number of sensitive products that could be designated—less than 5%—but also would lead to a decrease of more than 50% in the over-quota tariffs, as well as to an increase of more than 5% in tariff quotas.

We were very surprised to notice that a small country such as Norway, with a population of 4.5 million, that does not have access to the main negotiations was able to negotiate certain adjustments. Canada, although at the centre of the talks, has not yet succeeded in getting the necessary elements recognized to maintain its supply management system. Yet when it really wants to, Canada does succeed in asserting itself. In fact, this did happen in July 2004 and in December 2005 when Canada had certain irritants affecting supply management removed from the discussion document.

There are also the recent public announcements made by our two ministers responsible for WTO negotiations that worry us. They reveal that Canada will not block the negotiations and thus would be ready to sign an agreement at the expense of supply management. At this crucial stage of the DOHA round, it is certainly not the appropriate signal to send to our trading partners.

We would now like to say a few words regarding the Agriculture Policy Framework and more specifically, the elements that affect business risk management. Our position on this issue is clear. We wish to see improvements to the existing program and recognition that supply management is among the risk management programs included in the APF.

In brief, our demands are as follows.

It is essential that the Canadian government exercise the special safeguard provision, as other trading partners have done. Canada must set certain conditions before agreeing to return to the negotiation table with its WTO partners. These conditions should include a requirement that sensitive products be defined in the same way as special products.

Before contemplating increasing tariff quotas, it is essential to gain a minimum level of access that is equal for all member countries, by imposing the necessary control measures.

The Canadian government must recognize supply management as a risk management program, including its three mainstays: production management, the control of imports and a pricing policy that covers the cost of production.

Thank you.

[The Chair, Conservative, James Bezan]

Thank you very much.

We're going to go with five-minute rounds, in the interest of time.

Mr. Easter.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you, Mr. Chairman.

Thank you, folks, for coming.

A number of us have recently come back from the U.S., and when you look at the U.S. and Europe, the first question their bureaucracies seem to ask on any agriculture policy issue is “What will it mean to farmers”? I really note in here your ten years, Laurent, that you mentioned you've been working on this issue. For whatever reason, in Canada, and we saw it the other day with lowering the tolerance of pesticide residue on crops coming in here, it's because we're afraid it might be a trade challenge. Always the first question out of this centre, nothing to do with our government or the previous one, seems to be worrying about the trade challenges rather than worrying about farmers. That seems to be a mindset in this town, and we have to get away from it.

I have two questions, really. The supplemental safeguards....We're mixing up two issues, the eggs and chickens. There are three problems: the 13% rule, the 8.4 tariff rate quota on chickens, and the increase in eggs as well. The supplemental safeguards are special provisions. Can they apply to deal with that problem, the 8.4 TRQ, or not? I don't think so, can they? Why I ask the question is I'm not sure what we should be asking for. Are there two solutions to this problem in terms of the three requests, or are there three?

[Laurent Souligny]

I can answer for the egg industry. As far as the egg industry is concerned, it's the special safeguard that we would like to see the government make operational. Right now, they're not. It's a right that we achieved at the negotiations, and as I mentioned in my presentation, it's a tool that could be used, when made operational, to reduce the amount of eggs that could be imported with the over-quota tariff paid for. And this is what we're looking for. If we look at last year, there were over 300 million dozen that came in with the over-quota tariff paid for.

[Wayne Easter, Liberal, Malpeque, PE]

Then we do need to get on top of that.

I'll come to the 13% rule for a minute, and maybe the chicken guys can think about what I asked earlier. In terms of the 13% rule, what we get into in the dairy industry by not dealing with milk protein components coming in is the more they come in the more it gets to an historic level and the less we can go back. Is it the same situation with chicken, or is it a different situation? If we allow this to go on and don't move on it quickly, are we creating ourselves some historic import problems that will dig us a deeper hole, if we don't deal on it fast? And when we make the application, is that when we trigger the level, or is it when it's finally negotiated? I mean, these are technical questions that I personally don't know the answers to.

[The Chair, Conservative, James Bezan]

Yes, go ahead.

[Urs Kressibucher]

In regard to your question about special safeguards, we'd like to see it operational also. But in regard to the 13% rule, we require an article 28. As far as the import level goes, if you look on page 5 of our presentation, you'll see that the level of imports right now of these non-ICL products have not escalated to the point that the special supplementals have.

Now is the time to initiate the article 28, when you don't have to compensate to the degree that, for instance, other commodities would have to do. It's like triage on a patient. You don't want to see a pile of blood on the floor and the patient flat-lining before you apply the article 28.

[The Chair, Conservative, James Bezan]

Anybody else?

Mr. Bellavance.

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

I would first like to thank my colleagues on the committee for having agreed to reverse the agenda to hear the witnesses. I would also like to thank our witnesses for having informed us of these situations, which are different, but which reflect the trend we have been observing for some time now, namely an increase in the imports of farm products. Beef is following this trend, as are other products. Everyone is trying to find a solution. And you have also presented us with some solutions.

I will immediately go to my questions, because we do not have a lot of time. Mr. Dufresne, you said that imports increased by 8.7 million kilograms, which means that market access has increased from 7.5% to 8.4%. It seems that suddenly the demand for these products has increased. Importers and processors are asking for products from abroad.

Do they necessarily have to come from outside the country? Could our producers produce the additional 8.7 million kilos? Why does the product have to come from elsewhere?

[Martin Dufresne]

Obviously, producers are quite able to produce that amount of chicken. This situation did not just happen this year: industry demand has been strong for several years now. The 13% rule which has been referred to is vague enough to allow people to bypass the import list.

When the content of a product is below 87%, say 86.5%, for instance—a good example would be chicken tournedos, but also kebabs—it can be imported outside of tariffs. So what the industry does is develop recipes which barely respect the 87% rule and then imports additional chicken from outside the country, at a lower price, obviously, and then it makes the tournedos and kebabs here, for instance.

There is no doubt that we could produce the product here, but under supply management we obviously are not entitled to subsidies, as you already know. However, we need to get our price. If, for example, you import chicken from the United States where, everyone knows, subsidies are much more generous, the price is lower. It's to the advantage of the industry.

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

So I gather it is for economic reasons. However, we can be autonomous under supply management, we can meet the demand with our products.

As far as article 28 is concerned, we fought a fairly long battle with regard to milk protein imports. When we began discussing the issue, following your interventions, in fact, we received the same responses from the minister and the department, namely that in the case of milk proteins, we were not allowed to invoke article 28. Further, there is the danger that the Americans might not be subject to article 28 because of NAFTA. Ultimately, one thing led to another and we made sure that dairy producers won their case. The government accepted their arguments. We were told exactly the same thing in the case of chicken.

You have presented us today with a partial solution, in addition to the 20%. How do you react when you hear that article 28 may not apply to the Americans? If I understand correctly, most of the products at issue here come from the United States.

[Martin Dufresne]

Yes, for the most part. But you mustn't forget that Brazil and Thailand are now part of the market. The US may even be overtaken, on the Canadian market, by these two exporting countries.

If we changed the rule to go from 87% to 20% chicken content we think the United States would probably be exempted. I had understood that in the case of dairy protein there was an exemption for the United States.

Under the Free Trade Agreement today, there are products the United States may export to Canada which are not on the list. These are specific products for the US. For our part we think that products coming from Thailand, of which we've seen an increase over the last year or two, and products from Brazil could be blocked from entering Canada.

If only US products remained, we would already have achieved something. It could be positive for the Americans in a way. Their already registered products would be protected. I'll give you a few examples: chicken Cordon Bleu and chicken Kiev. These are very specific products that the Americans, under the Free Trade Agreement, are entitled to export to Canada duty free. In that sense they get preferential treatment. However, this privilege could be lost if Thailand or Brazil were to become more competitive and manage to get these products into Canada. Changing the 13% rule would give them some protection. In exchange for this protection, we could put a ceiling on imports to keep them at the level they are at today.

To get back to the question that was asked earlier on, there's been an increase and it would be difficult to bring about a decrease. If at least we could stop this hemorrhaging, things would be better.

[The Chair, Conservative, James Bezan]

Thank you very much.

Mr. Gourde, you have five minutes.

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

Thank you very much, Mr. Chairman.

My question is for the egg producers of Quebec. I'd ask you for brief answers, if possible, because we do not have much time.

There's been an increase in egg imports. Because there are not many producers in Quebec, you must all know each other. You say that you do not know where these eggs are coming from, from whom. But how do they end up in the network? I believe egg producers have their own distribution system, and their own candling stations, etc. It's almost as though egg producers in Quebec own the shelves.

How could anyone bring eggs into the system anonymously and get market distribution without anyone knowing where they come from or from whom? I'm having some difficulty understanding that.

[Serge Lefebvre]

In short, what happened in Quebec could happen in any other region in Canada. In 2006, Quebec was the hardest hit by egg imports subject to tariffs. We do not know how these eggs enter the country or what advantage this gives to the provinces.

The eggs are imported by people requesting them. Anyone can, by paying the required tariffs, import eggs into Canada. Under our supply management system, we assess requirements and adjust our production accordingly. Well, we do not know who is importing these eggs or where they come from. It could be a chain, a grader, or an individual. We know they come from the United States, but we do not know from where exactly.

We do not know the final destination either, because this information is confidential. We've asked to have access to this information to know, at the very least, the final destination for these eggs, and perhaps, to have an opportunity to discuss the matter with these people and do something. For the time people, that's not possible.

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

Do you know under which label these eggs are sold? Generally, we know that a dozen eggs will come from a given region. The packaging for these eggs must carry a label or a name.

[Serge Lefebvre]

Generally, all products from the United States should be labelled “Product of the USA”. That is the only label we may see on grocery store products.

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

And there are no such labels on products at present?

[Serge Lefebvre]

The “Product of the USA” label does appear on an egg carton, but we do not know where these eggs come from or who imported them into Canada.

According to agreements signed with the Fédération des producteurs d'oeufs, graders must declare their purchases. However, if eggs enter Canada or Quebec through some other channel, then we have no control over this process.