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.