Thanks, Wade.
As you may or may not know, the WGEA is an association of eight farmer-owned public and private grain businesses operating in Canada, which collectively handle in excess of 90% of western Canada's bulk grain exports. Our members own grain-handling facilities throughout the country and in the ports of Prince Rupert, Vancouver, and Thunder Bay.
There are three critical areas of policy that we would like to discuss today. The solutions we are proposing are fundamental to Canada's long-term success in the world grain trade. They are as follows: the future of wheat and barley marketing in western Canada and the dispute resolution with the Canadian Wheat Board; changes to the Canadian Grain Commission and the Canada Grain Act; and changes to the Canada Transportation Act.
On the future of wheat and barley marketing in western Canada, the role of the Canadian Wheat Board as it pertains to the marketing of wheat and barley has been the subject of much discussion and debate over the past months. As companies with significant investment in the industry are keenly interested in the future of wheat and barley marketing in western Canada and are prepared to accommodate whatever future the government decides upon, we only ask that you attempt to minimize, as best as possible, any uncertainty, because the types of changes being discussed are significant, and long-term uncertainty can cause the industry to destabilize or stagnate.
The most important point we can emphasize here—and it's critical that we all understand it—is that the interests of the WGEA and farmers are not in conflict. Our overall objective is to make the industry more profitable. This includes farmers. There is a false notion that agricultural policies must take the approach that farmers and grain companies have naturally conflicting objectives, when in fact we cannot be profitable if the farmers are not profitable.
WGEA members currently market wheat, barley, canola, special crops, other grains and oilseeds to almost a hundred countries around the world. We would be fully prepared for the future if the Government of Canada decides to implement changes to the system.
Regardless of how the crop is marketed and sold, grain companies have a job to do, whether acting as a direct agent of the Canadian Wheat Board, or in direct partnership with farmers in meeting end-use customers' needs. Grain companies are looking forward to handling as much wheat and barley as farmers produce within a competitive marketplace. If changes are coming—and we want to reiterate this—we are fully committed to participating in the development of a new framework for the future.
We of course understand that this process could take some time, which leads us to the second part of this segment. Unfortunately, our business relationship with the Canadian Wheat Board has some serious problems that cannot wait and must be addressed immediately. Our solution to these problems is via the adoption of a dispute resolution mechanism. Grain companies and the Canadian Wheat Board have to negotiate a number of different agreements and arrangements. In some cases we are able to reach agreement and in some cases we are not.
In those instances when we cannot agree, the Canadian Wheat Board proceeds as it sees fit--that is, unilaterally. There is no third party to go to or other avenue of appeal for grain companies; we simply have to live with the Canadian Wheat Board's decision.
For example, the handling agreement the Canadian Wheat Board has with its agents is the 1999 version, much of which is outdated and irrelevant. The outdated agreement continues to be extended under duress due to the fact that we cannot reach resolution on a new agreement. Our members would have obviously had the option not to sign the agreement, and therefore not handle Canadian Wheat Board grain, but this would not be an economically reasonable solution and would cause distress to farmers who grow Canadian Wheat Board grain.
By way of background, the Canadian Wheat Board is virtually the only monopoly in Canada without some form of regulatory oversight mechanism. There is a concern that the Canadian Wheat Board uses its statutory power in a manner that is inconsistent with reasonable standards of commercial behaviour. We are seeking a mechanism to counter potential abuse of dominance and promote reasonable standards of economic commercial behaviour.
To provide an unbiased determination, we have proposed a two-level arbitration system. If the Canadian Wheat Board, or one of its agents, has a dispute requiring a resolution, the issue would first be taken to an independent arbitrator to determine if the challenge would or would not contravene the Canadian Wheat Board Act or regulations. The item under dispute could only proceed to the second phase of arbitration if the arbitration in the first phase rules that, regardless of the outcome, it would not contravene any law. We believe this to be a fair and expedient way to resolve the handling agreement and to implement dispute resolution, while putting some parameters around what can and cannot be arbitrated.
We've approached the Canadian Wheat Board with this concept of dispute resolution on a number of occasions; however, they have tried to limit the discussion to only certain items. Dispute resolution is a fundamental governing principle in the world of business, trade, and commerce. It is used so parties have a reasonable option for resolving issues other than lengthy and costly court proceedings.
The existing process is unacceptable, in the context of normal commercial relationships, as having significant detrimental effects on the industry. We retained specialists who have explained to us that the government has the ability to enact appropriate provisions in the Canadian Wheat Board Act, or enact regulations by order in council, or issue directions.
Section 18 of the Canadian Wheat Board Act provides that cabinet “may, by order, direct the Corporation with respect to the manner in which any of its operations, powers and duties under this Act shall be conducted, exercised or performed.”
The WGEA firmly believes that a dispute resolution process is required. To be clear, we do not intend that the arbitration process would be used to replace discussions or negotiations, nor to contravene anything in the Canadian Wheat Board Act. It is not intended to give the handling companies any advantage over the Canadian Wheat Board. It is only to be used for a fair, impartial decision, if needed, following an attempt to resolve a matter through good-faith discussions and negotiations.
We feel that both sides would be much more inclined to reach a cooperative resolution with the existence of a chance that each side could lose at arbitration. The changes we are suggesting would be positive and would stimulate respect and collaboration.
Next I will discuss a review of the Canadian Grain Commission and the Canada Grain Act:
With respect to the current review of the Canada Grain Act and the Canadian Grain Commission, the WGEA was very supportive of the government's decision to hold such consultations. The act was written approximately 100 years ago and hasn't changed much since that time. An overhaul is long overdue, and we want to thank the committee for ensuring that the review of this act was initiated.
We have called for and supported this review because fundamental reform to the Canada Grain Act and the Canadian Grain Commission is essential for competitiveness today and in the future of Canada's grains, oilseeds, and special crops. Failure to move forward on the necessary reforms has placed Canada at a competitive disadvantage. We've seen the COMPAS report and, to say the least, we are very disappointed. We have some serious concerns about the directions it proposes. The need for fundamental reform and the consequences of failing to modernize Canada's regulatory system are absent from their initial document; rather, they appear to be favouring minor tweaks to the existing system.
As grain handlers, we absolutely support the involvement of the CGC with the mandate to help assure the integrity of Canadian grain. It is vital that the industry evolve in response to requirements of customers and consumers. It is equally vital that our regulators make every attempt, in consultation with industry, to do the same. As expressed in our detailed comments to both COMPAS and to the Standing Committee on Agriculture and Agri-Food in the past, the WGEA saw a real opportunity to make changes.
We were very discouraged to find that the COMPAS report either overlooked outright or dismissed the vast majority of the issues, concerns, and solutions offered. Their initial discussion document will not provide the required direction or framework for future consultations. The lack of understanding of the need for reform and the lack of direction demonstrated in the initial document will make it difficult for COMPAS to deliver a meaningful, comprehensive final report.
Again, we were under the impression that the review would result in a serious overhaul of this 100-year-old piece of legislation. Since the COMPAS report only identifies minor tweaks to the system, the public will not have the opportunity to comment on more fundamental changes.
We're not sure whether this committee also envisioned more than just minor tweaks when you mandated the review, but if you did, we would suggest and recommend that you invite COMPAS to appear here to outline why they have reached the conclusions they have.
In summary, the following changes need to be made to the CGC and the Canada Grain Act: first, the mandate should be revised to clarify that the CGC is the impartial adjudicator of the industry and to recognize the interests of grain producers are also served by having a healthy and vibrant grain-handling sector.
Second, either a business model or a government model should be adopted. If a business model is selected, it should be one of the CEO reporting to a board of directors. If a government model is selected, the CGC's status as an independent agency should be eliminated, and it should be incorporated directly into Agriculture and Agri-Food Canada.
Third, the primary function of the CGC should be to continue to establish grades and the standards for those grades, taking into account primarily customer demands and market conditions. Licensing should be the secondary function. The focus of licensing activities should be the maintenance of Canada's quality assurance system. Otherwise, the remaining functions and activities should either be eliminated or moved under AAFC.
There have been a number of reviews of the CGC, dating back to 1998. Each report has suggested many recommendations. However, few, if any, have ever been adopted and implemented by the federal government. Considering the flavour of COMPAS's report thus far, the WGEA is very concerned that the COMPAS review will once again fail to deliver the much-needed reform for our industry.
Finally, the Canada Transportation Act is the third area of fundamental change. On May 5 we met with the office of the Minister of Transport, Transport Canada, and other shippers and stakeholders to discuss the types of changes that should be made. This was a monumental task, but for the first time in history there was consensus among a significant number of shippers, stakeholders, and government officials. The changes we expect in the next rail freight bill will be beneficial and important to the grain industry. We're fully supportive of the process, and we thank the Minister of Transport for his leadership and guidance.
Provided this bill includes consensus from the May 5 meeting, we believe it would be a move in the right direction. We feel this bill is an important first step with respect to a number of outstanding issues for the whole rail-shipping community.
In due course, we look forward to a review of the level of service and balance of accountability between shippers and railways, which will be the next critical step more specifically designed for the grain industry. We encourage the government to act quickly to pass this bill so we can build on these changes.
In conclusion, traditionally Canadian western agricultural policy has pitted individual industry participants against each other, rather than fostering an environment of cooperation and partnership. Old deep-seated feelings of suspicion and fear, born in a far different world many decades ago, have been entrenched because our policy has not changed to reflect the new realities. This entrenchment has damaged Canada's competitiveness. Everything you have heard here today, and there is so much more, is designed to unravel the old biases in favour of a modern, balanced, reactive, efficient system, where all players push in the same direction towards the same common goal.
Thank you.