Agriculture Committee on Feb. 7th, 2008

[The Chair, Conservative, James Bezan]

Thank you.

Mr. Easter.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you, Mr. Chair.

Thanks for coming, Steve. Thanks for your efforts in negotiating our position at WTO.

I do have a quick comment on Mr. Lauzon's earlier remarks. It's a direct question to you. I want to find out what exactly happened last summer.

There's no question that this government excels in putting gag orders on...whether it's the Wheat Board, the Grain Commission, and sometimes individuals. It was raised last year—

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

That's irrelevant.

[Wayne Easter, Liberal, Malpeque, PE]

I know the truth hurts, Larry, but that's the truth.

It was rumoured last year, Steve, that basically because of the House of Commons' position, the Prime Minister ordered you, or put a gag order on you, not to discuss sensitive commodities. I don't know whether you were in the room for those discussions.

As we all know around this table, negotiations at the WTO basically work in layers. What's accomplished at one level moves up to the next, and that's your new platform.

Is it a fact that you weren't allowed in the room on sensitive commodities because of orders from the Prime Minister? Or is it not a fact? I just want the facts.

[Steve Verheul]

No, I have never at any stage been left out of any negotiating room that related to sensitive products. In fact, I think we've been a key player in all of those rooms.

I think the direction from the government has been very clear, though, that I am to maintain a very hard line on no tariff reductions and no tariff quota expansion for supply-managed products. This means that I don't have the flexibility to engage in a lot of negotiations that would involve movement off those positions, because our instruction is to maintain that hard line.

[Wayne Easter, Liberal, Malpeque, PE]

On that point then, in terms of tariff reduction and tariff quota expansion, there's no question, looking closely at those two points, that we would get hurt more under one than the other.

But on the tariff quota expansion or allowable levels of product coming into a country, in the previous rounds the U.S. made certain agreements, Europe made certain agreements, and Canada made certain agreements. We, as a country, have basically always lived up to our obligations in terms of allowing imports. Other countries have not, especially the U.S.

Where this negotiation is starting now, is it at the level that was agreed to in previous negotiations? I forget what it was, 5%, or whatever. And I believe the Americans got to a half per cent or 1%, or some such thing.

What are the Americans now willing to start their tariff quota expansion levels at? Is it the level they were supposed to be at or the level they are at, in which they basically violated the original agreement?

[Steve Verheul]

To start with, I think we should look back to the conclusion of the last negotiation, because I think there has been a misconception that while the U.S. and Europe were quite creative in putting together their obligations, no one was more creative than we were. We didn't follow the exact guidelines that others had any more than our trading partners did. In fact, we have several tariff quotas in which we provide zero access, far lower than the 5%.

But that was part of the problem last time. We had guidelines and not rules. Particularly once we saw that others were bending those guidelines, we bent them, as well.

The approach for this time is going to be to create new obligations that will not use as a starting point the last agreement. These will be separate and new obligations. They will be additional to what was done last time.

Our main effort, at this point in time, in sensitive products is that we're developing the base upon which the expansion would be applied. We've spent all of our efforts trying to make sure that base is an equitable one, so that we have exactly the same kinds of bases applied in the U.S. and in other countries so that there is going to be a fairer outcome than we've seen in the past. We've been stressing that point of fairness and equity time and time again in the negotiations, to the point that the delegate from Cuba has referred to me as “Mr. Fair”.

[Wayne Easter, Liberal, Malpeque, PE]

We're always fair in Canada.

What about enforcement?

[The Chair, Conservative, James Bezan]

Your time has expired, Mr. Easter. I'm sorry.

Mr. Storseth, you're up.

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

Thank you very much, Mr. Chair.

I'd just like to point out that Mr. Easter does very clearly acknowledge the fact that while his government was in power they were willing to negotiate and in that manner also negotiated away some of the potential tariffs for the supply management sector.

I think it's important that we take this opportunity today, as we even have constituents here from Alberta, all the way from Lacombe, to hear what's going on with the WTO negotiations.

First of all, Mr. Verheul, I want to congratulate you. The members from my constituency, my constituents who have the opportunity to keep an eye on the WTO trade negotiations, my colleagues such as David Anderson and Gerry Ritz, have long since bragged that we have some of the best trade negotiators in the world and it's about time we took the handcuffs off them a little bit and got a good result for our producers.

I'd like to talk to you a little bit about market access and what you perceive. Some of these questions may be a little too specific, but I'm going to ask you to focus on the seven primary commodities that would be affected by this agreement. Do you have any idea of the numbers on the increase of export value in Canadian dollars that we would see overall in these seven commodities?

[Steve Verheul]

I'm not sure which seven commodities you're referring to.

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

Primarily beef, pork, wheat, barley, canola, soybeans, and peas.

[Steve Verheul]

You've certainly hit on our key export interests. Those are the biggest ones and where we're putting most of our effort. I think we will see a substantial result. It's hard to put a number on it exactly, because we're negotiating opportunities, and whether we can take advantage of those opportunities or whether some of our competitors can take advantage of those opportunities is going to be up to the industry at the end of the day.

But we will have significant new market access opportunities. That trade will be on a much fairer basis because we're going to have very large cuts in subsidies that have been holding back some of our producers. We will have a less distorted international market because export subsidies will be gone, which will tend to raise prices for producers as well.

I'd have a hard time quantifying it, given that other factors are involved, such as our exchange rate and other industry-related factors, but I know one of the export-oriented sectors has recently talked about a study that talked about a figure in the neighbourhood of a $3 billion gain.

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

Thank you very much.

In these seven sectors, you point out the increased value of the commodity, which is going to benefit the producer, and I think that's a very important thing to recognize: the producer has the opportunity to be one of the biggest winners in this.

Of these seven sectors we've talked about, which sectors do you perceive...? Do you think it's a fair statement that the beef and pork sectors would be two of the biggest benefactors of this agreement?

[Steve Verheul]

Absolutely. Our beef and pork exporters can compete around the world. They have some of the most attractive products to other countries of any of our trading partners, and I think one of the bigger challenges they will have is maintaining the capacity to access some of these markets. We're going to have market opening in the European Union that will be significant. We're looking to have some big achievements in Japan, and a lot of access in the developing countries, particularly the emerging ones, is also going to be increasingly important.

So I see quite a few gains on the beef and pork sector coming out of this agreement. They will be among the most significant, for sure.

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

Thank you very much for those comments.

That is something that has been identified as a critical component of moving forward by the industry that we've had in here, the Canadian Cattlemen's Association as well as the Canadian Pork Council. We need to open up some of these markets, and I'm glad to see you feel this would help those 90% of producers who are very reliant upon trade and export in our country.

On a little bit more of a domestic level, first of all, do you have any idea of the farm-gate sales that are directly related or can be attributed directly to supply management in the provinces of Quebec and Ontario, which have our biggest supply-managed sector? Would you have those numbers?

[Steve Verheul]

I would have a rough idea of what they are, but I wouldn't want to hazard a guess. I don't have it off the top of my head.

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

All right, that's fair.

[The Chair, Conservative, James Bezan]

Your time has expired, Mr. Storseth.

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

Mr. Easter would be more than happy to give some of his time to good questions.

[The Chair, Conservative, James Bezan]

I'm keeping you guys on a short leash here.

Madame Thaï Thi Lac.

[Ève-Mary Thaï Thi Lac, Bloc, Saint-Hyacinthe—Bagot, QC]

My next question is on an issue of vital importance for farmers; that is why I would like to get a clear answer from you.

One of the objectives of the WTO negotiations is to ensure that agricultural subsidies do not distort the global market for agricultural products. Since supply management does not create any trade distortion, would that argument carry weight with the WTO? How would you make your case?

[Steve Verheul]

Unfortunately, most of our trading partners consider a system with higher prices than what would otherwise prevail in the market as being among the most trade-distorting practices, because that system distorts what the markets would otherwise do. In fact, we suffer somewhat with supply management because of the fact that where other countries have had higher domestic prices, these have tended to create overproduction, which the countries have then dumped onto world markets. They didn't have the kinds of supply controls we have in supply management. So that has done a lot of damage in the past, and there's still a lot of suspicion about any system with higher prices domestically than would otherwise be the case.

We see much greater damage taking place through the subsidies the U.S. has, as they can provide some $9 billion in support for corn one year and a couple of hundred million dollars the next. That's what really distorts markets. Supply management doesn't export a lot, so it's not interfering with other markets to any great extent.

But others do have a great interest in our market and in accessing our market, and that's where we're facing the pressure.

[Ève-Mary Thaï Thi Lac, Bloc, Saint-Hyacinthe—Bagot, QC]

I would like to come back to the question I asked a little earlier. How will you make your case? Are other countries interested in defending supply management? Which countries look favourably upon Canada's position?

[Steve Verheul]

Well, unfortunately, that's also one of our bigger challenges, because the European Union is getting out of all of its quotas, the supply-management-type schemes, and moving towards a different system, based mainly on green-box types of support and direct payments to farmers. Countries like Japan, Switzerland, and Norway, who have been our allies in the past on these issues, are also moving in that direction. They're getting rid of production quotas and are lowering their prices to world levels so they can compete directly—but they are providing direct payments to farmers in compensation.

So we really are the only country that continues with a supply management approach and which intends to continue with that approach. Others are going in a different direction, which makes our task that much more difficult.