Agriculture Committee on Feb. 7th, 2008

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

I will share my time with Mr. Asselin.

[Gérard Asselin, Bloc, Manicouagan, QC]

I would like to know what you think will be the main issues you will have to deal with in the course of the negotiations. Is Canada likely to come out a winner?

[Steve Verheul]

Well, I think there are several levels of difficulty. It's an incredibly complex negotiation.

First of all, we're going to have difficulties in the agriculture negotiation, particularly over how much the U.S. is prepared to cut its trade distorting domestic subsidies. That's going to be one of the key issues the whole negotiation will swing on. There's going to be a lot of pressure on them to make very deep cuts.

There's also going to be pressure on how far we go on sensitive products. The European Union is probably the biggest target here. It has the largest market and the most attractive market. There's a lot of focus on them and whether they'll be prepared to go far enough, as well.

There will probably be even bigger challenges getting some kind of resolution on how much access we're going to get to countries like India and China, which are very reluctant to provide much at all.

If we manage to resolve some of those questions, it's going to get even more complicated once we start to bring the agriculture negotiations together with the non-agriculture negotiations--industrial products--and try to find a balance of ambition across those different negotiations.

As far as our own objectives are concerned, I'm expecting that if we get an agreement, we will do very well on issues like export subsidies and export credit and food aid, on which we've long been battling against U.S. and EU practices. We will do very well on domestic support, with reductions in the range of 70% to 80% for the U.S. and the European Union, which will make a big difference. On our offensive interest, I think even in market access we will come up with a result that will be a significant achievement for us.

We will battle to the end on the supply management issues. What happens at the end will be critical, and that's going to be difficult to call until we get there. I think that even with some adjustments to the kinds of agreements on the table, we're not talking about the end of supply management. If we were to ever move our position--I've had no suggestion that we will--the package on the table, with certain changes, could allow us to continue with supply management. We will firmly be maintaining the position of no change in the negotiations.

[The Chair, Conservative, James Bezan]

Merci.

Go ahead, Mr. Miller.

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

Thank you, Mr. Chairman.

Thank you, Mr. Verheul, for being here.

You talked a bit here about sensitive products and what have you. You mentioned Sweden and Norway as being obstacles there. Were there any other countries that create further obstacles?

We know the EU and the Americans. We know the problems there as far as negotiations are concerned. But can you comment on any other countries that have maybe made the negotiations a little difficult at times? What sensitive products are they striving for?

[Steve Verheul]

Most of the major developed countries have their own sensitivities, clearly, just as we do. The U.S. has sensitivities in sugar and in dairy, and despite much of the rhetoric, it's been playing defence as much as offence on many issues.

The European Union has sensitivities on dairy, sugar, beef, pork, and a whole range of products, a much broader range of products than we have. Japan, Norway, Switzerland, and Iceland have sensitivities on a wide range of products. We have a smaller range of products that are difficult for us, but they have a much broader range. I think we've done most of our work with a group of six countries, which includes those I just named, which are the ones that are intending to use sensitive products.

Part of the broader problem is that there are roughly 110 or 115 developing countries that are members of the WTO, out of a total of 152, that are very offensive. They only have an interest in getting better access to developed-country markets, and that's where a lot of the pressure is coming from.

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

Actually, those developing countries is where I was going to go with my next question. It relates directly to China, and maybe I could lump India in with it. We all know how their economies have been booming, but my understanding is that they've also in recent years been increasing their agricultural productivity and that kind of thing. Has that added any special obstacles in the discussions. Is there an impact that maybe wouldn't be there if they weren't developing their own at home? Could you comment on that a little bit?

[Steve Verheul]

Well, it certainly changed the dynamics from previous negotiations. In the last negotiation, the U.S. and Europe were pretty close, and we weren't far off from a deal. Now we have significant players like China and India and Brazil that are carrying a lot of weight to the table because of their size.

As you correctly point out, India and China are significantly increasing their capacity with respect to agricultural production, and that's starting to change things quite a bit, particularly as we look out further into the future.

We want to achieve significant gains in market access to those countries, because we could have this agreement in place for a long time. We don't want them to get off without having to do all that much and basically shut us out. So there's going to be a continuing difficulty in pushing particularly India and China to get a better result than they've offered so far.

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

Mr. Chairman, I think I'm done. If one of my colleagues would like, I'll give them the balance of my time.

[The Chair, Conservative, James Bezan]

There is a minute and a half left.

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

Thank you very much, Mr. Miller.

He always knows when to cut it short.

Mr. Verheul, one thing really scares me. You talk about the benefits for our agricultural community and the benefits that could be received by 90% of our producers, and everybody stands up at committee and says these are the guys we need to fight for and the guys who need it most right now. Yet we're still hearing today from members of the opposition about being ready to walk away from the table.

I most certainly hope that's not the impression you are getting from the Government of Canada; I know it's not. I can definitely tell you that people in my area are dependent upon us moving forward in a strong fashion on this, while preserving our supply-managed sectors, to get an excellent deal for our producers, who represent that other 90%.

What are your gut instincts on this? Do you feel we are going to have a successful conclusion this time around?

[Steve Verheul]

I sure hope so. I've been at this for a long time, but I think the conditions now are more positive than they've been so far in this negotiation, by a fair margin. We really don't have that many more issues at a negotiator's level to resolve. We've now reached the point where the key and most difficult questions are going to be at the political level, and that's looking like it will happen within the next few months.

I think the deal that's shaping up is a pretty good one. We've achieved a lot of our objectives. I think we should be pleased with the kind of an agreement we get, if we manage to achieve it.

I think you're right that we have been very active in pursuing the interests of our exporting sector. I think those gains will be impressive.

Among developed countries, Canada is probably the most reliant on trade, so the WTO is essential for us. I personally can't imagine us walking away. We can certainly negotiate extremely hard, but walking away would have repercussions that are far beyond what we could imagine.

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

Maybe we'll see the political will from both sides.

[The Chair, Conservative, James Bezan]

Thank you.

Mr. Easter, you get to bat cleanup.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you, Mr. Chair.

The minister was here previous to you, Steve, and we raised the fact of the lack of effort of the government to assist with the financial liquidity problem in hogs and beef. There are tremendous concerns about the bankruptcies out there and the lack of government response.

Earlier one of the government members mentioned the markets on beef and hogs.

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

Point of order, Mr. Chair

[The Chair, Conservative, James Bezan]

Mr. Storseth.

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

Mr. Easter is belittling his own work on this. This committee is one representative of the Government of Canada, and if we have put forward--

[Wayne Easter, Liberal, Malpeque, PE]

Mr. Chair, that's not a point of order. I have a very serious question--

[The Chair, Conservative, James Bezan]

Okay, let's get to it, Mr. Easter, you only have five minutes left.

[Wayne Easter, Liberal, Malpeque, PE]

The member asked earlier about the new markets in beef and hogs. When do you expect those new markets to kick in?

[Steve Verheul]

I think that's one of the problems with the WTO negotiations: nothing happens quickly. If we manage to reach an agreement in the spring on the modalities, it would take us the rest of 2008 to finish the whole agreement. Then it wouldn't begin to come into effect until at the earliest the beginning of 2010, a five-year implementation period, in all likelihood. I don't think the WTO is going to be a quick fix.

[Wayne Easter, Liberal, Malpeque, PE]

So I guess the fact of the matter is that the negotiations are not going to do those producers who have a financial liquidity problem right now much good.

If you look at France, they are, no question, breaking the rules. They're subsidizing their industry. But they're at least going to ensure that they have an industry there if we ever get a WTO agreement that can be utilized, and that's the important thing.

There are two things I need to ask. First, what are the penalties that France could face in terms of subsidizing against the rules? We have to look at this seriously. We're losing a hog industry in this country. We're losing it. A deal that brings in markets in four years' time, or two or three years' time, is all well and good, and I support that, but organizations are taking a different position from producers. Producers are saying they don't care about a trade agreement, but they have to be around when the trade agreement is signed, so something has to be done for them now. So what's the penalty for France?

Second, we should have learned some lessons on our trade negotiations in terms of general trade—agriculture, manufacturing, industrial goods. Our country is in a bind right now on those industries, because labour and environment and lack of enforcement aren't in the agreements. What are we doing in that area? We can be all well and good on labour and environment in this country, but if China and India and those other countries are not doing anything in that regard, we're not helping the environment over the long term, because they're pumping the crap into the air, and we're putting our industries at a disadvantage. So what are we doing in this negotiation to prevent agriculture from being in the same position?

[Steve Verheul]

To start, with respect to the penalties that France could face for the assistance being provided to the hog sector, the primary means of assistance that I've been seeing is use of export subsidies. They do have the legal right to do that under the WTO. With the agreement, that right would be removed. We'd be eliminating export subsidies. So, at the moment, they are doing things that they are able to do legally under the agreement, unfortunately.

[Wayne Easter, Liberal, Malpeque, PE]

Can we do it?