Evidence of meeting #40 for Agriculture and Agri-Food in the 39th Parliament, 2nd session. (The original version is on Parliament’s site, as are the minutes.) The winning word was contraband.
A recording is available from Parliament.
Board Member, National Farmers Union
You know, I couldn't tell you exactly how many tobacco farmers are NFU members. I know how many there are in my area.
Conservative
Conservative
Guy Lauzon Conservative Stormont—Dundas—South Glengarry, ON
Okay.
Mr. Preston, you're doing town hall meetings and you're working with all of the stakeholders. How is that going?
Elgin—Middlesex—London, CPC
It's going well. I'm very pleased with how well the mayors have come together on this. The answer is that I'm just facilitating this; the real work is being done on the ground by the municipalities and the counties. They recognize the economic distress that's going to be there.
Under any circumstances, given where it is today, even if an absolutely perfect or total solution were found tomorrow, the economic distress is still going to be there. The crop that has led this area's economy is not going to be there anymore. So we have to put in place a long-term vision of what this area of southern Ontario will look like down the road. That's the answer. I'm not trying to separate it off from this problem; I'm saying that it goes hand in hand with this, and that it has to be there too.
And as you've mentioned, the battle against contraband is the third wheel to this. There have to be all three of these things working—and they don't stop, but go on forever.
Conservative
NDP
Alex Atamanenko NDP British Columbia Southern Interior, BC
Thank you for being here.
I'll try to be brief. In 2000, you mentioned that the growers were encouraged to invest heavily by government and industry and that many put their life savings into doing that. Then there was a market free fall. And then we talk about all stakeholders needing to contribute; and I agree with that, as I think it's a multi-faceted approach.
The first question is, would you then agree that even though all stakeholders need to take responsibility, the lead should be taken by the senior level of government because of the government's prior initiative to encourage more investment? In other words, yes, we can pass the cart around the table, but somebody has to take the bull by the horns—especially if it were our level of government that encouraged further investment—and take the lead to bring these people together. That's the first question.
And the second one is about an exit strategy and contraband. In an ideal world, we would solve the contraband issue and move into the exit strategy, and some people could stay in the industry and some could leave. But even though the initiative has been undertaken by our ministers to do that—and I thank them for that—to try to get the contraband under control, what we in fact have is a crisis situation, and we have to set priorities.
Would you agree, then, that we should be getting the federal government to take the lead? You know, the minister's response of March 31 that no money is available is not acceptable. The fact that there is no response to your suggestions is not acceptable.
So should we be demanding that the government take the lead to bring people together, to take the initiative, and to bear some responsibility, and also to do the exit strategy as we work on contraband? I'll just leave it at that.
Chair, Ontario Flue-Cured Tobacco Growers' Marketing Board
Yes, that is a good answer.
But just to start off, you're right, the reason we approached the federal government—because it is a national problem—is the national situation with the sale of tobacco across the country. And rightfully so, it is the federal government that is the top echelon of government, so you would go to them first. And I would personally feel, and I think the board does, that the federal government is responsible for bringing all of us together. And they are doing that; I won't deny that. I've had conversations with Minister Ritz, and we are continuing those conversations with his department. We're doing well, trying to get things together. But it's the urgency of the situation—we have to move more quickly.
As far as trying to solve the contraband situation is concerned, there is contraband in all manufactured products. You haven't solved those, and you're not going to solve tobacco's problems overnight either. But given the desperation of farmers today, we need to come up with a solution today, to have input into a program that delivers some dollars to these farmers—to all of us who are suffering—because not only will it assist us, but it will also assist the manufacturers and storekeepers.
And we will pay our taxes. I sat on municipal government for a long time. I know very well that when a farmer is broke, the number one thing he does do is pay his taxes, because we have pride and respect in that. But at the end of the day, it's pretty tough to say to your kids, you can't go to university this year because we don't have the dollars.
This program needs to come, and it needs to come now, and we need the assistance of all parties to put something together. I'm begging. I am begging that you will see fit to come forth and help us. But I do acknowledge that Minister Ritz's department is helping us, and we are in discussions with them and hope that those will continue until a resolution.
Elgin—Middlesex—London, CPC
Mr. Chair, could I speak to that?
You've just seen the patch-in with Linda, and I know that Fred is the same way.
Mr. Atamanenko, you said someone needs to take the bull by the horns, and I have no doubt who is doing it. I don't even have to look at my call display sometimes to know who's calling. The tobacco board has taken the lead to bring it to us, and I know that they're taking the same lead and taking it to the province in their own discussions with the manufacturers also doing that piece.
Board Member, National Farmers Union
May I say something as well?
Look at the profits that are being made in the cigarette industry right now. There's lots of money in the cigarette business, and there's no reason the federal government cannot negotiate an arrangement with the manufacturers. There's plenty of money available. This little bit that we're asking for is nothing.
NDP
Alex Atamanenko NDP British Columbia Southern Interior, BC
I think the misconception many have is that this has to be an entirely government-funded approach and that we have to somehow scramble to find the money from taxpayers' dollars. But what you're saying is that there is an equal, if not greater, responsibility on the part of industry, which has money that could certainly contribute to this, because they are part of the problem. Am I right?
Conservative
Conservative
The Chair Conservative James Bezan
Thank you, Mr. Atamanenko.
Mr. Easter, you get to take us to bells. As soon as the bells start ringing, we will suspend.
Liberal
Wayne Easter Liberal Malpeque, PE
Thank you, Mr. Chair.
I think it's fair to say that the exit strategy that the tobacco industry believed the current Minister of Immigration had committed herself to, had committed the government to, and then broke her word on was based on the federal government, the provincial government, and industry. Is that correct? And was the federal government share about $275 million?
Vice-Chair, Ontario Flue-Cured Tobacco Growers' Marketing Board
Mr. Easter, thank you for the question.
When we put forward the original proposal some two and a half years ago, it spoke to the consumers and/or the manufacturers of tobacco essentially paying for this through a levy on a carton of cigarettes. But throughout this process we look to the senior partner, which really is the federal government, to cause it to happen.
Federal tobacco tax policy extends right across this country. The federal government has the levers at its disposal to cause this to happen, either directly by making the manufacturers pay for it or by putting a levy on a package of cigarettes themselves to fund it.
Liberal
Wayne Easter Liberal Malpeque, PE
I think what you're saying, Fred, is that the plan you could have put in place—and this is why I can't understand the federal government's reluctance—would have been self-financing to a great extent, with either additional levies, which somebody said earlier bring in $2 billion to the federal government, on tobacco itself or levies on the share of the cost that the manufacturers would follow through on. Is that not correct?
Liberal
Wayne Easter Liberal Malpeque, PE
“Revenue neutral” is the new term these days. It will be revenue neutral to the Government of Canada.
Mr. Preston, in terms of the proposal that you're following up on, what is the target date of having this completed?
I've been in this area with these tobacco producers, and indeed suicides are a problem. This is an industry that doesn't have a future, and the asset levels are going through the floor. The bankers have made it clear that there are no asset levels left, and they're moving in. What is the specific target date by which you can assure this group of tobacco producers that you will have finished and an announcement will be made so that they can clear with their bankers what liquidity they may have at the end of the day?
Elgin—Middlesex—London, CPC
Mr. Easter, the question is not that easy. I'm chairing an economic development task force for the area to help the municipal governments and the county governments find a way forward into the future. That's what the minister has tasked me with. I expect that my economic task force will finish its work this summer, and the solution and plan forward will come from that. I expect it to be extremely comprehensive in the short term, from an economic development point of view, for the municipality so they know what is available to them from a program point of view.
The Prime Minister announced the community development trust for industries like this. That money has now been transferred to the province, and we will be asking to use part of that in this program. But I expect that the economic development piece will be brought forward from a short-term plan and a long-term plan by the end of this summer.
Liberal
Wayne Easter Liberal Malpeque, PE
Would it jeopardize your process if the Minister of Agriculture and Agri-Food announced tomorrow a commitment by the federal government of $275 million to meet the needs of the people who are most direly affected?
These are the people who are committing suicide. These are the people whose lives and futures are on the line. Would it jeopardize your process if the federal government committed to that? We've already established that it's cost neutral.
Elgin—Middlesex—London, CPC
Mr. Easter, these are my friends and neighbours too. Of course not; this is a parallel process that has to happen. We have to do all of this.
Contraband has been mentioned here today too. It's at least three prongs going forward: it's economic development; it's contraband; it's an overall solution for the producers. All of these things have to happen.
Conservative
The Chair Conservative James Bezan
Okay, the bells are going; it's my duty to suspend the meeting.
I want to thank the witnesses for coming and testifying. We will come back. Your stuff is safe in here. The room will be monitored. The clerk will stay in the room. Immediately following votes, please come back, and our second hour will commence with our other witnesses.
Monsieur Bellavance, I need to table our reports in the House during routine proceedings, so I'll ask that you take the chair when we return.
Thank you. We are suspended.
Conservative
The Chair Conservative James Bezan
I call this meeting back to order.
We're going to continue our study on tobacco production in Canada. We're into the second hour. I do appreciate everybody's patience, since votes went on for over an hour.
For the committee's information, I just finished tabling our seventh and eighth reports, so they can be made public now.
We're going to welcome, from Tobacco Farmers in Crisis, John Lechowicz, who is a farmer, and Peter Van Berlo; and from the Association des producteurs de tabac jaune du Québec, Gaétan Beaulieu and Christian Boisjoly. I want to welcome both groups to the table.
We're going to start off with Mr. Lechowicz.
Jon Lechowicz Farmer, Tobacco Farmers In Crisis
I guess it's still good morning.
My name is Jon Lechowicz. I'm a tobacco farmer and a founding member of Tobacco Farmers in Crisis. TFIC is an umbrella grassroots farm organization, with farmer members from the last three provinces in tobacco production in Canada, those being Ontario, Quebec, and P.E.I. We represent over 500 farm units and over 70% of the tobacco quota holdings in Ontario.
At this time I'd like to thank the committee for its support and recent motion, which was carried by a majority. So I'd like to thank those members who voted in favour of that motion.
Since TFIC was first presented to this committee two years ago, the Canadian government—and by that I mean governments—has collected $18 billion in tax revenues. As a matter of fact, since 2004 when TFIC began its campaign to seek compensation for the loss of quota caused by government policies, Canadian governments have collected in excess of $36 billion in tax revenues.
The multinational cigarette companies doing business in Canada have made in excess of $8 billion in revenue. This year, Rothmans recorded record profits, largely through increased use of cheap imported tobacco from developing countries. Apparently contraband hasn't hurt the bottom line of those two big partners in the tobacco business, those being the government and the multinational corporations.
The U.S., the European Union, and Australia have all compensated their tobacco farmers for loss of their livelihoods, and in a manner and to a level that is appropriate.
A profitable contraband market has continued to flourish more or less unchallenged by the same government that has denied fair compensation to farmers.
Canadian tobacco farming communities have been steadily dying. Tobacco farmers have been drowning under mounting debt or going bankrupt, and their families have been torn apart by stress, depression, and constant fear about their bleak futures--and as mentioned by Mr. St. Amand this morning, to the point of suicide.
We know these people. A gentleman burned himself to death in his tobacco barn not long ago. On Tuesday, by virtue of my other job as a real estate agent, I got a call from a social worker who had a third-generation tobacco farm family sitting in her office, who had to ask me how a power of sale went, because they've been notified that they had to vacate their home of the last three generations by June 13, which is tomorrow.
These people were waiting for the government of this country to do something for them. They've lost their quota. They've lost their farm. Whatever you're going to do now is not going to help them. They're gone. And there are a lot more like that. They're going to be gone before this government does anything, apparently. That's what I see.
The Minister of Agriculture has declared that there is no money for an exit strategy, while his government has made record cuts to the GST and other taxes, and at the same time steadily raising more tax revenue from sales of legal tobacco products.
Manufacturers, in the past 36 months, have raised their price on a carton of cigarettes by over $3. That's more than we've ever asked for. They've already taken it out of the tobacco business.
This situation is unfair, dishonest, and hypocritical. Our position is that Canadian tobacco farming families have been robbed of their legal livelihoods by the Canadian government in collusion with multinational tobacco manufacturers, who are raking in taxes and profits respectively while farmers are going bankrupt. This would not be allowed to happen in any other industry. If the government did this to a foreign company, for example, they would be hauled before courts under international trade and investment treaties that Canada is party to, and they would compensate or desist.
Our demand is simple: fair compensation for the years of work and investments we have made in a legal livelihood that has been taken from us by a government that persists in believing farming families and our communities are acceptable collateral damage.
We respectfully remind the committee that this not an agricultural issue. Tobacco farmers are the only victims of Canada's ill-conceived tobacco control policy, which taxes a product to control legal consumption. This is a health policy, not an agricultural policy.
The same government has all but ignored the resulting growth of a contraband market, which now accounts for 30% to 40% of all cigarettes consumed in Canada, which keeps it easy and cheap to smoke in this country. It's a justice issue, not an agricultural issue.
Last year we produced 37 million pounds of tobacco that we sold through the marketing board. That was our total production. All of that production last year would not have supplied the contraband market, even if 100% of that production had gone to the contraband market. So do not look to the farmers for the salvation of the contraband problem. We're not part of it—never have been, and never will be.
And the same government ignored the fact that this combination of a highly taxed legal product and a cheap, easily available alternative would wipe out tobacco farming families and their communities by destroying the economic value of the tobacco quota and related investments. These are financial and economic decisions, not ones emanating from the Department of Agriculture and Agri-Food.
In fact, tobacco is still big business in this country. As we all know, governments and tobacco manufacturers reap billions of dollars from it each year. Tobacco farmers are the only economic victims. Of the revenues generated, the government takes 68%, the multinational companies take 23%, and Canadian farmers receive a fraction of 1%. This plainly and simply is a disgraceful inequity.
Today we'll address where TFIC is going next, after four years of intensive lobbying and education on this problem, and why we have chosen this path. In our strategy, we have now been forced to pursue two tracks. We will continue to seek redress from government by discussion and lobbying—which has always been our preferred route up until this time. And we will support legal action by farmers. Although we are hopeful that this issue can be moved to the departments of health, finance, and justice, we recognize that farmers must be prepared to take actions that will protect their families' assets if this fails. People are being excluded from this process as we speak.
First, in terms of pursuing direct government action, we continue to demand that the issue of quota compensation be immediately acted upon by those departments within government responsible for the tobacco control file, namely, Health, Finance and Justice. We recognize the shrewd strategy of the Conservative government in continuing to lob the tobacco issue back into the agriculture department, which does not have the funds to implement an exit strategy. But as we have repeatedly emphasized, this is not an agricultural issue. This crisis in tobacco farming has not been caused by poor agricultural policies or crop production problems. It has not been caused by any natural disaster. It is Canada's tobacco control policy and related measures that have destroyed the economic value of tobacco quotas, and the owners of those quotas must be compensated for that loss of value. That's what this is all about, plain and simple. It's a business issue and an issue of basic fairness and justice to compensate us for the deliberate devaluation of assets and the loss of our legal livelihoods. We are simply asking Canada to do the same thing as other countries have done.
To guide that discussion, we developed a blueprint for action, which TFIC first presented to the federal and Ontario governments in July 2005, and of course we presented it to this committee in 2006, as the basis of a comprehensive exit strategy. We have brought along copies in case someone hasn't seen it.
We ask this committee for your continued support to try to move the issue of compensation for tobacco farmers' loss of livelihood onto the government's immediate agenda. Our first choice is to have this resolved by government, but until it becomes a matter on the Order Paper, nothing will be done. We are therefore asking for an immediate discussion in the House, with the focus on the point that the issue should be acted on by Health, Finance and Justice.
Although we acknowledge the committee's passage of a recent motion as a good first step, the level of funding is inadequate. Therefore, we also ask this committee to support and recommend to Parliament our blueprint for action as the basis of a comprehensive, fair, and orderly exit strategy.
Based on the government's intransigence and neglect to date, we are very concerned whether the tobacco issue will reach the House in time for many of our members. Therefore, we have no choice but to support our members and other farmers seeking legal options. We feel we have no other options.
Thank you for your time. I'm ready to answer lots of question.
Thank you very much.
