Agriculture Committee on May 26th, 2009

[Mark Eyking, Liberal, Sydney—Victoria, NS]

Thank you very much.

My third question is to the supply and management guys. We often hear, from New Zealand especially, about this protective system that we have here. I was in New Zealand this past winter and I thought I would get all of this cheap yogourt, milk, and cheese, but apparently it's just as expensive as in Canada. There's a two-price system. They know how to do it there in a different way. They're talking about all of this free enterprise that is not happening there. They set the price, and it's kind of subsidizing their export price I think.

I always believe supply management is the best system in the world, but we're always defending it. Is there a way that we could promote it more, especially to these emerging economies that are out there that are looking for a system where they have food security? Their economies are going through a transition. Is there a way we can push back and promote our system? The figures all show it's good for the producer and the consumer. How can we push that back on the world scene?

[Mark Davies]

I'll tackle that one, Mark.

What I'll do is put it in some context. Everybody is familiar with the G-8 meetings that took place. Subsequently, there was also a G-8 farmers conference that I attended, which was actually expanded to the G-14. Around the table were various countries, some developing and some developed, like the U.S. Within that discussion--it was a room much like this--the main topic was the crisis and where the farmers' place was in this. They discussed that they, at some point, could be seen as a way out of this economic mess, because if you feed people, your economy does better. That was a simple equation.

Within that meeting we discussed that we need a way to manage supply, we need a way to get a fair price to our farmer, and we need a way to make sure that it maintains it long term. So basically they were discussing supply management without uttering the words. There were declarations that were sent to the governments, including ours. In fact a number of us delivered the signed declaration to Minister Ritz when we were in Italy, so he does have a copy of that. It is something that's discussed. I think we, as supply management commodities, do spend a lot of time promoting this worldwide, trying to educate. I know in the past it has been a CFA policy, within the education realm of supply management, to foster that.

It is something that's being done. It seems to be an uphill battle, but I think with the current economic crisis it's something that's maybe falling on ears that aren't as deaf as they used to be.

Secondary to that--and Richard may expand on this--I know that some of the dairy individuals in Wisconsin are looking at managing their supply within dairy.

[The Chair, Conservative, Larry Miller]

Time has expired. You can comment very briefly, Mr. Doyle.

[Richard Doyle]

Just as a reality check, one of the big dilemmas is that while countries like Europe and the U.S. still have border protection that can implement supply management, developing countries have very little border protections or controls of any sort. The WTO forced them not to increase any one.... And their access to funding for development is also based on the removal of any barriers.

It's not that we don't promote supply management, it's that the rules at the international level do not assist any other countries--other than those who are in the same situation as we are, the big ones--to actually introduce it.

[The Chair, Conservative, Larry Miller]

Thank you.

Mr. Bellavance, seven minutes.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

Thank you.

Mr. Doyle, you raised the spectre of demonstrations. Thousands of milk producers went to demonstrate in front of the European Union Building in Brussels. They are greatly affected by falling prices; they are not even covering their costs of production. Far be it from me to take pleasure in that. But it may be an opportunity for them to consider a different option that is used elsewhere, by which I mean supply management. If they did, they would not be living with those problems. Our milk producers too have had to throw away milk because it was worth nothing. They had produced too much and could not get a price that made it worth selling, so it was easier to pour away. Of course, throwing away good food like that is completely unacceptable.

In Europe, during the 1980s, they were buying so much butter that they had mountains of it that they no longer knew what to do with. So I have a hard time understanding why some of those countries, that previously had supply management, do not open their eyes today and say to themselves that maybe it is a system that would prevent the problems they are facing. In any event, let us hope that their current misfortune will cause some of them to open their eyes to that. I hope so. I draw the comparison because, as you know, discussions on a free trade agreement between Canada and the European Union are currently getting underway. Reaching an agreement can take a long time.

My questions will be about that, in a way. You are familiar with the international negotiations at the World Trade Organization. We met, I think, in Geneva. That is why I would like some insight from you on what is being discussed between the European Union and Canada in order to reach a free trade agreement.

As you know, Mr. Doyle, in bilateral negotiations, supply management is not on the table. In agriculture, it is not generally excluded. I know that the negotiations with Costa Rica, for example, are not the most consequential, but sugar was an issue. Clearly, in those kinds of discussions, agri-food can be raised, but can you confirm that supply management is not on the table in talks on bilateral agreements?

[Richard Doyle]

I can tell you that, in most bilateral agreements that Canada has signed, at the outset, we excluded supply management rights that had been negotiated at the WTO, as was also done with NAFTA. I understand the Canada-Europe context, and the understanding at the beginning, before the talks began, excluded absolutely nothing. But the government clearly stipulated that, as far as it was concerned...We know very well that, even if nothing is excluded at the start of the race, each party will have its areas of exclusion at the finish line, and that goes for Europe just as much as for Canada. I have spoken to Minister Stockwell Day and I know that they intend to exclude the supply management system during the negotiations. But, at the very outset—and I think this was your question—unlike other bilateral agreements, it was not excluded before negotiations started.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

I saw a newspaper article in which, before Mr. Harper left for Europe to get the discussions started, an anonymous government source told the reporter not to worry about supply management. I think that message is for those of you who are in areas governed by supply management. The source said that the tone of the discussions would not be like that, that it would be protected. When an anonymous source tells me not to worry before anything happens, I hear alarm bells. That is precisely when I do worry. I see that you are confirming my fears in a way. We see it in the “Joint Report on the EU-Canada Scoping Exercise”, as it is called, dated March 5, 2009. So we are dealing with very preliminary discussions between Canada and the European Union.

Are you familiar with the document, Mr. Doyle?

[Richard Doyle]

In outline, yes; not all of it.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

Point 3.1 of chapter 3 talks about trade in goods. In the next paragraph, I wonder whether or not they are talking about supply management. It says this:

The Scoping Group recognized that any agreement should address the issues of agriculture export subsidies and state trading enterprises and assess any possible distortion of competition and barriers to trade and investment these issues could create.

I am somewhat reassured by the fact that subsidies are mentioned. From our perspective, supply management is not a subsidy, but, for the European Union, it is. Is there any cause for concern in this small part of the report?

[Richard Doyle]

I do not know whether the concern is in that small part or in the fact that the agreement does not exclude supply management specifically. The dairy industry benefits from export subsidies. That was determined by a panel that looked at our export subsidy program. We lost that advantage a few years ago because we had a two-tier price. So restrictions were automatically imposed on us.

Under NAFTA, for example, no trade subsidy can be used, and exclusions do not matter. The situation is going to be the same with the paragraph that you just read, which is going to apply to an agreement with Europe. At the moment, we cannot export to the United States unless the price is exactly the same as the price that would be asked in their domestic market. That is what explains that paragraph, in my opinion. That does not take anything away from your first question. The fact is that, in this very preliminary agreement, no specific provision excludes supply management.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

Had you been asked...

[The Chair, Conservative, Larry Miller]

Your time has expired, Mr. Bellavance.

We'll move to Mr. Atamanenko for seven minutes.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

Thank you very much.

Just as a preamble, in my consultations across the country on this whole topic of food sovereignty and food security, a lot of people are raising the issue of trade and domestic agriculture, and sometimes the negative effect of the WTO and globalization. They are using the example of what we did before NAFTA, the in-season tariffs we used to have protecting vegetable producers in Ontario and across Canada. We don't see those now.

Mr. Gilroy, you mentioned dumping. We may have discussed this already, but I know I have certainly discussed this with Joe Sardinha, from B.C., and others. What would happen if American apples were dumped and right away we slapped on an immediate tariff? Rather than going through the panel and getting lawyers and fighting it—because by that time it would probably be too late, because apple producers would have lost money—could we have a floor price, so you couldn't dump apples in Canada below a certain price?

I ask because we know there are many, many apple producers in my province and yours who have gone out of business and are scrambling and trying to develop new varieties, and doing all of the things you folks are doing--and growing grapes.

So what would happen if we were to do that? Has there ever been a thought from the Canadian Horticultural Council to propose that and to work with government to do that?

[Brian Gilroy]

We did have a minimum price on Washington red and golden delicious apples back in the early to mid-nineties. We were told at the time that we would have that for a five-year period, and then the industry would have to find ways to adapt to the market signals. After three years, the minimum price was removed, because there was no sign that harm was occurring within the industry while the minimum price was in effect.

Now, it wasn't one of my favourite decisions, but it was a decision made by a panel. Strangely enough, the fellow's last name was Trudeau—not Pierre, but another Trudeau—who made that ruling. It was very puzzling, because it did do a good job. At that point in time, it was $12.50 a bushel FOB from Washington State. Strangely enough, apples came into Ontario this year below those prices.

Your other comment was about a quick way of dealing with dumping and stepping in and imposing some sort of a tariff or hold-back on those products, up to a minimum level. That would be great. It is something we have asked about, but we've been told to move on to other areas.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

I have one other last question, and then I want to talk to Jurgen about the pork industry.

You mentioned “buy U.S.” and the fact that this is happening there. Our committee did a tour two years ago, and we had a number of recommendations on food security. One of them was--and all parties agreed to it--that we should encourage the federal government to buy food locally for federal government institutions. The push-back we got from government was that we had to be careful of our trade obligations. Do you want to comment on that?

[Brian Gilroy]

Do as they do, not as they say.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

Thank you.

In regard to the pork industry, Jurgen, you mentioned high feed costs, the strong dollar, low prices, COOL, and now this H1N1. Are the conditions any different in your industry from the cattle industry? These seem to be the factors that affect them also.

[Jurgen Preugschas]

Without a question, both our industries are having great difficulties, and most of the same factors affect both.

Ours has been affected somewhat more strongly simply because of our huge export dependency. The number of jobs we put into Canada is even larger and we're much more dependent on export. Therefore, the effects have been stronger on us, and we've been in a low price cycle, which is different. Beef prices haven't been great either, but they have been nowhere near as low as what ours have been.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

We talked about supply management, and you mentioned that 50,000 to 60,000 people are out of work. If we had a system similar to the poultry industry and the turkey industry where we had this 7.5% quota on imports, would it still affect that many people or would two-thirds of the people still be out of work?

[Jurgen Preugschas]

Certainly the importation of pork has increased somewhat from the U.S., and it's a significant import. We got in about 200,000 tonnes last year and we exported over one million tonnes of pork, so it would lower it to a certain degree. Of course, even if we reduced our production, the big plants in the U.S. would still send in a fair amount of pork.

If we went to supply management, of course, that wouldn't be possible if you put high tariffs on it. But number one, I don't think it would even be allowed under NAFTA; and number two, as I said, I'm not prepared to put that many people out of work.

Maybe, Stephen, you would like to comment a bit on the integration, how you've built your business integrated with the U.S. as well.

[Stephen Moffett, Director, Canadian Pork Council]

In our case, we send half our pigs to the U.S. as baby pigs and we finish them down there. As Jurgen said, the model made a lot of sense. It was cheaper to finish them down there and certainly cheaper to process them. They have a very strong processing industry down there and access to world markets, so it made a lot of sense.

This introduction of the COOL has really kicked us in the teeth. We had a long-term contract with the plant we used to sell to, and at some point they just came and said, “Sorry, guys, we're just not killing Canadian hogs anymore.” We had to go with our hat in our hand to another plant, negotiate a deal with somewhat poorer returns on a per hog basis, and move to a different location.

I have a little further comment on your comparison to some of the other industries. A certain amount of that is fair, but there's probably a bit more impact for us than with beef, because we're more grain based, and this whole issue around ethanol and the driving up of the price of corn and soybean meal probably hits us a little bit harder. Then, of course, as the final shock after all that, this H1N1 has hit us, and it has really knocked us in the teeth. H1N1 continues to cost me probably $70,000 a week.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

Thank you.

[The Chair, Conservative, Larry Miller]

Thank you very much. Your time has expired.

Mr. Shipley, you have seven minutes.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Thank you, Mr. Chair, and thank you to our guests for coming out.

I want to go first to Mr. Doyle and to the comment made earlier. I want to be clear about our free trade agreements. We have been, in the free trade agreements that have been done in the Americas--approved--with Colombia, Costa Rica, and even NAFTA.... Actually, these are ones that our government has brought forward and that have protected supply management, and we will continue to do that as we enter into the EU. You have to remember that there isn't a table yet at the EU for those discussions. When I hear about what is called an anonymous source or a reliable source from government, usually it's not government. Sometimes it comes from the media. Sometimes it comes from the opposition. But it certainly hasn't come from this government. You can be confident in terms of our stand and position on free trade.

I have one quick question. Interestingly, you have on your chart that the producers receive a stable percentage of the consumer dollar. I take that to mean that actually the stable part of it is that it's good and a benefit to producers and actually good and a benefit to consumers. It's one of those win-wins. How are you doing this? I know it's because of supply management. I think the bigger part, when I look at page 11, is the increase in retail demand in these times. You have increases.

I was in Barrie at one time, and I remember the discussion. It was always about dollars. Farmers are kind of tight to the tree sometimes in terms of dollars going out for promotion. But we were always in competition with somebody else. We were in competition with the other products either of butter or of a drink.

What are you putting into promotion to build demand?