Agriculture Committee on Dec. 2nd, 2010

[Steve Verheul]

Yes, we have been spending quite a bit of time on the area of dispute settlement, both with respect to dispute settlement state-to-state as well as the possibility of an investor-state dispute settlement mechanism.

We've been having intensive discussions about this. We're trying to bring things up to date. We want to introduce some approaches that haven't been tried in previous agreements.

Provinces have expressed a keen interest in those issues as well, and there have been some discussions going on more broadly, outside these negotiations, about the role that provinces should play in these disputes.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

How much are the 27 states in the European Union providing in subsidies for agricultural production? EU member countries provide significant support. How much is it worth? Basically, I want to draw a comparison. On the issue of supply management, one might suppose that if the EU is pushing hard for us to abandon it, they will have to eliminate many of their subsidies. How much is the EU providing in subsidies?

[Gilles Gauthier]

Mr. Chairman, I do not have the exact figure, but I will be pleased to send it to the committee. Obviously, it varies by sector. In dairy, it may be as much as 40% to 50% of earnings.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

One might say the EU subsidizes agricultural producers quite heavily.

[Gilles Gauthier]

Absolutely. As part of its common agricultural policy, the EU has a host of agricultural support measures. However, under reforms that were made in recent years and expected reforms under the new common agricultural policy in 2013, their subsidies will be less and less linked to production. It is a direct support mechanism for producers.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

May I ask one last question?

[The Chair, Conservative, Larry Miller]

Thank you, Mr. Laforest.

Mr. Atamanenko.

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

Thank you very much, gentlemen, for being here.

I have a number of questions on agriculture, but I also have some general questions on some information I've found in my research from a document entitled Negotiating from Weakness, by the Canadian Centre for Policy Alternatives. I'm not sure if you're familiar with that.

It seems to me, looking at this agreement, it's more about European access to our government procurement, public services, municipalities, than it is about trade. I find this a bit disturbing.

I'll quote from the document in a few places, as follows:

In December 2009, the EU presented its initial market access requests covering procurement to Canada.

At the federal level, they have demanded that Canada cover: “All central government entities and all other central public entities including subordinated entities of central government....”

For greater certainty, the EU specifically lists a large number of federal entities currently not covered under international procurement agreements. Consider just two examples from this European list--the Canadian Wheat Board and the Canadian Space Agency. Hampering the procurement policies of the Wheat Board, which has a statutory monopoly to market wheat and barley grown in western Canada, complements the EU’s publicly-stated goal of dismantling the Board, which it reiterated at the outset of negotiations. The Canadian Space Agency provides hundreds of millions of dollars annually....

In other words, both of these, according to this document, could be under threat.

The document also says:

They have, as at the federal level, demanded universal coverage of “All sub-central government entities including those operating at the local, regional or municipal level....All entities operating in the so-called M.A.S.H sector (municipalities, municipal organizations, school boards and publicly funded academic, health and social service entities)....”

The impression I'm getting is that these subnational governments won't have any control over local procurement. In other words, instead of trying to provide jobs to local companies, companies will have to compete with major European multinationals. So that's my question in general.

In agriculture, I would like your comment with regard to the UPOV 1991 version of the plant breeders act. According to the information I've received, that would virtually eliminate farmers' rights to save, reuse, and sell seed, so I'd like some comments on that.

Also, with regard to the geographical indications, I know that's a real concern for dairy farmers. The other concern they have is that although things are going along well, there is a chance at the last moment they may throw cheese on the table and say that everything's fine, give us access to your cheese market. Is there that chance?

And the last question I have is with regard to pulses. Right now there are no import duties on non-processed products but there are on processed. So would that change if this agreement were signed?

I'll stop there.

[Steve Verheul]

Okay, thank you.

I'll start with a response to the procurement question, and I'll leave the agriculture questions to my colleague.

With respect to procurement, particularly at the provincial and territorial and municipal level, the EU has made it clear across the board that they have very strong offensive interests in that area. The EU claims to be the most open government procurement market in the world, so they're looking for that same kind of access in other markets.

We have been assessing the EU's request, and certainly when you make requests in a negotiation like this, you aim very high. And they did aim very high, just as we aim very high in our requests of them. So we shouldn't assume they will be getting everything they're asking for because that certainly won't be the case.

We will certainly be making some moves into the provincial and territorial agencies, as well as federal agencies and municipalities, but we're also looking very closely at the EU approach to government procurement so we can reflect all the flexibilities they have built into their system that allow for the kinds of practices you mentioned. So we're engaged in that process now.

We also need to keep in mind that we're negotiating fairly high thresholds, which would mean that anything under these thresholds would not be subject to the obligations of the agreement. Procurement for construction, for example, the threshold is $8.5 million. Anything under that would not be subject to the discipline.

There are also flexibilities for security-related issues, defence-related issues. All of that is exempted. There are a series of exemptions that limit the amount of access and provide certain flexibilities to those offering procurement.

So we're still at the stage now where we're about to exchange offers on procurement. Then we'll see how serious the European side is about some of these specific issues and take it from there.

[Gilles Gauthier]

On your agriculture question regarding UPOV 1991, it's important to note that this international treaty was signed by Canada, and it's up to Canada now to decide to ratify it and to decide how and when to implement it. It's not necessarily related to the CETA negotiations. In UPOV 1991, there is a provision dealing with the right of farmers to save their seed. I think this is more a domestic policy decision. We have to decide how and when to implement UPOV 1991, since we're already a signatory to that treaty.

As to geographical indications, as Steve mentioned, this is an issue of significant interest to the European Union. We have embarked on a fairly detailed discussion on this issue in the negotiation. In our view, if we were to adapt some of the GI concept currently in existence in Europe, this would need to be done in a way that is consistent with our existing framework on trademarks and the use of generic or common names in the marketplace. That's the approach we're taking. Taking into account the two principles of federal protection of existing trademarks and the protection for common or generic names, are there other ways we can accommodate the EU request for protection for some of the European GIs? That's our approach.

With respect to pulse, you're quite right that all the pulse are currently imported duty-free in Europe. For the processed product, though, they are subject to several fairly complicated tariff structures. Our objective is to liberalize all the processed products so that we can have access to that huge market.

Lastly, for cheese, it's up to the Europeans to submit a proposal on cheese. Canada already imports large quantities of European cheese, more than $150 million per year. European cheese accounts for 3% to 4% of the Canadian domestic market. In no product does Canada have such a market share in Europe. So we are starting from a position of strength here in dealing with market access.

[The Chair, Conservative, Larry Miller]

Thank you.

Your time has expired, Mr. Atamanenko.

Mr. Lemieux.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

Thank you, Chair.

My thanks to you gentlemen for being here today. I'm glad we're having this discussion. I think it's critical to the agricultural sector. We've been doing a number of studies here on the agriculture committee. We did one on competitiveness within agriculture. We did one on young farmers. We're going to be looking at biotech. And we're also reviewing government programming.

When farmers come in front of the committee, and when I meet with farmers, I keep hearing that farmers don't want to farm their mailbox. They want to compete. They want to compete and sell their products in Canada and internationally. It's easy to criticize a free trade deal and to play up the possible downside, but I'd like to switch the focus. I actually think there's tremendous possibility being offered to Canadian farmers through a trade agreement like this one.

You mentioned some numbers in your speech, but I'd like you to highlight some of the ways this trade agreement would benefit our farmers and our agricultural sector.

[Gilles Gauthier]

Let me take an example that I referred to in my opening remarks. Europe is now a net importer of beef. The domestic consumption in Europe is approaching 8 million tonnes a year. We have had a minuscule export to Europe up to now. Under the recently negotiated settlement for hormone-free treated beef, we will have access to 20,000 tonnes. And 20,000 tonnes in relation to a domestic market of 8 million is still a small market share.

I think we have a tremendous opportunity to grow that market, and that would be quite significant to the Canadian beef industry.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

An interesting highlight is that one of the things we've heard, of course, is that the beef sector in Canada is in crisis. They need to expand their market opportunities. They need to be able to sell beef into new markets in order to recover, and I think that's very encouraging.

Please go on. I only wanted to highlight that.

[Gilles Gauthier]

Just as a last word on beef, I was negotiating in CETA a preferential access to the European market that would certainly put our producers in a much more competitive context vis-à-vis other exporters of Latin America or elsewhere, and I think they'll be able to seize a greater share of that huge European market.

On pork, we have exported less than a thousand tonnes of pork to Europe. The European market is 20 million tonnes, so you can see the great scope here. Even if a decimal proportion of the EU market were to be liberalized or made accessible to pork producers, this could represent a huge opportunity for them.

On the question of grains, eliminating all the quantitative restrictions that we're facing will enable us to make commercial decisions as to whether or not we want to ship more to Europe. In relation to grain, I think an important issue that we need to start a dialogue on with the Europeans is on the question of biotechnology products. We faced some challenges last year for flax. There are potential areas where we could face new hurdles if we are to penetrate the EU market.

I think that in CETA here, not only do we want to secure tangible market access for some of the commodities, but we will also want to create a framework that would enable a bit more predictability to our trade through a rules-based approach in how we govern our trade relationship.

I think you have both avenues of making tangible benefits on the market access side, but also a rules-based system to govern our trade.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

Thank you.

Certainly we want to represent farmers. We want to do what's best for farmers and for the agriculture sector. Can you tell me if you've had any interactions with farm groups, with farmers, and what kind of feedback you might be getting from them on this particular agreement?

[Gilles Gauthier]

We've had very extensive consultation with all the various agriculture groups. I meet with them on a regular basis. Many of them have also embarked on their own market studies, which is quite helpful to our negotiations, because they can examine in detail the shape of the European market and how they feel as a sector they can position themselves to have access to that market. I have a fairly extensive set of meetings on a regular basis with all the stakeholder groups. I even have a network through which I provide a debrief of all the meetings that we're having so that everybody has access to the same degree of information.

So far, the agricultural community has been extremely engaged, and I'm very thankful for their active participation and the quality of the submissions they've made to the department in order to inform our negotiating process.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

Are there particular commodities that are more exciting than others and that you might highlight?

[Gilles Gauthier]

As I said, our major interests lie in the areas of meat and grain, but we've also had some valuable input from many of the other sectors, fruits and vegetables, processed products. I also have had the privilege of participating in provincial events all across the country, so we also obtain views from the provinces and from the stakeholder groups in the various provinces to ensure that we can reflect their interests in the negotiations.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

Very good.

Do I still have a bit of time?

[The Chair, Conservative, Larry Miller]

Only a few seconds.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

Okay. I have one last question, then, and it has to do with the nature of subsidies.

I think there's fact and then there's fiction. Sometimes the fiction is much larger than the fact. What I mean by that is we probably have a perception of the European subsidies—some of it based on fact, some of it blown out of proportion. I wouldn't be surprised if Europeans have exactly the same view of Canada, that we oversubsidize our farmers, etc.

I'm wondering if you can comment on that, perhaps what your experience is, and how you defuse some of this, especially when you're working with farm groups, in terms of reality versus fiction when it comes to subsidies.

[Gilles Gauthier]

I think it has been a long-standing concern of Canada that the European Union has the capacity and has the tools to subsidize far more than we do. So that's why in the WTO context we've been aggressive in trying to introduce more discipline in the use of subsidies by the major players, notably the European Union and the United States.

Then you need to look at issues product by product. For many of the products where we feel we can be competitive in world markets, the issue of subsidy is still relevant. But I think we can still be competitive and active in that market despite the subsidies. If we can resolve some of the subsidy issues through a multilateral context, all the better for our producers.

For other sectors, in the context of the supply-managed sector, when you compare things between Canada and Europe, you have to devise a model by which you attribute to the supply-managed sector the value of the subsidy that comes from the border protection that they need to have in order to sustain the supply-managed sector.

So you have difficulty trying to reconcile different ways of subsidies. Some are more trade-distorting than others, some are more income support, others are more production support. So you have to be able to devise a methodology that is somewhat neutral. Of course that's why the difference of perspective between each country, because each country would devise a methodology that suits their interests more.

[The Chair, Conservative, Larry Miller]

Thank you.

Just before we move into the next round, Mr. Verheul, I wonder if we could just follow up on something that was brought up earlier about dispute mechanisms.

One of the criticisms.... I think overall the U.S. free trade agreement has worked out very well, but with the dispute mechanism--to use softwood lumber as an example--it basically could go on for years.

Is there any kind of discussion there to ensure there's a more expedient timeframe where basically a decision can be made, and go from there? Could you comment on that a little bit?

[Steve Verheul]

Sure.

We've had some 20 years of experience with the NAFTA dispute settlement model, which is very much similar to the WTO dispute settlement model. So we think we're in a good position to try to learn from some mistakes, or some inefficiencies in those models.

We are trying to design an approach to dispute settlement that is going to be much more effective and efficient, reducing the timelines, streamlining the process in ways we can. We're also exploring the notion of a mediation mechanism so you could have an alternative track to dispute settlement that wouldn't necessarily take you down the whole process of a dispute settlement formal panel and all of the rest that can take up to a couple of years.

So between the notion of having a mediation mechanism to try to resolve a lot of these disputes as an alternative to the longer process, we're also trying to design an approach within dispute settlement that will be more efficient and move through the issues more quickly.

We're also trying to find approaches that will make sure the kinds of cases that come before dispute settlement aren't frivolous cases but are actually significant, economically important issues.