Bill C-18 Committee on Nov. 1st, 2011

[Frank Valeriote, Liberal, Guelph, ON]

Thank you, Mr. Chair.

Thank you, gentlemen, for coming in, and those appearing by telecast.

I have to echo the sentiments of Mr. Martin. Frankly, I agree with them. I may not do it as dramatically, but I do it with the same conviction and the same passion. Please understand that. I'm concerned about western Canadian grain farmers. They were denied a plebiscite. They had their own. It was ignored. We've had three days of debate and now three days of discussion that will affect something as iconic as the Wheat Board and obviously will dramatically affect small farms in the provinces.

However, at the risk of being objected to here, I will try to draw out my questions to the technical nature of the bill. Mr. Knubley, I'm hoping you can talk to me about the legislation and not just the report of the working group. Specifically, can you speak about the commercialization or the privatization, if you will, of the Wheat Board after the transition period?

Clause 42 talks about the corporation submitting an application under either the Canadian Business Corporations Act or the Canada Cooperatives Act or the Canada Not-for-profit Corporations Act. It then goes on to say that before they do, they have to send their application to the minister.

That offends me. I think it would offend any entrepreneur out there. Other farmers right now have a right to create a co-operative without getting permission from the minister. This is a minister who claims freedom for farmers, and yet is micromanaging every single aspect and move of the interim board and even the board that chooses to privatize.

Would you please explain to me why, Mr. Knubley, a board that is going to go private and register under any of those three pieces of legislation needs to seek the permission of the minister?

[John Knubley]

Thank you, Mr. Chair.

On this issue I'm going to turn to Greg Meredith, the assistant deputy minister for strategic policy.

[Greg Meredith, Assistant Deputy Minister, Strategic Policy Branch, Department of Agriculture and Agri-Food]

Thank you very much for the question.

This clause of the bill does a few things. It asks the board to come to the government with a privatization plan and it asks for approval for a couple of reasons. One, to make sure that it's done within a reasonable amount of time--that is, four years, with implementation in the fifth.

The other thing it does is it provides the minister the opportunity to make sure that the taxpayers' money, which is at stake in this operation of the voluntary Wheat Board, is protected.

[Frank Valeriote, Liberal, Guelph, ON]

I'm sorry, but the reading of the legislation does not prescribe that. The intent isn't disclosed through the words that are used. It simply says you have to have the application approved by the minister. This is a board. This is an interim Wheat Board, which is supposed to be for farmers and by farmers, and yet even to the last minute he thinks that he—or she, whoever it might be at the time—needs to somehow have some control over an application. I need to voice my dissent with that.

My next question is to you, Mr. Phillips, with respect to the check-off you just spoke of. I've talked to a lot of farmers. A lot of farmers are concerned, of course, as you know—we all know that. There are some who want the board and some who don't. So let's not kid ourselves. Those who are concerned—apparently a majority—are worried that they're not going to get paid for their grain at the prices they have been receiving.

An example is the fact that the Alliance Grain Traders are opening up a pasta factory, and will probably be doing that because they expect to pay less for grain rather than more. Assuming that is the case, why on earth do you think farmers are going to check off any amount of money for research? They're currently checking off 50¢ a tonne for barley and 30¢ for wheat. I'm hearing from the farmers out there that they have no plans to check off for a long time, until they know that this is going to succeed. There's no guarantee of success, and we've now lost a vital source of income for valued research.

[Richard Phillips]

Thank you.

I would say, when we look at all the other crops out in the open market, that they have check-offs operating very successfully. There's an oat check-off. I will make the estimate that over 90% of the money stays in these check-offs, and that less than 10% of the money for each of these commodities would ever be withdrawn by farmers. So oats, there's a big check-off; canola, there's a check-off; peas, there's a check-off; and lentils, there's a check-off. There are check-offs for all those other crops, and farmers leave the money in there because they know there's value to the research. And almost regardless of whether they see the price—

[Frank Valeriote, Liberal, Guelph, ON]

Mr. Phillips, I'm talking about future check-offs, not current check-offs. It's doubtful that these check-offs will be made by farmers when they're not secure with the form of income.

[Richard Phillips]

Right now farmers can request their check-off back if they're not happy with what's going on with the work. It's up to the Western Grains Research Foundation to make a case, and for farm groups to stand up and point out the value of this research and the objectives. If $1 million goes in, it's $5 million of value coming back out to farmers, because, at the end of the day, I think a lot of farmers will look ahead. They may be unhappy with some stuff, but when they look ahead, I think most people will leave money in there, because without the research they're going to get left behind in the world market.

[The Chair, Conservative, Blaine Calkins]

Thank you very much, Mr. Valeriote; your time has expired.

Mr. Merrifield.

[Rob Merrifield, Conservative, Yellowhead, AB]

Thank you very much for coming in as a working group and being able to lend your expertise to this.

I take note that you talk about the importance of the rail freight service review in your report. I actually had a fair amount to do with railway and the rail freight service review. In fact, it was a two-year study on the rail freight service, which was extended because we saw the performance of rail considerably increase as we neared the end of that. In fact, I think it moved rail performance on-time delivery of cars from about 50% up to over 90% last year. So we're seeing a tremendous increase in service, which is really paramount to farmers. If farmers can't move their product to shore and off to market, they're never going to get a nickel for it. So it really becomes critical for that to take place.

My question concerns the timing of the service review and the marketing with regard to this piece of legislation. You make some reference to it being important that they happen in concert. I don't know who would like to take this question, but can you explain, from your perspective, what you saw as you analyzed this?

[John Knubley]

As a way of introduction, this is an issue that the working group spent a good deal of time discussing. We held a special session on logistics. As I mentioned earlier, we had officials from Transport Canada who were involved in the rail review participating in our discussions. I will let Gordon Bacon discuss the issues, but the simple message from the working group is that we very much see the rail review as complementary to Bill C-18 and the work that's being done as a priority to move forward in that regard.

Gordon.

[Gordon Bacon, Chief Executive Officer, Pulse Canada]

As the deputy minister noted in his opening remarks, predictability was the key message that came through from all the witnesses that the working group spoke to, and predictability in rail service was certainly a key part of this. What we were wanting to do in terms of managing a transition or making recommendations for a transition was to ensure that we had addressed all areas of predictability. As people know, the Wheat Board has played a major role in bringing grain into the primary system, its movement to port position, and its handling at port.

The committee's strong recommendation was that the rail freight service review recommendations and the course of action the government set out on March 18 needed to move forward quickly. There was discussion that they certainly needed to move in tandem, because this was going to enhance the level of predictability in a major cost to all farmers that is incurred in the movement of product from farm to port and ultimately through to destination.

I'm very pleased. The committee actually hasn't met, but the government made the announcement yesterday that a facilitator has been appointed and that this process is now going to begin.

[Rob Merrifield, Conservative, Yellowhead, AB]

Yes. Actually it began a long time ago, about a year ago or even prior to that, and the shippers didn't need to wait for legislation to move to a service agreement. In fact, many of the large grain corporations have done this and are working toward one and have moved that ball down the court a long way.

Can you tell me where the Wheat Board is on it? To your knowledge, have they made a service agreement with the railways? It would be paramount for them to move, since they are one of the largest movers of product.

[John Knubley]

I understand from discussions with Ian White that they intend to undertake those discussions for setting commercial agreements. In terms of the rail service review, there is still work to do. As you know, the six-month facilitation process, which now has a facilitator, will lead to negotiating the template for those service agreements as well as—

[Rob Merrifield, Conservative, Yellowhead, AB]

Yes, but the facilitator is there just to make certain, if an agreement bogs down. But that certainly doesn't retard the ability of shippers to work out a service agreement. In fact, some of the larger grain handlers have accomplished this. But it' s of keen interest to me to see why our largest shipper, which is the Wheat Board, doesn't have an agreement. The idea of just starting to think about coming up with an agreement seems a little bit behind the ball.

[John Knubley]

I think that upon assent to this bill they will move forward quickly on their commercial agreements, and they will have their opportunity to do forward contracts. It's at that point that these commercial agreements can be really moved forward.

[The Chair, Conservative, Blaine Calkins]

Thank you, Mr. Merrifield. Unfortunately, your time has expired.

Moving on to our next speaker, we have a question from Mr. Allen.

The floor is yours, sir, for five minutes.

[Malcolm Allen, NDP, Welland, ON]

Thank you very much, and thank you gentlemen for being here. And thank you for the flow chart, which I think is helpful.

Let me go back to a couple of things you said in your opening remarks, I believe on page 3, which said that the working group assumed three things: a business plan continuing to see the WB as a voluntary marketing agency; marketing and transportation systems; all grains to be removed from monopoly.

As I look through, your first steps talk about reducing the board of directors to five government-appointed directors, so there would no longer be any elected ones. You can check these off: its directors are removed from office, it continues to work, the old act disappears, and the board of five government-appointed directors continues under the interim period.

So the transition period passes. We have the preliminary period. We get rid of the elected directors; we bring on five appointed ones. They stay in place.

And yet when we look at the bill, they're in place. Proposed section 25 talks about direction to the corporation. I will quote proposed subsection 25(1):

The Governor in Council may, by order, direct the Corporation with respect to the manner in which any of its operations, powers and duties under this Act are to be conducted, exercised or performed.

Proposed subsection 25(2) says, of the directors who are to be appointed:

The directors are to cause the directions to be implemented and, in so far as they act in accordance with section 16, they are not accountable for any consequences arising from the implementation of the directions.

In other words, you have a board of directors that doesn't seem to do anything but take orders and then direct that something be done.

Am I misreading the legislation, or have I lost something in your transition plan?

[John Knubley]

Mr. Chair, I think the particular reference in the bill is exactly the same as what is in the current act, in terms of the powers to the directors. What I would like to reinforce, before I turn it over Mr. Meredith to explain in more detail, is that broadly speaking the intent here is to use the five directors to design and plan the new entity that will be part of the open market. That is the desire of Minister Ritz.

Greg.

[Greg Meredith]

The section the member is referring to is very similar to what the current arrangement is between the government and the Wheat Board, whereby the government can provide direction to the board on the way they conduct their business. The “section 16” reference is about conducting business in good faith, with the normal due diligence and prudence. But the subsection you read out that talks about not being held liable is really to say to the directors: “You are following a government order in this respect. It is deemed to be in the interests of the corporation; therefore you wouldn't be held liable by a private lawsuit or some such legal intervention from following the order.” This is not terribly different from the current situation.

[Malcolm Allen, NDP, Welland, ON]

The only difference is that the directors presently are elected. And if they actually were to decide to follow through on something they didn't necessarily agree with, they might end up being unelected. These folks are appointed, so if they're taking direction from the person who appointed them, they're hardly going to suffer any consequence related to that appointment. I think the distinction is there.

But the bill continues with “Plans, Borrowings and Guarantees”. I quote proposed subsection 26(1):

The Corporation must submit annually a corporate plan to the Minister for the approval of the Minister in consultation with the Minister of Finance.

You're setting up a corporation and suggesting to it, “You should act like a corporation, but oh, by the way, we want you to take a plan to the Minister of Agriculture first for approval, and then take your business plan, when it comes to actual money—what you might want to borrow—and have it approved by the Minister of Finance as well.”

Now, I heard earlier that there might be taxpayers' dollars involved. I get that piece, that taxpayers' dollars are involved. But why is there a need for the Minister of Agriculture to make a decision on what business the board should carry out? If you indeed want this board to be an entity unto itself at the end of five years, would you not want it to learn how to stand on its own two feet so that it actually can do what it is the government wants it to be at the end of the day, which is a voluntary, successful board that people want to use? If the minister is going to intervene all the time, how do they learn to do that?

[The Chair, Conservative, Blaine Calkins]

Mr. Allen, your time has expired, but I will allow a brief answer from the witnesses.

[John Knubley]

Again, what I would want to emphasize, Mr. Chair, is that the transition period and the interim period is up to five years. If the Wheat Board can develop a plan that will allow it to be viable in the open market and to go forward earlier than that, that will be considered. The intent, again, of the legislation is such that we are looking to the Wheat Board itself to find how it can be viable.

[The Chair, Conservative, Blaine Calkins]

Thank you, Mr. Knubley.

Mr. Storseth, you have five minutes, please.

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

Thank you very much, Mr. Chair.

I'd like to thank the working group for all the great work they have done on this and thank them for coming today to talk to us about this very important change for western Canadian farmers.

Mr. Knubley, in your opening comments you referred to a 2008 AGRA Informa study. Would that be the study “An Open Market for CWB Grain”?

[John Knubley]

That's correct.