Thank you very much for the opportunity to present to the committee by video conference. We appreciate it.
We haven't had a lot of time to look at this trade agreement, but it's clear that it's one of a series of bilateral trade agreements that Canada is pursuing. They're all in conjunction with the larger trade agreement, the WTO, so it's important to look at this in the context of the WTO.
The bottom line for measuring success or failure of any trade agreement from the farmers' perspective is whether that trade agreement actually raises farmers' net income. A trade agreement that boosts exports but results in lower net farm income is not a good deal for Canadian farmers.
That being said, there is actually one positive thing in this agreement that I've seen, and that is on durum wheat. It's perhaps the only positive aspect of this trade deal that I've found. Because durum exports are made through the Canadian Wheat Board, the farmers of western Canada are the direct beneficiaries of those sales and more money is going right back to the farm gate. If those sales were made through private grain companies, there would be considerably less going back to the farm gate. So an increase in sales as a result of lower tariffs in some of these countries will actually translate into increased direct revenue for farmers.
Of course, the Wheat Board has done a tremendous job marketing durum in Europe. You're probably aware that the EU is our biggest customer already for durum wheat. Canada grows only a little over 12% of world durum production, but we actually ship 51.8% of durum globally.
Right now Switzerland isn't a big market for us. From the best estimates we've seen, we only ship about 1,500 tonnes, and the tariff rate is already very low. Norway is a little bigger, and right now we export no durum to Norway. So if we are increasing those exports, that will probably help us.
But it's important to keep in mind that Canadian wheat and durum exports are a big draw for our overseas customers because of the consistent quality and reliability of those grains. That's due to the Canadian Wheat Board sales regulations that are in place, the Canadian Grain Commission, and our system of kernel visual distinguishability.
Both of those agencies are under severe stress right now. The Canadian Grain Commission, under Bill C-39, is faced with the loss of inward inspection. As you're probably aware, the KVD system, which is the key cornerstone of our grain quality system, is going to be phased out on August 1, 2008. If that happens, there is a real concern about whether we're going to be able to keep those markets. So even if we gain something with these duty tariff reductions, we may lose many millions more if we lose the Canadian Grain Commission and the Canadian Wheat Board single desk.
I was a little surprised, in reading some of the transcripts, that no economic analysis has been done on the implications of this trade deal. I think that speaks volumes. We've seen a similar lack of economic analysis in Bill C-46, which will change the Canadian Wheat Board Act and the Grain Commission. We haven't seen any economic analysis by the government on what will happen to farm incomes if those two agencies are weakened in any way.
But the most critical and highly negative aspect of this deal, from our point of view, is its impact on supply management, for example, in the dairy industry. It's true that our access commitments remain in place for imports of certain commodities, as specified under the WTO agreement, but the tariff rates on some of those imports have been dramatically lowered, some of them to the point of elimination entirely.
It's good when the tariff rates on our exports are reduced. It's another matter when we see tariff rates on imports of dairy products, for example, coming into Canada reduced.... I think the Ag Canada representative, in early March, pointed out that, for example, on butter, under 4,000 tonnes of butter coming into Canada, which is our access quota, right now under the WTO--that's a 7% tariff. Under this deal, that 7% goes down to 0%. That is, without a doubt, a tariff cut from 7% down to 0%. The amount that's coming in stays the same, but the tariff rate is actually reduced.
That is a key point, because what that does is effectively facilitate access to the Canadian market for imports of dairy products. We have to keep in mind that the more we open up our market to imports, the more we shut out Canadian producers from their own domestic market. As I pointed out, that cut from 7% to 0% for some dairy products coming in is definitely a cut in tariff rates.
A little over two months ago, Agriculture Minister Gerry Ritz stated in response to a revised WTO draft modalities text, “Canada maintains its firm opposition to any tariff cuts or tariff quota expansion for sensitive products. This represents a fundamental element of Canada’s negotiating position.”
I'll just finish up by saying that that statement from Gerry Ritz was released two weeks after this agreement was signed, when he certainly should have been well aware that there were tariff cuts. So when he said there will be no tariff cuts at the WTO, it makes us wonder whether the government is perhaps putting on a public show of resisting this push at the WTO for reductions in tariffs; but it's actually willing to cut tariffs on a small bilateral trade deal, so how can it refuse to do so on the larger WTO deal?
This agreement actually appears to have set a precedent that may well facilitate ongoing trade measures that weaken Canada's supply management and orderly marketing systems.
I'll conclude with those remarks.