International Trade Committee on Oct. 8th, 2009

[Peter Julian, NDP, Burnaby—New Westminster, BC]

So for the WTO negotiations, Canada will not sign on to agricultural provisions.

[Stockwell Day, Conservative, Okanagan—Coquihalla, BC]

We've been very strong on that.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Okay. I'd like to go on to softwood lumber. As you know, we have tens of millions of dollars now that are going to be--

[An hon member]

[Inaudible--Editor]

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Thank you.

[Stockwell Day, Conservative, Okanagan—Coquihalla, BC]

I appreciate those spontaneous efforts there.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

We'll be quoting these back in the House in a few weeks' time, so I'm not sure you should be applauding this early.

On softwood lumber, we have the penalties that have been forced on the border in what the NDP called an appallingly bad deal. I'd like you to share with the committee two things.

On the case that starts this month that attacks the so-called subventions going into the Ontario and Quebec forestry industry, how much are we likely to lose there?

This is the question that you may not be able to answer, understandably: how much have Canadian taxpayers paid in legal fees since the softwood lumber agreement, or sellout, was implemented?

[Stockwell Day, Conservative, Okanagan—Coquihalla, BC]

First you went with “agreement”, then you went with “sellout”.

I can't be predictive on the Ontario-Quebec question. Obviously we're in there fighting hard. We're going to have to see how that works out.

Let's keep in mind, on the softwood lumber situation—I know there will be debate on this, agreement or disagreement--virtually in the entire industry, whenever we come into part of the dispute process, one thing I hear across the country, in all provinces, and it happened with this particular ruling too, is to abide by the ruling; do not give the Americans the chance to lobby to break out of the deal; we want the softwood lumber agreement in place. It may not be perfect. The industry is in very tough times with the market having collapsed, especially in the U.S., and we hear in a resounding way that the deal is good; we want it; we want it kept. That's right across the board, in all provinces.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Just on the legal fees, though--

[Stockwell Day, Conservative, Okanagan—Coquihalla, BC]

On the legal fees, I don't have the number, Peter. I'll get that to you, whatever it is to date.

Keep in mind, on this particular dispute, back in 2007 we received some advice from the industry in regard to this reallocation formula, which everybody agreed to; everybody agreed this tax would be paid. The industry and others suggested the tax didn't have to be collected until July 1, 2007. We had officials saying they thought it was January 1. It was a grey area. Anyway, we went with the considered opinion, which was to start collecting those taxes in July. The Americans challenged that. They won the ruling. The ruling said, sorry, you should have started collecting in January. So it was really six months of back taxes that were owed--$68 million or $70 million.

We didn't like the ruling. We appealed it. We even offered a lesser amount, as you know. We said that if there was harm to the U.S. industry, they quoted a particular figure, and that's what we were going to offer to cure the breach. We said to the panel, tell us if you accept the appeal. As you know, just recently the panel came back. They could not have been clearer, that they did not accept that appeal and they didn't accept our down payment. They said the full amount had to be paid, those back taxes, as if it were from January 1. They said to pay up. They even told us how it would be paid--this was the panel, not the Americans. They said it would be done on those who were first shipping across the border until they got the $68 million. They have collected about $12 million, because as you know, while we were in the process of appeal, the Americans went ahead and started collecting. It's somewhere in the neighbourhood of $12 million. We're just in the process of negotiating. Does that come back to us in the form of a cheque, a rebate? Do we deduct it from the $68 million? We're in that process of negotiation right now.

Chairman, I thank you for allowing me to go a bit over time. I do have to leave. As we indicated before, I can be here until noon.

I look forward to coming back to this committee at the will of the committee, and I do sincerely thank the committee. I know there are times, quite rightly, when things get partisan, but there is good advice and direction that comes from members. We listen to it all and we even try to implement a significant part of it, and we thank committee members for the good work.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Minister.

[Some hon. members]

Hear, hear!

[The Chair, Conservative, Lee Richardson]

We appreciate your time. Thank you for being here.

We're going to take about a three-minute break while we switch over and welcome our witnesses.

Up next is the National Farmers Union.

I would ask that you take a place at the witness end of the table. Thank you.

[The Chair, Conservative, Lee Richardson]

We'll resume. Thank you.

We're going to continue our discussion of supply management at the World Trade Organization.

We have, as our next witness, Stewart Wells, who is the president of the National Farmers Union.

We're a little late starting this round because of earlier complications. If it's okay with everybody, I'm going to ask that we finish by 12:55 p.m. We have a Liaison Committee in the Centre Block, and there are three of us who have to be at that meeting.

I think we'll get all the questions in, but we will again stick to our timeline.

Mr. Wells, could I ask you to begin with an opening statement to set the course? Give us your point of view, and then we'll go to questions.

[Stewart Wells, President, National Farmers Union]

Thank you, Mr. Chair, and thanks to the entire committee for the invitation to be here today on behalf of the National Farmers Union. I would like to start by thanking all members of the House of Commons for the support they have shown for supply management. It has been very important.

I think a copy of our brief has been distributed to all members, and that's the template that I want to stick to for the opening presentation. We have the summary at the bottom of the first page with the five points. I won't be able to cover all of them, of course, but I would like to focus on the first two.

I did have a meeting this morning with Mr. Gauthier, going over the important pieces here. We feel that one of the most important pieces in defending supply management is knowing the underlying reasons why we want to support supply management.

A little while ago the term “the elephant in the room” was used here, and the first graph we have in this short brief does show the agrifood exports out of the country versus farmers' incomes. This is the context that Canadian farmers are in; this is the context that the WTO negotiations and European negotiations are being held in.

What we can see, what the data shows, is that as our exports of agrifood products have increased out of the country, farmers' incomes have declined. The realized net farm incomes of farmers have declined—that's the red line on the bottom. The next line up includes the government payments and government transfers, the transfers of taxpayers' dollars. Those taxpayer transfers more or less bring farmers, on average, up to zero, after all the work has been done. Farm family labour and management, of course, is not included in this in any shape or form as an expense item.

We have a graph here that shows that as we increase agrifood exports out of the country, farmers' net incomes in this country are going down. I suggest that if you want to look at this another way, if that bottom line represented salaries of people on Parliament Hill versus agrifood exports, you would start to feel the tension that farmers feel when they look at this graph. We are, of course, looking for ways to increase the net income of farmers.

Looking at the next two graphs, which both pertain to this item number one, about why the National Farmers Union so strongly supports supply management and orderly marketing of all kinds, what you see is that when you look specifically at agriculture, sector by sector, it's the supply-managed industries that are doing the best in terms of realized net farm income. This is followed by, on that second graph, grains and oilseeds, where the Canadian Wheat Board does play a major role.

The third graph brings this even more closely into focus because it just deals with livestock issues. When you compare livestock to livestock, the supply-managed livestock producers are the ones in the top two lines who at least have a positive realized net income. The two livestock sectors that have been the most supportive and the most vocal advocates of the international trade agreements are down at the bottom. Hogs and beef have really been struggling.

So we can see this complete dichotomy; they are not connected whatsoever. It's the supply-managed industries that are, of course, faring better.

There's a lot more, of course, that can be said about these incomes and the graphs, but that's the underlying context that the National Farmers Union comes from. These numbers are not in dispute. These are Agriculture Canada numbers.

On the second piece, examine the legislated marketing tools in general. We spend only one-half page talking about this, but all of the marketing systems—the hog marketing boards, tobacco marketing boards, Canadian Wheat Board, supply management—all fit into the category that we call legislated marketing tools. Politicians have sat down in Canada, developed these rules, passed these laws, and they have worked for farmers by helping farmers extract the most they can from the marketplace. These are the quid pro quo for this.

The analogy, the exact parallel, is copyright and patent protection. These two pieces are exactly parallel, but at the WTO process we don't see other countries lining up to weaken or negotiate away copyright and patent protection. So we feel there's a huge discrepancy here, that Canadian farmers especially are being held to a double standard whereby our legislated marketing tools are constantly under attack,but other people's, other sectors' legislated marketing tools, are not.

I think I'll stop there for an opening comment, but that really gives the underlying position the National Farmers Union is coming from.

I would like to say as well that the National Farmers Union members played a hugely significant role in the development of orderly marketing systems in Canada, and the National Farmers Union feels a proprietary interest in both supply management and the Canadian Wheat Board systems, because many of our members actually worked on these plans and marketing systems and got them off the ground to start with.

Thank you.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Wells.

We'll begin the first round of questions. The questions and answers will be seven minutes.

We'll begin with Mr. Easter.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you, Mr. Chair.

Thank you, Stewart.

The charts you outline tell a heck of a story of financial tragedy. Growing the Island Way, the report of the Commission on the Future of Agriculture and Agri-food on Prince Edward Island, looked at realized net farm income on Prince Edward Island in gross dollars from 1929 to now—and I think you've seen that, Stewart—but the chart in here is in decline and now it's in negative territory.

You go to some length in your brief...and I'd like you to comment on that. When I look at the situation across the country, with debt increasing now at $58 billion to $60 billion, farmers are in a position where, even with low interest rates, I don't know how we're ever going to get out of that debt. But when you look at the supply management industry, you know where you're going to be in terms of pricing, you can meet with your banker, you can cashflow your operation, and you can clearly show that you can manage your debt, pay your bills, and provide for your family and your community.

So that's certainly one of the benefits of the system, the stability that's there, and we strongly support it.

You opened by saying the most important reason, in terms of our discussion on maintaining supply management in Canada, is understanding the underlying reason we have it. Can you expand on that? Is it a question of income security for farmers? Is it a question of food security and food safety for the country? What's the bottom line here? What do we need to be arguing internationally?

I think one of our failings internationally is that we've failed to tell other countries or get other countries to implement a similar system to ours so they do gain a better understanding of the system.

[Stewart Wells]

Thank you.

The short answer is yes to the two things you mentioned, income security and food security. There is a growing recognition worldwide around the food sovereignty movement. Food sovereignty is a term that people are going to be hearing more and more in the future. The National Farmers Union works through an international organization called La Via Campesina, which represents millions of farmers worldwide. We have the best working definition of food sovereignty that there is.

I think one of the examples that highlight this discussion was the absolutely absurd situation we had 18 months ago in the spring of 2008, when there were food riots happening on the streets of some 30 countries around the world, and the IMF--based in the United States but representing countries like Canada--was issuing directives in public telling these countries that they needed to keep exporting food out of their own countries, even though their own citizens were rioting in the streets because they had no food. There is no situation that I can think of that more quickly destabilizes any federal government than a situation like that, where you are advocating shipping food out of your country while your own people are starving. That's just a ridiculous notion.

You mentioned farm debt. In the Doha round there's a lot of talk about development; it's a development round. The notion is that farmers in developing countries should have some special considerations that farmers in other countries like Canada don't have. Of course there's no firm definition of what a developing country is. According to the trade negotiators, they are self-identifying. You can make the argument that all farmers worldwide, including Canadian farmers, are developing world farmers, because the thing that separates us from other farmers in the world--whether it's Africa or some other place where we would think of the farmers as being in a different situation--is $60 billion worth of debt. Canadian farmers are operating on $60 billion worth of debt. That means, in very round figures, interest payments of $3.5 billion a year.

In Canada the long-term average net farm income from the markets is $125 million. So farmers have to pay down the principal on that $60 billion worth of debt out of that $125 million per year. Using today's numbers, it would take 500 years for farmers to use their farm income to pay down that debt. It's a bubble. Lenders are still lending into the agricultural market because they think these transfers from government, the taxpayers, are going to increase over time and they think they can maintain their position even if they just get the interest back, not necessarily the principal.

We're consistently told that we have to look at farming as a business, that it's not somehow different; it's just a business. If you look at the business of farming, we're trying to pay down $60 billion worth of debt on a net income of $125 million per year. It does not work.

[Wayne Easter, Liberal, Malpeque, PE]

How is my time, Mr. Chair?

[The Chair, Conservative, Lee Richardson]

You have 30 seconds.

[Wayne Easter, Liberal, Malpeque, PE]

Just a quick one then. One of the areas of critique against supply management is that it leads to higher food prices. I certainly don't agree with that. But what's your argument on that?

[Stewart Wells]

Absolutely not. It leads to stable prices, where the farmers are getting a consistent and fair share from the marketplace.

When we look at the share of the food dollar, the farmer's share of the food dollar has been going down and down and down over time. That's noticed less in the supply-managed sectors. There have been lots of studies and numbers generated that show Canadian consumers enjoy great benefits from Canada's supply-managed systems. We see the pain internationally now with the pictures in the papers of dairy producers in other countries out dumping milk. It's very painful to watch that happen. We have to thank our lucky stars that Canadians were smarter.

The G8 and G20 countries congratulated Canada on the international stage for developing in a different way so our banking sector is more stable. It's exactly the same with the supply management and orderly marketing systems and the Canadian Wheat Board. It's more stable and recognized as something that other countries envy. It's not something we should give up.

[The Chair, Conservative, Lee Richardson]

Thank you.

Monsieur Bellavance.

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

Thank you, Mr. Chairman. Thank you for your testimony, Mr. Wells.

Like me, you heard the testimony of the Minister of International Trade a little earlier. Perhaps we could be satisfied with what he tells us about supply management. He is saying that the government intends to comply with the motion of November 22, 2005 to the letter. I could be satisfied with that since I introduced that motion.

However, you should take nothing for granted in politics. It's not because someone takes a certain position at some point that you shouldn't check to see what action the government has taken on this matter. As I mentioned to the minister earlier, I am concerned about the WTO negotiations and the bilateral negotiations with the European Union because sometimes we can hear the government's ministers state contradictory positions.

For example, an agreement was almost reached at the WTO last July. The texts simply provided for a drop in over-quota tariffs and a decline in tariffs protecting products subject to supply management. Fortunately, there was a disagreement among the seven countries that had begun to negotiate, but Canada's Minister of Agriculture and Agri-Food, Mr. Ritz, and the former Minister of International Trade, Mr. Michael Fortier, both stated publicly that they were disappointed that there had been a misunderstanding and that there was no agreement at the WTO on agriculture.

In the same breath, they told us they wanted, at all costs, to protect supply management come hell or high water. That's contradictory. Moreover, another former minister, Mr. Chuck Strahl, told the Standing Committee on Agriculture and Agri-Food that, if all the other countries made a decision and reached an agreement at the WTO, Canada did not want to be isolated and alone.

Do you think that, for the good of Canadian and Quebec agriculture, in which the vast majority of producers are subject to supply management, it would be legitimate for Canada to withdraw from the bargaining table if ever an agreement was reached that did not protect gains with regard to the supply management system?

[Stewart Wells]

Thank you very much for the question, Mr. Bellavance.

First of all, I think you're right to stay vigilant in all of these matters, because they change from day to day and minute to minute, and sometimes in the middle of the night.

When the minister spoke earlier, I think the language he used was “finding a way to negotiate around these issues when they're still included”. That's a pretty iffy proposition. You have to be very solid and have political will, frankly, because it changes so quickly and can change overnight or in the middle of the night. That type of political will is hard to maintain through a lengthy, all-night, week-long negotiation. It would be better if people were to come out and say, point-blank, yes, we will walk away from the table if detrimental changes are made in the text to supply management and orderly marketing in the Canadian Wheat Board.

I would argue that you're right to stay vigilant. I worry about the statements that I heard from the minister earlier on, when he said that the rest of the world knows our position, that the negotiators know the position of Canada. I heard that this morning from our chief agriculture negotiator, Mr. Gauthier.

I've participated on behalf of the National Farmers Union in the agriculture trade committee negotiating calls that we have from time to time with the trade negotiator, and we hear this line repeated: other countries know our position. Well, either they don't know our position or they don't respect it, because they keep on making detrimental changes to the text that will hurt Canadian farmers and that are not the position of the Government of Canada as stated to us inside the country.

Just at the end of last year, we had the then chair, Mr. Falconer, removing brackets on text that would kill the advantages of the Canadian Wheat Board, yet the response from the Canadian government internationally seemed to be, well, okay, we'll restart negotiations on the basis of that text.

Of course, the National Farmers Union is advocating that Canada right now should be sending letters to the WTO from the people politically responsible, the ministers and the Prime Minister, and saying no, we don't agree to the November text, the last text that came out from Mr. Falconer, and we want that changed, because the circle doesn't square: this line that other countries know our position does not square with the actions that other countries are taking in relation to these texts.