Debates of May 16th, 1995

Canadian Dairy Commission Act

[Jean-Guy Chrétien, Bloc, Frontenac, QC]

Madam Speaker, if I have only a minute left, I would like to remind you that, here in Ottawa, on May 2, 3 and 4 the representatives of nine provinces discussed matters in detail. Six of them subsequently made a three-point proposal to Saskatchewan, Alberta and British Columbia. If you permit me, I will read it to you.

The proposal to British Columbia was to pool industrial milk revenues on August 1, 1996. Fluid milk revenues would be added the following year, on August 1, 1997. The province would keep much of the future increases in fluid milk, because the population in British Columbia is the fastest growing in Canada.

Madam Speaker, I thank you very much for your attention. As I indicated to the Speaker before you, five of my colleagues will help me with Bill C-86. They are the hon. members for Champlain, Lotbinière-

[The Acting Speaker (Mrs. Maheu)]

I would remind the hon. member that I have the list of his colleagues who will take part in the debate.

Debate continues with the hon. member for Vegreville.

[Leon Benoit, Reform, Vegreville, AB]

Madam Speaker, it is with enthusiasm and some trepidation that I lead the debate for the Reform Party on the future of supply management and the dairy industry in Canada.

The enthusiasm comes from my belief that there could be and should be a bright future for supply management and particularly the dairy industry in Canada.

The trepidation I feel is for two reasons. First, if the changes in the dairy industry are handled poorly or badly everyone involved in the industry will suffer. Second, I have less of an understanding of the dairy industry than I do of many other areas of agriculture. I have been working hard with the help of dairy farmers and groups that deal with dairy farmers to improve my understanding and I will certainly continue to work on this.

Today we are debating Bill C-86, an act to amend the dairy commission act, but our debate must go beyond the bill to a discussion on the very future of supply management and the dairy industry.

I will debate the bill by summarizing it and how it will affect the dairy industry and discussing the future of the dairy business in Canada as I see it with input from farmers and groups I have talked to. I will do this by discussing Liberal policy on supply management from the red book and later added to the red book in an appendix. I will discuss it by talking about the Liberal position as presented from two other sources. I will refer to these sources later.

Bill C-86 is an act to amend the Canadian Dairy Commission Act. It was given first reading on April 28, 1995. The purpose of the bill is to amend the Canadian Dairy Commission Act to provide for a replacement of the existing system of levies with a system of pooling market returns from different classes of milk.

The government claims the switch to a pooling system will maintain equity among producers and is consistent with Canada's international trade agreement.

I have some background information. As part of Canada's system of supply management, the Canadian milk supply management committee, chaired by the Canadian Dairy Commission, oversees the application of the national milk marketing plan.

The CMSMC sets national production targets, establishes each province's share of the national quota and exports any surplus milk through planned marketing programs. The orderly export of surplus production is an essential element for ensuring the integrity of the supply managed system. Without it the system would falter.

Currently producers assume the cost of exporting dairy products not consumed in Canada through a system of levies collected by provincial marketing boards and agencies as deductions from payments to milk producers. Once remitted to the commission these levies are used to finance special programs intended to increase the domestic use of dairy products and to cover the commission's administrative costs.

During the 1993-94 year a total of $141.5 million was collected from the industrial and fluid milk sectors. Such levies, however, are now considered to be a form of export subsidy under the new GATT deal and must be reduced or modified.

Through the bill Canada's dairy industry would abandon this established system of producer levies on industrial milk. The levies will be replaced with a system of national pooling which allows all stakeholders, including farmers, processors and the commission, to equitably share the costs and benefits of pooling revenues and the effects of fluctuations in market size for both fluid and industrial milk.

Through a system of pooling the producers who export milk into the U.S. would receive smaller returns for their milk but the burden would still be shared by all dairy farmers. Basically instead of a levy taken off farmers' cheques to subsidize exports, the national pool would achieve the same ends since the net return to farmers would be in theory identical.

For its part the processing industry would still pay lower prices for its industrial milk. These amendments to the Canadian Dairy Commission Act add a certain amount of new pricing and funding distribution authority to the Canadian Dairy Commission. The new pricing and pooling approach for milk has

received agreement from all provinces in principle. However, negotiations are ongoing as to whether there will be one national pool, which at the moment appears very unlikely, or two separate pools. There would possibly be one for B.C., Alberta and Saskatchewan, and we do not know about Newfoundland, and another for the other six provinces.

Ontario dairy farmers supply most of the industrial milk to further processors and Quebec dairy farmers are the biggest exporters. They would receive less than other dairy farmers unless there is some form of national pooling. On the other hand, under a national pooling system producers in the other non-exporting provinces subsidize those who are exporting. It really amounts to a form of equalization payment from one sector of the industry to another or from one province to another. This is perhaps the biggest obstacle to achieving agreement on establishing one national pooling regime for all classes of milk.

I would like to talk about the Reform Party's policy and position relating to Bill C-86. Reform policy in this area has four main points.

First, all processors will be able to structure and manage their organizations in any manner they believe will best serve their interests. The matter of regulating production and setting prices for products under the organization's jurisdiction is a producer issue and should be dealt with by producers.

Second, Reformers acknowledge that the agriculture industry, including supply managed sectors, is moving toward a more competitive market driven system.

Third, we have proposed tough positive measures to ensure fair competition. These are measures such as a tougher anti-combines legislation. That would lead to lower input prices and fair trade policies which would help protect against dumping from other countries particularly from the United States. It would help to protect Canada from the effects of high subsidization in other countries in particular the United States.

Fourth, Reformers propose general changes which will reduce government overspending in a general way but through that will reduce input costs to farmers and indeed to other business people.

We presented these measures before the election campaign, during the election campaign and most recently in the taxpayers budget which would lead to a balanced budget over a three year period if implemented. It would be good for all businesses, including the dairy industry.

In February I visited with farmers in the Niagara peninsula. They spoke of three options. These three options have been presented many times since from a variety of groups. For example, a group of dairy farmers and veterinarians who were in Ottawa a couple of weeks ago wanted to discuss the issue of the BST, but also other dairy issues. These options were presented from dairy farmers in my constituency and across the country both in person and by letter.

The three options concern the future of supply management in the dairy industry. The first option is to end supply management now. I do not believe that this is a widely accepted option within the dairy industry. The second option is to start preparing. Recognize the reality and start a transition process which will allow a healthy dairy industry to continue down the road. The third option is to keep supply management as it is.

The third option clearly is not a reality. Unfortunately it is the position this government presents at least in public. It chooses to go down the avenue of least resistance. It would be appropriate now to look at what happened to grain farmers in western Canada because past governments have chosen to go down the road of least resistance.

I am talking about the elimination overnight of the Western Grain Transportation Act subsidy, the old Crow benefit. Due to the lack of openness, honesty and action on the part of previous Conservative and Liberal governments, no phase-out period was provided. There is no clear direction on how farmers will deal with the loss of the freight subsidy. There are no changes in place or proposed by government which would allow efficiencies to be put in place within the grain handling and grain movement system. There are no changes which would allow lower input costs in other areas. Many grain farmers in western Canada will go out of business over the next few years because of the loss of this subsidy, particularly the loss without a transition period for crops which are now being seeded in western Canada.

Governments have talked a lot over the past several years about stabilizing the agriculture industry, but their moves have led to chaos, not stability.

Of these three options, the second option is the option which the Reform Party supports and believes is most realistic. Use what time there is left before we move to open competition in the dairy industry to help prepare for the changes which will come in a supply managed industry. Let us not take the bury your head in the sand approach which has been taken by the government.

Let us look at the reality of the situation in supply management. First, let us look at the GATT and what it does to supply management in the future. After the year 2000 new negotiations will begin regarding supply management through the GATT. In the new negotiations there will be a rapid reduction in tariffs. Those tariffs are presently high and protect the supply managed

industry quite well. There will be more access to imported dairy products in this country.

The changes to the GATT starting a short five years from now will have a huge impact on dairy farmers. That leaves precious little time for farmers to prepare for these changes.

I believe that the real open borders, particularly between the United States and Canada in supply managed products and in dairy products, will come through new NAFTA negotiations. A lawyer for the Dairy Farmers of Canada, which of course is arguing that the GATT supersedes NAFTA in guiding supply managed industries in the Canada-U.S. trade agreement, said in a Western Producer article: ``The Americans have a strong case in arguing that NAFTA supersedes and that dairy farmers should be preparing for this possibility''.

Further, a very significant event happened when our Prime Minister and U.S. President Bill Clinton announced a few months ago that Chile would be a part of the NAFTA deal within four years. Why is that significant? It is significant because the Americans, who are looking for and pushing Canada in every way they can for more access to our supply managed markets will not sign a new NAFTA deal until they have much more access to the Canadian market in milk and dairy products. That will mean that in less than four years the supply managed industry in Canada will have to move to a much more competitive environment.

The government can pretend that it will protect supply management through this process but it cannot. I will demonstrate this with quotes from three sources, from the red book first. I will quote all of the agriculture policy in the red book; it will not take very long. This is how important agriculture is and was to the Liberals when they drafted the red book. This is their complete agriculture policy:

The Canadian agri-food sector has a unique opportunity for growth. An overall policy for the agri-food sector must build upon three component strategies: developing new domestic and international markets for Canadian food products; reducing input costs to make farming more viable; and introducing a new "whole farm" income stabilization program. Liberals believe that farm families need long term programs to assist them in securing their future, so that they can continue to provide Canadians with the best quality food in the world.

The red book goes on for one more whole paragraph to conclude the Liberals' agriculture policy:

Canada's agri-food industry needs policies and programs such as supply management, the Canadian Wheat Board, and stabilization programs to minimize the impact of market price fluctuations; government support in developing new commercial markets for commodities in which the agri-food industry has a competitive advantage; sustainable agriculture practices to maintain and improve the quality of our land and water; and mission oriented research to increase productivity and create quality products to meet market demand.

That is the entire agriculture policy that was included in the Liberal red book.

There was a very secret appendix that was even more difficult to get than the red book itself during the campaign and since. It was quite difficult to get. The appendix goes on for three more paragraphs regarding supply management. Three whole paragraphs. That is the extent of the Liberal policy on agriculture and on supply management.

I will go next to some quotes from the parliamentary secretary to the agriculture minister. I will read from a publication put out by the Independent Dairymen's Association Committee of British Columbia which is made up of the Mainland Dairymen's Association and the Southern Interior Dairymen's Association:

Following are some public quotes from Lyle Vanclief, parliamentary secretary to the federal minister of agriculture, member of Parliament for Prince Edward-Hastings, and owner of a cash crop and market garden farm in Ontario:

"It is more than definite that the future of supply management in Canada will be `uncertain after the year 2001'. The United States insists that the earlier signed NAFTA supersedes GATT rules. The Americans expect tariff levels to be reduced at a quicker NAFTA rate and be completely gone to zero by 1998".

There are three or four more paragraphs but for the sake of brevity I will end the quote from the parliamentary secretary with that.

It is interesting to note the difference between what the Liberals said in the red book and what the parliamentary secretary to the agriculture minister is now finally starting to say in public. Until now this Liberal government has pretended it can protect supply management. It seems to have refused to acknowledge that NAFTA and the GATT and changes that will come to both agreements will bring about quick change to the supply managed industry, including the dairy industry.

It is encouraging that the parliamentary secretary is finally starting to talk publicly about some of the changes that will come about. This will give the industry some time, a bit of a transition period, to get from where it is to a competitive system which will be in place some time over the next few years.

The third source is an article from the May 4 Western Producer . The headline is: Grits didn't support supply management''. The lengthy quote is from Michelle Comeau, former assistant deputy minister for agriculture:Supply management has proven useful in stabilizing farm income but has generated costs to consumers and to the economy in general''.

Barry Wilson leads in by saying: "The Liberals wanted the end of supply management long before GATT, say internal documents". This is totally different from what the Liberals have been saying publicly.

Part of this article states:

Long before the December 1993 world trade deal "forced" Canada to abandon the legal basis for supply management, the government had decided the system had to go, according to an Agriculture Canada planning document.

Memos issued in 1993, obtained from government files under access to information legislation, show a government publicly proclaiming support for supply management, while privately drawing up plans to manage its weakening.

According to a memo written in late 1993 by then assistant deputy agriculture minister Michelle Comeau to then deputy minister Rob Wright, the system was too rigid and too farmer-dominated.

In any reform, the power of the provinces would have to be reduced and the "excessive producer control over decision making" would have to be counter-balanced by a greater role for processors, retailers and consumers who want lower prices.

"Supply management has proven useful in stabilizing farm income but has generated costs to consumers and to the economy in general", she wrote. "Reform is required."

Point out how different this is from what the Liberals were acknowledging at the time. If the Liberals did not agree with what the bureaucrats were saying, they should have said so then. They chose not to. It is clear from this article the Liberals are saying one thing in public and another thing privately.

I continue with this article:

Comeau's memo was part of a plan devised by the bureaucracy to handle fall-out from the decision to sign a new world trade deal, even though it excluded the rule which had allowed Canada to control imports of dairy, poultry and egg products governed by supply-managed rules.

For years, the government had been criticizing the rigidity of the decision-making process while praising supply management as a way to help farmers make their living from the market.

Privately, the bureaucrats were agreeing with consumer and processing lobbyists that supply management was bad for the country and the economy.

The planning documents laid out a strategy for dismantling the traditional rules of supply management-controlling the communications, stressing that the system could survive under new rules, injecting more voices into the decision-making, stressing that trade deals and competition made change inevitable and making sure the provinces accepted some of the responsibility for deciding to tear the old system down.

This, released through access to information, is much different from what the Liberals have been saying publicly.

Reform has chosen the more direct and honest approach, even if it means taking some heat in the short term. Which is kinder and gentler, as the Liberals like to always say, to pretend that major changes are not coming and ending up with the pain and hardships that grain farmers in western Canada will feel over the next years as they deal with subsidies that were removed overnight, or being open and honest and allowing dairymen and others involved in the industry to make the transitions that are necessary?

It would be kinder and gentler to lay the cards on the table and allow farmers and processors the time they need to make the transition from this protected industry to a more competitive industry.

The change is coming. Reformers have chosen to be up front and honest in dealing with changes to supply management. I encourage dairy farmers across Canada to choose the approach they prefer and to choose the people they prefer to help them with the transition they must make over the next few years.

[Rose-Marie Ur, Liberal, Lambton—Middlesex, ON]

Madam Speaker, I will be sharing my time with the hon. member for Vaudreuil.

I am pleased to contribute to the debate on Bill C-86, an act to amend the Canadian Dairy Commission Act. It offers a new, more competitive marketing approach for the Canadian dairy industry, which is required to allow Canada to honour its international trade commitment while preserving the fairness and equity for Canadian milk producers of the present system.

While market opportunities will flow from both the North American free trade agreement and the World Trade Organization agreement, certain changes to our domestic structure must be made. Effective August 1, 1995, under NAFTA Canada will not be permitted to export dairy products to the United States where the price of the product has been supported by a producer funded levy. This relatively immediate export restraint will be accompanied by a more gradually implemented WTO restriction on our ability to use levies to finance dairy product exports to other market destinations.

The importance of maintaining current export and domestic markets for dairy products and for products containing dairy ingredients in a manner that still allows all dairy producers to share the cost of supplying milk to these markets cannot be overstated.

Over 300 dairy plants in Canada employ almost 25,000 Canadians to process milk used as table cream and milk or in products such as milk, cheese, yogurt, and ice cream. Thousands of other jobs are provided in the further processing sector for items containing dairy ingredients such as cookies, pizza, and chocolate, as well as in areas of dairy product transportation, packaging, storage, and marketing.

Under the rebate program for further processors in dairy product export assistance programs, initiatives currently funded by the producer levies and administered by the Canadian Dairy Commission, export assistance was provided to facilitate the export of over 10 million kilograms of cheese in 1993-94 and to support processor purchases of dairy ingredients used in the production of over 2,000 finished food products.

In 1993-94 dairy exports to the United States involved about 0.7 million hectolitres of milk, about 1.7 per cent of the entire Canadian milk quota set for that period.

Canada's dairy processing industry is largely centred in the provinces of Ontario and Quebec. The 1992 census data indicated that 105 plants processing fluid and or industrial milk were located in Ontario, while the 83 plants situated in Quebec had the highest value of shipments, at $3 billion. Alberta follows with 31 processing establishments. B.C. has 25, Manitoba 18, Nova Scotia 14, Saskatchewan 12, P.E.I. 9, New Brunswick 6, and Newfoundland has 5 such processing facilities.

Without price discrimination and pooling of returns, dairy and further processors would not be able to access milk at price levels that would enable them to compete on the U.S. market and be competitive against imports on the domestic market. Furthermore, the current level playing field provided to producers by the current levy system would be eliminated.

The largest volumes of the lower priced milk needed by processors and further processors for certain export and domestic products are produced in the more industrial provinces of Ontario and Quebec. Some smaller provinces are also greatly affected in terms of the proportion of their total milk marketing that is sold at reduced prices.

Without a workable alternative to the current levy system such as that offered by price discrimination, the loss of the U.S. market for Canadian dairy products and products containing dairy ingredients would lead to reduced competitiveness and would place in jeopardy the domestic further processing sector for such products.

Without pooling of the market returns, there would be an inequitable sharing among producers of the cost of maintaining exports to the United States and for domestic competitive markets. This could lead to their abandonment. Should these markets not be maintained, the domestic further processing industry would be less viable due to the diminished economies of scale. Pressure on further processors to relocate their operations to the United States would result. The job loss ramifications of such relocations would be significant.

There is a potential additional reduction in the industry side of almost two per cent resulting from the growing restrictions agreed to under the WTO agreement of the allowable quantity of subsidized exports and the export subsidy paid annually for each product class up to the year 2000-2001. A price discrimination system with pooling of market returns as facilitated by Bill C-86 would address this issue.

Everyone in the Canadian dairy sector is becoming clearly aware of the need to adapt to the new North American and global trade conditions in competition. To illustrate Canadian dairy producers' awareness of this need to adapt, I quote from a May 4 letter written to the Minister of Agriculture and Agri-Food and copied to me by my constituent, Mr. John Core, chairman of the Ontario milk marketing board.

Mr. Core writes:

It is extremely important that Bill C-86 be passed by the House. We have negotiated long and hard to arrive at a system to replace levies effective August 1. The changes to the CDC Act are critical to special class pricing and the required pooling that follows from that new pricing method. Your directive to not use levies for exports to the U.S. cannot be adhered to without the necessary amendments.

We met the challenge given to us by the federal and provincial agricultural ministers to find the solution. We require the legislative changes now to implement the necessary changes.

Mr. Core, I am proud to say, is one of my constituents.

The dairy industry leaders who have developed and negotiated the approach facilitated by these amendments fully understand that while tariff protection is in place between now and the year 2001, the only way to reduce uncertainty and concern about what happens after this period is to meet the new trade challenges head on. Bill C-86 will allow the industry to do so.

I urge my fellow members to support these amendments.

[Jean-Guy Chrétien, Bloc, Frontenac, QC]

Madam Speaker, I listened with great interest the hon. member's speech on Bill C-86. There was a point I found particularly interesting, and I would like the hon. member to clarify, because I know very well that the farmers' problem is not producing milk but producing just enough to fill their quota.

If farmers were told to raise their quota by 5 per cent this year, they would be very happy. The problem is that they have to produce, say, 10 000 hectolitres of milk, but if they produce more than that they are fined, and if they produce less their quota will be reduced in the following years because-bad boys, bad girls-they cannot fulfil their commitments. So much so that people often joke and compare cows, as the hon. member for Lotbinière did yesterday, to gas pumps that have not been fixed. With gasoline, once the exact number of hectolitres has been

pumped into the tank, the pump is turned off, and the customer waits until tomorrow or the next year. But one can hardly do that with cows.

Therefore our problem is not to produce more, because milk production could easily be increased by 5 per cent a year. What I want to ask about is the 1.7 per cent of our milk production which was exported to the United States last year or in 1993-94. I would like the hon. member to tell the House what province this 1.7 per cent came from and in what form it was exported.

[Rose-Marie Ur, Liberal, Lambton—Middlesex, ON]

Madam Speaker, I thank the hon. member for his question.

In his statement he said that the dairy farmers do not wish to produce more milk. Bill C-86 is not about producing more milk. It is about providing a proper environment for the new export rules that will be implemented in August of this year. Bill C-86 will open those avenues to the dairy farmers so they can adjust.

Dairy farmers are well aware of the adjustments they have had to make since the Uruguay round of discussions. It is not something that was thrust on them at the last minute.

[Leon Benoit, Reform, Vegreville, AB]

Madam Speaker, I agree with the hon. member for Frontenac that Canadian dairy farmers could increase production very rapidly. If Quebec were to become independent and leave Canada I believe that the rest of the country could take up the production that Canada would lose very quickly. Alberta and western Canada would love to be able to improve dairy production.

They do not want Quebec to leave so that will happen. They have other plans for allowing for the increase in dairy production.

There is an understanding that the present system of levies is not GATT friendly. I ask the hon. member if she is completely confident that this bill cannot be challenged successfully by the World Trade Organization?

[Rose-Marie Ur, Liberal, Lambton—Middlesex, ON]

Madam Speaker, I thank the hon. member for his question.

We certainly have top priority with our dairy people. I feel the government has moved in a fashion that will protect the whole dairy industry.

I realize that six provinces have signed on and other provinces agree with portions of Bill C-86. The bill is in the best interest of Canada and its export markets and pertains to the reduction and changeovers that will be happening in August of this year.

[The Acting Speaker (Mrs. Maheu)]

The hon. member for Frontenac has 30 seconds left.

[Jean-Guy Chrétien, Bloc, Frontenac, QC]

Do we not have ten minutes for questions and comments?

[The Acting Speaker (Mrs. Maheu)]

No. It is five minutes because there was an agreement to share time.

[Jean-Guy Chrétien, Bloc, Frontenac, QC]

Then 30 seconds will not be enough.

[Nick Discepola, Liberal, Vaudreuil, QC]

Madam Speaker, it is my pleasure today to speak in favour of Bill C-86, an act to amend the Canadian Dairy Commission Act. The proposed amendments will permit the strengthening of the partnership between the commission, provincial milk marketing authorities and the dairy industry, through the joint administration of the new pricing system and the pooling of market returns.

This approach will allow Canada to comply with the new trade conditions under the North American Free Trade Agreement and the World Trade Organization agreement. Milk used for exported products or for products on domestic competitive markets will continue to be made available to processors at competitive prices. At the same time, we will maintain the producer equity that is so essential to the current milk marketing system.

Even though Bill C-86 gives new powers to the Canadian Dairy Commission, it has no effect on provincial jurisdiction. An interface between current provincial and federal powers on pricing is necessary so that all milk marketing can be regulated, whether the milk is sold beyond provincial borders or on export markets.

The pricing and pooling approach, authorized by the amendments in Bill C-86, was proposed by the dairy industry itself and represents only administrative changes to the mandate already given to the Canadian Dairy Commission and the provincial milk marketing authorities.

Since its creation as a Crown corporation in 1966, the commission has assumed a key role in the development and implementation of the federal dairy policy. It is working in close collaboration with important national organizations such as the Dairy Farmers of Canada, the National Dairy Council of Canada and others working under them.

The Canadian Dairy Commission is also facilitating the essential work of the Canadian Milk Supply Management Committee through the chairman of this committee responsible for controlling the implementation of the national milk marketing

plan, the federal-provincial agreement governing the management of milk supplies in Canada.

After detailed consultation with the industry, the commission sets the target price of industrial milk-the milk used in dairy products such as cheese and yogurt-and the support price of butter and skim milk powder.

The Canadian Dairy Commission is also authorized to collect levies from producers remitted by the provincial milk marketing authorities. This is to cover exportation costs and finance special programs aimed at increasing domestic consumption of dairy products.

Provincial milk marketing authorities are authorized to set the prices and pool market returns within their respective borders. The new legal provisions contained in Bill C-86 will place the commission on equal footing with provincial authorities as far as price setting is concerned and authorize it to operate the pooling system agreed on by the provinces for milk earmarked for interprovincial or international trade.

In order for the Canadian Dairy Commission to be able to manage this new price setting and pooling approach in the interest of producers, legislation must give certain powers to provincial dairy authorities and, as required, provide that they give up certain responsibilities. In the new system, provincial authorities will grade milk for export or sale on competitive domestic markets and set prices depending on end use.

Under the terms of the amendments before us, the Canadian Dairy Commission would be able to delegate to provincial authorities its present responsibility with respect to the pricing of milk traded interprovincially while being granted the power to pool revenues from the sale of milk sold interprovincially by provincial authorities.

On a regular basis, boards and milk marketing boards would report to the commission the sales volumes and going prices for each grade of milk sold during a given month. The Canadian Dairy Commission would then be asked by provincial authorities to average nationally the price for each component included in the pool. Sufficient amounts would be included from each province to ensure fair distribution of the proceeds from the sale of milk for the lowest priced classes.

We must bear in mind that not all provinces contribute to the same degree to processing activities. The quantity of milk for special classes of products, that is to say, dairy products for export such as cheese, or further processed products such as chocolate and pizza, varies widely across the country.

Most of the inexpensive milk in these classes will be sold to processors in the most industrialized provinces, namely Ontario and Quebec. Some smaller provinces, however, are greatly affected as to their proportion of the total volume of milk sold at reduced prices.

To ensure that the cost of maintaining these industries and the essential export markets is shared equitably among producers, each province will be required to inject a minimum percentage of its total monthly sales of milk into the pooled fund.

This is how national average prices for the different classes of milk products would be calculated. This percentage is being negotiated by provincial authorities.

Returns from the agreed upon percentage of milk sales would then be pooled and redistributed to producers through provincial authorities on an equitable basis negotiated by the industry and provincial authorities and set out in official federal-provincial agreements.

The industry has concluded that creating special classes of milk sold at competitive prices on the destination market would be a good way of maintaining our share of the dairy export market without resorting to production levies.

The importance of finding an equitable way of maintaining our share of the export market in dairy products and products with dairy ingredients was the main force behind the intense negotiations and hard work undertaken by the provinces through the various committees and working groups in the past year.

Just before Christmas, the hon. Ralph Goodale and his provincial and territorial counterparts responsible for agriculture and agri-food confirmed their support of the industry's consensus that some pooling of market returns from dairy products was urgently needed so that the industry could meet Canada's international obligations and maintain an orderly marketing system.

By passing Bill C-86, the House can finally take an active part in the development of this essential sector of the Canadian economy, which successfully faces the modern challenges of the emerging global market.

[Jean-Guy Chrétien, Bloc, Frontenac, QC]

Madam Speaker, the hon. member for Vaudreuil talked about the target price for industrial milk, which is essential to producers of powdered milk, for example, or frozen pizzas with cheese; this class of milk is sold at a lower price. He talked about the targeted price for that milk. I would like him to elaborate on that.

Secondly he spoke about NAFTA and GATT. I often ask Liberal Party members as well as Reformers which of the two agreements should take precedence. Would the hon. member for Vaudreuil not agree that his government should seek to determine which should take precedence?

For example, the three dollar levy per hectolitre of milk was partly consistent with GATT. It could have been reduced each year by 15 per cent, while, according to NAFTA, it will have to be totally eliminated by August 1, 1995. Which one is right? Is it

GATT or NAFTA? If the hon. member for Vaudreuil does not know, would he not be tempted to suggest to his minister of agriculture that he seek a determination of whether GATT or NAFTA takes precedence?

[Nick Discepola, Liberal, Vaudreuil, QC]

Madam Speaker, first, the hon. member for Frontenac will surely agree that the bill was drafted in consultation with Quebec's dairy industry, which is very supportive of this legislation.

I do not want to get into a debate as to which agreement takes precedence over the other. Rather, I want to congratulate the hon. member for Frontenac, who is the opposition's critic on agriculture, for his very positive comments, in this House, on April 4, 1995, regarding the development of the memorandum of understanding which integrates the marketing of industrial milk. Indeed, the hon. member was very pleased with this change.

Consequently, I wonder what the opposition is now up to. The fact is that, if the amendments to the act do not come into effect by August 1, 1995, there is a risk that producers' contributions could no longer be used to finance exports to the U.S.

Considering that Quebec accounts for over 47 per cent of the industrial milk production, and that most of this production is exported to the U.S., it only makes sense to pass this bill as quickly as possible, so that producers in Quebec and in the rest of Canada can benefit from it.

[The Acting Speaker (Mrs. Maheu)]

It is my duty, pursuant to Standing Order 38, to inform the House that the questions to be raised tonight at the time of adjournment are as follows: The hon. member for Davenport, World Bank and International Monetary Fund; the hon. member for Richmond-Wolfe, internal trade; the hon. member for Regina-Lumsden, gasoline prices.

[Réjean Lefebvre, Bloc, Champlain, QC]

Madam Speaker, I am very happy to rise and speak today to further the interests of farmers in Quebec and Canada, and more particularly in my riding of Champlain.

It is all the more pleasant to do so since Bill C-86, an act to amend the Canadian Dairy Commission, shows that, for once, the government has understood how important it is for our agricultural producers to adjust to the new international trade rules.

We all know that agriculture is an industry that cannot be compared with any other, especially in Quebec. For example, virtually all farm production in Quebec comes from family farms. Agricultural performance depends on the weather and, for most products, marketing is done jointly by producers. Those few points illustrate the distinctive features of this local industry that has to compete on world markets.

With GATT and NAFTA, farmers are thrown onto a free market and have no other choice but to succeed. To do so, they must prepare, and we must set up systems that are allowed under those agreements and provide independent producers with a framework that is both flexible and competitive.

Bill C-86 is a step in the right direction, but the government should keep in mind that producers must constantly adjust and keep their production costs as low as possible, to be able to meet the challenge of world competition. Farmers have realized as much in the last few years, and they do whatever is needed to succeed. In Quebec, let us just mention the establishment, in 1992, of the Quebec dairy industry recovery fund, which has, as one of its prime missions, the funding of research projects on dairy products or of marketing projects aimed to increase sales.

This recovery fund is partially financed through a levy on each hectolitre of milk produced and on processed products. The fund was set up by the Quebec milk producers federation, Agropur and its subsidiaries, the Lactel Group and a number of associated co-operatives, as well as a company belonging to private manufacturers members of the Dairy Council.

This example shows the innovative spirit of producers and others involved in the Quebec agri-food system and, in addition, it reflects their capacity and willingness to work together to face common challenges. It is no longer possible to ask producers alone to constantly reduce their production costs without asking the other people involved in the agri-food system to do the same.

This reality is the basis of our collective approach and competitiveness on the world markets. Emphasis is now put on total quality and the implementation of research results not only throughout the Quebec and Canadian agri-food systems, but also by all the stakeholders involved, including the federal government.

As for the government, it must make the legislative framework more flexible and maintain the assistance measures allowed under the international trade agreements, as requested by the president of the Canadian Federation of Agriculture during the last general assembly of his organization. The government and the Minister of Agriculture must constantly ensure that their action does not harm the agricultural industry.

The budget recently tabled by the Minister of Finance took away some of the basic resources our farmers need and undermined the growth of our agricultural industry. Under the February budget, Agriculture Canada stands to lose 2,000 jobs, including 900 in the research sector, one of the most important sectors in agriculture, and the farm support programs will be

reduced by 30 per cent. More specifically, milk producers will sustain over a two-year period a 30 per cent cut in the subsidies for industrial milk. These producers live for the most part in eastern Canada, which includes Quebec, and the government has made no provision to compensate these producers, although it plans to compensate western farmers for the elimination of the Crow benefit. The producers will have no other choice but to pass part of the bill on to consumers. And producers will again be accused of having increased the price of dairy products.

As the president of a farmers association, Laurent Pellerin, said in an article which appeared in the weekly La terre de chez nous : ``The Martin budget singles out rural regions''.

The government cannot, on the one hand, change the rules applying to the dairy industry and, on the other, gradually withdraw its support. I would hope that both measures are carried out with the same outlook on our agricultural future and that the Minister of Finance has consulted the Minister of Agriculture before proceeding with these cuts. I would also hope that they have assessed the impact because it would be a shame for the farmers to see the efforts of the Minister of Agriculture wiped out by his colleague, the Minister of Finance, year after year, budget after budget.

Bill C-86 is a very praiseworthy initiative of the Minister of Agriculture, who wishes to establish a national pooling system of market returns which will help sustain dairy product exports. This new system is consistent with international trade agreements and gives producers the same advantages as a deduction system. However, I hope that the minister has thought of a reply for the American government, which has the habit of challenging Canadian agricultural policy and could be tempted to accuse Canada of dumping, since this system favours a lower price for milk used in export products.

We must not forget that the bill before us has been introduced right after six provinces, including Quebec, signed an agreement in principle on the pooling of their milk supply systems. That means that, in these six provinces, producers will get the same price for their milk and that the provinces will administer a common quota. Put together, these six provinces account for 85 per cent of all the industrial milk produced in Canada. That consolidation will allow them to implement a single milk marketing system under which interprovincial barriers to milk supply will be phased out in the medium term.

Moreover, the consolidation of the milk supply system will help these provinces make the adjustment to competition from further-processed foreign dairy products. The agreement is the culmination of lengthy negotiations in which Quebec played a leadership role.

Quebec is the main stakeholder in the dairy products supply management system. Without Quebec, the Canadian dairy policy collapses. The Canadian dairy producers understood that. This agreement proves indeed that, even in the middle of a referendum campaign, dairy producers from the other provinces have recognized the importance of economically integrating their industry with that of Quebec in order to protect their interests.

By their actions, dairy producers have shown that economic reality prevails over emotional debates. This is proof once again that all the dire scenarios that federalists spread about will simply not materialize once Quebec becomes sovereign.

Quebec will not lose its present share of quotas. On the contrary, like the other provinces, it will maintain the supply management system in the interest of all dairy producers in Quebec and in Canada. Quebec's success in dairy production is an economic reality hard won by producers, not a gift from Canadian federalism.

I wanted to mention these facts because they are important in order to explain the role of each player, to understand fully the economic dynamics of the dairy industry and to clarify the role of the government, which must follow suit and work with producers toward a shared vision of tomorrow's agriculture and the actions needed to get there.

The government's contribution to the development of our agricultural economy is mainly through the creation of a favourable environment. It must act as a guide and help all those who want to consolidate their markets or to develop new ones.

Let us hope that Bill C-86 is only the beginning and, as the member of this House for the riding of Champlain, where agriculture is very important to our economy, I must support such initiatives.

[Nick Discepola, Liberal, Vaudreuil, QC]

Madam Speaker, I listened attentively to the hon. member's representations, and, I must say, it sounded to me like a rerun of all of the debates which have taken place in this past year, or even in the past 30 years. They always come back to how our federalist system has mistreated Quebec.

But, recently, the debate shifted to how Quebec can retain the benefits of a federalist system even after declaring its independence. For almost a year now, they have been discussing how Quebec could keep the same currency as Canada, the same passport and citizenship, and how it could remain a member of all of the trade agreements.

I will ask my question now because I would like to give them ample time to answer. How can they dare say to Quebecers today, in this House, that if Quebec were to separate, they would guarantee them-? Under the federal system, dairy producers get 47 per cent of overall production. We heard the Reform member say-

How happy the rest of Canada would be, if Quebec ever decided to separate, to take up the slack in milk production in the rest of Canada. They would be happy. He stated that they did not want the separation of Quebec.

Therefore, I am going to ask my hon. colleague how he can dare, first, to tell Quebecers today that they will be a signing party not only with the rest of Canada, but that they will also remain part of NAFTA, GATT and other trade agreements? But, more importantly, how does he intend to guarantee that the production quotas of dairy producers will remain at their current levels?

[Réjean Lefebvre, Bloc, Champlain, QC]

Madam Speaker, I listened carefully to my colleague opposite, the member for Vaudreuil. We can see how consistent the Liberals are in their approach. They continuously resort to the same scare tactics against Quebecers. What I want to say to the member for Veaudreuil is that we, on this side, have guts, we have courage, we are willing and able to trade with any country, and we want to maintain provincial agreements. I believe it will be in the best interests of everybody in Ontario and in the western provinces.

[Jean Landry, Bloc, Lotbinière, QC]

Madam Speaker, my party's position on Bill C-86 is very clear. We support this bill, which enables milk producers to meet the requirements contained in the international trade agreements signed by Canada. This bill provides for the creation of a national pooling system of market returns which will help support the export of milk products.

Among the interesting proposals, we notice that, from now on, the Canadian Dairy Commission will manage a common fund made up of returns from the sale of dairy products. Previously, the commission deducted levies from producers' pay cheques. With this bill, the commission will ensure that the provinces fund exports proportionally to their milk quotas. For instance, Quebec which exports more dairy products than the other provinces, will be assured that producers will share equally in the risks and in the costs of the system, as was the case under the old levy system.

On April 4, I mentioned in this House that six provinces had signed a memorandum of agreement aimed at merging their milk supply systems. This bill is being tabled while Quebec, Ontario, Manitoba, Prince Edward Island, Nova Scotia and New Brunswick have signed a memorandum of agreement providing for the common marketing of industrial milk and fluid milk in these six provinces. Even if the provinces keep their present quotas, there will be only one class of milk and one price and no more distinction between industrial and fluid milk.

Quebec has played a major role in the signing of this agreement, I want to make that clear. I want to mention it because, even with the upcoming referendum on Quebec's future, the other provinces recognize the importance of an economic union with Quebec. Federalists say that, if Quebec separates, it will lose its present part of the quotas. I say this is false.

Come on. Quebec will keep the supply management process, mainly because it is in the interests of milk producers in other provinces. If the federalist threat were true, Quebec products would create a very harsh competition for dairy farmers from the rest of Canada and there could even be a shortage of these products on the Canadian market.

The fearmongering campaign of the federalists caught on rapidly in Quebec. One of their key arguments is the threat that a sovereign Quebec will lose half of its industrial milk quotas and that thousands of dairy farms will be out of business in Quebec. Roger B. Buckland, a vice-principal at McGill University, suggested in the Opinion rurale column of the March 2nd issue of the magazine La Terre de chez-nous that the United States would drive many dairy farms to the brink of bankruptcy.

According to him, the United States would refuse to maintain the tariffs agreed to under GATT in an agreement which would make an independent Quebec part of NAFTA. He argues that sovereignty would have a negative impact on Quebec dairy farmers since, within Confederation, they supply 48 per cent of the industrial milk sold on the Canadian market when Quebec has only 25 per cent of the population.

Fortunately, the same publication also ran a reply from a sociologist, Stéphane Paré, in its issue of March 30 to April 5. Here are some excerpts from this reply:

"Will Americans swallow us? Will they take advantage of the situation to make NAFTA prevail over GATT? Will Canadians produce more milk and will Quebecers have to reduce their production? Quebec, even if it separates, will remain a signatory to GATT, at least that is the way we interpret international law. It is called "state succession", and it means that the successor state abides by the laws and obligations of the country it was part of previously.

Mr. Buckland, I can just see you rushing in to argue that the rule of successor states does not necessarily apply. You are right. In fact, this is one of the reasons why I believe that Canada would be interested in siding with us against Uncle Sam. Canadians know very well that, without Quebec, they would be an easy prey for the Americans. Therefore, they would see the advantages of sitting down with Quebec to negotiate. If there is a possibility that Chile could join NAFTA, I fail to see why the signatories would be harder on Quebec. We must keep in mind that, for the U.S., Quebec is a more important economic partner than France is, for example. As for the fate of dairy producers in

Quebec, you should know that they do not need Quebec's independence to disappear. All they have to do is to let Mr. Martin do his thing".

Rational arguments always prevail over fear, and Quebecers will not be fooled on the day of the referendum. Why claim that a sovereign Quebec would not be allowed to trade with the rest of Canada, when we know that Canada's dairy production is an economic reality? Trade between Quebec and Canada exceeds $80 billion.

Do you think that it would be in Canada's interest to cut all ties to an independent Quebec? If Quebec loses, how can Canada expect to gain? The need to maintain a Quebec-Canada economic zone is obvious.

The agreement in principle reached between the six provinces that we referred to earlier is an increasingly relevant case in point. Dairy producers in the other provinces know that Canada will maintain economic ties with a sovereign Quebec. Economic reality will prevail over feelings of emotion and vengeance. Furthermore, the Quebec government is committed to maintaining a quota system, which it sees as essential to both producers and processors.

We know that scrapping this system would not be in the best interest of any dairy industry in Quebec and Canada. As the Bloc Quebecois demonstrated during the official opposition day on agriculture, excluding Quebec from the quota system would expose dairy producers in the other provinces to the fierce competition of their Quebec counterparts, in addition to creating a shortage of dairy products in those provinces.

GATT rules virtually preclude the imposition, by Canada, of restrictive measures to prevent Quebec dairy products from getting in. These rules seem to be open to a legal challenge. So, we will leave it to the lawyers.

Maintaining a common economic zone within the dairy industry will make it possible to resist pressure from the United States. Quebec and Canada will have to join forces if they want to counter constant American opposition to custom tariffs on our dairy products. The bill before the House, Bill C-86, will probably be challenged by the Americans.

It should not come as a surprise to us to hear that the U.S. are accusing Canada of dumping by reason of the fact that Canada intends to promote low prices for milk in dairy products for the export market. However, it will be up to our neighbours to the South to prove that Canadian exports have an injurious effect on their market. This will not be an easy task, for our products are exported in small amounts and generally processed.

At any rate, we know that all European GATT members subsidize their dairy exports. Canada is not there yet. Therefore, there is no reason to worry too much. However, if Canada were to act on the federalists' threat to break off any ties with an independent Quebec, the American ogre would be sitting pretty. The federalists also threatened Quebec dairy producers with the loss of tariffs negotiated with the U.S. under NAFTA if and when Quebec became sovereign. Come on.

The U.S. appetite for international trade is well known and I am convinced that they will not change their ways with a sovereign Quebec. Naturally, they will try to get more than they already have and to renegotiate the agreement with an independent Quebec. But the fact of the matter is that this is already going on now with Canada. Like Canada, Quebec will reply that customs tariffs are protected by GATT.

The Americans are putting the pressure on and will continue to do so, whether Quebec becomes sovereign or not. However, they do understand that money talks. With exports of $14 billion and imports of $27 billion to and from Quebec, it is not the economic considerations involving Quebec's dairy industry that would keep Americans from signing a new free trade agreement with us.

There is currently very limited trade between Quebec and the U.S. involving the dairy industry, because of high tariffs. It is easy to see that we would have a new free trade agreement without having to make concessions on agricultural tariffs. So, where is the catastrophe for the Quebec dairy industry in a sovereign Quebec?

Where is the catastrophe, if it is wrong to claim that a sovereign Quebec would lose half of its industrial milk quota, which would result, if we are to believe the fearmongers, in the closure of thousands of dairy farms in the province? Where is the catastrophe, if it is wrong to claim that sovereignty would adversely affect Quebec producers, because they provide 48 per cent of Canada's industrial milk production, while accounting for only 25 per cent of the country's population? Where is the catastrope, if it is wrong to claim that Quebec dairy producers will lose the benefit of the existing tariffs with the U.S., under NAFTA. Where then is the real threat?

The real threat was tabled by this government not long ago. The real threat for Quebec's dairy industry is the last federal budget, as I said a few moments ago, when I quoted a Quebec sociologist. Because of that budget, the federal subsidy for industrial milk is reduced by 30 per cent over a two year period.

We mentioned earlier that Quebec accounts for 48 per cent of Canada's industrial milk production. So, who do you think will bear the brunt of these cuts? It is pretty easy to figure out. These cuts amount to a loss of income of $3,775 for an average size dairy farm producing about 2,500 hectolitres of milk. This means a 15 per cent loss of income for a producer with a net income of $25,000. And this is not taking into account the

increased feed costs, following the elimination of transport subsidies for grain and feed. Quebec farmers have been left high and dry. The finance minister's budget does not provide any compensation for them, even though they are the most affected by it.

This bill will allow producers to adjust to the requirements of international trade agreements signed by Canada. As we said, this is why the official opposition supports Bill C-86. However, the problem confronting our daiary producers is certainly not solved, given the obstacles set in their way by the finance minister's budget.

What gives me hope however is the agreement in principle signed by Quebec, Ontario and the four other provinces to pool their milk supply system. This shows that a sovereign Quebec would not be isolated for mere emotional reasons, when it is economic considerations that really count.

[John Bryden, Liberal, Hamilton—Wentworth, ON]

Madam Speaker, I listened to the remarks of my colleague with great interest.

I come from a rural Ontario riding that has an excellent dairy industry. Speaking on behalf of the farmers, the dairy producers in the immediate area where I live, I am perplexed by the remarks that separation would not hurt Quebec producers.

The dairy farmers in my area feel very strongly that Quebec dairy farmers are enjoying a singular advantage right now and would look forward to an opportunity to compete face to face with Quebec as would be the case in the event of separation. There are farmers in my riding who are very expert in the dairy industry.

Does my colleague feel in the event of Quebec's separation that Ontario dairy producers would lose or gain? Would they produce more milk and get more money?

[Jean Landry, Bloc, Lotbinière, QC]

Madam Speaker, it is my pleasure to answer this question because, in reality, our colleagues from Ontario, our neighbour, have nothing to worry about. They know very well that they have a good thing going with Quebec, and Quebec knows it too.

I do not believe that the day after Quebec's separation, should that day come, Ontario would say: "From this day on, we are going to ignore you, ignore your businesses, your dairy businesses, your imports and exports". I do not believe it because my colleague opposite knows very well that two provinces, two good provinces, Quebec and Ontario, which have always had good trade relations, are not going to erect walls at their borders, even when it comes to agriculture, I might add.

My colleague also knows very well that, as things stand now, such a move would cause Ontario to lose thousands of jobs and millions and millions in revenue. Therefore, I think that a married couple can always make some kind of alliance and come to some kind of agreement. I would like to add that we are all sensible people, whether we are from Quebec or from another place in Canada. We are all very reasonable and very talented. Should Quebec separate from the rest of Canada, I would be worried in the least. We will continue to have very good trade relations. I assure you. I thank my colleague for raising this excellent question.

[Nick Discepola, Liberal, Vaudreuil, QC]

Madam Speaker, marriage is not on the agenda in the current political situation in Quebec. Divorce is. And I never knew people to be better off after a divorce than they were before. Never. They keep talking about threats and scare tactics when we disagree with them. The real scare tactics started when the budget was brought down in Quebec. Although six or as many as eight provinces brought down a balanced budget, the Quebec minister of finance opted for genuine scaremongering. Vote no or vote yes, depending on the question, otherwise we raise taxes.

The hon. member also said everything would be just fine after separation.

They are dreaming in Technicolor. They stand in the House day after day and state everything will be rosy after separation. I challenge them.

[Jean-Guy Chrétien, Bloc, Frontenac, QC]

Question. Question.

[Nick Discepola, Liberal, Vaudreuil, QC]

The hon. member for Frontenac might as well know this is a time for more than questions, this is a time for questions and comments. He never had the intestinal fortitude to tell the House how Quebec and its farmers would be better off in an independent Quebec.

The hon. member also said that, in an independent Quebec, Quebecers would have the assurance that their new country would be a party to all trade agreements.

He says again that it is in the interest of Ontario and all other provinces to continue a lateral trade relationship with Quebec.

We are talking about a divorce; we are talking about the destruction of a country. They cannot stand in the House day after day and pretend that in a separate Quebec people would be able to keep the monetary policy, the Canadian dollar, and to have dual citizenship. Imagine people in Quebec being able to vote in the rest of Canada because they have dual citizenship and people from the rest of Canada not being able to vote in Quebec.

There is never a campaign of fear mongering in this party. We will reach a decision diplomatically and democratically. I would like them once and for all to stand and say there may be a risk but they do not. They continually tell Quebecers that it will be business as usual.

How can they guarantee that? They have said they want to take the good things Canada has to offer. They want the same dollar, the same passport, the same everything. Pretty soon they will be telling us: "We will keep Canada; find your own Quebec".