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.