Mr. Speaker, I welcome the opportunity to speak to Bill C-86 today.
I certainly appreciated the comments from my seatmate, the member for Lisgar-Marquette, about the need for a healthy agricultural economy in Canada. Like him, I operate an active grain farm and know that we contribute very much to the economy of Canada in terms of providing a good food supply at a very reasonable cost.
I want to premise my remarks today on Bill C-86 by saying that what I am trying to do and our party is trying to do today is to outline what we think is the need for leadership to provide the environment for opportunities for those farm industries that operate under supply management, how they can make the change, how they can adapt to go into the 21st century and be productive members of our society, keep their farms and operate on a very sound economic basis.
Bill C-86 is an attempt by the government to change the present levy system for industrial milk by implementing a pooling system for all industrial milk among six provinces. This bill's purpose is to enact the obligations of the Uruguay round of the GATT.
The present levy system is considered an export subsidy under GATT and is not permitted under the agreement. The new system will pool all earnings for industrial milk and will take the cost for exporting excess milk from those earnings. The revenues the farmers receive will remain unchanged.
This bill simply keeps the present supply management system in place. The government openly acknowledges that this is the case. But supply management and free trade are very much opposing systems.
The last time I checked, the trend in the world economy was in the direction of a more open trade. Supply management is totally out of step with the times. It is like a horsedrawn buggy and it needs a redesign so we can move as quickly as the rest of the world.
Recently our quotas for products made with industrial milk ended due to GATT and were replaced with astronomically high tariffs, 351 per cent in the case of butter, which is the highest. They are all in that range of some 250 to 350 per cent.
Members will probably know that the United States is presently challenging our sky high dairy tariffs. They are viewed by the United States as a violation under NAFTA and the United States has called for a NAFTA panel to hear arguments on this issue during the summer. So the process has started.
A challenge under NAFTA takes between two and five years. If Canada loses the transition time for the elimination of tariffs, domestic quotas would have to be negotiated. The chances of Canada winning the present challenge to the new dairy tariffs are questionable, in my view. Our American sources are quite confident they can win this one.
Even if Canada feels it has a good case, the future for the pooling system cannot be ensured. Many would like to believe that the pooling system can solve all of our problems in this industry, that it can make supply management secure. That is not realistic. What we need is some realism here. The future of an
entire industry cannot be focused on such a weak system. The time has come to move on and to move this industry beyond supply management.
NAFTA negotiations to include Chile as a new partner have already begun. These new negotiations will be an opportunity to resolve old issues. Our partners in NAFTA want to finalize those old issues before admitting a new member and signing a new agreement. The supply management dairy issue is one of those.
The United States has good reason to push for an end to our present supply management system. The Americans want to have access to our markets for dairy products. On the other hand, Canada has a chance to end the notorious back door subsidies the U.S. hands out to its farmers. This is an opportunity, and I stress it is an opportunity that cannot be lost, to push for an end to all United States subsidies, which totalled over $10 billion U.S. per year in 1993.
We can also shape the time period for phasing out our present supply management system in Canada. We have to seize this opportunity to do some hardball negotiations where Canada says yes, we will give up some of our high tariffs on the supply managed industries, but only in exchange for you reducing your subsidies that you do through the back door. Then we would have the level playing field my colleague from Lisgar-Marquette spoke about, the need for this level playing field.
I believe that our farmers can compete with anyone as long as they have the same conditions. In fact, I believe that with the high population base in the United States and with most of our supply managed industry located within this 100-mile corridor we can function very well. I believe we can make the most of opportunities. We cannot lose this important opportunity that has been presented with the United States challenge to NAFTA to say yes, we are willing to give up something, but only in exchange for your backing off your subsidies.
I think we should work toward a continental free trade zone for dairy products, a sectoral approach. One sector may be able to move faster than others, and I believe this is one of them. This will place all dairy farmers on an even footing. No one farmer will have an unfair advantage based on the country in which he lives or produces. I believe that is to the advantage of our dairy farmers.
The world is moving to a new open market. There are 130 countries that signed the Uruguay round of the GATT agreement and there are more countries that want to get in. Canada is part of that free trade world. The time has come for government to recognize that a transition to a free market in this hemisphere is important to all of us. The government needs to help dairy farmers to make the necessary transition, not hold them back.
The industry needs time to adjust. Dairy farmers have invested hundreds of thousands of dollars in their operations. The government must negotiate a new deal for farmers or all their hard work could be lost in the blink of an eye. I for one know of the hard work that is involved in running any type of farm operation, but in a dairy farm operation, as my colleague has just said, seven days a week is the norm. We must take this opportunity to give them some kind of a future, not one where we have the blinkers on and pretend the system will always be in place, but one where we can help them to move to this. Many of these farms have been handed down from generation to generation, and farmers want that to continue. It is a way of life they enjoy.
This industry needs to develop an economy of scale to compete with producers from other countries. The industry must develop into a system that increases efficiencies and lowers the cost of production. For example, the diversity of herd size and yield in Canada is not set up to meet that need. The same holds true for the United States. The average size of a cow herd in Canada is 47, and in the United States it is 45. But in British Columbia, the model province in the industry, the average herd size is larger, at 78 milking cows. They are starting to make the adjustment. As a result, the yield in B.C. is over 20 per cent higher than that in the rest of Canada or the United States. The industry in British Columbia is considered to be the most advanced in North America. But under the present system the industry cannot operate at full capacity. The B.C. quota is not high enough.
I believe it is ludicrous that the provinces that are the most efficient cannot benefit from this efficiency. The supply management system is only coddling the inefficient producers and hurting the industry as a whole.
The U.S. dairy industry is not making the transition to free trade either. Farmers in the U.S. are paid to keep their herd sizes down. This policy is meant to limit output. U.S. farmers receive more subsidies from the government than their Canadian counterparts. In fact, dairy farmers are the most highly subsidized in the United States.
In Canada, subsidies for industrial milk were decreased in the February budget by 30 per cent over two years. There is even a possibility that the entire system of direct government subsidies will end in the near future. The rebate to manufacturers using Canadian dairy products will end in August. This is due to our GATT commitments. We need to continue the trend.
I know that Canadian farmers need to stay one step ahead of their American counterparts. The phasing out of internal quota would be a next logical step. There has been discussion that one possible option would be a partial buyout of the quota. Farmers should be fully functioning members of a free enterprise system and should stay ahead of the competition. They would not lose all the time and money they have invested by taking this approach.
With the negotiation of a new deal for NAFTA they would be able to compete.
Canada needs to take this further in the next round of the GATT as well, in five years. But first we must start with the new opportunity I spoke of earlier that is presented by the NAFTA talks and any possible expansion to include other countries.
I understand the fear of the dairy industry and dairy farmers. Grain farmers went through about 15 tough years when there was a massive trade war on in agriculture. Trade rules have really helped. The World Trade Organization and the GATT have really helped. As long as we can phase down subsidies worldwide we can compete with anybody.
A new system would be open and entirely different. There would be no guaranteed price for their product but some farmers would not be able to adjust. They would have to go. As a whole, the industry would have to benefit.
The economy has changed and the way to do business must change as well. If the dairy industry does not change, I fear it will be harmed very substantially. This would hurt all Canadians regardless of which province they live in, regardless of the level of dairy production in their area.
We do have a very important example of an integrated economy in agriculture, the beef industry. It is a North American integrated market. The next logical step for Canada is to do the same thing with the supply managed industries, specifically the dairy industries.
If we can negotiate subsidies down in the United States and our tariffs, Canadian dairy farmers can compete. Members of Parliament have an obligation to ensure our dairy industry can compete. We need to help the industry to survive and prosper. The industry needs direction for the transition. If we do not lead in the Chamber, who will? We need to give guidance to the industry of intentions to negotiate a better solution.
To ignore the reality and lose it in the end makes no sense. The time for change is now before it is forced on this industry. I want to help dairy farmers make this adjustment for the future.
The government needs to broker a better deal during future negotiations. I want to see them be a success. Governments should want to see them succeed as well.
Let us not bury our heads in the sand and ignore reality. As a farmer and a believer in the free market system, I call on the government to lead dairy farmers and the supply managed industry into the 21st century.