Debates of June 20th, 1995

Canadian Dairy Commission Act

[Lyle Vanclief, Liberal, Parliamentary Secretary to Minister of Agriculture and Agri-food]

Mr. Speaker, I am pleased to take a few minutes this morning to add some final thoughts to the consideration by the House to Bill C-86, an act to amend the Canadian Dairy Commission Act, and reaffirm my support and the support of the government for this industry driven initiative. I am pleased to say that the bill reaffirms the support of the House of an industry driven initiative.

As my colleagues from all sides of the House have acknowledged, the Canadian dairy industry will not be untouched by the global market transformation under way. The Canadian dairy, egg and poultry industries or the supply managed industries are evolving in ways that are necessary to meet the global market transformation that is in progress. I am proud and pleased in the way in which they are doing that. They have shown in the past they can roll with the punches. They can evolve as necessary to maintain economically viable industries that provide safe food in sufficient quantities to the Canadian consumer.

Major changes are now reverberating throughout the economic sectors of the world's major trading nations. That is not an exaggeration. Competition is and will be fierce. However, opportunities for success are at hand. In order to take advantage of those opportunities, changes will be required in the way we do business.

Bill C-86 represents one of the best of these changes. The new milk pricing and pooling of returns approach enabled by these legislative amendments evolved from within the industry itself. That is what it is all about.

The new system was developed as a result of intense consultations with a good deal of give and take. These give and take negotiations among the dairy stakeholders took place from coast to coast. These discussions remain ongoing as the dairy sector fine tunes and reshapes the way milk and milk components are sold both within and outside of our borders over the next five years and beyond.

The administration of pricing and the pooling of milk marketing returns by the Canadian Dairy Commission and provincial authorities offers significant advantages. It will permit retention of the equity currently offered by levies while allowing us to keep and possibly expand important domestic and export markets in the face of strict new rules under GATT and the World Trade Organization.

While the possibility of a trade challenge by the United States can never be categorically ruled out, Canadian trade officials have advised that as long as Canada does not use producer financed assistance to support exports of Canadian dairy products to the United States, as long as Canada does not use levies beyond the levels of gradual reduction for export of commodity specific groups, our system will then conform with the provisions of the international agreements we have signed. August 1 is the date of implementation of Canada's dairy commitment under GATT and the WTO arrangements.

It is important to emphasize again that this is an industry driven initiative which is shaping its future on this key issue. While governments will continue to have an important role to play, that role is facilitative. The shaping process is an ongoing one and the passage of the amendments now before us will assist the process. It will not define the process. It will not limit the process nor will it hinder the process with over-regulation

This bill provides the necessary legislative authority to permit the Canadian Dairy Commission, in close co-operation with the provincial milk marketing authorities, to implement a new milk pricing system with the pooling and market returns from different classes of milk.

I wish to remind all members that under the pooling arrangements, the Canadian Dairy Commission will simply be administering a pool of producer moneys on behalf of the producers. No government financing is involved.

Bill C-86 is enabling legislation which does not specifically define the extent or timing of a particular milk pooling system or systems. The dairy industry will do this for itself in the weeks and the months ahead.

With the passage of the bill most aspects of the new dairy approach will be implemented on a national basis within the next two months. Negotiations remain ongoing in all nine provinces. It is only nine provinces because Newfoundland is

not part of the national milk supply management system as it produces only a limited amount of industrial milk. The other nine provinces have agreed to a national pooling of market returns from special classes of milk as of August 1 of this year.

These nine provinces have also agreed to a harmonized milk classification system and all nine provinces have agreed to implement uniform pricing for special classes of milk destined for United States export and for certain domestic products containing diary ingredients.

Six of the nine provinces, namely Manitoba, Ontario, Quebec, New Brunswick, Nova Scotia and Prince Edward Island have decided to proceed more immediately to the pooling of market returns for all classes of milk. British Columbia may join this broader pooling arrangement as well and it is still considering the option.

Alberta and Saskatchewan have indicated that they wish to implement pooling arrangements on a more limited scale. At the outset nothing precludes their joining the all milk pool at any point in the future.

Again, I urge my fellow members to fully support and expedite the passage of Bill C-86. Such action will clearly demonstrate our recognition of the dairy sector's commendable initiatives. As well, it will demonstrate our willingness to facilitate this industry driven means of successfully competing in the post-GATT environment.

We look forward to the support of the House in expediting this bill for the good of the industry.

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

Mr. Speaker, it is a privilege and an honour for me to speak this morning on a bill that is extremely important to Quebec farmers, particularly dairy producers.

It is also an honour to speak immediately after the Parliamentary Secretary to the Minister of Agriculture and Agri-Food, the member for Prince Edward-Hastings, who really is quite familiar with agriculture.

As you know, Quebec alone produces 47.5 per cent of industrial milk. Furthermore, Quebec has always played a leading role in Canada's dairy industry. Quebec does a very good job of carrying out its responsibility as a leader among the other provinces where milk is still produced in Canada.

Canada's present dairy product supply management system was initiated by Quebec residents. Without the determination of Quebec dairy producers in the 1970s, we would not have supply management in this industry and, let me tell you, it would be an indescribable mess.

I am therefore especially pleased to note that the constituency of Frontenac has over 15 per cent of farm producers, the vast majority of whom are dairy producers.

Since we have been discussing Bill C-86 in this House, we have addressed the possibility of changing the Canadian Dairy Commission to a standing committee. Recently, on June 8, we had a chance to hear people who have worked very hard to ensure that this proposed change does benefit the dairy industry in Quebec and Canada, particularly our dairy producers. So it was that we met Claude Richard, president of the Fédération des producteurs de lait du Québec; his counterpart from Ontario, John Cor; and Richard Doyle of the Dairy Farmers of Canada.

I also visited a great many dairy producers in the Saint-Hyacinthe area: the Martins, the St Laurents, the Gouins, the Vigneaults, the Barils, the Pellerins, the Lessards, the Poulins and the Loiselles.

These farmers explained to us once again the ins and outs of Bill C-86 that will allow the six provinces to come to an agreement.

In light of that information and the answers we have obtained to our questions, I am able today to reiterate to my colleague opposite that the Bloc Quebecois supports Bill C-86.

Without rereading Bill C-86 in detail or clause by clause, I do want to explain what the change consists of, and note that the dairy industry has been required to adjust rapidly to the context of the free trade agreements. The GATT negotiations in Geneva, and the campaign to defend article XI, as well as the discussions about the relevance of maintaining a supply management system, have indicated major upheavals to come in the dairy industry. Clearly, Canada's dairy producers had to find a solution quickly if they were to be competitive in the context of free trade and the globalization of markets. The challenge was a big one.

Bill C-86 will make it possible to implement the agreement signed by the six provinces-Prince Edward Island, New Brunswick, Nova Scotia, Quebec, Ontario and Manitoba-, which, I remind you, produce over 82 per cent of all milk in Canada. This agreement is a solution that will maintain our system and comply with the new requirements of the GATT and NAFTA.

Pursuant to the GATT definition of an export subsidy, under the free trade agreement, dairy producers must eliminate their system of export levies by August 1. That is the problem Bill C-86 solves by making changes to the Canadian Dairy Commission Act.

At present, producers of industrial milk pay a levy of approximately three dollars per hectolitre of industrial milk that is to be exported, mainly in the form of butter and skim milk powder. If we make a quick calculation, three dollars per hectolitre is three cents per litre, which represents approximately 7.5 per cent of the value of the milk and which each producer of industrial milk used to pay in order to promote exports.

Even though it comes out of the producers' pockets, not out of public funds, under the GATT and the free trade agreement, that levy is an export subsidy and, as such, illegal. Starting on August 1, GATT and our partners in the free trade agreement would not have accepted our continuing to operate in that way.

More specifically, this bill implements a national system for pooling market returns that will be used to support the export of dairy products. The pooling permitted under Bill C-86 will comply with the international agreements, while allowing producers to maintain the advantages of the present system.

However, we must be aware that there is a possibility that the United States, which is challenging anything and everything these days, may decide to challenge this two-price policy for milk: one price for milk for the domestic market, and one price for milk destined for export. In that case, the dairy industry in Quebec and Canada could be accused of dumping.

In order to be successful, however, the United States or the country that considered its interests harmed would have to prove that exports from Canada were harming its market. Since our exports are relatively small, and since we export an increasing proportion of value-added processed products, that harm may be very difficult to prove. Bill C-86, which we are discussing today on third reading, is the solution that will enable producers to face the upheavals in their industry resulting from the new international context.

We, the MPs of the Bloc Quebecois, therefore support Bill C-86, since it meets the needs of producers who want to adjust to the requirements of the international trade agreements signed by Canada. Of course there are certain shortcomings in this bill; in-depth discussions are going on, in Quebec at least. Apparently the bill is creating a bit of a problem for processors. The discussions are not sticking on dozens of points, only on a few specific ones, and in a few days there should be-at least we hope there will be-an agreement between the Quebec department of agriculture, the UPA, the federation, and the Canadian Dairy Commission.

At present, the dairy industry is managed partly by the provinces and partly by the federal government, as are many industries that appear to have two heads. In these cases, of course, two heads are often not better than one. At present, the provinces have jurisdiction over fluid milk, and the Canadian Dairy Commission has jurisdiction over industrial milk only. The bill provides for a delegation of powers between the Commission and the provinces in order to administer the pooled market returns. If the agreement were not signed, the Commission would administer the pooled market returns for industrial milk only.

Those, then, are the technical changes made to the Canadian Dairy Commission by Bill C-86; I call them technical changes because they are regulations that will allow dairy producers to achieve their objective of adjusting the system as we now know it to the new standards of our international commitments, such as the GATT and NAFTA.

Mainly, we must remember that six provinces have signed an agreement in principle to pool their entire milk supply system. The initiative comes from the dairy industry; that point must be emphasized. The initative comes from the dairy industry, whose producers decided that they had to take the necessary action in order to make the most of the resources available to the dairy industry. The distinction made between industrial milk and fluid milk will be eliminated; the provinces' present quotas will not be changed.

I am particularly proud to state in this House that the concept of single-price milk was initiated in my region, the Eastern Townships, and that the then president of the federation in Sherbrooke was Jacques Blais.

I remember very clearly indeed the initial meetings, at which people wanted very serious discussion of a future single price for fluid milk and industrial milk. Those discussions were lively-and sometimes even physical. I attended one of those meetings and I certainly was not at ease. Those farmers had some powerful arguments. The Eastern Townships played a pioneering role in this debate.

It should be noted that, at the time, there was a difference of more than 10 per cent between the prices for fluid milk and industrial milk. It was practically the same milk. At the time, the farmers were told: streamline your operations; become more productive and more competitive; lower your production costs. And they did.

At the time, you could encounter three tank trucks on the same concession road, which might have only three dairy producers along it. You could see a truck for fluid milk, a second truck for industrial milk belonging to the Coopérative fédérée, and a third truck that might belong to an independent company like Lactantia, for example.

Today on that concession road, there are still only three dairy producers, but only one truck. So we have managed to reduce transportation costs. Fluid milk, the price of which, as I was saying, was 10 per cent higher, is now carried in the same truck. I can even tell you that the same cows, the same milk, and the same consumers are involved, and so, 13 or 14 months from now, the price should be exactly the same.

I have here a document showing Quebec's dairy production, from 1950 to 1994, in fact. In 1994, there were 11,763 dairy producers in Quebec. These 11,000 dairy producers produce pretty well the same volume of milk as was produced in 1970. But wait a minute. In 1970 there were 43,669 dairy producers. That means that, with one quarter of the number of dairy producers, we are producing practically the same volume of

milk. Better yet. If I take one cow as an example-I am sure the member for Drummond will be pleased-, in 1970, the average cow in our herds in Quebec produced 3,324 litres of milk per year-and without hormomes, without being shot up, just through improved breeding and better livestock feed. Look at this: in 24 years, the average cow in Quebec has gone from producing 3,324 litres of milk to producing 5,336 litres. The figure has not doubled, but it is at least 75 per cent higher.

I was reading in La terre de chez nous , the magazine for Quebec farmers, that a 3 per cent production increase was anticipated for the current year. So it is possible to up the quantity of milk given by our dairy cows each year without ``boosting'' or shooting them up, without altering the milk, without risking animal and human health.

I would remind you that the milk produced in Quebec and in Canada is a credit to us. We have some of the cleanest, freshest milk in the world. Within minutes of leaving the cow's udder it has already been refrigerated to a temperature where it can be properly kept. We are proud of that. Our facilities prove beyond the shadow of a doubt that without exaggeration we can increase milk production by 3 per cent without increasing the size of our herds.

The farmers in my riding tell me that if their milk quotas could be upped by 10 per cent per year, they could meet the demand without having to struggle.

What would give me the greatest pleasure would be if all our farmers in Quebec could have a chance to read the text, or a part of the text, that we received a copy of on June 2, 1995, signed by an Assistant Deputy Minister at the federal Department of Agriculture and Agri-Food. It was a copy of a letter addressed to the Chairman of the Standing Committee on Agriculture and Agri-Food, Bob Speller; it is signed by J.B. Morrissey.

A question had been raised by my colleague, the honourable member for Champlain, Réjean Lefebvre of the Bloc Quebecois, and I'm going to read you a sentence from it: " -with respect to expenditures on primary agricultural research relative to research into finished agrifood products, for a period going from 1990 to roughly 1998, the projections, as Table I shows-"

Quebec's farmers are responsible, in terms of Canada as a whole, for about 18 to 19 per cent of agricultural production. Quebec has about 24 per cent of the population and it pays between 23 and 24 per cent of Canada's income taxes.

And at this point I would hope that the farmers in my riding are listening closely, when I talk about the share that this government-and when I say "this government" I do not necessarily mean the party currently in power. Quebec agriculture has always been shafted by the federal system and I have another egregious case here, where Quebec has been cheated year after year.

For instance, in terms of the resources allocated to full-time equivalents in research and development, Quebec in 1990-91 received 12.4 per cent of the total research and development budget allocated among all the provinces by Agriculture and Agri-Food Canada. In 1991-92 we got even less, and that was under the Conservatives, which is why I say that it is not necessarily the current government. In 1991-92 the Conservatives gave us 12.04 per cent of the total, or let us say 12 per cent.

I would remind you that Quebec's relative participation in this Department's activities is from 17 to 19 per cent, so we are being cheated out of 5 per cent every year. The pattern is the same right up to 1995-96, the current year, where Quebec's share is 13 per cent. At 13 per cent, we are still having a minimum of 4 per cent in research and development resources stolen from us.

It is not the sovereignists, the Pequistes, the Bloquistes, who are inventing these figures. This is an official document. I see here the logo of Agriculture and Agri-Food Canada and it is signed by an Assistant Deputy Minister of that department.

In October 1993, when I was campaigning during the last election, I said to the people of my riding, "Send us to Ottawa. We will audit the books and we will come back and tell you what we find. If they are giving us too much money, we will tell you that and we will give it back to them. We will be honest with the rest of the country". This document from Agriculture and Agri-Food Canada that I have just read to you has its equivalents in all the departments.

Quebec's farmers have to understand that the federal government is not necessarily the modern Messiah. The federal government serves western agriculture well, but when the time comes for it to serve agriculture in Quebec and the Maritimes, there is nothing left in the coffers.

Here is another example. In the Magdalen Islands, the UPA arranged for a special quota so that the Islands could be self-sufficient in egg production. A special quota was awarded to an egg producer in Etang-du-Nord. Now that assistance to eastern grain transportation is being abolished, the price that this egg producer will have to pay for meal will shoot up by over $50 a tonne. Is it going to be more cost-effective for the Magdalen Islanders to import eggs from the mainland or to continue to import meal?

Many more crazy situations like that can be found in Quebec. No, the federal government is not a Messiah, and when Quebecers want information or help they head first for the Quebec Ministry of Agriculture. Last week I just asked a number of farmers whether they knew the name of Quebec's Minister of

Agriculture. Eight out of ten of them could name him, but not one out of ten could name the federal Minister-he is completely unknown. When people do know his name, they massacre it so that if you did not know it yourself you would not be able to decipher it.

It is a pity to have two Ministers of Agriculture for the same farmer, the same cows. One of those ministers is very expensive to keep and never, ever, gives Quebec the share to which it is entitled.

Whether you look at it in terms of Quebec's proportion of the population, which is 24 per cent of the Canadian total, or in terms of the percentage of income tax we pay to Ottawa, or in terms of GDP directly related to agriculture, Quebec is not getting its fair share.

Worse still, it is the taxes Quebecers are paying to the federal government that are paying, compensating, the western grain producers so that they can diversify and compete against us in our own province, and we are paying with our money for the privilege of getting booted on the backside. You all know that 80 per cent of Quebec's farmers are in livestock production. When I say livestock production, of course I include eggs and dairy production, because to get eggs you have to raise hens.

The opposite holds true in the west. There it is grain production that predominates. But diversification is changing the stakes. Obviously it is easier to work six or seven months a year and then to garage the machinery and wait for spring to start work again, crops and seed-if you raise livestock, it is not five days a week, it is seven out of seven, 365 days a year. It would be unthinkable for any of our dairy farmers or egg producers in Quebec to treat themselves to vacations in the south the way some of those western grain farmers can, for two or three months, you will agree with me on that.

So it is a choice, and the choice has been entirely decided by successive governments in Ottawa. Eastern Canada, Quebec, Ontario and the Maritimes, were directed into livestock production while the west grew grain; that was the arrangement and it was accepted. The building of the railway that tied the country together was of course done to satisfy the farmers.

So the dairy farmers know what a fair deal is, and in the budget and in Bill C-76, which passed a couple of days ago, we identified unfairnesses and we criticized them in this House on more than one occasion, such as the way the industrial milk subsidy is being cut by 30 per cent, in two 15 per cent cuts. The budget makes it clear that the remaining 70 per cent will be done away with sooner or later. No compensation is provided for, no $300 or $400 million is going into an adjustment fund for our farmers, to help them change direction.

In August our farmers will be going on a pilgrimage to the Canadian Dairy Commission to request an increase to compensate for the subsidy cuts. The result will be that you the consumers will be paying more for milk, butter, cheese, yoghurt, ice cream. Just as with gasoline, the increase will be greater than the increase in the cost of living. The government is washing its hands of the whole affair and saying, "Oh, we are not raising taxes. The prices of butter and cheese and yogurt and ice cream are going up, and gasoline taxes are pushing up the cost of gasoline". And it proudly announces, "We have not raised anything". The consumer price index is going up by 2.9 per cent. There has not been an increase like it in four years.

We are very comfortably installed in this House or elsewhere in Canada discussing the benefits of the pooling arrangement agreement reached by six provinces, but the negotiations that led to the agreement should not be left unmentioned. I want once again to emphasize the hard work done by people from my region, as Quebec had a strong voice in the negotiations, particularly the Fédération des producteurs de lait du Québec and its president, Claude Rivard, its vice-president, Jean Grégoire, and their senior economist, Guylaine Gosselin.

One question came up repeatedly during the committee's hearings, and that was: why have only six provinces joined the pooling agreement? We were told that certain provinces were taking advantage of the opportunity to get the CDC to review the way it treats them, that others did not operate the same way at the provincial level and that the jump involved in pooling all their milk with the other provinces was too great. But the most interesting thing to emerge from the discussions was that these six provinces are powerful enough without the rest, because they represent, as I mentioned earlier, 82 per cent of total milk production. So the other provinces can always join later, and their abstaining, at the moment, will not jeopardize the success of the agreement as it now stands.

This historic agreement will have a much more far-reaching impact than appears at first glance. If we take the example of Quebec, in 1996 the dairy producers should enjoy an increase in income varying from 60 to 70 cents per hectolitre. And because of GATT, Canada will have to accept imports of butter this year, which will probably affect quotas.

Since the six provinces will be spreading out the market variations over all the milk produced, the impact will not be felt too strongly, because it will not be just one province that has to absorb the costs. More clearly, if there were to be more butter or cheese imported into Canada from other GATT members, each of the provinces could see its quota drop by, say, 1 per cent. It

would not be just one province that was affected. The same thing would happen if, for example, consumption, or our exports, went up: it would not be just one province that saw its quota increase but all the provinces.

I could perhaps remind you that under this agreement dairy quotas will no longer be confined to one province. A dairy farmer in Quebec could buy an Ontario quota, or a Nova Scotia quota, or he could sell his quota in Alberta. And if ever too great a proportion of our quota were to go outside the province, the province could withdraw for a year or for the current year, as soon as 1 per cent was reached. So no province could have more than 1 per cent of its quota siphoned off, unless it was willing to sell its quota to other provinces.

In conclusion, I want to recall the political context that underlay the signing of this agreement. This kind of arrangement may well turn out to be a prototype for similar agreements in other sectors, since its basis is the one that is likely to predominate in the years to come. Why? Because it is an economic agreement.

The agreement banks on the advantages that all partners will derive from working as a team. With a referendum coming up this very year, the producers in many provinces have not hesitated to enter into an association with Quebec, because it is in their best interests. When it comes down to reality, not some hypothetical disaster situation, it is clear that logic counts for more than political considerations.

Rest assured that our prize cow in the Plessisville region will still be a prize cow, even after a "Yes" vote in the referendum. There are those who would like to frighten people by saying, "Your quotas will not be worth anything, your cows will get mastitis, they will injure themselves grazing, they will have more trouble calving in the spring". These are scare tactics, and increasingly our dairy farmers realize this.

One scare tactic the federalists use a lot is saying that if Quebec becomes sovereign, its producers will immediately lose their sale quotas in Canada: that is not true.

In conclusion, I would like to say that the Bloc Quebecois is proud to be associated with Quebec's dairy producers and to endorse Bill C-86 in this vote at third reading, for the good of all dairy producers everywhere in Canada. And I hope that Canada will give Quebec more of a share in research and development funding. The people who will not go beyond 12 per cent and who laugh at our farmers should be ashamed of themselves, especially when they visit our farmers or turn up at auctions, Encan Lafaille for example, and swagger around trying to impress people and then come back here and make fun of them. They laugh at them and will not go beyond a miserable 12 per cent.

[Lyle Vanclief, Liberal, Prince Edward—Hastings, ON]

Mr. Speaker, on a point of order, toward the end of the speech by the hon. member for Frontenac he made the statement that in the 1995 budget the support to the industrial milk producers was cut 30 per cent twice over. I wonder if the hon. member would like to take the opportunity to correct the record. It was 15 per cent each year for two years, not 30 per cent twice over.

[The Deputy Speaker]

The hon. parliamentary secretary will know that was not a point of order as much as it was a question of debate.

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

Mr. Speaker, what I said was that over the next two years 30 per cent is going to be cut from the subsidies to industrial milk producers: 15 per cent in the 1995-96 budget and 15 per cent in next year's budget. Fifteen plus fifteen equals thirty. The subsidies are being cut by 30 per cent. If the honourable member can prove me wrong, I will apologize to the House.

[Leon Benoit, Reform, Vegreville, AB]

Mr. Speaker, I am certainly not pleased to be interrupting that interesting exchange, but I am here today to speak on Bill C-86, an act to amend the Dairy Commission Act.

This bill is significant. It provides for the replacement of the existing system of levies with a system of pooling market returns for different classes of milk.

The government claims the move to a pooling system will maintain equity among producers and will be consistent with Canada's international trade agreements, namely NAFTA and the GATT. Changes are needed to supply management to continue while meeting the requirements of our trade agreements. Dairy farmers I have talked to and others in the industry have told me they feel this legislation is necessary to allow supply management to continue under the GATT and the NAFTA. For this reason, I support the stated intent of this legislation.

However, I do have a major concern with clause 2, which affects section 9 of the Dairy Commission Act. The bill extends the powers of the Canadian Dairy Commission and will diminish the authority given to the provinces under the present act. Therefore, to guard against this possible erosion I proposed an amendment that would have affected section 9 of the Dairy Commission Act. Last night my amendment was voted down in this House, which is very unfortunate.

Once again the Liberal government has shown its desire to intrude in areas of provincial jurisdiction. This is one more move of many we have seen over the years. It is a revolt against this intrusion on the part of the federal government into areas of provincial jurisdiction that led to the existence of the Bloc

Quebecois in this Parliament. We need to move in the other direction and return some of the powers that belong rightfully to the provinces under our Constitution. This is one more move in the opposite direction, the wrong direction. It is another example of wrong thinking on the part of this Liberal government.

I will take a few minutes to talk about what Bill C-86 is and what it does. C-86 is an act to amend the Canadian Dairy Commission Act. The purpose of the bill is to amend the Canadian Dairy Commission Act to provide for the 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 agreements.

As part of Canada's system of supply management, the Canadian Milk Supply Management Committee, which is chaired by the Canadian Dairy Commission, oversees the application of the national milk marketing plan. The Canadian Milk Supply Management Committee sets national production targets, establishes each province's share of the national quota, and exports surplus milk through planned marketing programs. The orderly export of surplus production is an essential element of ensuring the integrity of the supply management system; without it the system would falter.

Currently producers assume the cost of exporting dairy products that are 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.

I have a few observations on Bill C-86. Through this bill Canada's dairy industry would abandon this established system of producer levies on industrial milk. The levies would be replaced by a system of national pooling, which allows all stakeholders-the farmers, the 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 across the country. Instead of a levy being taken off the farmers' cheques to subsidize exports, a national pool would achieve the same end since the net return to farmers would be identical. For its part, the processing industry would still pay a lower price for industrial milk than consumers pay for fluid milk.

These amendments to the Canadian Dairy Commission Act add a certain amount of new pricing and funding distribution authority to the CDC, the Canadian Dairy Commission. Although the new pricing and pooling approach for milk has received agreement from all provinces in principle, negotiations are ongoing as to whether there will actually be one national pool, which at the moment appears very unlikely, or two separate pools, one for B.C., Alberta and Saskatchewan together and the other for the other six provinces that are covered by the act.

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

I would like to speak briefly about the relationship between Bill C-86 and the Reform Party policy and position on supply management and various particulars.

Reform policy in this area has been and still is that all producers should be able to structure and manage their organizations in any manner which 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 which should be dealt with by farmers.

Reformers acknowledge that the agriculture industry, including the supply managed sector, is moving toward a more competitive market driven system. We have proposed tough, positive measures to ensure fair competition, such as tougher anti-combines legislation which would help reduce the input costs to farmers.

The anti-combines measures have been demonstrated in agriculture over the years, particularly in the fertilizer industry where there have been court challenges by farmers against companies which appeared to be price fixing. Unfortunately these cases drag on in court until they are eventually dropped. I know the last case dragged on for about 10 years and then eventually died.

That is not the kind of anti-combines legislation and fair trade legislation we need. We need tougher action by government in this area. We need tougher laws first and then we need tougher enforcement. Canada has some of the weakest anti-combines

legislation in the developed world. A stronger approach needs to be taken and some new policies made in this area.

In terms of trying to reduce input costs we need fair trade policies which would help protect against dumping by other countries and which would guard against unfair subsidies in other countries, for example, the United States. I will speak a little more about this later in my presentation.

Too often when politicians and others involved in supply managed industries talk about the fact that the industry is moving toward a more competitive type of industry-by competitive I mean more products will be coming in from other countries to compete-we forget to say that it is absolutely critical that the products coming in are under a fair trade environment. This means that where there is unfair subsidy in other countries, as there is in the United States in this industry, our government must protect against these products coming into our markets. Again, it is an area where government has to strengthen its resolve and be tougher when it comes to unfair trade, particularly dumping.

Another area of Reform policy regarding this industry relates to general changes which will reduce government overspending and which will lead to lower taxes and lower input costs in the future. I am thinking in particular of a plan we presented in the taxpayers budget. I will talk about that later.

With respect to supply management, I believe change is inevitable. The fact is dairy farmers will be forced to compete more and more with American farmers. The odds are that this competition will come sooner than this government is willing to admit. I am not saying this is what I necessarily want, but it is the way I see it. This is what is most likely to happen.

The rules are changing and dairy farmers will need transition time in order to adapt to the more open trade of the future. This bill will allow a supply managed system to continue for some time but there is some doubt about the reality of border protection continuing over the long run.

Members of the dairy commission claim this bill properly reflects the changes affecting dairy farmers. What the bill actually does is maintain the status quo. Given the fact that a change to supply management is inevitable, I see this as a problem over the long run.

The method this government has been presenting along with this legislation is an area of real concern to me. Yesterday in debate on report stage of this bill the parliamentary secretary to the agriculture minister made some disparaging remarks about my knowledge of the dairy industry.

I fully acknowledge that I am not a real expert in the dairy industry, but I am starting to realize that maybe I know a lot more than the parliamentary secretary does when it comes to acknowledging that this industry will change and that there will be more competition. It is important to acknowledge this so that farmers do get a reasonable transition time from the protection they have today to the reality of a more open market in the not too distant future. While the parliamentary secretary made some comments about my lack of knowledge, I believe his lack of publicly acknowledging the move to more open competition is wrong because farmers need forewarning of what is to come.

My main concerns regarding Bill C-86 do come from the discussions surrounding the whole supply management area. They revolve around talk I have heard from the minister of agriculture, the parliamentary secretary, leaders of farm groups and farmers themselves. This discussion has generally said that this legislation will allow supply management in the dairy industry to continue in a form quite similar to the present form indefinitely into the future.

This legislation would allow that, it is true, but this does not mean that supply management will continue in a form that is similar to the present system well into the future. There are several trade issues in particular which may lead to a lot more direct competition from the United States by allowing more access to dairy products from the Americans.

Before I start discussing these trade issues which will have a substantial impact on our present supply management system I would like to make one thing clear. I am not talking about these issues because I want to see the demise of supply management or because Reform wants to see the demise of supply management. I will discuss these issues because they will have a dramatic impact on the dairy industry in the future.

This discussion will provide an important service to dairy farmers and others in the industry. Even though this is a difficult message to deliver and the reaction is not always favourable, especially the immediate reaction, it is something that should be done. Reform will continue to do this and I hope this Liberal government will start to do it.

Reformers have had the courage to talk about probable change, while the minister, the parliamentary secretary and even the leaders of some farm groups have publicly pretended that the present system will exist indefinitely. This seems a dangerous message to send to dairy farmers, that they will be protected against further competition, in particular from the American dairy farmers.

Publicly they hide what they privately and in small groups acknowledge. Change is inevitable; it is a question of how much and when. That is what we have to talk about. I will take a little

time now to talk about why I believe change is inevitable and why it may be sooner rather than later.

The first reason is that the new GATT negotiations start in the year 2000. That is only five years from now. In the agreement there will be a lot of pressure from the Americans in particular to allow their products more free access to the Canadian market. There will be a lot of pressure, as there has been already, on our government to accept the freer access on the part of the American government. The GATT agreement and the negotiations starting in the year 2000 certainly will put pressure on the industry. Seven or eight years from now, considering the GATT alone, we will see an industry which will be competing against a lot more imported products, in particular from the United States.

The more immediate threat comes from the NAFTA. The most immediate concern under the NAFTA agreement has to do with the panel decision which will be coming down within a year. If the panel determines that the NAFTA takes precedence over the GATT with respect to supply management and trade between Canada and the United States, then the borders will be open much sooner than they would be under the GATT agreement.

In two to three years if the panel rules that the NAFTA takes precedence over the GATT, we could see a lot more free access from the United States with respect to dairy products. That is a much more immediate threat. It is very important for the government to start acknowledging it publicly in order that farmers get the proper transition time which they need to prepare for the change.

Another possible threat under the NAFTA will come with the inclusion of Chile in the NAFTA group. Our Prime Minister and the President of the United States have said it will probably happen within a year. That leads me to believe that there probably will not be significant negotiations taking place which would allow Chile into the NAFTA group. There just is not time in a year to carry out meaningful negotiations. Therefore, I believe that Chile will come in under the current agreement with very little negotiation. Maybe that threat is not quite as imminent as it was a few months ago.

There are several things which the government can do for the sake of dairy farmers in the dairy industry. I will talk about five.

First, the government can acknowledge that there is a high probability of more access from American products and therefore a move to more competition. I have stated this many times already in my presentation today and I will continue to state it.

Second, the government can help to ease the dairy farmers' legitimate fear that the Americans will not compete fairly unless they are forced to by tough action on the part of the Canadian government.

Third, the government should start working toward levelling the playing field between Canada and the United States before more competition occurs.

Fourth, the government must recognize that there are different concerns about change to the supply management system within different groups of dairy farmers. Each group must be listened to and asked for its recommendations as to how it can deal with its particular problems which will result from the move to more competition from imported products.

Fifth, the government must talk about the positive side of opening the borders. There is a huge American market there for the taking and it will take a healthy attitude on the part of dairy farmers to ensure they take full advantage of the available market.

I would like to take a few minutes now to talk about each of the different areas which government should be discussing with dairy farmers.

First, they must acknowledge that there is a high probability of more access for American dairy products and therefore a move toward more competition. It is critical to allow or even encourage dairy farmers to prepare for the change, because that will be necessary. There will be a transition time that will be necessary to allow dairy farmers to compete with the Americans. There is no doubt that the Canadian dairy farmer can compete very well with the American farmer if they are given a level playing field to work within.

Second, help ease the dairy farmers' legitimate fear that the Americans will not compete fairly unless they are forced to by tough action. I hear this all the time. They are afraid that dairy farmers who recognize-there are many now-that change is coming are really quite concerned that the Americans will not compete fairly. They say they can compete with anybody in the world if they are given a fair chance, but Americans do not have a good record of competing fairly. This is what dairy farmers tell me. They tell me that the American industry is highly subsidized, which it is, and that many of these subsidies are not acknowledged by the Americans themselves as subsidies, which is true. Some of these are the school milk program, the farm bill set aside program, irrigation subsidies, and on and on. There are an awful lot of subsidies that give the Americans an advantage, or will in an open border situation between Canada and the United States, and are not fair. These have to be dealt with.

Third, start working toward levelling the playing field between Canada and the United States before more competition occurs. An example of this is pesticides, which are used in all sectors of agriculture. Over the past months, as I have been travelling around in southern Ontario, there is a common theme I have heard from farmers from the dairy industry and from other industries. That theme is that if we are going to compete we need access to pesticides and drugs very soon after the

Americans have access, or even before the Americans have access. To accommodate this, why can we not have a reciprocal agreement? If a pesticide or drug is given approval through the regulatory system of one country, then why can that not be all that is necessary for this product to be used in the other country?

Both Canada and the United States have a very trusted regulatory system. I see absolutely no practical reason we cannot have an agreement between the two countries so that when a product is approved in one country it can be approved almost immediately in the other country when it is being used in a similar environment and for the same purpose.

This is a common theme. This and other moves have to be made to level the playing field so that the Americans do not have access to these pesticides or drugs years before Canadian farmers can take advantage of these products. In the agriculture industry this is absolutely a critical area, which must be dealt with.

Another way in which the playing field must be levelled has to do with the broader economic considerations. I am talking about, for example, tax levels. Tax levels in Canada are substantially higher than tax levels in the United States. This means that Canadian farmers are competing in an unfair way with American farmers because of the higher tax component of every dollar they earn.

The only way, of course, this can be dealt with, that taxes can be lowered, is by lowering government spending and eliminating completely government overspending.

Reform did present in February the taxpayers' budget, which was a detailed three-year plan that would eliminate government overspending. This plan is still a valid and sound plan. This Liberal government has to move toward this plan, the taxpayers' budget, or a similar budget over the next year so that we can move over the next several years toward the lowering of taxes so that tax levels become very similar in Canada and the United States and so that labour costs come into line. One of the reasons labour costs are higher in Canada than in the United States is because the tax level is so high, such a large portion of the paycheque goes to the taxman, the Government of Canada.

There are these broad economic considerations that must be dealt with to level the playing field so that Americans are competing fairly with Canadians.

The fourth area government must talk about and must deal with is to recognize that there are different concerns about change to the supply management system within different groups of dairy farmers. Each group must be listened to and asked for their recommendations.

I would like to spend a little time now to talk about these different groups I have been able to identify as I met with dairy farmers around southern Ontario, in Alberta, and other places across the country. The first group I will call the older dairy farmers, dairy farmers who are fairly close to retirement. They want to hold on to their quotas. In many cases their retirement fund is in quota value. They know that as soon as the border starts to open and the Americans can send more of their product into the Canadian market their quota values will start to decline rapidly. They know that their quotas could be worth nothing in the not too distant future. They are concerned about that.

I can understand that completely. Their retirement was built in large part on quota value, which can so quickly disappear and for which they have paid dearly throughout their expansion phase in the industry. It is a problem that will be very difficult to deal with, but it has to be dealt with and it has to be talked about.

The second group I will call the middle group. They are still expanding in many cases. This group has in many cases borrowed a lot of money to buy a quota. They have a couple of concerns about the possible loss in quota value. The first is that as quota value drops, while it does mean on the positive side that any new expansion they bring into their business will be less costly, it does mean that the value of quota they may have financed right now will drop in value dramatically. Their concern is that this will make them become insolvent in their businesses. In some cases it will.

Will they be undersecured by lenders? Will they because of lower equity levels not be able to borrow the money they need for expansion? These are questions that have to be dealt with and answered. Certainly it is different in every different dairy farmer's operation, but this is a common concern I have heard from this middle group.

As well, this middle group will be losing some of the value, some of the equity they have been counting on to use in their retirement and indeed to help with the transition of the farm from this generation to the next. That concern is there with the middle group as well.

In one of my past lives I worked as a farm economist. I worked with farmers in the business management area. I worked with 100, 200 and 300 farmers who were in severe financial difficulty. Each case is gutwrenching and very difficult to deal with. I had to learn to separate myself from the emotional impact this was having on each of those families.

So often in the dairy industry the difficulty started with paying a lot of money for quota, which provides nothing of productive value. It just does not improve productivity in any way. I saw so often where that led to the downfall of these operations.

I also worked in times when there was no value to quota. In Alberta in the late seventies and early eighties quota had no value. Farmers could get into the industry. They had to buy their cows, their buildings, their feed, and everything else that goes along with the industry, but at least they did not have to buy quota.

I have presented that so dairy farmers can remember that change has occurred in the past. Quota has lost and gained value in the past. In most cases dairy farmers have been able to deal with that, but in some cases they have not and it has led to their downfall.

There is a third group of dairy farmers that is important for government to work with or at least listen to: the people who are just getting into the business. Many of them have told me they would be all too happy to see the supply management system completely disappear. In some cases the people that message is coming from have quite shocked me. I have been surprised because often their parents are in the industry and they are just getting in. They know this quota is a very fragile thing in terms of value. They know that in many cases they will not even be able to get into the industry because lenders know there is a real risk to them with a reduction in quota values.

These young producers have said they do not want to have to pay for quota, something that may have no value in the not too distant future, and ask how they can get around that. That is the concern of the third group.

I do not pretend to know how we can ever deal with the varying concerns of these three groups. We have to start talking about it and it has to be dealt with. By ignoring the problem and by pretending change is not going to come quickly, the government is putting these farmers at an unnecessary disadvantage. By acknowledging the problem and giving the transition time they can deal with the change.

It is so important that the farmers in all three of these groups-break the groups down any way you like-start talking about some possible solutions to their problems. We need to know from them how we as parliamentarians can facilitate their solution, what we can do to help them accommodate the change they will be facing. That is the fourth area politicians and the government actually have to talk about and start dealing with.

The fifth area is to talk about the positive side of opening the borders and opening competition. There is a huge American market there for the taking. So seldom in this discussion is that positive side talked about. We are always defensive. How is it going to hurt us? We allow the Americans to bring their products in to compete with ours. How are we ever going to deal with it? We know the Americans are not fair traders. These are the comments I hear from dairy farmers, and they are legitimate concerns, but what about the opportunity that comes with this change? There is an absolutely incredible opportunity and the possibilities are mindboggling.

If members think that is just some talk that is not based on what has happened in the past, let us talk a little about the beef cattle industry in Alberta. When there were problems, as there always are problems when moving cattle back and forth across that border, the cattle industry went through some rough times. With the signing of the first free trade agreement, western Canadian farmers saw the opportunity and the cattlemen saw the opportunity. The attitude they have is that they can compete with the best. And they are absolutely right.

We have seen an industry grow in Alberta beyond what I would even have believed would be in the realm of possibility 10 years ago. I would not have dreamed it. I was really concerned about the future of the beef industry ten years ago. Cattlemen said they have the opportunity, mostly it is fair trade but there are still some things that have to be dealt with but they are doing great.

When we hear cattlemen say they are doing great, things are going very well. One thing farmers are not very good at is looking on the positive side. They like to talk about the negative a little more. They are very positive people but they like to talk and dwell a little more on the negative. I am also like that. It is built into me by my life as a farmer.

I acknowledge that change is difficult. Very few people like change especially when it affects them directly in their lives and in their business. Change is a lot easier when it affects someone else. The change in supply management will be particularly difficult because it will reduce the protection that has been in the industry for some years, protection which has been available to very few businesses besides supply management.

In the whole supply management question and in the dairy industry we have to talk a lot more about the positives of change and how we can take advantage of change. We have to talk about how farmers in different situations can deal with and prosper from change. I know, as many dairy farmers know, if farmers are given a fair chance to compete, which is all they ask, they will compete successfully.

[Chuck Strahl, Reform, Fraser Valley East, BC]

Mr. Speaker, it is a pleasure today to speak to Bill C-86. I will use the opportunity to pay tribute to the good dairy farmers of my own region, Fraser Valley. I will talk about the bill and some of the solutions the Reform Party sees to the ever changing and

evolving world of supply managed agricultural industries in Canada.

Farmers in the Fraser Valley are among the best in the world not only in the diary industry but also in the poultry industry. We now have an ever expanding greenhouse industry.

Instead of going into a decline as many people had predicted some years ago, our agriculture industry has a very bright future and has shown to be very innovative, creative and very willing to change, which is what they must be in order to survive in the 1990s and into the next century.

If dairy farmers in what is probably richest growing area in all of Canada, the Fraser Valley, are given an opportunity they will continue to be a major milk producer for British Columbia and in essence could be a major milk producer for areas around the world.

I will state for the record what the bill will do. It is a change that will allow Canada's dairy industry to abandon its established system of producer levies on industrial milk. The levies would be replaced with a system of national pooling which will allow all stakeholders to equitably share the costs and benefits of pooling revenues and the effects of fluctuations in market size for both fluid and industrial milk.

It is an evolving system from what was once allowed and acceptable, the idea of national levies, to a system more GATT sensitive into a national pooling system. That is an inevitable change and it can be a good thing.

It is important for producers to know what the Reform Party's policy is because there has been a lot of misinformation circulated about it.

The Reform policy, from our policy manual, states: "All producers should be able to structure and manage their organizations in any manner which they believe will best serve their interest. 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".

The second part of our policy, which the previous speaker elaborated on at considerable length and in great detail, states: "Reformers acknowledge that the agricultural industry, including the supply managed sector, is moving toward a more competitive market driven system".

Those are two truths I campaigned on during the 1993 election. We were up front with Canadian consumers and with producers about what we saw as the inevitable changes that would have to come to the milk production system in Canada.

For one farmer to produce a steady supply of milk takes a lot of care and planning. It is not a quick fix way of going into business. Cattle must be purchased, sheltered and fed and all the machinery required is bought. Farmers need to make sure the cows are impregnated at a certain cycle. They must have dry cows at some part of the year and fresh cows at the same time so that they have a steady supply of milk and so on. It takes all that planning. That I would even have to go through the lactation cycle of a cow shows the changing demographic face of Canada.

My father and a lot of our fathers grew up with dairy cows, helped to milk cows and understood that whole system. That was a big benefit for Canadian farmers. There is a residual understanding, even in the House, about what it takes to be a farmer, especially a dairy farmer.

It is unfortunate now, as our cities are growing and the number of farmers is shrinking, that more and more in the future it will be incumbent upon those of us who are concerned about the agricultural industry to take the time to explain to school children and to other politicians about the difficulties of farming and why one cannot suddenly increase milk production by 20 per cent or why one cannot be a miracle worker especially in the dairy industry. It takes some planning.

The government has to play a role in allowing for steady and incremental changes to occur so that cataclysmic changes do not have to happen overnight. It is the role of government to provide that. If it fails in that role, with the understanding in general society, then it will have failed Canadian farmers. Therefore we need to make sure the government does that.

I urge the government to not soft pedal inevitable change. It has to come. Those of us familiar with the agricultural industry want it to come in an organized fashion, not in a chaotic fashion.

I think of our call for a triple E Senate. People might ask how that affects the agricultural industry. However, there is a reason for that. One of the reasons is to give outlying and less populated regions more clout in our national decision making. It will be all too easy in the years to come, as more and more people move to the mega cities and we get one big city after another along the Great Lakes. Even in my area of Vancouver, which is now expanding and pushing out to become one big city, it is important we have the regions and agricultural producers represented with some strength in Ottawa.

One of the ways that could be done is through an elected Senate which would allow people from varied backgrounds to represent different regions.

It would be a pleasure to know that after the bill left the House it would go to an upper house where four or five members from Saskatchewan, four or five from Manitoba, and so on, had a keen interest in the agricultural future of the country. It would be a pleasure to know the bill would be under the scrutiny of people who want the best for agricultural producers. That is something I hope the upper place will do. However, it is more difficult because that area is not represented in the same way as it would

be under a triple E Senate. If it were properly handled it could give a better voice to Canadian agricultural producers.

It takes two years before a cow has a calf and freshens and supplies milk. The farmers therefore need to know they will have a market down the road for their product. A farmer can grow a broiler chicken in a few weeks but it takes two years to get the first bottle of milk in the dairy industry.

Fluctuating demand is a problem, especially in the period following the second world war when producers and farmers could not be sure of selling their milk. There was a problem with a glut on the market and then a shortage. Consumers saw prices going up and down. That resulted in unhappy producers and consumers alike.

Supply management was introduced, a uniquely Canadian version, and to its credit it has made the market very stable and has helped producers to prosper all over Canada, including in Quebec where 50 per cent of the industrial milk is produced. The industry has done well under the supply management system. I hope Bloc members are thinking of their dairy farmers when they talk about cutting off the borders from Canada.

In any supply managed system there is a tendency to become stuck in one group where it has worked. If it worked well in the 1960s and it has continued to work then it should stay the same. However, it cannot stay the same.

During the election campaign I am sorry to say there were candidates on the Liberal side who said that if Article XI 2.(c) of the GATT went ahead without being strengthened and clarified they would lay on the railroad tracks, they would resign their seats if they were elected, and so on. They did not get elected in my area. Weeks after the election the GATT was signed without a strengthened and clarified Article XI 2.(c).

The change was inevitable, as was noted in the Reform Party campaign. It was not an attack on the supply managed industry, it was an acknowledgement that change must happen and could be good. We went through the campaign and many of the innovative farmers in my area understood they would have to deal with the new trade realities of the 1990s.

Farmers still must be prepared for increasing market forces against the traditional system of supply management. The bill addresses that in a small way because it talks about why we must change to the pooling system as opposed to keeping the old levy. They will not be subjected to local pressures. They will not be worried about an influx of cheap milk from Alberta or about Washington state. We are now talking about a global shift in trade laws which will bring global pressure on the dairy industry. Fluctuations in demand and supply will mean stiff competition down the road.

There are many examples of how this global change is going to be a good one for the dairy industry. I envision a day when the producers of the Fraser valley will no longer make the bulk of their milk sales to the local consumer. However, I envision a day when the bulk of sales will be offshore, to markets throughout the developing world where our products can be marketed at a profit. The milk industry will expand outside our borders and take on the world.

There are many examples of that. In B.C. the grape growers were afraid their industry would be swallowed up. Remember a few years ago when the grape industry said that it was just a matter of time before it would be swallowed up by the cheap products from the states, the California wine makers and so on.

The growers grabbed the bull by the horns, if I can mix my metaphors a little, and asked themselves why they could not be innovative. They would be on the leading edge of the new grapes, the new technology, the new way of making wine. Now they are taking on the world.

Last year the wine producers from the Okanagan valley produced the world's best wine. I know there are some other good wines in Canada. I do not downplay them, but the B.C. wine producers were able to produce by not being afraid of the competition, the best wines in the world. My hat is off to them.

They did a good job. They took on the world. They can compete both price wise and especially in quality. They are among the best in the entire world. That is the way the agricultural industry is moving.

My own area is not known as an apple growing area, but an interesting phenomenon is happening. In British Columbia apple growers have always come from the Okanagan. In the Fraser valley an interesting thing has happened. The farmers are not growing apples in an orchard any more. They grow apples in straight rows four feet apart, with certain pruning techniques, certain pollination techniques and so on. They can produce as many apples on an acre as other growers do in 10 acres in a conventional orchard.

They are able to do that with innovation, by taking on the world, by exporting to Japan. They produce an excellent product at a good price. That allows them to make a living even in the Fraser valley where it was unheard of to even in a serious way grow apples just a few short years ago.

Innovation is coming and producers know they must change. There is evidence of that in my own riding. Recently the producers have agreed to allow some of their potential profit to go into the Agassiz Research Station as a joint venture project

with the federal government, producers and industry in general to find new and better ways to produce milk.

They are going to increase the herd size in Agassiz. The University of British Columbia is bringing its herd out to Agassiz. They will get them all together and have a good sized herd, a real production herd of a couple of hundred cows.

They have huge new manure handling facilities there. They are being innovative on how to handle manure storage, composting, injection and all the things that we are going to have to do. We cannot live in a society where the cities are encroaching on the farms and think that the old honey wagon is going to be able to do the same job it used to do just a few short years ago.

It has to change and it is not bad that it changes. In fact, farmers are finding as they change that not only can they handle manure storage, for example, in a way that does not offend the encroaching neighbours but also have a better yield and better crop production by being more careful and more innovative on how they handle manure.

Change is inevitable and it is not bad that change comes. Another example, if I can use a local example, is the B.C. AI centre, the artificial insemination centre. It has changed. It used to be that cows and especially bulls were rated on how much butterfat would be produced. Everything was rated on butterfat. One wanted a cow that produced a lot of butterfat and one wanted a bull whose offspring produced even more. Butterfat was the key to the future.

Times have changed. The AI centre now has realized that people want a low fat product. Fat is not considered something to be paid extra for. The centre is now tinkering with their next crop of bulls whose offspring will produce milk that has more protein and less butterfat. It is the wave of the future. There is no use sitting and crying over spilt milk. The hon. member for Vegreville enjoyed that comment.

Producers are saying that they have to plan. With a bull, it is not just a couple of years to see how it checks out. It takes the first crop of offspring, then the tests on those, making sure that the protein count and the butterfat is trending the right way and so on. It takes years and years to develop a good genetic program.

BCAI is one of many groups that has realized that changes must come. It does not look just to the lower Fraser valley, not to British Columbia where its roots are. It looks around the world to market its products, to market its bulls around the world. It has been very successful in being a leading example of what it is going to take to compete in the next century. It is not going to be the status quo. It must change and this change will be good.

Through the free trade agreements which the government has signed, both the GATT and the NAFTA agreements, tariffs will be reduced over the next few years. American products will be able to compete as time goes on more and more, head to head with Canadian products.

We have had a period of grace where the low Canadian dollar means that we have not had in the last year and a half to two years a lot of cross border shopping. We have not had a large influx from the United States as far as dairy products are concerned. We cannot plan a long term agricultural policy based on the fluctuations of the Canadian dollar. We must be competitive. We have to be competitive and ready to go head to head with the Americans over the next 10 years.

There is no sense saying that it is not going to happen. It will happen. The low Canadian dollar best not lull us into complacency. We have to be ready for the Americans when they start aggressively challenging us. They are doing that as we speak. They are challenging us hoping to prove to us that NAFTA will supersede GATT.

We can take on the Americans. We can take on the world. We will do it all if we are willing to change. This bill is a change. We will support it because it shows that change is inevitable. It can be a good thing and I am happy to support it.

[Leon Benoit, Reform, Vegreville, AB]

Mr. Speaker, I listened with interest to the speech of the hon. member. He referred first to the length of my comments, by the way, which I really appreciated. I think he wanted me to expand on them a bit. Next time I will try to do that. As he was talking about being raised on a farm that had dairy cattle, I would like to ask him about the pastoral scene which must have surrounded milking time.

In his constituency over these past couple of years as he hears from dairy farmers, I would like him to relay some of the key concerns which he has heard from them.

I have had correspondence from the Mainland Dairymen's Association which is in the hon. member's riding. Its members were concerned with some of our comments on supply management. When I wrote them a letter responding to that they published the whole letter in their newsletter. I think they appreciated our point of view on it.

I would like to hear from the hon. member the comments he has been hearing.

[Chuck Strahl, Reform, Fraser Valley East, BC]

Mr. Speaker, I am happy to do that.

The hon. member would be right to call the Fraser valley area one of the more pastoral scenes in all of Canada but we will not get into that so much as we will to the comments that I hear from farmers in the Fraser valley.

I may have more milk producers in my riding than probably anywhere west of Ontario. There is a huge concentration of supply managed industries. Both poultry and dairy products are concentrated in the lower Fraser Valley for good reason, because of the weather and proximity to markets.

However, there are two or three things that farmers keep raising as major concerns as they head into the next century and try to plan their lives and plan for handing off the farm to the next generation.

First, they say they are willing to go head to head with the Americans or with anyone else as long as it is on a level playing field. Farmers keeping telling me: "If you make sure the Americans do not subsidize their product, if you make sure we have anti-combines legislation in place, if you can make sure the health standards are the same and so on, then we will compete with the Americans. But you have to help us in a couple of ways. The help we need is not just from the federal government but all levels of government, to make sure governments get their own houses in order. They have to get taxes down. They have to get regulation of bureaucracy in hand so that we do not have to fight both with the federal and provincial fisheries and the federal and the provincial environment offices as we go about our business".

They need to know that the changes coming are not just dumped on them overnight. They are willing to change. If they have to go bigger, they will go bigger. If they have to bring in new technology, they are happy to do that. However they cannot handle sudden cataclysmic change where they will wake up one morning and find sudden change, as the Canadian wheat farmers found that the Crow rate was gone. Government should have warned them.

If we do not warn the Canadian farmers and help them plan over the next few years during the reduction in tariffication they will come back and curse this Parliament and the government for not having raised the warning flags to show where they must inevitably go.

There is no sense saying that things will stay the same. Farmers want to change. They are, first of all, good business people. They use technology. They are using computers and innovative feed rations. They are using market analysis and playing to the consumer's choices. They can do all of that. Government must not pull the rug out from under them suddenly down the road and tell them they should have been told that something was coming.

The change that Bill C-86 proposes is good. It points the way to something that is GATT friendly. But the government must be honest with the farmers and say: This is the change and we must move this way.

There are also other changes. Let us be honest. The changes are here. Be forthright. The farmers just ask for the rules to the game and they will play. Do not change the rules suddenly 10 years from now.

[Jake Hoeppner, Reform, Lisgar—Marquette, MB]

Mr. Speaker, when we talk about dairy farmers I always have to take my hat off to these people. I realize how dedicated they are to their jobs. I grew up on a farm and my dad had about 20 milk cows. I know what milking is all about. I did it for about 15 years before I went out on my own.

I sometimes cursed those dairy cows. I did not know why God invented them because He said: "Work six days and rest one", but these dairy farmers never rest.

If we had a ball game planned for Saturday night or the middle of the week we knew we milked first. Six o'clock was milking time and the ball games were postponed. We also knew that if we came in late after the ball game at 5.30 we would be off to the pasture to fetch the cows and do the milking. There was no fooling around.

That continues today. The dairy farmer is on schedule. He cannot be five minutes late or five minutes early. Those cows have to be milked at the right time.

It sometimes amazes me when I look at another aspect of government legislation. Where is the overtime? Where is the triple time for working on holidays that these dairy farmers deserve? Everybody wants to have at least two days of the week off but the dairy farmer is dedicated. He is there seven days a week and probably 24 hours a day.

It is a real credit to the dairy farmer to see the product he has produced. There is no better product in the milk industry worldwide. The American milk products cannot compete in terms of quality. We as consumers must recognize that and reward the farmer for it somehow.

Yesterday when I heard the parliamentary secretary to the agriculture minister say we should give farmers the right to make decisions, I was wondering whether he had bought a Reform membership because that is exactly what we said throughout the election. The farmer should have the right to decide how to market his product and how it should be priced.

We have often been accused of being anti-marketing boards, anti-supply management. We have always said the farmer has the knowledge and expertise. He knows how to set the quotas, how to set the prices and what has to be done to keep up with the times.

During the election I experienced something surprising. I went through some of the Liberal propaganda saying that they would preserve article 11: "That has to stay. There is no other way. It will not be negotiated out of the World Trade Organization. Vote for the Liberals". The Conservatives said much the same thing, that they would negotiate supply management:

"You will have your quotas". I received a nice brochure in the mail from the Canadian dairy farmers saying: "Vote anything but Reform. These guys do not know what they are talking about when it comes to the dairy industry. Their saying we have to go to tariffication is a bunch of beans".

What has happened? Nobody in this House has taken off his or her hat to the Reform to say that we were right. We have it in black and white that we were right. We will say again to this House that the dairy farmer has to be protected and his livelihood has to be guaranteed. If we lose the dairy farmer we lose one of the most precious things this country has.

I must give credit to the Bloc members. When it comes to attending meetings where farm issues are being addressed they seem to give credit where credit is due. They are always concerned that agriculture is looked after, which is something we have failed to do in the west. We sometimes think we are independent and as farmers we will do everything on our own but it means working together. That is why I think these dairy farmers have to be complimented.

When I talk to dairy farmers now they are taking a different view of what Reform policy is. During the spring break I had a meeting with Manitoba's milk marketing board and a number of farmers. I was pleasantly surprised when they started talking about the problems of the high priced quotas. I was surprised when I heard someone say that something had to be done.

A quota of $3,000 per cow cannot work. We have to start realizing that financing a piece of paper at today's interest rates cannot be done. It is hurting us and we have to change. I must give the members on the Manitoba milk marketing board and the farmers who were present credit that they finally acknowledge this. Why do we have those huge quotas and the prices on those quotas? Because of government regulations. Because provinces tried to protect their territory. Innocently, without wanting to we got into a situation where this thing crept up into the system and the prices on these quotas became higher and higher.

Today we know that has to change. Consider a dairy quota of $3,000 per cow. That is $300 of interest a year that new farmers will have to pay. It is not feasible. They cannot do it and therefore the change will come. We can depend on the dairy farmers to make the right changes. They have the knowledge on how to restructure and to be competitive.

We are now in the 1990s but thinking back to the 1970s and 1980s, when it comes to dairy commissions, the government really is a dairy commission. It has been milking the public for so many years it has almost milked it dry. The consumers and taxpayers are getting very thin. If somehow the government does not use some of that BST on the taxpayers, they will all disappear. The BST that needs to be injected into consumers and taxpayers is that they have to pay less in taxes, produce a little more and become a little more competitive than some of the industries.

When talking of industries, I am talking about grain handling which is probably one of the main ones. I was surprised the other day when dairy farmers were before the subcommittee on transportation. They told us that they cannot survive as dairy farmers in Atlantic Canada because the feed costs are way too high. One gentleman told me that they were paying over $4 for a bushel of barley in Atlantic Canada. I asked how that could be because as a farmer in Manitoba, I barely get $2. Something is wrong somewhere.

Then I started to think about the hearings we had in Thunder Bay. The taxation on the grain handling system, the terminals, the property taxes alone are 25 times as high as down the road at Duluth. These costs are added onto the cost of a bushel of barley. I am wondering why the government does not realize this. When the National Transportation Agency told the minister a year ago that there should be no increase in pilotage fees, he overruled that. He gave the pilotage authority another 9 per cent increase.

Why, when we know that we have to start making things more efficient would that be done? Not only that but when the pilotage authority heard about that, it started charging these fees two months ahead of schedule. It ripped off the shippers another million dollars or so.

There might be a court case over it. The shippers want that money returned. What does the transportation minister say? The government will change the legislation and make it retroactive. The government will make the illegal thing legal. Is that the way we are going to build efficiencies into our system? Is that the way we want to run our country? If that is the way we are going to do it, then I am very sorry that we will not be able to compete with other countries. It is very important that the Liberal government along with the opposition start realizing that and keep on hammering with that.

It makes me wonder when I look at this bill whether everyone read the fine print. I hope they did because I know a number of red book promises were given to us during the election. One of them was the barley plebiscite that was supposed to be held to let farmers make decisions on how they wanted to market their barley.

It astounds me today when I read quotes in the paper that there will be a huge loss in the barley pool because we have been selling our grain to other countries at prices below the cost of production. When I see barley being shipped into the U.S. for about $60 a tonne less than we can deliver it to Atlantic Canada, I am wondering who it is we are really protecting. Are we doing

what we say we will, protecting our supply management, or are we really trying to destroy it?

If we are not going to look after our own producers, why worry about the others? It is astounding that we do not start realizing that we have to look at issues at home first before we start to address the problems of the rest of the world.

Looking at unfairness, a level playing field, the taxation, it is killing us. When I look at fuel taxes five miles away from where I farm and I can buy gasoline for almost half the price that I can in Canada and all of it is due to tax, something has to change.

The government said in the budget that it would cut back. What did it do? It put another 1.5 cents of tax on a litre of gasoline, which amounts to 6 cents a gallon. We are supposed to be having a level playing field. How can that be?

The issue which the Liberals do not seem to realize is that we have to solve our problems at home first before we can point our finger across the border at what the Americans are doing wrong. It does not make sense when I can pick up a bottle of propane in Hannah, North Dakota for half the price that I would pay two miles away in Snowflake, Manitoba. It just does not make sense. I do not know how the country will keep running with that kind of discrepancy.

It is not the production units which are bringing on the costs, it is taxation on taxation. When I look at the deficit and the fact that by 1997 we are going to be paying $1 billion a week in interest, how can we ever have a level playing field? Why has this come about? Because of mismanagement by previous governments and because previous governments would not listen to the grassroots people. They always told the grassroots people: "Vote for me. Everything is in order. We will make it better". Now we have ourselves in a mess which we do not know how to get out of, so we are starting to point fingers at other areas saying: "They are to blame".

I was in Saskatoon at the beginning of February when the dollar was plummeting. I talked to some financial people. That little town has about 180,000 people. Seventy million dollars went out of that little town into the U.S. for safe keeping because of the fear of our dropping dollar. How can our economy survive if that is the kind of fear we are instilling in the grassroots people of our communities, in the entrepreneurs and the developers? It just will not work. That is why I am concerned about dairy farmers. If something does not happen to provide them with a level playing field, whether it is supply management or free enterprise, they will never survive the same as grain farmers or other industries.

I met with some of the railway people during our subcommittee hearings. I heard them say that they pay $654 million more in fuel taxes, property taxes and sales taxes than their counterparts in the U.S. How can they compete? It all goes back to the primary producer. Eventually that is where the cost gets carried. That is why it is very important when we debate this bill that we really mean what we say, that we want to provide a level playing field. That is not to say that this farmer has to have the advantage of producing more or that he has to receive more for his product; it means that we have to bring the input costs down to what the input costs are in the competing areas.

When the American farmer travels on roads that cost half the taxation for fuel, when the American farmer has half the property taxes to pay and when the American farmer's income tax is 30 per cent lower than in Canada, how can we make a level playing field? Cut back government spending. Bring the deficit under control. Pay down the debt and let our farmers take control of their industries. I have never seen a farmer who could not handle his problems if he had a level playing field. That is what we have to work on.

When I look at the barley producers today taking a loss in their pool, if that is correct, how can we say we have a level playing field for the grain farmers? How can we say that they can produce a product for the dairy farmer so that he can survive? One goes hand in hand with the other. That is why it is so important that we provide a level playing field for the dairy farmer and the grain farmer.

It must also be there for the machinery salesmen, related industries and labour. Labour is a prime expense to everybody. When labour gets taxed to a point where it takes until the end of June to pay their income taxes and property taxes, they have to have a price to do it. This adds into the cost of production. This is what is creating an uneven playing field. I think that is what we have to address.

I am always amazed when we go to a store and pick up a product and say it is too expensive, it is unaffordable. I think this struck home to me a year or two ago when I was at an agricultural conference in Winnipeg. The head honcho from Cargill Grain was talking to us and he said: "You know, I never realized what is really going on in the food industry. I know what corn costs in the United States and I know what some of the other raw products cost. But my wife sent me shopping the other day and I picked up a box of corn flakes and went home and priced the corn that was in the box by the weight of it. Do you know what the farmer should have got if he had got the price? $1,800 a tonne. That was the price of the corn in the corn flakes box. Where did all the costs go? Not to the farmer. He is getting around $100. So eighteen times what the farmer got was added to the cost of that box of corn flakes."

How can people survive with those types of costs, even if you are a labourer? Something is wrong in our system. I look at the dairy farmer today, who is getting about 30 per cent out of a litre of milk for his costs. He has to produce a calf that has to grow for at least two and a half years before it starts producing milk. He has to build the barns, buy the equipment, do the work, and then get one-third of his costs just to ship the milk to the processor and to the shelf in the store.

Something is wrong and it has to be changed. I am wondering how we can do it. I do not mean to say that it has to just be done by the Liberal government. It also has to be pointed out by the opposition people that there is something wrong. If we do not do it we fail our commitment to this House. I am hoping we will take it seriously, especially when we look at the food products.

I was on a phone-in show one day with one of the agriculture people from Manitoba. They were complaining about a few things like the cost of fuel, which they thought should be brought down, and I agreed. One person said: "Well, as long as we have the production of fuel and hydro we will be all right". I asked the minister: "How are you going to keep on producing, Mr. Minister, if you do not have the farmer? How much oil can you drink to sustain life? Will it help you much?" I then asked the manager who was there from the Royal Bank: "How long can you chew on your silver coins and stay alive?"

These are the things we are forgetting. We have to start realizing where this country really comes from. It comes from the agricultural sector. This is why people came here, to earn a living, to raise a family, and to produce food for their neighbours. It is important that we start realizing that we have to supply our own needs and we have to be competitive on the world export markets because we are an exporting country. Once we can solve those problems and lower our cost of production, the price itself will determine how successful we are in foreign markets.

I appreciate this time to speak on these issues. I hope the hon. members have been listening, because when we fail to put food on our table we can see what happens in other countries. Two prime examples are the Soviet Union and the African countries. When agriculture gets abused and goes down the tubes, so does the country. I do not want to see that happen to this country. I hope this House can do something to provide level playing fields for the primary producers, whether dairy, grain, or one of the specialty products.

[Charlie Penson, Reform, Peace River, AB]

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.

[The Deputy Speaker]

Is the House ready for the question?

[Some hon. members]

Question.

[The Deputy Speaker]

The question is on the motion. Is it the pleasure of the House to adopt the motion?

[Some hon. members]

Agreed.

[Some hon. members]

On division.

(Motion agreed to, bill read the third time and passed.)

Cn Commercialization Act

[Herb Gray, Liberal, for the Minister of Transport]

moved that Bill C-89, an act to provide for the continuance of the Canadian National Railway Company under the Canada Business Corporations Act and for the issuance and sale of shares of the company to the public, be read the third time and passed.

[Joe Fontana, Liberal, Parliamentary Secretary to Minister of Transport]

Mr. Speaker, I am pleased to have the opportunity today to speak in support of Bill C-89, an act to commercialize Canadian National at the third and final stage.

This undertaking is an important element in ensuring the continued success of the Canadian transportation system. The geographic nature of the country means the efficient transportation of goods is intrinsic to our producers and manufacturers' being competitive in the global marketplace.

Specifically, our exporters who use rail transportation to get their goods to market cannot compete on the global scale unless railways are cost efficient and effective in delivering their goods.

Commercialization of CN is one of the government's efforts to ensure a competitive and viable rail system in Canada.

We are also moving to reform the regulatory framework governing transportation to ensure it helps foster competition and serve shippers well, which is what the Minister of Transport did today. By putting CN on a level playing field and removing the often costly public policy demands it has faced as a crown corporation, the government is working to ensure we will have a healthy national railway to serve Canadians throughout the country into the future.

The bill before us aims to allow the government to sell all of its equity in Canadian National as a public share offering. In order to do so the government had to make sure enough capital would be available to absorb this issue, expected to be the largest initial public offering in Canadian history.

Recognizing the Canadian equity market could not absorb all the shares on its own, the government sought to structure the bill to allow for the maximum number of Canadians to take part as well as foreign investor participation. To this end we have not limited foreign investor share purchases any more than those of domestic investors. However, in trying to maximize the interest in this share issue we also recognize the desire to ensure CN will not be controlled by a single individual, whether Canadian or otherwise.

Therefore in order to ensure a broad distribution of these shares a limitation has been placed on the shares which any individual or associated group of individuals may own at a 15 per cent level. This level of restriction is both low enough to ensure no hostile takeover is possible and high enough to provide investors with some influence on management actions and decisions should they desire.

The government felt it was important to include this restriction. However, let me assure the House that recognizing the negative effect which restrictions could have on value, we were very careful not to include any limitations which would prevent us from maximizing the return to the taxpayers of Canada in this share sale.

The obligation for CN to retain its head offices in Montreal and to operate in both official languages will not affect the value. We could not include any sort of operating restrictions on CN's going forward because any sort of requirement in this legislation for CN to maintain a specific operation would have dampened investor interest in these shares given the possible effect on the railway's revenues.

It can be tempting for some to ask CN to maintain certain of its operations while it is still a crown corporation. However, CN can no longer be used as a tool of public policy if it is to serve Canadian shippers well. The government's objectives must be met through transparent and direct means, not through entities such as railways.

In committee Bloc members had originally indicated support and exemption from the bill for the Quebec bridge. The government has indicated in the past this is a perfect example of the government and CN's being committed to the maintenance of that bridge which is part of an important transportation corridor for Quebec, Quebec City and the area. Obviously it needs to have public participation by way of the provinces.

CN has already committed $1.5 million to the maintenance of that bridge, key to its rail network. Seventy-five per cent of the traffic on that Quebec bridge is vehicular traffic, which is the responsibility of the provincial government. The president of CN has invited the provincial government to participate more fully in a equitable sharing of those expenses. Hopefully Bloc Quebecois members will use their influence with the provincial government to ensure it pays its part in maintaining that historic bridge which serves Quebec City and its population and which is also a monument to what we have built in Canada together.

CN has already sold its exploration division, the proceeds of which will be applied to debt reduction. It is important that CN be privatized in an attractive way to investors. It has extensive real estate holdings and other non-rail assets, some of which have considerable value.

However, the government has been advised that investors will be looking for pure rail play and will not pay for CN's non-rail assets. Accordingly, these assets which have considerable value will be transferred to the government for subsequent sale.

Some of CN's property holdings are marketable in the near term and will be sold to reduce the debt. The CN commercialization act provides the Minister of Transport with the authority to transfer selected properties from CN to the government prior to the sale offering. CN will receive credit at fair market value for these properties.

One of the difficult aspects of reducing CN's debt will be to achieve a balance between what must be done to ensure the shares of CN are marketable, what CN must have at a minimum to start off on a financially viable footing and what impacts there may be on other players in the industry, notably CP.

The railways are an important part of the transportation system in Canada. Commercializing CN using the guidelines of Bill C-89 will put CN on a level playing field with its competitors. In conjunction with regulatory reform the government has introduced today, we will ensure a viable rail system up to the challenge of helping Canadian shippers compete in global markets of the future.

The government supports the bill and we encourage members on the other side to do likewise because it is an important moment in Canadian history, allowing one of our crown corporations to become a full player in the private sector and give the country what it needs, efficient, affordable and reliable rail service.

[Paul Mercier, Bloc, Blainville—Deux-Montagnes, QC]

Mr. Speaker, the Bloc Quebecois agrees with the principle of the CN Commercialization Act, and, in particular, we appreciate the fact that provisions in it guarantee the bilingualism of the institution and the maintenance of its head office in Montreal. There are, however, six points on which we oppose the bill, and I will first list them for you, before I go on to examine them in detail point by point.

The six points are as follows. The first is the excessive power the bill gives the minister to use public funds to pay off part of

CN's debts and to give CN consideration for any assets outside the railway system the minister wishes to transfer.

Second, we do not agree with the fact that the bill does not protect the interests of CN workers once the company passes into private hands.

In the same vein, we disapprove of the fact that the bill makes no provision for the retirement fund of CN workers. We also cannot accept the lack of provisions preventing foreign takeover of the company.

Fifth, we object to the fact that, through clause 16, the SLRs, because of their connection with CN, could, in the future, come under federal jurisdiction, whereas they are generally under provincial jurisdiction.

Furthermore, we do not agree with the fact that there is no guarantee CN's successors will carry out their obligations to repair the Pont de Québec, which is an historical work and of economic interest. There is, moreover, no guarantee that CN's successors will do it any better than CN has done it itself since its acquisition by the federal government.

Here, then are the six points one after another. First, the bill accords the minister excessive power to use public funds in order to pay off part of CN's debts in order to make the company a more attractive buy and in order to give CN consideration for portions of assets the minister would like transferred.

We find these powers truly outrageous. They are to be found under clauses 6 and 12. I will not quote the whole clause, but only parts of it: "The Minister may, at any time, while CN is a Crown corporation, direct CN to transfer property, on such terms and conditions, including consideration, if any, as the Minister considers appropriate"-he is the one in charge-"and CN shall forthwith comply with the direction".

I will now read a short quote from clause 12, which goes along the same lines: "The Minister, with the approval of the Minister of Finance, may enter into an agreement or other arrangement with CN or any other person respecting the acquisition, holding, service, disposal or discharge of or other dealing with any debt or obligation incurred by CN", this is somewhat excessive, "and pay out of the Consolidated Revenue Fund, or from the proceeds of any sale of shares, amounts in respect of any agreement or arrangement referred to in paragraph (a) or (b)".

We were and are still very much opposed to these provisions, but our proposed amendments were defeated. Motion No. 8, which I drafted myself, was in opposition to them. It said that no such agreement regarding the disposal of debt or the transfer of property may be entered into unless the following conditions were met, and here are a few of the most important ones: not until the minister has laid before the House of Commons a proposal that the agreement be entered into, and the House has concurred in the committee report. This was aimed at giving the House, rather than the minister, the authority to approve this kind of transaction.

We also proposed that the transfer of assets be conditional on either the approval of the House or the favourable opinion of the auditor general to transfer to the minister assets with a value exceeding one million dollars, or to transfer to a third party assets with a value exceeding ten million dollars. These amendments were voted down. Therefore, the minister retains this outrageous power to use public funds as if they were his own.

The second point we take issue with is that there is no provision protecting the interests of workers in those corporations that would be purchased by the minister, or transferred to the minister to be sold later on. In the case of companies that have formed an organic bond with CN and receive orders from it in some cases, if that bond is severed, we will have to make sure they remain viable and the jobs are protected. Nothing of this sort is mentioned in the bill.

We do not want to presume the worst about buyers' intentions, but someone could buy a company just to close it in order to eliminate a competitor and then the jobs would be lost. To prevent this, my colleague, the member for Beauport-Montmorency-Orléans presented the following motion which was defeated. Briefly it said that the minister could not sell any subsidiary or part of the operations of CN, unless CN and the purchaser had given the minister written undertakings, in terms satisfactory to the minister, that all reasonable steps had been taken to ensure that it would continue for a reasonable period as a viable operation and that the interests of the employees affected by the sale would, so far as is practicable, be maintained after the sale. That motion was defeated, therefore the workers have no protection whatsoever.

Third, on a similar issue, we see nothing here that would protect the CN employees' pension fund and on that point my colleague, the member for Beauport-Montmorency-Orléans, also presented Motion No. 11 which naturally was also defeated. It said that the pension plan for employees of CN known as the CN Pension Plan shall continue to exist and be funded and be administered by the CN Pension Board in accordance with the rules in existence immediately prior to the coming into force of this act. This amendment to protect the pension fund was defeated.

Fourth, we object to the fact that there are no provisions which will really prevent foreign interests from acquiring the majority of shares and therefore the control of CN. To support what I was saying, I am referring to clause 8 of the bill, from which I will quote.

"8.(1)The articles of continuance of CN shall contain a )provisions imposing constraints on the issue, transfer and ownership, [-]to prevent any one person, together with the associates of that person, from holding, beneficially owning or controlling [-]more than fifteen per cent of the votes-''

This provision is excellent, in principle, except that in the laudable intention of not reducing unduly the number of potential buyers in a market which is already rather limited, there is a provision that allows various persons, individuals or corporations, belonging to a group, to take less than 15 per cent each, even if the total for the group is over 15 per cent, provided that they submit a statutory declaration saying that they will not act in concert with respect to their interest in CN.

This is a good provision and we agree with it as far as Canadians are concerned. However, we disapprove of its application to foreign interests, because we are not convinced that CN directors will be able to make sure that foreign persons will abide by their declaration. We proposed, in an amendment, that this provision be restricted to Canadians. Of course our amendment was defeated.

Fifth, clause 16 which I will quote provides, intentionally I imagine, that a local railway created with a financial contribution from a CN buyer would come under federal jurisdiction, even though the others are under provincial jurisdiction. Here is what clause 16 says:

"The railway and other transportation works in Canada of CN, of every subsidiary of CN and of every corporation formed by any consolidation or amalgamation of any two or more of those corporations are hereby declared to be works for the general advantage of Canada."

We do not accept the principle of federal jurisdiction over a local railway created in partnership with CN. Against that we proposed Motion No. 15 from which I will quote. This provision concerning federal control does not apply to:

(a) any activity of CN within a province that operates under an agreement that subjects the activity to the jurisdiction of that province, or

(b) any work, subsidiary or corporation owned by CN that is situated or operates only within one province.

So, this provision putting short line railways under federal control could only apply to short line railways operating in more than one province. This amendment was rejected, just like the others.

The last provision concerns the Pont de Quebec, in Quebec City. You know that when it was first built, this bridge was considered the eighth wonder of the world and that it has not only an economic value, but it is also very interesting in terms of heritage. It seems to me that the Minister of Canadian Heritage, the Minister of Transport and the Minister of Public Works should show some concern. I saw photos of the bridge in its present condition. In fact, it does not put people at risk, but it is really regrettable to let an asset such as this one fall apart.

The federal government, which was the owner, was responsible for it, and then it transferred it to CN which should have taken all the necessary measures to repair this bridge as quickly as possible. It did not do so.

We would have liked the bill to stipulate explicitly that the buyer of the part of the assets of CN including this bridge would have the obligation to repair it urgently within a specified time frame. This is the purpose of motion No. 14 which says:

That Bill C-89 be amended by adding after line 3, on page 8, the following new Clause:

"15.1 The Minister shall, no later than January 1, 1996, conclude an agreement with CN providing for CN to repair, renovate and maintain the Pont de Quebec in Quebec City and to commence work under the agreement no later than May 1, 1996".

It will come as no surprise that this amendment was rejected. So they were all rejected, and we are left with legislation that allows the minister to use federal funds as he likes, to have assets transferred to him or to pay debts incurred by the CN.

The legislation does not protect the workers. It does not protect the CN pension plan. It does not give any real and verifiable protection against external control. It does not protect the future short line railways from an eventual take over by the federal government if ever there were joint ownership with the CN. The legislation does not give any guarantee at all respecting the Pont de Québec. It is an antisocial measure that totally disregards the rights of this House; it is insensitive to the fate of this historical bridge and would make short line railways come under two jurisdictions, some being under provincial jurisdiction and others, under federal jurisdiction.

In spite of what I mentioned earlier, in spite of the fact that it does guarantee bilingualism and keeps corporate headquarters in Montreal, we find that it is a bad bill and we will vote against it enthusiastically.

[Jim Gouk, Reform, Kootenay West—Revelstoke, BC]

Mr. Speaker, when Bill C-89 was first introduced, I stated that I supported the intent but not the content. Since that time the bill has been through committee, witnesses have appeared, amendments have been offered but very little has changed.

Speaking first of some of the restrictions in the bill, I cannot see any business reason for the insistence that CN's headquarters remain forevermore in any one city. Contrary to the Bloc's rhetoric, this is not a Quebec issue.

The concern on this clause is that a private company should not be restricted to any one location no matter where the location

is. I would have the exact same concern if the restricted location were elsewhere. The issue is the restriction, not the location.

During debate at report stage the Liberals stated that the headquarters are in Montreal, they have always been in Montreal and it is reasonable that they remain Montreal. Therefore, this is a good restriction. If the last part of the statement is true, then I would ask why they need the restriction placed into the legislation.

Likewise another restriction requires that CN maintain the federal official languages policy as if it were still a crown corporation. This is not necessary. Again, the Liberals used the illogical approach that CN is already following the Official Languages Act and therefore would continue to do so in any event. If this is practical to do, CN will likely continue to do so. If it is not, then it should not be required to continue it, at least not indefinitely.

An alternative which I offered on both of these clauses as well as the clause dealing with share restrictions was to include a sunset clause which would have provided that these restrictions would have been in place when the new company was formed initially but cancelled after a five-year period. CN would then be guided by market needs instead of political needs. This seems to me to be a reasonable compromise between Liberal needs and marketplace common sense. Unfortunately the words reasonable and compromise do not seem to be in the Liberal vocabulary.

The third restriction in the legislation is restricting the maximum number of shares in CN owned by any one person or company to 15 per cent. Most committee stage interveners from the financial sector stated that there was no particular advantage to this restriction but it would not cause a problem in the short term. The obvious implication is that this would cause problems in the long term.

The 15 per cent restriction prohibits shareholders from joining together to either ensure that directors will follow the will of the shareholders or to remove certain directors who are not acting in the best interests of the shareholders of that company. For example if a significant number of CN employees decided to buy into the company and the total number of shares held by various employees totalled more than 15 per cent, at any time they all voted the same way it could be ruled by the directors as collusion and their votes would not count. This serves to entrench management which hardly can be considered good long term policy.

This also inhibits some company which wishes to bring a new management style to what may be a very tired and inefficient company from buying in. If this company is able to buy a sufficient number of shares to ensure that its new management policies can be utilized and brought forward it would hope not only to get a return on its investment in terms of the share value but also appreciation of the capital value of the company itself through the innovative approach that it may be able to bring into the company and through ensuring that this comes to fruition.

There are those who will argue that some other companies have similar restrictions and therefore this one is okay. I would answer that by pointing out that over time many mistakes are made. For example we used to have autocratic Conservative rulers in Ottawa. Voters, the shareholders of Canada, partially corrected that mistake. Now we have autocratic Liberal rulers who are a transitional mistake that we must put up with until the next election. Only then will we have government representatives who write legislation based on the people's needs rather than political needs.

As in the case of the other two restrictions, I tried to find a reasonable compromise by amending this section with a five year sunset clause. Once again those words were not in the Liberal vocabulary.

The next section deals with Canadian ownership. Bill C-89 does not provide any restriction to foreign ownership, nor in my opinion should it. Financial experts have stated that it would likely take an international share offering to find enough investors for the CN shares. If that is the case, so be it.

What if there are enough investors in Canada who want to be involved in the ownership of a sector of Canadian heritage that it could in fact be sold here? Alternatively, what if there are a number of Canadians who wish to buy some portion of the shares but are scooped by foreign purchasers who are quicker off the mark when the share sales begin? Do we not have some obligation to Canadians?

I proposed a very simple solution which would have seen the shares available to Canadians and Canadian corporations only for the first 90 days. In terms of international sales all this would have done is delay the sales to the rest of the world by 90 days. This seemed to be a very reasonable approach to protect the rights of the people we represent without unduly restricting foreign sales. Of course I am again forgetting that the concept of representation is just as foreign to the Liberals as the words reasonable and compromise.

The next problem in the legislation that I tried to deal with is the period of continuation of the rail line to Atlantic Canada. I proposed an amendment that would require CN not to sell or abandon the rail line between Montreal and Halifax for a period of 10 years.

The Halifax Port Corporation testified before the standing committee pointing out that the new CN Sarnia tunnel gives Atlantic Canada excellent access to the American midwest. As such, it believes that by investing in upgraded port facilities it will secure handling of new high capacity, deep draft freighters

and thus the economic future of the marine industry in Atlantic Canada.

The same transport committee that rejected my Atlantic amendment recently tabled a marine study which recommends that ports such as Halifax should be commercialized and must obtain their financing on the open market without government guarantees. I happen to agree with this but once again the word reasonable comes into play.

For many years the government has interfered with the marketplace through government ownership, subsidies and regulations. It is obvious that the current government has looked at Reform policies and the popularity that those policies have generated. While anxious to try to adopt some of our ideas and policies, the Liberals always try to change things enough so they can call the ideas their own and in doing so lose much of the common sense that our original policies contained. The Atlantic Canada situation is a classic example.

If the Halifax Port Corporation goes to the private sector for financing without government backing, the private sector is going to want some assurance that the all important rail link to central Canada and the American midwest will remain for at least long enough to ensure a return on investment.

The purpose of the amendment is not to protect the rail line forever but to ensure its operation for a transitional period of 10 years. This should give Atlantic Canada the opportunity to develop its marine operations to a highly viable degree after which normal private sector determinations of future CN operations will rule. If nothing is done, Atlantic Canada will risk losing new freighter business to the American east coast ports and the cycle of Atlantic Canada's economic dependence on Ottawa will continue. Perhaps that is the government's real strategy.

I believe that this amendment is in keeping with my position on the other restrictions in that I can live with the other restrictions as long as they have a time limitation. My Atlantic Canada amendment did have that time limitation.

The government does not seem to mind restrictions dealing with shares, language and headquarters locations, so why this sudden rejection of one that will promote economic independence in Atlantic Canada? Perhaps consistency is yet another word that is not in the Liberal vocabulary.

I raised at committee another point of concern by way of an amendment. I tried to ensure that the sale of CN shares would not be prone to problems from insider trading. The argument from the Liberal side was that this was a wholly unnecessary amendment because the securities act covers insider trading. However, it only covers insider trading once the shares have been transferred to the stock exchange. If the government chose to sell any of those shares in advance of transferring all the shares to the securities commission, this would not be covered by the provincial regulations.

We do have an undertaking from the government that it does in fact intend to transfer 100 per cent of the shares. Thus they will be covered by the provincial securities regulations. We will certainly monitor that closely and see that the government lives up to its word on this.

The biggest concern I have about Bill C-89 is the minister's unlimited power to reduce or even eliminate CN's debt. CN currently owes $2.5 billion. Financial and industry experts have testified that in order to be able to sell the shares of CN they must have an investment grade bond rating of BBB. To ensure this, the debt will have to be reduced to about $1.5 billion.

I introduced an amendment in committee to restrict the amount of taxpayers' money that the minister could use for debt reduction to only the amount necessary to reduce the debt to $1.5 billion after first reducing it by all available CN funds on hand and excessive cash flow requirements along with the proceeds of sale of all non-rail real estate assets. The Liberals rejected this as too restrictive in that the exact figure to provide a BBB rating is not known for sure. Unlike the Liberals, the words reasonable and compromise are in my vocabulary.

I changed and reintroduced my committee amendment at report stage. This time instead of using the dollar amount of $1.5 billion that the Liberals had objected to, I restricted debt reduction to the amount necessary to produce an investment grade bond rating of BBB after following the other reduction steps in the original amendment. Even though this amendment followed the very line of logic offered by the Liberals, they turned it down. It seems that the Liberals are still enamoured with the concept of a blank cheque.

Bill C-89 is the first time I have been involved in the new process of sending a bill directly to committee after first reading. The rationale for this according to the Liberal government was that if a bill was dealt with in committee before real debate in the House, it would be much more amenable to amendments.

This has clearly not been the case. The amendments I proposed in committee were reasonable and had the support of many of the interveners. One of my amendments dealing with the preservation of the Atlantic Canada port viability even received the support of one of the Atlantic Canada Liberal MPs but was defeated in a tie breaking vote by the committee Chair.

One of the arguments I found really interesting was brought forward by the hon. Parliamentary Secretary to the Minister of Transport on this part of the Atlantic amendment that I offered. It was the idea that what was I doing promoting a restriction on

private enterprise, my being one of these infamous free enterprise Reformers. As I stated earlier, I do not see this as a long term problem. It is a transitional thing from where the government has total manipulation of the marketplace through intervention, through government ownership, through subsidies, through special regulations.

I thought this was a very reasonable thing to bring forward. It was asked for by Atlantic Canada. It had the support certainly of the Atlantic members of Parliament I would think even on the Liberal side. It is extremely unfortunate that in raising this in committee I was not able to bring it up at report stage. It would have been very interesting to see the compromise struck with the Atlantic members of Parliament between serving their region or following the dictates of the Prime Minister.

It seems that the only reason for moving to committee after first reading, which is the new procedure that is now often being used and pushed, is to fast track Liberal legislation by eliminating much of the public debate. This is just another example of the current system of autocratic rule. It certainly does not seem to indicate that the new procedure really works the way it was meant to work.

This now leaves me to consider whether or not to support the overall intent of the legislation to privatize CN Rail, something I have spoken in favour of since before the last election.

The open ended restrictions dealing with share sales, the location of headquarters and language requirements are not insurmountable problems. After all, we are only two years away from the next election after which I am sure those problems can speedily be cleared up. I can adequately deal with the Atlantic port problem at that time also because we do not expect the Liberals to be in a position to block that any longer.

This then only leaves the problem of debt reduction. In an attempt to resolve this, I wrote to the Minister of Transport through the transport committee. What actually happened is that the minister appeared but he was only available for an hour and a half. When I asked him a 30-second question I got a five-minute answer which, very common to question period, did not answer the question at all.

I asked the minister if he would respond to written questions submitted to the committee while it was still sitting. He indicated that he would. I set out a list of 12 questions which I submitted through the committee and I received the answers while the bill was still under committee study. Therefore, those questions and the subsequent answers have become part of the record of the committee study on Bill C-89.

The response which I received from the minister indicates that he intends to pay off no more debt than is necessary to produce an investment grade bond rating of BBB. I do not know why the minister is prepared to commit to this on paper but not in legislation. I would have to guess that this is the Liberals' method of accepting reasonable measures from Reform while trying to hide what they are doing from the public.

On the basis of the minister's written, on record commitment I am prepared to support Bill C-89.

I would like to quote an excerpt from a letter. It reads:

Without a doubt, Canada requires a first-rate transportation system that is able to service every region. The federal government must play a role in maintaining and developing that network, yet it remains to be seen whether the damage wrought by the Conservative's policies of massive deregulation of the transportation sector can be completely undone. Their continued tolerance of rail line abandonments and consideration of proposals for the privatization of CN Rail have done nothing to clean up this mess.

How these pre-election statements do keep coming back to embarrass their authors. The author of that letter is the current Prime Minister. He wrote it while he was Leader of the Opposition. It was written to the hon. member for Moncton only days before the last federal election.

Looking at some of the items which were in the letter, the Prime Minister stated that Canada has to have a first rate transportation system, able to serve every region of Canada. If that was his intent only days before the election, why when he walked across the floor did he suddenly decide that we did not need to ensure the transitional preservation of the CN Rail line to Atlantic Canada?

He also talked about the damage of the Conservative policies of massive deregulation. This is particularly interesting on the very day that we are having the introduction of a bill which will see massive deregulation of the transportation sector. He talked about the tolerance of rail line abandonments when the bill deals with improving, enhancing, speeding up and simplifying rail line abandonment.

It seems that the more reasonable position taken by the Reform Party finally got through to the Liberals. We have been on record since before the last election that privatization is not only a good idea, it is essential. More recently I testified before the all Liberal task force on CN Rail, reiterating that CN must be privatized. I am glad they are finally listening.

I hope that if the Liberals intend to use more Reform policies in the future that they come to us first so we can help them get it right the first time. Bill C-89, for all its flaws, is still a big change from the Liberal position at the beginning of this term of Parliament and I am pleased that we were able to show them the way.

[Anna Terrana, Liberal, Vancouver East, BC]

Mr. Speaker, I am pleased to speak in support of Bill C-89, an act to commercialize the Canadian National Railway. This proposal is one part of the government's larger plan for ensuring a viable and competitive transportation system in Canada. It is also part of the government's intention to have the private sector operate in areas where it can do the job better than government. As the Minister of Finance said last February, our view is straightforward. If government does not need to run something it should not and in future it will not.

Under Bill C-89 all of the government's current shares in CN will be sold on the public market. All Canadians, including CN employees, will have the opportunity to buy shares of the railway.

During the hearings of the CN commercialization task force and of the Standing Committee on Transportation, concern was expressed by employees regarding their jobs and pensions. I am pleased to confirm that CN employees will continue in their current positions in the new CN and their pensions will be protected under the Pensions Benefits Standards Act.

Employees will also have a special opportunity to take a stake in CN through a standard stock savings plan which will be part of the share sale.

While we hope that many Canadians will be interested in buying a piece of CN to maintain its historical value, we cannot believe that the Canadian market is large enough to absorb the entire equity of CN. Therefore, recognizing the need for foreign participation in the share offering to ensure success, we have not limited the extent to which foreigners can participate any more than we have restricted Canadians.

The 15 per cent individual ownership restriction, which is included in the bill, treats all investors equally by limiting their ability to take over CN by putting a ceiling on how much stock they can own. This represents the balance between not jeopardizing the government's ability to sell all its shares which would be the case if foreigners could not buy the stock and ensuring that no individual will be able to take over CN.

The bill strikes a balance between the objective of maximizing return for the taxpayer by ensuring CN is viable into the future and the operating obligations some may wish to impose on the railway.

I am also pleased, contrary to the Reform Party, that the headquarters of CN will remain in Montreal and the Official Languages Act will continue to apply to CN employees. This is a bilingual, bicultural country. However, these are not changes from the way the railway currently operates and will not affect the saleability or price which will be received for CN shares because investors will expect CN to continue to operate in this manner.

We cannot, however, impose any serious obligations on CN that do not apply to its competitors if we are to ensure that CN can compete on a level footing with the other transportation sector players into the future, nor can we allow CN to become a private company without addressing its capital structure.

CN must be able to finance itself in the public markets in the future at a premium similar to what its competitors pay. For that reason CN is doing all it can prior to the public offering to reduce its debt. In addition, CN will transfer its real estate assets to the government for a fair consideration which will also pay down debts. Any further debt reduction will be the minimum necessary and will be undertaken with the goals of fairness and competitiveness in the rail industry and the transportation sector in mind.

I believe that Bill C-89 will enable the government to sell 100 per cent of its equity in CN, maximizing the return to the taxpayer and ensuring that CN can remain a viable, national railway serving Canadians long into the future from the Atlantic to the Pacific.

[Michel Guimond, Bloc, Beauport—Montmorency—Orléans, QC]

Mr. Speaker, it is for me a pleasure to rise at third reading on Bill C-89, an act to privatize the Canadian National. We all know that transportation is essential to the economic prosperity and quality of life of Quebecers and Canadians.

Transportation networks are the lifeblood of industry in Quebec and Canada. The existence of a transportation infrastructure often is a critical factor in the prosperity of a region and, as such, can be viewed as the foundation of all regional economic development.

So in that context I am happy to rise this afternoon, since Canadian National has been, if we remember our Canadian history, a decisive factor in the development of this country, which is called Canada, from coast to coast.

The analogy of the lifeblood I just used can be applied as well to any means of transportation, by air, rail or water. Any infrastructure, whether it be a port, an airport or a railroad, must be considered first of all as a means of regional economic development.

Obviously, one does not need to be a rocket scientist to know that a serious shift in our rail policy is needed. The Canadian government has had for too long a narrow vision of the country's rail system and has sought no alternative to the abandonment of short lines. Large railway companies are not well equipped to operate short lines and do not possess the necessary flexibility to do so in a cost effective way.

The Bloc Quebecois believes that many short lines can be operated on a cost effective basis by local interest railroads which are called CFIL in Quebec and short lines by our English speaking colleagues.

The review of the railway regulations, as tabled this morning by the Minister of Transport, should contain measures which will pave the way for short line railroads to take over line portions that large railway companies no longer want to operate. The government should take measures to help the development of short line railroads, such as giving loan guarantees, to save as much as possible of Canadian railways, particularly in the regions.

It is easy to understand that, once CN is privatized, the whole matter may be called into question and the delicate balance that had been reached in Canada and Quebec could also be destroyed because a privatised CN would not have the same priorities in terms of regional economic development as a crown corporation. We know that in our capitalist system, the first priority is money; corporations must make profits. This is why I am not convinced that the new CN shareholders would be as responsive to social needs. I am not saying that they will not have any sensitivity, but you know what I mean. When a corporation is run by the state, its corporate mission is to promote regional economic development, whereas a private company is not in business to promote regional development, but to make profits. That is what the Americans call return on investment.

The Bloc Quebecois agrees in principle with privatizing the CN. However, it considers that it should remain under Canadian control, since this company was built with the Canadian taxpayers' money. Moreover, the Bloc Quebecois believes that the government is responsible for ensuring that CN subsidiaries, that are not directly related to railway transportation and that will be privatized, will be able to survive. To that effect, some measures should have been provided to ease their transition. Unfortunately, Bill C-89 does not respond to these expectations.

Our party submitted in committee a list of amendments that were unfortunately-of course, this is the game of democracy-defeated by the Liberal majority. Obviously, we would have liked our amendments to be accepted. We remain convinced that they were realistic, logical and not made with the sole purpose of annoying the government or getting on its nerves.

We believed and are still deeply convinced, this afternoon, just before the passing of this bill, that our amendments were reasonable and serious. In the time that I have left, I would like to look briefly at some of the amendments that were tabled and, of course, defeated by the Liberal majority in front of us.

At the same time, I will look back on some amendments that were moved by my colleague from Kootenay-West-Revelstoke, because some of them are very reasonable. I think they illustrate very well his concern with respect for democracy. However, as a Quebecer, there are some amendments there that I find totally absurd and, once again, this is a demonstration of what we call Quebec bashing on the part of some of our colleagues in the Reform Party.

I enjoy making comments like this, because it livens up the House a little. I was under the impression that, after lunch, my colleagues in front of me or beside me were sleeping. Deep down, I must be a troublemaker. Under clause 8, the government will leave the privatized CN's head office in the Montreal Urban Community. Once again, just to show that I am open-minded, I recognize that this is a good clause which reflects the strong presence of the rail industry in Montreal for over a century. This clause corresponds to other bills' provisions. For example, when Air Canada was privatized, in 1988, its head office was to remain in the Montreal Urban Community.

It is therefore unfortunate that my colleague from the Reform Party, in his Motion No. 2, proposed to limit the effect of this clause to five years, after which the matter could be re-examined. I was anxious to make that comment to the House about the Reform Party's amendment. We also proposed Motion No. 4, stating that subsidiaries not directly related to the railway sector, for example, CanCar, an engineering firm, could continue to operate. This amendment mainly concerned AMF Technotransport, a company located in Pointe-Saint-Charles, in Montreal. There are 1,300 jobs involved. We wanted the federal government to continue to assume its responsibilities, and to take sensible measures so that the subsidiary could keep operating for a while, long enough to recover its profitability and financial viability. Unfortunately, this amendment has also been defeated.

I also wanted to speak to amendment No. 8, proposed by my colleague for Blainville-Deux-Montagnes, and requiring the minister to obtain the House's agreement before arrangements are entered into in order to reduce CN's debt. As you know, there were increasingly persistent rumours that the minister would buy CN assets like the CN Tower or some other assets at a higher price than their real market value, in order to help CN bring its debt down to $1.5 billion. Obviously the Bloc Quebecois opposed such a buyout, which would amount to a subsidy to those buying CN.

In addition to Motion No. 8, dealing with operations concerning the debt, Motion No. 9, also put forward by my colleague for Blainville-Deux-Montagnes, dealt with operations concerning assets. In fact, with the latter amendment, we were asking that operations concerning CN assets be approved by the House.

As long as the government remains a majority shareholder in CN, any transfer to the government of CN assets with a value exceeding $1 million and any transaction between CN and a private party with a value exceeding $10 million must be approved by the House. This amendment would allow the House to assess the validity of the transaction and determine whether it is to the benefit of taxpayers.

It is first and foremost a matter of democracy. Unlike the members of the other place who are political appointees-I do not want to comment on people appointed by the previous government to the other House-we have been elected democratically and we do not have anything to learn from any member of the other place. Since ours is a democratic assembly, we are asking that the rules of democracy be adhered to and that the government come before the elected members to have its decision approved.

Another motion in amendment put forward by my colleague for Blainville-Deux-Montagnes, Motion No. 10, is an alternate motion to Motion No. 9. It would require that transactions with respect to assets be referred to the auditor general, and that his report be tabled in the House.

Once again, the purpose of this amendment is not to annoy or irritate anybody, but to have openness prevail, so that everything can be above board and out in the open. That is why we suggested that the Auditor General of Canada be involved, because he is a trustworthy official whose mandate is to protect public moneys, and because his credibility has never been questioned.

Another of my amendments, Motion No. 11, was meant to protect the CN employees' pension plan. Regrettably, Bill C-89 still does not contain provisions to prevent any changes in the CN pension plan after privatization.

Our party has already shown its commitment to workers at the time of the rail strike, when we sat over the weekend. We were the only ones in this House who fought for the rights of the workers. Therefore, it was important and crucial for us that CN employees get assurances concerning their pension plan. What will happen with this plan? Unfortunately, our amendment was defeated. The government did not see fit to accept our suggestion.

We also moved another amendment, Motion No. 14, concerning the Pont de Québec, an issue which is very important for me and my colleagues in the Quebec City area. Again, as I said the other evening, during the second reading stage, it is a shame that the Liberal members on the Standing Committee on Transport made light of the whole issue of the Pont de Québec. They really made it sound trivial.

I do not want to seem chauvinistic or presumptuous, but I am convinced that the hon. members who have visited the magnificent region of Quebec City and the surrounding area were able to realize that the Pont de Québec is really a world heritage jewel.

When the bridge was inaugurated by Sir Wilfrid Laurier, it was obvious in the mind of Laurier that this fine example of architectural engineering should be preserved so that future generations would be able to admire it.

It is unfortunate that, because of CN's carelessness, this world-class jewel of architectural engineering is deteriorating. It is unfortunate that, in order to maintain this infrastructure in a safe and aesthetically pleasing manner, we need to invest between $41 million and $45 million. The Liberal members of the transport committee, as I said, made light of the whole issue. Here are some examples of the comments they made during the committee's hearings: "As the federal government, we will not start preserving just any old bridge at the end of some concession, in some village in Canada. We will not start preserving just any short line railway. We will not start preserving every old rail station about to fall down". We are talking about the privatization of CN.

In making this comment, I do not mean to insult Canadians and Quebecers who happen to have an old bridge at the end of their concession road, but I do want to put things in perspective. To compare the Pont de Québec to any part of a railroad line that is no longer in use is to show a lack of knowledge of this architectural jewel. What can I say? The bridge is located in Quebec City and spans the St. Lawrence River. I know that, for some people elsewhere in Canada, just thinking that this bridge is located in Quebec City sets their teeth on edge, but there is nothing we can do about it.

I see that my time is running out. I would just like to say that this coalition to save the Pont de Québec has many members. In other words, the member of the Bloc Quebecois is not the only defender of the bridge. There is also that member's regional caucus, the city of Quebec, the city of Sainte-Foy, the Fédération des caisses populaires, RCMs, the Chambers of Commerce, the Auto Club, and many more.

In conclusion, we are disappointed that Bill C-89 will be adopted in its present form even though we have put forward very realistic and feasible amendments.

[The Speaker]

It being 2 p.m., pursuant to Standing Order 30(5) the House will now proceed to Statements by Members pursuant to Standing Order 31.

Communities In Bloom

[Jane Stewart, Liberal, Brant, ON]

Mr. Speaker, as we speak communities large and small right across the country are sprucing up, prettying up and greening up in hopes of being selected the most beautiful in the first annual Canadian communities in bloom competition.

The idea for a national beautification competition comes form Canadians in Quebec who want to share and celebrate the beauty of our towns and villages. Now with a board of directors and sponsors like the national capital commission, the competition is under way.

The city of Brantford in my riding has been selected to participate in the category of communities with a population under 100,000. The odds on favourite is Brantford because of the quality of our parks board, the involvement of local organizations and individual Brantfordtonians.

I know all hon. members will join with me in wishing all the participants well. We will see them in Ottawa in September when Canada's most beautiful bloom-in communities are selected under the first annual Canadian communities in bloom competition.

Culture

[Réal Ménard, Bloc, Hochelaga—Maisonneuve, QC]

Mr. Speaker, has the heritage minister been relieved of his duties or has he resigned from his position without informing the public and this House? There are several indications that this might be the case.

The minister was unable to attend the joint convention of the Canadian Museums Association and the Société des musées québécois at a time when the museums are waiting to hear about federal museum policy. For reasons that are a complete mystery, he did not delegate a replacement.

The cultural community is worried and offended by this silence on the part of the federal government. As far as culture at the federal level is concerned, it is the policy of the empty chair. Left vacant by a minister in name only, this chair is now occupied by the Minister for International Trade when it comes to film distribution, and by the Minister of Industry in the case of orders with respect to satellite broadcasting.

It is high time that the heritage minister handed the job over to someone really able to stand up for cultural issues. When will he be giving up his limousine?