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.