Mr. Speaker, I am pleased to introduce at second reading Bill C-26 which would amend the Canada Grain Act and the Agriculture and Agri-Food Administrative Monetary Penalties Act and repeal the Grain Futures Act.
This initiative reflects our government's willingness to meet the express needs of the grain industry. The industry has had to evolve in order to deal with many challenges. Legislation must also evolve to ensure that industry's efforts to meet these challenges are not hindered by arcane government regulation.
I will begin by placing this bill within the framework of our government's priorities. Agriculture and agri-food is a key sector of our economy that offers tremendous opportunities for Canadian producers and processors. This industry is growing at an impressive rate. Our exports continue to expand, as does the domestic market for our products.
Producers are generally optimistic about the future, investing in and diversifying their operations in order to benefit from new opportunities.
The main objective of this government is to build a competitive and innovative economy that will create even more jobs and more economic growth for Canadians. One of the ways to accomplish this objective is to work co-operatively at the grassroots level to ensure the views of stakeholders are incorporated at the early stages of discussions on policies surrounding new and emerging issues.
We are committed to a policy of full consultation with both the agri-food industry and the provinces. We endeavour to be responsive to the changing needs of the industry. Together we are working to develop strategies for achieving this goal.
This is particularly significant in light of our recently announced rural impact test, a policy which commits federal departments and agencies to consider the impact on rural Canada when formulating their policies, their programs and their services.
This policy is part of our government's ongoing commitment to build stronger rural communities by ensuring that federal policies and programs support community development.
We believe that the bill before the House is another example of our commitment to rural Canada. It will allow easier access to the special crops processing industry and will therefore have a positive impact on rural employment opportunities.
The federal and provincial governments must also work together to avoid, wherever possible, overlap and duplication so that we can better serve Canadians.
Having placed this bill in the context of the government's priorities, I would now like to review the major aspects of this legislation.
The provisions of this bill were developed and recommended by the Canadian Grain Commission, the organization responsible for administering both the Canadian Grain Act and the Grain Futures Act.
Under the Canada Grain Act the commission is responsible for regulating grain handling in Canada and for establishing and maintaining standards of grain quality.
Under the Grain Futures Act the commission regulates grain futures trading in Canada by monitoring the activities and transactions carried out at the Winnipeg Commodity Exchange.
I would be remiss if I did not acknowledge the valuable contribution that producers and other members of the grain industry have made to this bill. These amendments are the result of two separate sets of consultations throughout the industry.
I will outline this consultation process so that members can share the confidence I have that this legislation represents the needs, the expectations and the views of the majority of stakeholders from all sectors of the grain industry.
In 1995 Bill C-51, an act to amend the Canada Grain Act, was being moved through this House. At that time there was considerable interest on the part of members to deal with the concerns of the special crops industry, especially those in the industry who wanted to become licensed special crops dealers. Therefore, it is with great pleasure that I talk to this bill today.
The grain industry categorizes crops either as standard crops or as special crops. The standard crops are wheat, barley, oats and canola and these make up the bulk of agricultural production on the prairies. Special crops production on the prairies is considerably less than standard crop production but includes a wide variety of agricultural products.
I would like to begin by outlining the consultation process concerning the proposed special crops amendments. The first round of consultations was undertaken by a panel of producers. As part of the special crops initiative funded by the commission, members met with a variety of producers and industry organizations to assess their regulatory needs and to make recommendations to the commission.
In November 1994 the Canadian Grain Commission circulated a discussion paper to individuals and companies involved in the special crops industry on the prairies. The commission met with individual producers and their organizations, processors, grain dealers and representatives of elevator companies. The purpose of the discussions was to chart a new course for licensing and security in the special crops industry in western Canada. A consensus on licensing and security emerged from those consultations.
In March 1995 the commission released a report reflecting that consensus. Following the release of the report, the commission provided support to an advisory committee consisting of producers and dealers representing the principal special crops organizations as they developed the basis for this legislation.
Let me add for the benefit of members who represent ridings in eastern Canada that the special crops provision of the bill will apply to crops named in the proposed legislation and grown in western Canada. Persons and companies dealing in eastern special crops will not be affected by the legislation.
The special crops industry plays a significant role in the development of the rural economy of western Canada. The bulk of the country's special crops production comes from the three prairie provinces.
Statistics Canada figures indicate that special crops production on the prairies increased by about 300% in the last 14 years. In 1984-85 production was approximately one million tonnes. In 1997-98 this figure has climbed to approximately three million tonnes. The special crops market continues to expand. Both large and small players are contributing to its impressive growth.
The special crops industry exports a considerable amount of product. In 1996-97 the figure was 1.3 million tonnes. This represents about 5% of total exports.
The western Canadian special crops industry has become one of Canada's export success stories. Naturally, domestic seed cleaning plants are anxious to get into the business of buying and marketing. On the other hand, producers want to expand the number of outlets for their special crops. Moreover the entry of new players will stimulate innovation and the development of new markets.
The Canada Grain Act amendments relating to special crops involve three major elements: a voluntary producer insurance plan; affordable licensing for special crops dealers; and a special crops advisory committee. The first element of the proposed legislation is the financial protection that will be available to producers under a voluntary insurance plan. If approved, the amendments will provide financial protection to producers who are prepared to pay for it and will be simple to administer.
I emphasize that the plan is voluntary. This was a key recommendation of the majority of producers consulted and their representative organizations.
In consultation with a special crops advisory committee, the Canadian Grain Commission will manage the producer funded insurance plan. Producers can choose whether or not to participate.
Only those producers who are members of the producer insurance plan will be eligible for compensation if a licensed company they deal with fails to meet its payment obligations. Producers will be considered members of the plan and eligible for coverage unless they notify the Canadian Grain Commission in writing that they want to opt out. Producers who do not want to belong can opt out prior to the start of the crop year.
All producers will pay a levy when they sell special crops to licensed dealers. The initial levy will be a small percentage of the value of grain delivered. It is expected that the initial levy will be 0.038% or 38 cents per $100 worth of grain. This works out to between 50 cents and $1 per acre depending on crop price and yield. It may be adjusted up or down in accordance with the level of losses and the costs of administration. Producers who have opted out of the plan will at the end of each crop year receive a full rebate on the levies collected from them.
The plan has administrative benefits for companies. The dealer takes a levy for each delivery, whether the producer is in the plan or has opted out. For the industry this keeps paperwork to a minimum.
Special crops dealers will remit levies to the Canadian Grain Commission, the agent for participating producers. After deducting an administration fee, the commission will forward the premiums to an insurer. The Canadian Export Development Corporation has agreed to act as the insurer for the plan. The insurer and the agent can be changed in the future if the special crops advisory committee recommends it. I will talk about this committee in more detail shortly.
Prospective licensees will have to demonstrate financial ability to receive a licence. This protects producers and ensures the viability of the insurance plan. It is expected that most producers will participate. To encourage their participation, startup funding of $500,000 will be made available from the Government of Canada to assist in implementing this new program. The insurance plan will be self funded after initial startup.
The second element concerning proposed changes to the Canada Grain Act is affordable licensing for special crops dealers. The handling of special crops is regulated under the Canada Grain Act which was initially designed to regulate the bulk handling of cereal grains. The licensing and security system in place however was not designed to serve the unique needs of special crops dealers.
Under the current system, buyers and sellers of Canadian grain, including special crops, must be licensed by the Canadian Grain Commission. They must also provide security for producers by posting a bond or letter of credit. Security protects producers if licensed elevators or grain dealers default on their payment obligations.
Unfortunately for small companies in the special crops industry, the security that must be provided is expensive and depletes their available credit restricting their ability to buy special crops. Security requirements are tough on small companies and prevent the special crops industry from developing.
About 800 seed cleaning plants operate on the prairies. They are currently exempt from licensing, provided they do not buy and sell grain. Only a few operators of seed cleaning plants are currently licensed.
It is not uncommon in this growing industry for a seed cleaning plant to act as an agent for an established licensee. This will not change in the future. However it would be easier for them under the provisions of the bill to evolve to the next level, to actually become a grain dealer buying and selling special crops.
More special crops dealers would become licensed if they could satisfy the licensing requirements. Because they cannot, they are constrained in expanding their operations. Furthermore they are not in a position to offer the full range of services demanded by producers and provided by their licensed competitors.
Unfortunately there have been cases where dealers have ignored the legislation and bought grain without a licence. This places producers at significant risk of not being paid if the dealer defaults on payments because no security has been provided to the Canadian Grain Commission.
For Canada to make further gains in the special crops market, a regulatory environment is required that allows companies, both large and small, to participate. The proposed legislation before the House this morning would reduce entry barriers for special crops dealers by making licensing more affordable and making the licensing requirements easier to satisfy.
If approved, it is expected that the new special crops provisions will initially apply to the following special crops: beans, buckwheat, corn, fababeans, lentils, mustard seed, peas, safflower seeds, soybeans, sunflower seed and triticale. This list could be expanded or reduced if the special crops industry wants this to happen.
A special crops dealer will be defined as an elevator operator or grain dealer who buys only special crops from producers.
An amendment to the Canada Grain Act will create a class of licence called a special crops licence. This licence will give companies the right to use official grade names when buying and selling special crops.
Individuals and companies that also buy and sell standard crops such as wheat, barley and canola will continue to be licensed under current provisions of the Canada Grain Act. They will not have to obtain a special crops licence to buy and sell special crops but will have to collect levies from producers for a producer funded insurance plan. However, the security that companies currently post in the form of bonds and letters of credit to cover their liabilities to special crops producers will be reduced correspondingly.
Finally, special crops dealers will not have to post security to cover payment obligations to special crops producers. This will remove a major barrier to owners of small companies who want to participate in the special crops industry.
The new program will encourage companies currently operating without a licence to apply for one. By making licensing affordable and by eliminating costly security requirements, this proposed legislation will allow the number of licensed special crops dealers to increase. Both large and small dealers will operate on a level playing field.
The third element concerning proposed changes to the Canada Grain Act is the establishment of a special crops advisory committee. The committee will be appointed by the Minister of Agriculture and Agri-Food. It will be composed of a maximum of nine members representing special crops producers, processors, producer-processors, and exporters. Each prairie province and sector of the industry will be represented on the committee. The majority of the members will be producers.
The special crops advisory committee will advise the Minister of Agriculture and Agri-Food on the operations of the special crops program. The committee can recommend to the minister that the administrator of the insurance plan or the insurer be replaced. It can also make recommendations on the designation of new crops and on other issues referred by the minister.
I will now talk about our proposed amendments to the Administrative Monetary Penalties Act, AMPA, so that AMPA applies to the Canada Grain Act. The Administrative Monetary Penalties Act is legislation that was enacted in 1995. It provides a broad range of enforcement options by allowing monetary penalties, fines, to be levied for non-compliance with regulations. The Fertilizer Act, Plant Protect Act, Health of Animals Act, Pest Control Products Act and Feeds Act are subject to this innovative legislation.
The main enforcement options now available under the Canada Grain Act are the suspension and revocation of licences and prosecution. However, those sanctions have the impact of stopping business operations either temporarily or perhaps permanently. Because their impact is so serious, they are seen as a sanction of last resort, not as a normal regulatory enforcement tool. The current options are also costly, lengthy and mean that strict procedural requirements must be followed.
With this proposed change, the Canadian Grain Commission will have a broader range of measures to enforce its regulations.
An important feature of AMPA is that it allows for the issuing of warnings and negotiated solutions to non-compliance. Administrative monetary penalties can be reduced to zero if a violator takes immediate corrective action to comply. In this way AMPA emphasizes compliance, not punishment.
I would now like to move on to talk about our initiative to repeal the Grain Futures Act.
As members may be aware, the Grain Futures Act is federal legislation that was created in 1939. Under the act the Canadian Grain Commission is responsible for regulating grain futures trading in Canada which is done solely at the Winnipeg Commodity Exchange with trade clearing done by Winnipeg Commodity Clearing Ltd.
In the spring of 1997 the Canadian Grain Commission completed its consultation process with nearly 70 stakeholder groups and companies involved in the trading of grain futures and options. The purpose of the consultations was to determine the extent of industry support for a proposal to repeal the Grain Futures Act. These consultations were triggered by a recommendation made by the board of governors of the Winnipeg Commodity Exchange in 1996 calling for a change in regulator from the Canadian Grain Commission to the Manitoba Securities Commission. This recommendation stemmed from the exchanges plan to introduce trading in non-grain products.
There is wide agreement that the Manitoba Securities Commission has the appropriate statute to effectively regulate all trading activities at the Winnipeg Commodity Exchange. The province of Manitoba has enacted the Commodity Futures Act, giving the Manitoba Securities Commission the mandate to regulate grain futures trading. The legislation is expected to be proclaimed very soon.
Several strong messages were received as a result of the consultation process. They included the following. The current Grain Futures Act is outmoded and no longer meets international and domestic regulatory standards. It does not have the elements or scope to be an effective regulatory tool for the futures industry today. The act provides for only the regulation of grain futures contracts. It does not provide the authority to regulate all trading current and proposed at the Winnipeg Commodity Exchange.
This key prairie institution wants to get involved in non-grain contracts such as hogs. Under the current legislation for non-grain commodities the WCE would be subject to provincial legislation and regulations. Transferring regulatory responsibilities to the province of Manitoba will eliminate the unsatisfactory prospect of the Winnipeg Commodity Exchange being subject to regulation by both the province of Manitoba for grain and non-grain contracts and by the Government of Canada for grain futures contracts. This scenario is inconsistent with our national objectives of avoiding overlap and duplication of federal and provincial activities.
The province of Manitoba's regulatory body, the Manitoba Securities Commission, has the legislation to provide the regulatory oversight that meets national and international standards. The Manitoba legislation features comprehensive regulation of all aspects of futures and options trading from the point of order taking by futures commission merchants to the transactions on the floor and the clearing of trade. In contrast the Grain Futures Act provides for only the supervision of grain futures trading and the clearing process.
The Manitoba Securities Commission has also indicated that it will acquire additional expertise in grains futures by hiring experienced staff, giving it the necessary resources to do an effective job.
The Canadian Grain Commission intends to maintain an ongoing liaison with the Manitoba Securities Commission through a memorandum of understanding. Preliminary discussions have already been held. This process will ensure that a formal mechanism is in place to communicate grain industry concerns and to ensure harmonization of trading regulators with grain handling regulations.
I would like to conclude by stating that this proposed legislation is our government's response to the express needs of the western agriculture industry. If passed, the legislation would benefit the special crops sector by recognizing and addressing the following principles: that security should be available to all producers who are prepared to pay for it; that their participation in an insurance plan should be voluntary; that the regulatory system for special crops should encourage development of the industry and not impede it; and that the program should be affordable, simple to administer and should not impose any additional costs or bureaucracy on any sector of the special crops industry.
Repeal of the outmoded Grain Futures Act would recognize the following principles: that the federal government supports the introduction of a comprehensive, contemporary regulatory framework that will allow futures and options trading on the Winnipeg Commodity Exchange to develop new contracts and that dual regulations should be avoided or eliminated.
The principal amendments before the House represent what the industry and producers believe are necessary for the future growth of the agricultural sector. I recommend that members of the House support Bill C-26.