Madam Chair, before I begin I would like to congratulate Yukon farmers for the tremendous work they do and the diversity and quality of their products. I am very proud every year to open the agricultural fair where these products are displayed. They are quite unique compared to what people might think of this area. This area is actually growing in production because of global warming and the opportunities to have a wide variety of very high quality products.
Seeing as the minister is here this evening, I would like to thank him and the department for the tremendous support that our agricultural community receives. It makes it a very exciting sector in our economy.
I am pleased to take part in this important debate this evening and to reaffirm the government's strong commitment to our supply management system, which we have been seeing for years. Supply management has been the choice of dairy, poultry and egg producers over the past three decades and has proven to be a very successful choice for these industries. It is one of the hallmarks of Canada's domestic agricultural policy and something of which this government is very proud.
Supply management is a uniquely Canadian agricultural commodity system and its benefits are many. It offers market stability and predictability to producers and consumers alike. It enables producers to secure a fair return in the marketplace in exchange for supplying higher quality, value added products to consumers.
Nevertheless, our supply management system is not without its share of challenges. Indeed, supply managed producers and dairy producers, in particular, are facing some very real and difficult challenges from a number of different sources. Some are domestic in origin, such as technological developments in the dairy sector, high quota values and limited growth potential in domestic markets.
Others are international in scope, including the fact that the low cost global competitors are looking to enter the domestic market in spite of current tariff levels. Still others stem from the very real pressures that Canada is facing in the World Trade Organization's agricultural negotiations. For example, in the area of market access our overquota tariffs are under pressure as all other WTO members are calling for tariff reductions on all tariff lines.
On domestic support, disciplines on product specific support will constrain Canada's approach to market price support for the dairy sector. In the area of export competition, the elimination of export subsidies will almost completely bar dairy producers from entering export markets. Taken together, we are facing the possibility of a smaller supply managed industry with lower returns for our dairy, poultry and egg producers.
Our supply managed producers are very aware of these challenges and the impacts they could have on their operations and on their future bottom lines. One of the key pillars of Canada's supply management system is the management of domestic supply through import controls. Regulated levels of imports enable governments to predict future demand and then ensure that domestic production levels satisfy most of that demand.
However, given the domestic and international challenges I have just outlined, supply managed producers, especially dairy producers, are becoming increasingly concerned about what they deem “to be the erosion of supply management's important control pillar”. In response, they have pressed the government hard to protect their interests. The Dairy Farmers of Canada have been pressing the government to initiate a GATT article XXVIII action which, if successful, would allow Canada to negotiate the creation of new tariff quotas or TRQs on specified products.
Specifically, the Dairy Farmers of Canada has called for the negotiation of new TRQs on four specific dairy ingredients: casein, caseinates, butter oil-sugar blends and milk protein isolates. Given the increased levels of these imports, they have affected almost 50% of the ice cream market and 20% of the cheese market.
Supply managed producers have also been calling for fairness and equity in the rules that define the global trading system. For too long they and many other Canadian producers have been disadvantaged by inequities that were entrenched in the WTO agreement on agriculture and the unfairly high levels of support and protection offered by a small handful of other countries.
I want to stress to the House that the Government of Canada has been listening to the concerns of supply managed producers. Indeed, we have been doing more than just listening. The government has been working hand in hand with Canadian producers to address these challenges and to begin considering possible short and long term approaches to sustain their prosperity going into the future.
It is true that the government has informed the dairy farmers of Canada that from a strategic perspective this is not the right time to take an article XVIII action given the intensity of the WTO agriculture negotiations and the fact that the shape of the potential outcome is not yet clear.
It is the government's view that Canada can best defend the interests of dairy producers and therefore work to minimize the pressures that they are facing by retaining our credibility and influence in the negotiations.
Other key WTO members have warned Canada that initiating an article XVIII action at this juncture in the negotiations would seriously undermine our credibility and influence. The government position on this matter has been personally conveyed on a number of occasions to the dairy farmers by the Minister of International Trade, the Minister of Finance and the Minister of Agriculture and Agri-Food.
At the same time, the DFC has been assured that the government will continue to assess its requests in light of ongoing developments in the WTO negotiations as well as other domestic and international factors related to this issue.
That said, the government has been doing other things to address the concerns of the dairy farmers of Canada. For example, the government will appeal the Canadian International Trade Tribunal's ruling on tariff classification of a milk protein isolate to address concerns with increased imports of milk proteins in various forms.
The government will also make efforts to monitor the level of imports of similar milk protein products to assess any possible trends and we will work with the Canadian Dairy Commission to carefully monitor any increase in the size of the skim milk powder surplus. Furthermore, the government has been working with the dairy farmers to address their concerns with labelling regulations and regulatory standards.
In regard to the WTO agriculture negotiations, the government has been working very closely with all Canadian producers to press hard to achieve a more level international playing field, one characterized by clear, fair and more equitable trading rules. A more level playing field is truly in the interests of all Canadian producers as it will help them to do business effectively in an increasingly globalized economy.
At the same time, we will continue to strongly defend the ability of producers to choose how to market their products through orderly marketing structures like supply management.
Canada is a real player in the WTO agriculture negotiations. We are working with a wide range of countries to position our ideas as the most effective means to achieve fairness and equity in the global trading system.
We have been recognized for our ability to bring practical and credible ideas to the table to move the negotiations forward and have been doing so in a way that aims to achieve a positive outcome for the entire agrifood sector.
I am proud to tell the House that many of Canada's key ideas and approaches are guiding the way in which the negotiations are unfolding. For example, Canada's idea that those countries that subsidize the most should make the largest reductions has been embraced by all WTO members and is now guiding the discussions on how to reduce trade distorting domestic support.
The July 2004 framework on agriculture, which is the road map for the negotiations, also reflects Canada's proposal that market access improvements for sensitive products, like our supply managed products, should be made through combinations of tariff reductions and tariff quota expansion to offer flexibility for countries to accommodate their respective domestic policy approaches.
We can see that the negotiations are pointing in the direction of a more level playing field and moving in the direction of clear and fairer rules that address some of the inequities that our producers have faced since the Uruguay round.
In closing, I want to reiterate that the government fully recognizes the seriousness of the challenges facing our supply managed producers. More important, I want to stress that the government will continue to do all it can to respond to them. The government has and will continue to partner with our producers to seek short and long term solutions to ensure the viability and sustained prosperity of our supply management system.