Mr. Chair, a little over a month ago, the Fédération des producteurs de lait du Québec launched a widespread campaign to raise awareness with MPs from Quebec about the importation of subsidized artificial milk ingredients. One after the other, federal MPs from Quebec were visited by local dairy producers, asking them to press the government to staunch the hemorrhage affecting their industry.
But what is the problem exactly? Why are dairy producers calling for firm action by the federal government at this time?
The dairy producers of Quebec and Canada want to raise public awareness of the fact that milk ingredients subsidized by foreign governments are coming through our borders. These ingredients are increasingly replacing milk in producing dairy products such as cheese and yogourt.
These modified milk ingredients, including casein, caseinates and butter oil with sugar, circumvent supply management regulations to compete with locally produced milk. In fact, this is loophole in the free trade agreement that foreign producers take advantage of to invade our market in Quebec and Canada, which is supposedly supported by a supply management system.
What are the three gold standards for supply management? First is production planning, whereby production must be limited to what can be absorbed by the demand, ensuring that dairy producers produce 100% of what will be used, nothing more, nothing less.
Second is a pricing mechanism that ensures a fair market income, so that producers do not have to rely on government subsidies, as they still do in many countries, despite the free trade agreements.
Third is import control, not the closure of borders but control, so that the industry can know how much is imported and that local production can be planned accordingly.
In a nutshell, these three standards, these three pillars are interdependent, and should one fall, the entire supply management system would collapse.
It should be noted right off that the system of supply management provides a number of benefits. By correcting the imbalance in the forces of a market without subsidies, supply management enables producers to earn a fair income from a market that has the unfortunate tendency to treat producers unfavourably. Supply management thus saves taxpayers' money, since producers do not enjoy generous government subsidies. It also benefits consumers, who can find Quebec and Canadian dairy products on grocery shelves at some of the world's lowest prices.
It can therefore safely be said that a market operating under a supply management system is the model promoting healthy and responsible farming in which all participants, producers and consumers, come out ahead. It is a win-win situation.
Members know, as I do, that there is no stopping scientific advances. In recent years, new technologies have made it possible to fractionate milk, as milk producers themselves say, into a number of elements and milk proteins. The problem lies in the fact that the Liberal government in Ottawa did not include this modern technological development in the application of the law.
Indeed, while real milk imports were monitored, new milk proteins appeared and were not considered to be in the same category as real milk. The law was therefore unable to stop modified milk products from entering the Quebec and Canadian markets, which, it will be remembered, operate under the supply management system.
Milk processors, those who take milk and turn it into cheese and yogurt, for example, are no fools. In the face of these new proteins even less expensive than local milk, because they are subsidized outside the country, processors have no qualms about using them in the manufacture of their cheese and yogurt.
Where does this lead? In the dairy products everyone eats daily, there are fewer and fewer real dairy products and more and more artificial dairy substances subsidized by foreign countries.
In addition, the entry of the modified milk products into the Quebec and Canadian markets has lowered the demand by processors for real dairy products from Quebec and Canada.
Since domestic demand dropped, dairy producers either have to cut production or sell their milk at a loss. Either way, the supply management system is completely off kilter and has been jeopardized as a whole.
As a result, dairy producers have lost nearly 50% of the ice cream market due to butter oil-sugar blends, which the Liberal government decided not to include in the list of imported ingredients subject to supply management. Ice cream is just one of many examples. As a result of these imports violating the principle of supply management, actual annual losses are set at $175 million for producers in Canada and nearly $70 million for producers in Quebec. This does not take into account the $100 million that dairy producers lost in 2004 alone due to fallout from the mad cow crisis. At that rate, given the many ingredients that slip through the overly generous loopholes, dairy producers estimate that their industry could lose up to 30% of the combined market share for all dairy ingredients. This is the real disaster they tried to warn us about by dumping no less than two tonnes of skim milk powder in the offices of 75 Quebec MPs to condemn the unacceptable inaction of this government.
The worst part is that, at the end of the day, the imported modified milk products subsidized abroad do not even benefit consumers here. In some cases, cheese and yogurt made of modified milk products are more expensive. We are robbing Peter to pay Paul and benefiting the processors at the expense of the farmers, while ensuring that the foreign dairy substitute products is prospering at the expense of our industry.
Imports without restriction and unlimited dairy ingredients, including milk proteins, prevents the dairy industry in Quebec and Canada from predicting with certainty the demand for milk proteins, which contributes to knocking down the three pillars of supply management that I was talking about earlier.
There is an urgent need for the government to put an end to this quiet demolition of the supply management system. Some farmers I met with at my office in Châteauguay made a very good point. They said that the losses caused by the imports will never be recovered and can no longer be minimized. The only thing the Canadian government can do is prevent further losses. For that, the government has to set new tariff quotas on certain dairy ingredients in order to protect the balance needed in a system like ours that operates under supply management.
I do not understand, nor do the farmers, the Liberal government's stubborn refusal to do anything about this. It is completely legal, within the framework of the WTO rules, to invoke article XXVIII to stop the foreign influx that threatens a system like supply management, which does not contravene world trade rules.
The use of article XXVIII of the GATT would just allow one very beneficial thing to happen to the dairy industry, and that is to update our tariff quotas list by using the techniques developed over the past decade. It would only be fair to fix the cracks in the foundation of our supply management system.