Madam Speaker, I would like to advise the Chair that Reform speakers will be dividing their time with the exception of the leader of the Reform Party who will be speaking later in the debate.
I would like to thank the hon. member for a chance to address the very important topic of agricultural reform. It is clear to many people that the counterproductive programs in place today cannot be fixed by simply cutting them without replacing existing programs with something else.
Most hon. members would agree that changes are needed in how we help Canadian farmers compete in the world market of the 1990s. The question of what type of change has not yet been resolved.
I would like to talk about the problem of subsidies and how they relate to transportation. We know that subsidies largely do not work. Not only do subsidies drain the public purse, they actually retard economic development.
We are fortunate in Canada to be able to learn from the mistakes of other countries like New Zealand, which had no choice but to drastically slash its farm and transportation subsidies. Between 1979 and 1983, a period of just over four years, farm subsidies in New Zealand tripled from $440 million to $1.2 billion per year. The former president of the Federation of New Zealand Farmers pointed out that these subsidies had inflated land prices, made it difficult for younger farmers to enter the industry, and ate up much of the value of the land.
The more the farmers received in subsidies, the more they had to pay in taxes for fertilizer, farm chemicals, machinery and transportation. The subsidies had a practical effect of limiting the choices of farmers when it came to deciding which products were the most economically viable to produce. Finally, the heavy subsidization paid for by the taxpayers of New Zealand encouraged wasteful and inefficient land and transportation practices.
The former finance minister of New Zealand, Roger Douglas, has a warning for countries with heavily subsidized agricultural sectors. He said the following:
New Zealand was able to demonstrate to the world the true effect of such subsidies, and I would say to those other countries: "The results of your policies are that your poor are poorer than they need to be; your jobless are more numerous than they need to be; your taxes are higher than they need to be; your economic performance is worse than it needs to be; and your farmers nevertheless continue to go bankrupt".
Sounds very familiar to us here.
In 1984 New Zealand ran into a debt wall. It was unable to borrow money to continue to fuel deficit programs and had to slash agricultural subsidies to almost zero. With no other choice the new New Zealand government withdrew agricultural subsidies and farm prices fell 40 per cent. The market values for some livestock fell to one-third of their original value and many farmers were driven off the land.
In spite of the hardships created by the withdrawal of subsidies, New Zealand today finds itself in an enviable position in the world market. The economic growth rate of the country will probably be about 3 per cent this year, the second strongest in the OECD. New Zealand now boasts as many farmers as it did a decade ago. Perhaps most important, farmers are free to choose what types of produce are the most economically viable.
The result of this is that New Zealand has diversified into many areas previously closed through directed subsidies and overregulation.
I believe Canada can learn a lot from the New Zealand experience. Canada is fortunate to have more time to change than New Zealand did. If we use this time to make wise decisions, Canada will be able to achieve the benefits of a
market driven agricultural economy without facing many of the hardships suffered by New Zealanders.
No matter how long we wait, Canada will still have to make the transformation from a centralized and over-subsidized farm economy to a market driven economy. If we wait too long we will not be able to assist our farmers in the transition.
One thing is clear. We have to change our policies. Three factors external to the agricultural sector are coming together to force us to change.
First, the General Agreement on Tariffs and Trade specifies that all members, Canada included, will have to modify their domestic agricultural programs to conform to a world of reduced subsidies and greater market access.
Second, there is an urgent need to keep Canada's debt from growing. Agricultural subsidization has put an enormous strain on our national resources and has had a negative effect on the industry.
Third and last, the Canadian agricultural industry needs to diversify if it is to survive.
The subsidization programs by previous governments forced Canadian farmers to produce and export only certain crops and only in an unprocessed form. Farmers want to be able to choose which products to develop and how to transport them.
If there is a trade war in wheat but not in wheat products then it only makes sense to sell wheat products instead of wheat. In addition, these value added products will create additional jobs and will help us avoid trade disputes over grain.
Reform believes that we have to change our agricultural policies to reflect a more market oriented approach and that we should do so with the least amount of disruption possible. Whatever their failings, free markets drive efficiency. Events in New Zealand are only the latest of many examples which underscore this fact. Markets allow farmers, grain companies and carriers the freedom to choose. Change and efficiency in a market oriented system are driven by the free choices made by the market participants.
Also, it should be recognized that there are some circumstances, such as international trade disputes, that farmers cannot control. For problems like this we need to redirect the funds currently used to subsidize transportation toward a trade distortion adjustment program and crop insurance safety net system. To demonstrate how we think this can be done let me say a few words about Reform's policy on transportation.
Under the present system trains loaded with U.S. bound grain are travelling as much as 1,400 kilometres out of their way so prairie shippers can take advantage of attractive federal freight subsidies. Ironically, at the same time we are told that farmers stand to lose over $200 million because there is poor grain movement.
Clearly the present grain transportation act does not encourage efficiency in the transportation system. The WGTA is a direct federal subsidy on grains and oilseeds paid to the railways. Because it encourages farmers to export grain instead of shipping it to Canadian processors, the WGTA results in the creation of provincial programs such as the Alberta Crow benefit offset program set up for the purpose of counteracting the WGTA, subsidies to balance other subsidies.
Second, the government currently subsidizes 57 per cent of the cost of shipping prairie grain by rail to various ports. This takes away any incentive for the railways to increase efficiency since they get paid anyway.
The third point is one of the most important. Under the WGTA farmers are given no incentive to diversify into higher value crops or to ship to domestic processing facilities. I can think of no better job creation program than to allow the market to create its own jobs in our dying rural areas by allowing farmers to make the decision based on cost effectiveness as to where they want to ship their farm produce.
Reform proposes that we do away with the WGTA subsidy and redirect funding to a trade distortion adjustment program to compensate exporting producers as a direct counter measure to foreign subsidies on competing products. This would force the railways to develop efficient methods of transportation and would allow farmers to choose which method of transportation is the most cost effective for them. At the same time it would encourage rural development by adding a market driven incentive to process raw goods into value added goods.
Reform also suggests the deregulation of the rail transportation system and the elimination of regional development as a goal of transportation policy. The markets are far better at creating development than the huge bureaucracy which currently exists.
Under the present system farmers can be held hostage to grain handling strikes at any time. The elimination of the WGTA and the creation of a more efficient system would allow farmers to seek alternative means of transportation if this occurred.
Let me end by saying that Canadians involved in the agricultural sector can and will compete in the changing world economy if only given the chance to take control of their involvement in the market. External factors will eventually force the necessary changes with or without our agreement.
Unlike New Zealand and other less fortunate countries, we have the chance to create a viable, self-reliant and market driven agricultural industry before we are forced to. Reform believes now is the time.