Agriculture committee  As Graham said in his introductory statement, we are strong supporters of supply management and strongly subscribe to its principles. Over the years it has had to adapt to changes, and it's been very successful in doing that. I think back to the Canada-U.S. trade agreement, which brought about a lot of change, and the change from import controls to tariffication, which changed the rules of the border.

Agriculture committee  I think I already said, Mr. Chairman, that the national level quota is set by the Canadian Milk Supply Management Committee, on which dairy producers and processors and provinces are represented, and it's their best judgment of what the market requires or what the domestic requirements for dairy are.

Agriculture committee  I think that is something that we hope will be discussed by the dairy working group that the minister has established, involving producers and processors. I think it would be very helpful for the future stability of the industry to have a plan to which all of the sector could subscribe.

Agriculture committee  Mr. Chair, I will just clarify something in response to Mr. Easter's question. I hope I didn't say that domestic markets were declining. What I did say was that there had been growth in the market-sharing quota, that is, the size of the national market in relation to consumer demand since the end of the Uruguay Round and that the national quota had peaked a couple of years ago and has fallen back somewhat.

Agriculture committee  No, Mr. Chairman, with respect, because MPCs are entirely solids, not fat, they do not affect domestic disappearance of butter fat. What they do is to displace solids, not fat, in cheese milk, which then goes into the skim milk powder surplus. So if the skim milk powder surplus is 60,000 tonnes, if you had further imports of MPCs, you'd expect to see that surplus increase.

Agriculture committee  No, Mr. Chairman. The quota is set on a butter fat basis, and any displacement by MPCs that takes place, for example, in the manufacture of cheese, affects the solids, not the fats side of the equation. Therefore, the way the system is currently operated, displacement by MPCs would not affect the quota.

Agriculture committee  Thank you, Mr. Chairman. One of the principles of these supply managed sectors is the amount of quota in the system is managed by the stakeholders to equate to the domestic requirements for the product. When you look at the national quota for industrial milk, for example—and I was talking about how it grew after the Uruguay Round and has slipped back a little in the last couple of years—what that's reflecting is the disappearance of dairy products, in effect the consumption of dairy products by Canadians.

Agriculture committee  I think it's worth pointing out that I was talking about the current situation. I wasn't purporting to forecast out. Also, as you would see from a riding perspective, there is an ongoing consolidation taking place in dairy. There are fewer dairy producers. They tend to be larger.

Agriculture committee  This would be current data, Mr. Chair.

Agriculture committee  Thank you very much, Mr. Chairman. As far as the honourable member's question with regard to the stability of the dairy industry is concerned, I think it's fair to say that since the end of the Uruguay Round, there has been growth in the industrial sector of the dairy industry.

Agriculture committee  It's not an indicator that we consider on a regular basis, but we do monitor those changes, and quota values since the end of the Uruguay Round have increased.

Agriculture committee  Thank you, Mr. Chair. With regard to the honourable member's question, it is quite correct that if increased MPC imports did displace solids, not fat, in cheese manufacturing, it would increase the skim milk powder surplus that has to be dealt with in the system. It's already a substantial surplus and it would be increased.