[Recorded by Electronic Apparatus]
Tuesday, April 25, 1995
.1535 
[English]
The Chairman: I call the meeting to order. I'd like to welcome the Minister of Agriculture, who will be making a short presentation, and then we'll go to questions.
Mr. Minister.
Hon. Ralph E. Goodale (Minister of Agriculture and Agri-Food): Thank you very much, Mr. Chairman and members of the committee. I'm glad to have the opportunity to discuss today, and no doubt on other occasions, the flow of events that we anticipate and hope to encourage in the wake of the various changes affecting agriculture and agrifood in Canada as a result of the most recent federal budget.
I believe all members of the committee will have received, at the time of the budget, a package of documents entitled Securing Our Future in Agriculture and Agri-Food. These documents intend to bring together in one place a good solid overview of the budget's implications in respect of agriculture and agrifood and to link those implications back to the presentation I had the opportunity to make before the combined committees on agriculture of both the Senate and the House of Commons last September in respect of the elements of a vision statement for the future of Canadian agriculture and agrifood.
As I understand the mandate for this committee, your objective is to look at all of the various implications of the budgetary changes in respect of agriculture and particularly the budgetary provisions related to the WGTA, the feed freight assistance program and the ARFAA and MFRA programs, as they are referred to by their acronyms in Atlantic and eastern Canada.
The detailed clause-by-clause examination, of course, of the necessary legislation will be taking place in the finance committee and it's this subcommittee's goal to focus essentially on the question, where to from here? I look forward to the discussion that we will have and the ideas and suggestions that members of this committee may bring forward in terms of how best to shape the kind of environment we would want for the successful future of the Canadian agriculture and agrifood sector.
The budgetary provisions that are explicitly a part of your mandate are those that deal essentially with the elimination of various kinds of transportation subsidies. The first point that I would make is that despite the fact that in many ways those subsidy programs are different across the country, they are in fact being treated in a similar manner under the budget. The various programs are being eliminated and there are adjustment or transition or adaptation measures being put in place with respect to all of them to ease the transition from the old subsidized environment to a new and less subsidized environment.
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That principle of eliminating the subsidization and providing for an appropriate form of transition and adjustment is a principle that is being applied consistently all across the country with respect to all of the programs under discussion. So this is not the case of one program or one region or one group of farmers being treated differently from others. It is a consistent national policy that applies across the board.
Apart from budgetary considerations, there are also a number of other reasons that argue very strongly for the agricultural transportation reforms with which we are proceeding. I think it's important to keep those other good and valid reasons in mind as well as we go through all of these discussions.
Mr. Chairman, if I could deal specifically and most particularly today with the changes with respect to the WGTA, I would suggest that in your discussions that would focus upon the feed freight assistance changes it would be perhaps most useful to the committee to involve the Secretary of State for Agriculture and Agri-Food, Fisheries and Oceans. The hon. Mr. Robichaud has been asked by me to lead the consultative process with all of the affected stakeholders with respect to the FFA. He has started that process. He has an advisory group in place. The work is beginning in terms of how the future adjustments with respect to the FFA will come to pass. While I could comment on that subject area in a general way today, I think it would be most useful to invite Mr. Robichaud to have that discussion with you in greater detail, which he is obviously in a better position to do.
With respect to the ARFAA and the MFRA, while those budgetary changes do have some consequences for agriculture, they are most particularly within the responsibility of my colleague Mr. Young in the Department of Transport. Again, either Mr. Young or his officials would be in a better position to talk about the details with respect to the ARFAA and the MFRA. Again, I could offer some general observations, but I think the committee would be better informed if they had the opportunity to have that dialogue with Minister Young.
With respect to the WGTA, as I said, there are reasons quite beyond the budget as to why it was necessary to deal with western grain transportation reform. The first of those reasons is to achieve consistency with our international trading obligations under the new GATT. The new General Agreement on Tariffs and Trade, soon to be known as the WTO, will come into effect during the course of 1995.
The general GATT implementing legislation has been before the House of Commons. When it came before the House of Commons members expressed concern because a bare reading of that WTO legislation indicates that it obviously carries with it some pretty significant and dire consequences with respect to agriculture unless some things are changed. What the WTO implementing legislation was intended to do was adopt, if you will, a minimalist approach to implementing our trade obligations, simply translate the bare legal letter of the WTO into what it meant in terms of Canadian legislation.
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Our clear objective has been to avoid some of those consequences from the implementation of that bare legislation, specifically in respect of the WGTA. If the WGTA were not changed, the WTO would impose upon it some very substantial reductions, both in dollar terms and in volume of product terms, which would be eligible for the subsidy in the future. While those consequences would be relatively small in respect of crops like wheat and barley in the next crop year or two, the consequences for canola and special crops would be quite significant. In fact, if we just took the bare rules of the WTO and applied those rules to the existing WGTA, we would run into very substantial trade impediments for special crops and oilseeds during the course of the 1995-96 crop year, restrictions in terms of the volume of product that it would be possible for us to export, to which the WGTA would be applicable. Obviously, it's important to head off that consequence.
I give that example simply to make the point that compliance with the GATT is not just some international trade theory, it's not just a nice little diplomatic nicety; it carries some very significant consequences that we have to deal with.
Another example of those consequences is in respect of wheat. Right at this moment we are facing certain countervailing duty investigations in certain Latin American markets because of the existence of the WGTA. Market access to certain of those markets will depend on reforms to our transportation system.
Finally, in respect of the GATT, the same trade rules that catch the WGTA also catch programs and policies of foreign governments to which we have long taken exception in Canada. I think particularly of the U.S. enhancement program and the corresponding regime of subsidization that exists in Europe through the European Union.
Obviously, if we expect the Americans and the Europeans to reduce their level of subsidization significantly, which we think is required by the GATT, we also need to be in a position to comply. Our compliance in respect of the WGTA will put us in a much stronger position to make the arguments that we would want to make as to what the Americans and the Europeans ought to do about their subsidies.
I had the opportunity a couple of weeks ago, during my trade mission to South America, to discuss this kind of issue with my counterparts in Chile, Argentina, and Brazil. In each case that argument about the elimination of trade-distorting export subsidies was received very well. That is one of the reasons to deal with the WGTA, and that is consistency with the new GATT.
Second, it is obviously important to establish a grain handling and transportation system for the future of the grains industry that is more efficient, less expensive, and faster than the one we have had. I know several members of this committee were involved in committee discussions about a year ago now, when certain aspects of our grain handling and transportation system were proving to be exceedingly inefficient and running into substantial difficulties. Later on in that crop year, a year ago, we managed to deal with those issues in an ad hoc way to get over the particular difficulty that was confronting us in terms of congestion and other problems at that time.
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Those sorts of problems will occur over and over again unless we find a way to move toward a less rigid and more responsive transportation system that can achieve real internal efficiencies. That means removing unnecessary costs, doing so in a manner that is sensitive to all of the stakeholders, including most particularly producers.
What we're proposing in the legislation, as you know, involves a legislated maximum freight rate for a five-year period. We're also proposing an industry-led assessment of the new regime to be put in place, an assessment to include very specifically an examination of the degree to which efficiencies are being achieved in the system because of the changes we are making and the degree to which those efficiencies are being fairly shared among all the participants in the system.
In my discussions with farmers and farm organizations about the kind of efficiency improvements they would like to see accomplished, they make two points very clear. Number one, there was ample room for improvement, and they wanted to see that improvement accomplished as rapidly as possible. Two, they wanted some way to monitor the degree of progress that was being made toward a more efficient system, and also - and this was the crucial question - to whose benefit was the efficiency gain accruing and were farmers participating fully in the sharing of those benefits?
I had the opportunity a couple of weeks ago to address the Canada Grains Council meeting in Winnipeg. I laid out a number of the developments that had taken place with respect to the efficiencies issue since the time of the budget. I won't take the time of the committee to review all of that in detail. The information is available in the form of that speech and other documents, if members would like to review it more specifically.
That is the second reason for the kind of reform we are contemplating, the drive toward a grain handling and transportation system that is lower cost, faster and more efficient, with a fair sharing of the efficiency accomplishments.
The third reason for WGTA reform, apart from budgetary reasons, is the objective of eliminating the built-in discrimination that has existed for many years in our freight rate structure, which has impeded broader economic diversification and growth. The freight rate, by including a substantial measure of subsidization, has tended to drive the grains economy in a certain direction and to limit the focus of the grains and oilseeds sector from what could have been some broader horizons.
When that kind of freight rate discrimination got worked into the system very nearly 100 years ago, diversification wasn't an issue. Value-added wasn't anybody's concern in the early days of the 1900s. But over the years that freight rate structure has served to limit economic opportunities and to skew production and processing in a certain particular direction at the expense of everything else.
One of the objectives is to eliminate that kind of discrimination and broaden the horizons with a higher valued crop production mix overall, more value-added processing and potentially further processing, greater livestock production and processing, and a general theme of economic growth and jobs.
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To accomplish all of that is an agenda for change which is probably unprecedented in Canadian agriculture and agrifood. The magnitude of change that is being contemplated here is obviously very significant.
Two types of measures are in place to assist in the WGTA transition. One of those is the $1.6 billion ex gratia capital payment. The other transitional measure is a $300 million multi-year WGTA adjustment fund.
We have published a great deal of detail about both of those adjustment measures. Again, I won't wade into that detail now - I'd be happy to answer your questions on the detail - but both of those measures are in place to deal with the adjustment process.
I would say that in the document I referred to at the very beginning of my remarks this afternoon, the document entitled Securing our Future in Agriculture and Agri-Food, which was released on budget night, we included several discussion papers that described some of the proposed detail with respect to the $1.6 billion ex gratia capital payment and the $300 million WGTA adjustment fund.
They were entitled ``Discussion Papers'' for the very reason that we wanted to stimulate discussion on a good many of those details. I took the time from the day of the budget until the early part of April to consult extensively with virtually all of the stakeholders in the western Canadian grain handling and transportation system to get their input on a great many of the technical details on those two adjustment measures.
During the course of the month of April we are in the process of finalizing all of that detail. A lot of it is already settled. A few points remain to be resolved. But we are doing so, I want to assure you, in very close consultation with farmers, farm organizations, the grain companies, the railways, the rural municipal organizations, the provinces and others to make sure that we have the benefit of all of their advice in the technical application of these programs.
Mr. Chairman, specifically within the mandate of your committee, I would certainly welcome and entertain any suggestions that members of this committee might wish to make about these administrative questions. It is important to make sure that we get it right as much as that is humanly possible to do. If members have suggestions today or otherwise about how these administrative matters can best be dealt with, I would be glad to have that input.
I would note there are some members on both sides of the House who have already offered comments, advice, suggestions and recommendations. I appreciate that and it very definitely will all be taken into account.
I should perhaps mention about the $300 million WGTA adjustment fund that the one most significant issue that we need to resolve within the next week to 10 days, I would think, is the issue of whether or not the Canadian Wheat Board freight pooling issue is to be addressed as of August 1, 1995 or left, as was suggested in the budget, to be addressed on August 1, 1996. In the budget we said the most convenient time to make that pooling change would be at the beginning of the 1996-97 crop year.
.1600
A good many farm organizations and other stakeholders agreed with us on that point. But a significant number have made the argument since the budget that if at all possible, it would be better to get all of these changes done as quickly as possible during the current calendar year, and if we could move more quickly on the Canadian Wheat Board freight pooling issue at the beginning of the 1995-96 crop year, then we should do it.
The Canadian Wheat Board and other organizations have been bringing forward various proposals for how that pooling issue should be addressed. The last of those proposals was presented to me during the first week of April. We have circulated it to the farm organizations for their comment. Comments are coming in quite literally as we speak. I saw one in my office from one of the farm organizations just before I came over to participate in this meeting.
I must say the opinions that are coming in are varied. Some groups are saying, by all means, at all cost, proceed with this for August 1, 1995. Others are saying no, this is too large a change and too complicated a change, and it would be better if we took the extra year to deal with it in a bit more deliberate way.
I think it's fair to say that the views of provincial governments are not consistent on this issue. The Government of Alberta I think would argue for the fastest possible change. The Government of Manitoba is arguing for the slowest possible change. Because that line goes right down the middle of Saskatchewan, the Saskatchewan government is on both sides of the issue. I suppose that's to be expected, because one part of the province will be affected in one way and the other part of the province will be affected in another.
This issue remains outstanding. I have asked the farm organizations to get their last representations in to me this week. I think it would be important to make a decision around May 1 as to whether we are going to proceed with that pooling change for August 1, 1995 or leave that issue to August 1, 1996.
Again, in your discussions this week, Mr. Chairman, if members of this committee have specific advice on that point, because it is at this moment one of the most urgent issues, I would welcome your comments as to the desirability of proceeding now or a year from now.
I relate the pooling issue to the $300 million WGTA adjustment fund because we have indicated from day one that there will be some compensation from that $300 million fund to help deal with the transition from the old freight pooling arrangement to the new arrangement, and that would come from the $300 million. I would simply mention that the other items we have in mind dealing within that $300 million fund are the peculiar situation that affects the alfalfa dehydration industry on the prairies, the issue of rural municipal roads, the question of trucking assistance, if that proves to be desirable and necessary in some circumstances, and finally the issue of short-line rail service, as that may become more appropriate in certain circumstances in the future.
Those are the broad categories of subject areas that we have in mind coming within the $300 million adjustment fund. Once again, if you have specific thoughts or observations on what is or is not a priority for that fund, I would be anxious to have that input.
Mr. Chairman, on the WGTA, let me conclude with one final comment. In at least some of the media in western Canada in the last couple of days, there seems to have been some confusion between the $300 million WGTA adjustment fund and the other adjustment measures that were provided for in the budget. Several different kinds of adjustment or adaptation measures were being muddled together in some of the media reports that I have seen in the last couple of days.
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I want to make it clear that the $300 million is specifically intended to deal with the adjustments in respect of the western Canadian grains and oilseeds industry. In addition and separate from that, there is another fund of approximately $62 million which is intended to be earmarked for the adjustments in feed grain assistance. There is a third and separate fund, under the jurisdiction of the Department of Transport, to deal with the ARFAA and the MFRA issues.
Finally, there is a fourth and totally separate fund, not to be included with any of the foregoing, that deals with agricultural adaptation and rural development. All of this is laid out in the budget documents, but in some of the media reports it all gets run together.
I noticed that there was some criticism in some of the stories in the last couple of days saying, why is the WGTA adjustment fund being used for things like the Canadian Farm Business Management Program and funding for agricultural safety and so forth? Well, it's not. Those programs come under the Agricultural Adaptation and Rural Development Fund and have absolutely nothing to do with the funding that's been established for the WGTA. But I would just make the point that there are four separate adaptation and adjustment funds, dedicated for specific purposes, all of which are described in detail in the budget documentation. To understand the situation clearly, it's important to keep the different funds separate, in terms of their source and their purpose.
Mr. Chairman, I'm going to leave it there for now. Thank you for your attention. I would welcome any questions.
The Chairman: Thank you, Mr. Minister.
I just want to make a couple of points on the mandate before going to questions. There is no doubt there is potential for some confusion, in that the finance committee is looking at Bill C-76 and the definitive budgetary aspects relative to the WGTA, ARFAA, MFRA, and feed freight assistance. But we felt, as an agriculture committee that although transport is involved in this area and finance is involved in this area, the ones most seriously affected by all of these changes are certainly the primary producers in the rural communities.
So the mandate of the committee is really to look to the future, in the absence of the WGTA, the ARFAA, the MFRA, and feed freight assistance. I might say that there's no question in my mind, especially with the Western Grain Transportation Act, that the Crow statute previous to the WGTA, and then the Crow benefit ended up being in effect the cornerstone for agricultural policy in western Canada, which other policies derived from and were complementary to.
Therefore these changes are extremely important because of their impact. Whether we like the changes or not, there is going to be an impact and we have to ensure that we develop a new foundation for agricultural policy in the west and a new transportation regime, and as the minister said, we get it right.
That is the purpose of this committee, to look to the future. Haste makes waste. If there are impacts, we want to be aware of them before decisions are made and try to move in a direction in which farmers' interests and the interests of rural communities are protected as well as the interests of all others involved.
Just in response, I would say as well that we will eventually be looking at feed freight assistance and we have in mind to have Secretary of State for Agriculture, Mr. Robichaud. In transport later this week, we will be having Mr. Mulder before the committee. We will debate, at some point in time, whether we should have the minister.
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So with that, I'll turn to Mr. Bernier.
[Translation]
Mr. Bernier (Mégantic - Compton - Stanstead): First of all, you will have noticed that the Official Opposition has a new critic for agriculture, but only for a short while, since my colleague, Mr. Chrétien, had to go back to his riding for very special reasons but will be back soon.
As member for Mégantic - Compton - Stanstead, agriculture is of course of great interest to me. Farming plays a big part in my riding. The other day, I took part in the debate on agriculture heald during an allotted day, which is why I agreed at very short notice to replace my colleague here today. I hope I will be equal to the task.
I would like to thank the Minister for agreeing to answer our questions. I will make a brief comment and then ask a few questions. I was somewhat surprised when I heard you say at the beginning of your presentation that the decisions concerning the grain transportation policy that were made following the budget are the same throughout the country, in Western Canada as in Eastern Canada, which means that the regions are all treated the same way.
I hope that during the next hour or the next few minutes, you will have the opportunity to explain why you feel Eastern Canada and Western Canada are equal, because I know that the other day, during the debate in the House, you blamed the Official Opposition, the Bloc Québécois, for stirring up feeling and for pitting Western Canadians against Eastern Canadians. You will probably have the opportunity during the next hour to explain what you meant, at least I sincerely hope so, because this is not the way we see things.
We think the Crow policy is a discriminatory policy, which you recognized in some ways in your presentation. So, we, in the Bloc, are very glad it is being abolished. However, we think that the compensation measures you are setting up are just as discriminatory, because of the way Eastern Canada is being treated compared to Western Canada.
So, I would like to hear what you have to say on this, which is a very general issue. I will have the opportunity to ask you more pointed questions following your reply, but first, let me ask you two very specific questions.
You said you are currently examining the issue and consulting with all the different stakeholders on the best way to apply these compensation measures, but I would like to know if the $1.6 billion compensation payments for Western farmers, which in fact reach $2.2 billion according to your own department, will be handed to the landowners or to the tenants and what criteria will be used?
At what stage are you in your examination of this issue? What criteria will be used for this $1.6 billion fund?
[English]
Mr. Goodale: For the question, essentially in terms of the subsidization of the transportation of goods, there have been three major government programs. Obviously the WGTA is one, a subsidy in the most recent fiscal year of some $560 million to offset about half of the cost of transporting prairie grains and oilseeds into export market position.
The second one is the freight assistance program.
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The feed freight assistance program has virtually no application in the prairie region, but it is particularly important in the Atlantic provinces and in British Columbia. It's also important in the eastern part of Quebec, the northern part of Ontario, and some parts of the Northwest Territories, and also, I believe, Yukon. That program has cost in the past something in the order of $15 million to $17 million annually compared to the WGTA at about $560 million annually or more.
The third major subsidization program is what we in shorthand form around here call the ARFAA and the MFRA, the Atlantic region freight assistance program and the maritime region freight assistance program. I don't have the cost numbers for those programs immediately at my fingertips, but I am advised it's something in excess of $100 million a year traditionally for the ARFAA and the MFRA, of particular benefit in the Atlantic region and the eastern parts of Canada.
Those are all, or have been, programs to subsidize the transportation of goods.
Under the terms of the budget, all three of those programs, the WGTA, the feed freight assistance, and the ARFAA and the MFRA, will come to an end essentially during the course of 1995.
With respect to each of them, we have recognized that transition, adjustment, adaptation measures will need to take place, and we have provided in the budget the proportionate funding to provide for that transition and adjustment with the values being applied on a basis that we think fairly reflects the proportionate relationship among those various programs in the past.
[Translation]
Mr. Bernier: You are explaining to us the various programs that exist, but I would like you to talk about the terms of application of the $1.6 billion compensation. That is the part that interests me. In what sense will this measure be fair, as opposed to measures being applied in the eastern parts of Canada?
[English]
Mr. Goodale: I'm getting to that issue, and I agree with you that it's an important one. I was trying to answer your earlier question about the symmetry, if you will, in the manner in which we are treating all of these various programs. Whether they relate to eastern Canada, western Canada, central Canada, or northern Canada, the principle upon which we are approaching all of these programs is the same and there is equity in the government's approach in dealing with these various issues.
The one other comment that I would make with respect to the WGTA per se, before I get to your issue in detail about landlord versus tenant, is that the proposal we put together for how to handle this transition from the old regime to the new regime as per the WGTA is, we believe, within the parameters and the principles that were outlined some time ago by the coalition of Quebec producers and others who had made comments as to how to deal with the issue of WGTA reform and made certain recommendations about how properly to put all of this together. Obviously, there are a great many permutations and combinations of how one can do this, but what we have come up with in the budget, I think, is very squarely within the broad set of principles outlined to us by that Quebec coalition that had come together with respect to the WGTA.
Specifically on the $1.6 billion, we have decided that this payment should be directed to landowners, for several reasons.
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First, land ownership on the prairies, as is the case almost everywhere in Canada, is precisely identifiable. Under the terms of the various land titles acts and registration offices, according to municipal tax rules, it is very easy to identify precisely who is the owner of a particular parcel of farmland.
It is somewhat more complicated to try to be that precise when it comes to farm operators. In about 60% of the cases, the owner and the operator are one and the same person. In as much as 40% of the cases, the land is rented, and therefore the operator is someone different from the owner. In those cases, there is an almost endless variation in terms of the rental or tenancy arrangements between the landlord and the tenant. Some of them are quite straightforward; some of them are very complicated. A broad variety of arrangements exists between landlords and tenants. Trying to find a way to accommodate all of that variation is exceedingly complex.
I simply make the point that trying to identify the landowner is something you can accomplish with a great deal of precision; trying to identify the farmland operator is not so precise.
We found some quarter sections, for example, in Saskatchewan where there may be five or six different operators who have an interest in the same quarter section. By the nature of the interest, none of it happens to be recorded under a Canadian Wheat Board permit book, and the rental arrangement for how the land is used and paid for is done in about five or six different ways. Trying to sort through in that one quarter section who ought properly to receive the payment is a very complicated matter. We have decided for the reason, at least in part, of administrative simplicity to focus upon land ownership.
The second reason to pay the landowner is to recognize that the freight rate subsidization has been in place for 98 years in one form or another. Over that long period of time, the value of the freight rate subsidy has been capitalized in the value of the farmland. When the subsidy is removed, the freight rate will go up; the value of the farmland will accordingly be affected in a downward direction. By paying the landowner, you recognize that impact in a cause-and-effect relationship.
The third reason to pay the landowner is a taxation reason. If you make the payment as a capital payment in respect of land, it largely goes tax free because of our existing capital gains tax rules. If you were to make the payment to a farm operator, whether owner or not, then that payment to the farm operator would have to be categorized as income and it would be taxable. If you are able to structure this payment in such a way that it avoids the tax implications, then you obviously enhance its benefit, because in the hands of the recipient, the recipient doesn't have to worry about the tax problem. If it were taxable, then obviously the net value would be reduced. So there's the tax reason as well.
I would add one final comment. This issue has been roundly debated among the farm organizations. While there is not unanimity on the point, I think it is fair to say that there's a general consensus that paying the farmland owner is the correct economic theory. That theory is also supported by a group of agricultural economists from the University of Saskatchewan and from a variety of other independent commentators and editorial writers in newspapers and so forth.
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We have tried to recognize the concern that has been expressed to us that you may have the economic theory right in paying the farmland owner, but how then do you go one step further and ensure that the renter, where there is a renter, enjoys some fair sharing of the benefit? We have put a procedure in place, which I described in my remarks to the Canada Grains Council earlier this month and which I'd be happy to describe to you, as to how we intend to help facilitate this passing of the benefit through in an appropriate way to the renter.
The Chairman: We'll let it come to you in a second round. There will be another opportunity in a second round. We'll let it go to Mrs. Cowling.
Mr. Goodale: Mr. Chairman, I apologize for that long-winded answer, but it is an important issue and I think it's important to go into it in detail.
The Chairman: They are long answers.
Mrs. Cowling (Dauphin - Swan River): I would like to address two issues particularly because they have been brought to my attention by the constituents in my riding of Dauphin - Swan River.
One is the payment to landowners. You spoke about that and the people in my riding believe it is the best solution. They think it is the fairest and are quite pleased about it.
However, I am concerned about the future of the capital gains exemption. The payment is being considered as capital to ensure that the benefit is not taxed back. However, if the capital gains exemption is eliminated or reduced for farmers next year, then the benefit may very well end up being taxed back. Has the Minister of Finance given you any assurances that the capital gains exemption will be retained for farmers?
Mr. Goodale: I've had the opportunity to discuss this issue with Mr. Martin. I have made it very clear that the existing capital gains tax regime as it affects farmers is critically important to the effective implementation of what we have in mind with respect to the $1.6 billion. I think that point has been very well registered with the Minister of Finance, but I always welcome allies in making tax arguments with the Minister of Finance, so join the parade on this one.
Mrs. Cowling: My other question, of course, is around the issue of the pooling of the seaway costs. I mention this because of the costs that eastern Saskatchewan farmers and Manitoba farmers and western Ontario farmers may pick up. They may pick up the highest costs of moving their grain out of those land-locked areas in Canada.
It's difficult to decide when we should make the pooling. As you mentioned earlier, some farm groups would like to have that issue documented and cleared up as early as this crop year. However, it's difficult to make those decisions when in fact we don't know what the pooling changes might be. So it puts us in a situation where it's hard for us to decide where we should go.
I guess the question I raise then is what will the cost and the benefit to the producers be if the pooling of the seaway costs is addressed as of August 1995 and if the pooling point will be where it is now in Saskatchewan or if in fact it will be moved, as has been suggested by some provinces, to another point? So we need to know what those costs and benefits may be to the producers in the long term.
Mr. Goodale: On that latter point, it's that very complexity that has led some of us to the conclusion that we all need a bit more time to assess the various proposals that are presently on the table for changing the freight pooling system.
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I say proposals in the plural because there is an outstanding proposal, first put forward by the Canadian Wheat Board in 1985, I think, as to how this might properly be done to reflect the changing nature of world markets and why it is more legitimate to have a port location in the lower St. Lawrence as the eastern pooling point, as compared to Vancouver on the west point, instead of using Thunder Bay as a mid-point, part way across the country.
You can make the adjustment in various ways. As I said in my opening remarks, as recently as the beginning of this month, the Canadian Wheat Board came forth with a further methodology for how this matter could be treated. Just as soon as I got that further paper from the Wheat Board, I circulated it to all of the farm leadership and the other stakeholders across western Canada to get their input. I would be happy to make a copy of that most recent submission available to members of the committee so you could have a look at it as well.
It goes into excruciating detail, but it is that kind of detail that we all need to see, know and understand in order to make the judgment as to whether this particular formula for changing the pooling is better than two or three others that might be out there and whether it is desirable to do it forthwith or it would be better to wait for a year and let things settle down a little bit. I will ask my officials to circulate that paper to the committee so all of you can take a look at it.
I would simply make the point, though, that if the committee has some view to express on the issue of Canadian Wheat Board freight pooling changes, then I would urge you to make those views known to me within the next few days, because I think, in all fairness, in the very early part of May and no later, we have to make the go or no go decision on whether the change will take effect for 1995 or be deferred until 1996.
The Chairman: I think the committee notes the need to get back to you quickly.
Mr. Kerpan.
Mr. Kerpan (Moose Jaw - Lake Centre): Mr. Goodale, we often accuse Mr. Easter of being rather long-winded with his questions at this committee. I guess my concern here today would be that he would ask you one of his typical questions and you'd give him a like answer and we wouldn't get a word in edgewise.
Mr. Goodale: Let's go for it, Wayne!
Mr. Kerpan: I appreciate your concern for the issue and I thank you for being here today.
Obviously, as many people have told me in my province and in my area, the Crow is dead. There is no question of that. In fact, somebody told me the other day that it's scattered all over western Canada, like so much road-kill.
I guess what I hear is somewhat different from what I expected to hear when the announcement came that the WGTA would no longer be in existence and the lack of resistance to that announcement by some of the farm groups in Saskatchewan somewhat surprised me.
There are two issues we need to talk about and make some decisions on. Obviously, number one would be the method of payment of the $1.6 billion: how it will be paid, to whom it will be paid, and when it will be paid. I think, sir, that you should make that decision. What I'm saying here is that I don't see a need for another bureaucracy, a mechanism for a panel of arbitrators among farmers, owners, and producers. If it's your decision that it should go to landowners, then I believe that's the way it should be, and if it's your decision to do something else with it, then I believe you should make that decision. That would be my suggestion and my recommendation.
I'm fearful of another bureaucracy, if you want to call it that, where farmers, owners, and producers might get mixed up and involved in something that we may not be able to settle. I'm thinking specifically of land that might be owned by chartered banks and credit unions. There is a fair bit of this in our province of Saskatchewan, and I would be concerned that this might be an ongoing process that may not be solved easily. That would be one suggestion on this issue.
I have a second suggestion on this issue, and I'd like to get your thoughts on it. It has to do with the date of official ownership of any particular piece of land.
.1635
As you well know, coming from Saskatchewan, almost 100% of the land transactions take place during the winter months. There are very few at any other time.
I've heard from a lot of farmers, both producers and owners, who have called me and asked me what the official day of ownership would be. I know it was budget day; I know that was announced. However, I would suggest that we use August 1 as an official ownership day. Obviously we have the benefit of WGTA up to August 1, 1995. I would suggest that we use that as the official ownership day for any forthcoming payments in order to reduce and remove any confusion among people who are in the midst or just going through any type of land transaction. I'll ask for your comment on that as well.
Mr. Goodale: On the method of payment, what you have raised is really the final part of the answer that I would have given in response to the very first question about the mechanism that we have tried to put in place to see, in fairness and common sense, that the benefit of this change also accrues to a tenant where the land is rented and not operated by its owner.
As I indicated in my earlier answer, the economic theory is that because of the change in the freight rate there will be a general reduction in the value of farmland that had previously benefited from a subsidized freight rate. The corollary of that theory is that if the farmland value goes down, then the rental rate should also go down and the tenant will benefit in the form of lower lease rates.
In my discussions with farmers and farm organizations, I think there was a general understanding of the economic theory, but a real questioning as to whether the theory would follow through into reality, particularly in some of those tough cases where you may be dealing with foreign land ownership, for example. Would the benefit in terms of a reduced land value flow through in terms of reduced rent?
What we have decided to do is to pursue a suggestion made to us by the Saskatchewan Association of Rural Municipalities. They've obviously wrestled with this issue as well. They suggested that through the application process for these funds we identify land where rental arrangements exist - the 40% or so that I was referring to earlier - and have a requirement that in the application process we would want some indication from the tenant that the issue of this rental adjustment has been discussed between landlord and tenant and that they have arrived at their own agreement as to how to deal with it.
We don't need to know, nor should we know, what their agreement is; that's their own private business as a landlord-tenancy arrangement. They can make their own judgment about what is the right thing to do. We simply want an indication that they've addressed the issue and they've arrived at whatever they've concluded is right for them.
That begs the question as to what happens if there is no agreement.
We've said that we hope to be in a position to make the first instalment on this $1.6 billion by December, 1995. Where there is no indication that the landlord and the tenant have arrived at a solution, we would not make that first instalment. We'd put a hold on that money.
The next and final instalment would be expected in the spring or the early summer of 1996, and we would give the landlord and the tenant that additional five or six months to try to sort things out. If they can't sort it out, if they have an absolutely intractable problem, an impasse, then we would consider an arbitration process that we would want to be as clean, simple, short and inexpensive as we could possibly make it.
.1640
I recognize that there is probably no perfect way to deal with this issue, but I have noticed, since we announced this kind of process I've just described, that the Saskatchewan Association of Rural Municipalities has indicated that they support it as being probably as good a process as there could be. We've also had the same indication from the Western Canadian Wheat Growers Association and from the Western Barley Growers Association. The Saskatchewan Wheat Pool has indicated that they acknowledge there's no perfect answer and this may be a solution to deal with this in a proper way.
As I say, there's no perfect way to do it. I think this is about as good as it gets, and I'm pleased to see that most of the farm organizations seem to agree with that.
They have also indicated - and I hope they are right - that they don't think there will be much recourse to the arbitration process. The fact that it's there will encourage decisions to be made by voluntary agreement before you reach that stage. But the farm organizations, in my last consultation with them in that first week of April, suggested that maybe as many as 95% of the cases would be resolved amicably between the parties as a matter of private business between landlord and tenant without anybody else getting involved by means of arbitration or whatever. I certainly would hope that we could reach that 95% rate.
On the issue of ownership, you're quite right: no matter what date we pick for a change of this magnitude, there will be on that date transactions in progress that were started before that date but not fully concluded by that date.
We have said in the budget that the effective date of ownership will be the budget date itself, February 27, 1995, and that is consistent with standard budget principles. But we have also said that we need to have some flexibility to recognize these problems of a transaction in progress.
What we've indicated is that where the parties had really concluded their deal for the sale of land and had arrived at a pre-budget, pre-WGTA reform price, and there was written evidence of that, we would make the payment to the purchaser, because the transaction would have been concluded at a price that had not taken the change into account. Again, as I have discussed that with farm organizations, they all seem to regard that issue of timing to be a fair way to deal with it.
Mr. Collins (Souris - Moose Mountain): I'll try to run through a series of questions rather than give you a speech.
One I'm concerned about on the WGTA is that last year, Ralph, we looked at awards and penalties to railways. Are we going to continue to see that as an effective process to protect the grain movers?
Do you want me to go through my list?
Mr. Goodale: I think I can answer that one quickly, Mr. Collins. You're referring, I think at least in part to Bill C-66 which is presently before the House. It seems to me that the budget bill really usurps the purpose of proceeding with Bill C-66, so I would think we should get on with dealing with the budget bill and never mind Bill C-66.
The Minister of Transport will at some point later on this year be bringing forward some suggested amendments to the National Transportation Act. I would think it's in the context of those broader amendments to the NTA that we would want to deal with any of these specific issues about performance assurances, penalties and other things that might emerge as disciplines within the system.
In other words, if there is something good and valuable in Bill C-66 that doesn't get covered as we deal with the budget bill, then there's opportunity in dealing with the National Transportation Act amendments to come back to those issues.
.1645
Mr. Collins: I think it's critical, because we spend enough time looking at it and saying that something is wrong. I wouldn't want to see those things continue to be wrong. We say that the budget bill has taken them out of the way.
I want some assurance, Mr. Minister, that FCC, along with SCA, will pass the WGTA on to the producers. There is some suggestion now in Saskatchewan that Saskatchewan may take a look at reducing the budget by saying that this is a nice flow through to them, and I think FCC has to give the same thing.
I'm glad that the Bank of Montreal said, ``Look, we're going to lead the way; we sure don't want these people leaving us behind when the process goes through''.
Out where we are concerned about the retention of the road beds, maybe we should retain the road beds instead of railways.
There is this business that at the end of five years we drop the cap. Why not leave it? The cap would stay and they would show us after five years why we should have to change it, rather than our doing the reverse cycle and saying that after five years we'll drop the cap.
I have three more things and they are really very serious. We're taking a look at changes now. With the taxing system we have at the port of Vancouver, we pay five or six times that of Seattle and we pay about 25 times that of Duluth. If we're going to be competitive, how do we get this thing into place?
In fact, the railways used to pay for every 100 miles of travel. That was a day's travel. Now trains travel about 250 miles and I understand these guys are getting paid about two and a half days' wages for 250 miles of travel. We have a whole series of inequities in the system.
What I'm afraid of is that people in transportation are OTL, as I see it, with regard to the way things are going out west. Specifically, they're out to lunch. They do not understand what is going on out there and the impact that it's going to have on our road beds and our whole transportation system. For people just to say that we'll abandon lines, you had better come out and see what you are talking about. I have some really serious concerns.
When we get down to the bottom line, I guess it is whether we are prepared to see a seven day a week service provided, not five, at the ports, because if we don't people are going to say, ``Let's go south or elsewhere to move our product''.
When this transportation subsidy goes, people are going to look at the efficiencies in the system.
I think we have to look at what our neighbours are doing and whether we are playing on a level playing field. If we're not, how can we make that adjustment?
I'm sorry. I rattled on a whole series of them.
The Chairman: Mr. Goodale, a short answer.
Mr. Goodale: On the Farm Credit Corporation's plans, I'm pleased to say they were very quick off the mark, within 48 hours of the budget, in indicating that they intended to find the way to pass the bulk of it through to their intended clients.
What they have suggested are really two alternatives. Where they receive a capital payment with respect to a certain parcel of land, they would be prepared to sell that land to their farmer client at the reduced price after the capital payment had been deducted from the existing market value. That's obviously consistent with FCC's desire not to be a landlord. They're in the lending business, not the farm ownership business, so they would prefer to dispose of their inventory of farmland. But obviously they can't dump it and have no intention of dumping it on the market in a disruptive way. But in these circumstances where that capital payment makes the difference as to whether the existing farm client would be able to purchase or not, the FCC would be delighted to dispose of the land to the farmer at the lower price.
The other method by which they will pass the benefit on where the farmer prefers to continue with the tenancy agreement is they will calculate the appropriate percentage by which the capital payment reduces the market value of the land and they will reduce the rent accordingly for the tenant.
The FCC is also thinking of some other techniques by which they can be sure that they are following the legitimate market trend in the prairie region and being fair to all of their clients and consistent with what the rest of the marketplace is doing with respect to farm leases.
.1650
I have not had an opportunity to discuss in detail with Mr. Cunningham of Saskatchewan his precise plans in respect of the Agriculture Credit Corporation of Saskatchewan, although I would point out that it holds very little land, relatively speaking.
The major landlord is actually the lands branch of the provincial department of agriculture, wherein is vested the majority of what used to be the old land bank land in Saskatchewan.
Mr. Cunningham has indicated to me that while his government may use other techniques and mechanisms that may not be exactly according to the FCC model, it does intend to pass the benefit through. I would obviously have to leave it to the Government of Saskatchewan to describe exactly how it intends to do that, but that's the indication that the minister has given to me. It may be a different method, but it will be intended to give the same result, in passing the benefit through.
I generally have the same impression from the other western provinces, again without detail as to methodology but certainly with the assurance that they do not intend to profit from this ex gratia capital payment. They intend to reflect the value of it in the tenancy arrangements for which they are responsible.
As to the reverse onus issue to which you referred in your question, Mr. Collins, in terms of the transition period, I think that is an issue that is probably most appropriate to raise before the finance committee, in terms of the discussions in respect of the budget bill. It is my impression that some of the farm organizations that will be appearing before the finance committee intend to raise that point and make their arguments quite clear, I think along the lines that you were reflecting in your question about where the onus ought to lie at the end of that five-year transition period.
You mentioned continuous operations at the port and certain labour and taxation issues. Those all go very much to the competitiveness and the cost effectiveness of our grain handling and transportation system. They are more particularly within the purview of Mr. Young, although I obviously have a very active interest in this subject matter, as do all of you.
Let me just say this, without treading on the turf of my cabinet colleague: I think we would all welcome a thoughtful, concerted effort to address the kinds of issues that you referred to in terms of taxation, continuous operations, industrial relations in the grain handling and transportation system, and a long list of others, whereby we could improve the throughput of our system and get to what I was describing in my opening remarks, a system that is lower cost, faster, and more efficient for everyone concerned and where there's a fair sharing of the benefits of those efficiency gains.
I think you will find that Mr. Young has a good many of your points on his agenda.
The Chairman: I have just a short question before I let you in, Mr. Bernier.
Further to the questions of Mr. Collins, grain producers certainly see the railways as a virtual monopoly. Mr. Minister, you're talking about more efficiency, fairness and equity in the system. Under this less regulated system, what kinds of safeguards are you aware of that will be put in place to ensure that the shippers are protected, and how do we ensure that the efficiencies gained by the railways are in fact passed on to producers?
Mr. Goodale: There are several techniques.
Let me preface my answer by inviting members of the committee to turn their minds to that very question.
.1655
If the purpose of the committee is to address where to from here after these various legislative and financial changes, I think the question of how we achieve that more efficient system and how we make sure that there is fairness in the system are important questions for people like those on this committee. They should examine and bring forward their thoughts and recommendations, especially in the context of what may be forthcoming in terms of additional amendments to transportation law quite apart from the specific amendments that are in the budget bill.
We have talked today about a number of the detailed issues on the method of distributing the $1.6 billion and the kinds of priorities that ought to be addressed under the $300 million WGTA adjustment fund. Those are important issues and I think issues that are appropriate for this committee to review and offer advice upon.
Once we get beyond the detail of how to deal with the $1.6 billion and how to distribute the $300 million, I think there are two broader issues that are exceedingly important and probably more important than the distribution of the funds that I just referred to, where all of us who have the grain handling and transportation systems at heart need to devote a good deal of creative thought and energy.
One of those is this whole question of structuring the right kind of efficiencies package so that we do in fact get a system that is faster, cheaper and more efficient, with a fair sharing of the gains. How do we accomplish that? In this process of deregulation, if you will, how do you get the right balance between a system that is flexible enough and responsive enough to be innovative? How do you get that kind of creativity in the system and yet not go so far as to remove from those who are in a vulnerable position, like some producers believe they are in, to leave them totally without any assurance whatsoever? There is a fine line there. In structuring this collection of actions with respect to efficiencies, the advice of this committee could be very helpful.
The other broad area, which I won't go into but where I hope the committee will do some work, is the whole question of diversification, value-added processing, economic growth, how we can develop. Once the freight rate discrimination has been eliminated, how do we develop a growing and more complex and sophisticated economy that can generate economic growth and jobs to a far larger degree than has been the case in the past?
The Chairman: I am just worried. Are you suggesting that the protective measures may not be there at the moment?
Mr. Goodale: Pardon me, you are quite right to remind me. No, there are protective measures in the legislation that is presently before the finance committee. Again, I won't comment on the detailed provisions, but let me just describe the principles.
There is a legislated maximum freight rate formula built into the legislation that our colleagues before the finance committee will be looking at. That formula for imposing a maximum freight rate includes a lot of complex detail but essentially two component parts. One is an adjustment where the freight rate could move upward, depending on the impact of inflation. Another adjustment is where the freight rate could move downward, depending on savings that are gained over the course of this five-year period of the transition. So there's the legislated maximum freight rate.
Second, there is a review process. Let me back up for a moment. With respect to the maximum freight rate, it is legislated for a five-year period. This was the issue Mr. Collins was referring to in his question. At the end of the five-year period, then what? Where should the onus be in terms of whether that legislated maximum would continue or whether there would need to be a legislative change for the maximum to continue? That's the issue that, as I said, I understand some farm organizations will be addressing when they deal with the legislation before the other committee.
.1700
Part way through the five-year period, and roughly speaking, halfway, at the suggestion of the farm organizations, we have included an industry-led review to examine at that point, two and a half or three years into the transition period, what efficiencies have in fact been gained. If all of this was to bring about a more efficient system, then okay, halfway through the process, how is it going? That is the issue the industry-led review is supposed to address. What efficiency gains have been made, roughly speaking halfway through? What are the costs and the revenues that are now involved in the grain handling and transportation system, and to what extent are the efficiency gains being shared? Again, that is to my mind a crucial question to all of this when it comes to the basic issue of equity.
Finally, a year before the transition period is to come to an end, there is specifically in the legislation a detailed review leading up to the end of the five-year period. The necessary decisions could be made at that point in time as to whether any further amendments are required with respect to the bill that is presently before the other committee.
The Chairman: Mr. Bernier.
[Translation]
Mr. Bernier: The Minister has very long answers for us - certainly very interesting, but very long. I want to come back to the question of the $6.6 billion. You mentioned earlier that you would prefer to give a compensation to the land owners rather than to the producers themselves.
This decision is a concern for us. We would like you to make a commitment, Minister. Thinking of producers themselves who will get a cost increase due to transportation costs or to a drop in property value, we agree they should receive a compensation.
However, when giving a compensation to the owners without knowing on which basis it will be allotted, can you offer safeguards that it will not be a backdoor way to expand subsidies in order to diversify the Western production to the expense of Eastern producers? I would like to get such a commitment.
You said it many times in the House but I would like you to confirm here that it will not be a backdoor subsidy used to diversify the Western crops to the expense of Eastern producers.
I also want to come back over the question of transportation. I know you will probably ask me to refer to the Minister of Transport for that. Nevertheless, as for the five-year delay to revise the rules, should you not consider, as member of government, that the cost-effectiveness of a railway should be estimated on the same basis both in Eastern and Western Canada?
You are perfectly aware that now, in Eastern Canada, the major criterion is cost-effectiveness whereas in Western Canada, it is public interest that is considered when deciding upon the continuation of a railway. What is your position in this regard? Do you not think that the same rules should apply?
[English]
Mr. Goodale: I would like to deal specifically with your concerns about to what land the $1.6 billion will relate. We have proposed that the eligible acres in western Canada ought to include those acres that were ceded to WGTA crops in 1994, plus the normal summer fallow. By focusing the payment in that way, I think we are focusing most precisely upon where the old WGTA benefit used to apply; that is, WGTA crops in 1994, plus the normal summer fallow in the crop rotation.
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The only outstanding issue with respect to eligible acres relates to the representations we have received from some - by no means all but some - farm organizations which have said that in some cases ceded forage has been used in the last couple of years in the same way as summer fallow has been used by other farmers.
There is an argument of interpretation there that I think we need to take into account. We are looking at that one final issue rather carefully right now. Again, Mr. Chairman, I would be interested in having them in the next few days if the committee or individual members of the committee have specific thoughts on what is appropriate with respect to ceded forage acreages. I would be interested to have your advice and your comments on that.
It's not a great question of principle; it's a question of appropriate application of a limited number of funds. I think you'll hear from some people who will say that forage in some cases is used by some farmers in their rotation as other farmers would use summer fallow. I think you will also hear from others who will say it is very difficult to distinguish one kind of forage production from everything else, and if a certain amount of forage is allowed into the formula, then where do you draw the line and what is fair after you've included some of it?
[Translation]
Mr. Bernier: Mr. Minister, your real concern is in fact to compensate those who will be affected by the change. At least, that is what I understand. You ask us to make suggestions, but the commitment you make as for compensation distribution is -
[English]
Mr. Goodale: That's certainly our objective. It's very much what we're trying to accomplish.
[Translation]
Mr. Bernier: - to avoid this difference between the Eastern and Western productions. As I said earlier, the concern is to ensure that the compensation distribution will not be detrimental to the Eastern producers. This is the commitment we want to get.
[English]
Mr. Goodale: I don't think there needs to be any concern with respect to that, but I appreciate your raising the question so I have the opportunity to answer it.
The diversification and the economic growth and the development I referred to earlier in my remarks to the chairman and others I think will flow not because of any future subsidization, obviously not, because the subsidy is being removed. The diversification will flow from the elimination of freight rate discrimination that exists today. By working that discrimination out of the system there will be an opportunity for more value-added production and livestock production and economic growth and diversification and so forth. That will be a natural evolution occurring in the absence of subsidization, not because of subsidization.
On the potential competition between east and west, I think our objective nationally has to be to ensure that we have those marketing opportunities for all of our producers in both eastern Canada and western Canada in terms of an aggressive trade and marketing initiative so that we don't need to concern ourselves about one part of the country competing with another part of the country and one having an advantage that the other doesn't have and so forth.
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We need to leapfrog over that problem and focus upon being able to market successfully into the world all of the production that we have the capacity to produce. That's how we're going to get to our export target of $23 billion by the turn of the century.
I had the opportunity during this trade mission to discuss with the delegation of farm leaders that was with me this issue of future marketing opportunities for the pork industry in particular. My discussion with the delegation that was with me in South America included representatives of the pork industry from Quebec, Ontario and western Canada.
Whatever part of the country they came from, all the representatives of the pork industry were very enthusiastic about the marketing opportunities for Canadian pork. Whether that pork was produced in Quebec, Ontario, the west, the Atlantic region, or wherever, they saw opportunities in Japan, the Asia-Pacific region, Latin America, eastern Europe and Russia.
From the Canadian point of view, they said we should be concentrating on increasing our pork production and increasing our further processing capacity so we can take advantage of those new international markets. It will mean growth in the view of these representatives of the pork industry. I agree with their view. It will mean growth for the pork industry in every region of Canada, and not one at the expense of another.
[Translation]
Mr. Bernier: But as to the transportation rules -
[English]
Mrs. Cowling: Mr. Minister, you mentioned we would be moving to a faster, new and less subsidized environment, which should increase the efficiencies in the system. I want to focus on the untold story that the producer payment panel neglected to tell. That's the story about the Manitoba producers who have been cross-subsidizing a huge network of branch lines in northern Alberta and parts of northern Saskatchewan while the Manitoba system has been very fine tuned and is very efficient.
Under a deregulated regime there should be increased efficiencies to the rail system with the branch line abandonment and the car allocations and freight rates. Have there been any projections regarding the impacts of deregulation on grain freight rates and what those service levels might be? You won't be surprised when I ask my second question. What portion of the $300 million will go to the Manitoba producers, who will in fact pick up the highest freight costs in the country to move their grain to export?
Mr. Goodale: Mrs. Cowling, on that latter point, we are still working on the calculations and getting advice from the provinces and farm organizations. If I could take you back about five or six months, there was a calculation on the table, largely supported by the industry in the eastern part of the prairies, saying that the compensation for the pooling change would need to start out somewhere in the order of $25 million to $30 million a year. Obviously, that would scale down over a period of time, but it would start out in that range.
There was another set of calculations that came forward from the western part of the prairies showing the schizophrenic nature of this issue. This said that arithmetic coming from the eastern part of the prairies was about twice as much as it should be. Those in the western part of the prairies were saying it's more like $10 million to $15 million, not $25 million to $30 million, but I think those numbers probably give you the range. Obviously, we are now trying to do the fine tuning, but it depends on the exact nature of the pooling change that is in fact made. Is it the 1985 original Canadian Wheat Board proposal? Is it the modified proposal that came in a couple of weeks ago? Is it a variation on one of those themes as put forward by one of the farm organizations? Every time you change the pooling arrangement a little bit, it changes the arithmetic.
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I think the broad numbers I've given you sort of bracket the range and we will work out the detail very rapidly. If we're going to make this change for August 1, 1995, some very rapid work will need to be done. If it's August 1, 1996, we can take a little more time with the necessary arithmetic. But we're working on the issue and it's going to take some further refinement once the farm organizations have given us their last and best advice on which of the pooling formulas is the best one to use.
On your issue of cross-subsidization, that is one of the problems that has existed in our system for a lot of years because of its rigid nature and because of the fact that there was a substantial element of subsidization involved. There were producers in one part of the prairies who believed they had been cross-subsidizing producers elsewhere. No matter what part of the prairies you go to and raise the issue, they will believe in that area that there's an element in the system that causes them to subsidize somebody somewhere else. A lot of those arguments are true.
Part of what we're trying to do with this reform is to produce a system that is more straightforward and involves less of that cross-subsidization that has existed in the past and is fundamentally fair to all of the participants across the prairies.
The Chairman: We're rapidly running out of time. Be as concise as you can.
Mrs. Cowling: This is the last question. I don't think the minister had a chance to answer the first question I asked, the impact of the deregulation of the grain freight rate on the system.
Mr. Goodale: It should result in freight rates that first of all are known. What are the costs in the system? That is a question that is not generally known to the participants in the system today because the costs are shielded and hidden because of the freight rate structure and because of the existence of subsidization. So the process will be far more transparent.
You will note in the legislation, which, I hasten to add, we are not discussing in detail, but just making general reference to, before the other committee, the pro-shipper provisions of the existing National Transportation Act, which have up to now not applied to the grains industry, will, after this reform, become applicable to the grains industry. To get back to a question the chairman was asking earlier, what are the guarantees and the safeguards, I referred to some in my previous answer to the chairman. This is another element of the reform that attempts to put the grain farmer and the grain shipper in a more competitive position, vis-à-vis the railways.
Now, that is not the only element and that is a broader discussion we need to have in terms of genuine competition and how do you ensure the strength of the position of somebody who may regard themselves as a captive or in a vulnerable position. I think we need to look at that very seriously to ensure that we are achieving genuine competition in the system, which is ultimately the most useful discipline. But as we know, competition in the transportation system is pretty limited in a lot of cases and mythical in some cases.
The Chairman: Mr. Hoeppner.
Mr. Hoeppner (Lisgar - Marquette): I hope Mr. Easter listens better than his eyesight, because I have been waving for him for about half an hour.
The Chairman: You're not big enough.
Mr. Hoeppner: I didn't know whether I should go home or not.
Mr. Goodale: I'm glad you stayed, Jake.
Mr. Hoeppner: I'm listening here today and I think I'm getting a free dinner or one more every time the Liberals make a decision on something. I have a bet going with Mr. Bodnar and I've challenged that to other Liberals.
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I'm very concerned, and I think Mr. Collins touched on it. I think we've got out the combine to thresh all the efficiencies in the rail transportation system, but we forgot to plant the crop first of all. We've made a decision here to do away with the Crow, but where are we going to get the efficiencies from?
I'll tell you exactly what bothers me. I will read some statistics from Manitoba Pool Elevators that were presented to us at Thunder Bay. Between 1980 and 1993 the wage of grain workers and rail workers has gone approximately from $10.72 to $22 or $23. Western red spring wheat has dropped from $212 to $156. We've had the biggest number of farmers going bankrupt during this time period. Now we're all of a sudden going to make the system efficient so that these farmers can survive.
Fertilizer has gone up 50% since last fall, and Mr. Collins touched on the overtaxation. Mr. Young pointed out last fall that our Canadian railway labour productivity is 60% of what the U.S. labour productivity is and our rates are $22 an hour. After eight years you get paid until you die. I wonder how you can make a level playing field with those types of statistics.
Mr. Collins talks about property taxes. I would like to tell you that according to the pool elevators, fuel taxes, sales taxes and property taxes are $640 million more a year than the U.S. railways pay. That's more than we get in subsidies. How are we going to change this system and keep the producer on the land?
The $20 that the landowner is going to get is going to be gone - poof. He won't have any producers.
At every meeting I've had in my area - and I was surprised by Mrs. Cowling saying that their producers supported the landowner getting it - I'll bet you every time I asked for a raise of hands, a hundred said to give it to the producer and one said to give it to the landowner. If you don't have producers, you don't have landowners. It doesn't matter what you do with the land; you can turn to the deer, or the natives, or whoever wants to have it, for nothing.
So how are we going to keep our farmers on the land? During the good period, 1980 to 1993, we lost 20%, 30%, 40% of our farmers. This is my concern.
We want a level playing field. The U.S. screams about subsidies; they pay $640 million less just in fuel and property and sales taxes. Those subsidies never went to the farmers; they went to government pockets. We can very quickly take $540 million off the Crow and say we gave it all back to you and added another $100 million.
The Chairman: Jake, can you get to a specific question.
Mr. Hoeppner: I'm asking how can we keep farmers on the land - that's what I'm asking - with these kinds of figures?
Mr. Goodale: Mr. Chairman, I think Mr. Hoeppner said 20% or 30% of farmers were lost from the industry prior to -
Mr. Hoeppner: From 1980 to 1993, and I think that's really low.
Mr. Goodale: That's an interesting statistic, that prior to 1993, 20%, 25% or 30% of farmers were lost from that sector of the economy. That tends to indicate that there were some problems that needed to be addressed. Maybe it is time for some of the measures that we're now proposing.
In order to make the efficiency gains that you and others have referred to, there are several techniques that we need to pursue. One of those is to identify the capital infrastructure in our system now that may be overbuilt or unaffordable.
When I was before the Canada Grains Council a couple of weeks ago, I described a process, for example, where we were going to take a new and fresh look at the light steel and low volume branch lines, and a process is under way to review those branch lines between now and November 1995.
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Overall, I would think the vast majority of grain dependent branch lines operated by either CN or CP will in the long term be retained by CN or CP. Some of them may be candidates for some very interesting short line operations. We now have a regulatory system that in fact discourages short lines. Perhaps our emphasis should be the other way around, to encourage their development where they can be viable and reasonable alternatives. I think we need to look very seriously at all of those alternatives.
Within the branch line network we have now, I would think most of those grain dependent lines will in fact be retained by the railways. Some of them will find their way into short line services. I think there's a reasonable consensus among a lot of the farm organizations that there are at least some - and I don't want that word to be exaggerated - in the light steel or the low volume category that could be discontinued from service in the relatively near term.
The process that is now under way through the national transportation authority will help identify which are the appropriate lines for near term discontinuation, taking into account all of the cost factors that are involved. This is not just railway costs, but also trucking costs, road costs, elevation costs and so forth. It's a full objective cost analysis that's being undertaken with the participation of all the farm organizations and municipal organizations across the west. That's one way in which some savings can be achieved.
Mr. Hoeppner: I think if you look at the figures, it will reduce costs by about 5% or 10%. It's very minor.
Mr. Goodale: It's not the big ticket item; you're quite right. I think there are other issues, as you've referred to in your question and as Mr. Collins has referred to.
Mr. Hoeppner: Overtaxation.
The Chairman: We have to move on, Mr. Hoeppner.
Mr. Goodale: Some structural things need to be addressed. I think you'll find those items on the government's agenda.
Also, do not underestimate the impact of the pro-shipper provisions in the National Transportation Act that are going to come into play.
There is that other issue I've referred to several times, and I do hope the committee will be able to turn its attention to this in due course. That is the way in which transportation policy, whether legislated or not, can help to create a more competitive situation between carriers when the natural history of that situation over the last number of years has been non-competition.
You obviously can't create a whole plethora of new railroads. But how do you get competition into that system or more closely mimic competition so the shipper and ultimately the farmer is in a competitive position, sharing in the benefits and not just paying the bill somebody else determines they have to pay?
The Chairman: Mr. Minister, on that point, we will be sending out a number of focus questions for groups to consider. That'll be one of them.
Mr. Collins, before turning to you, I have another question for the minister. Mr. Minister, you mentioned short lines. In your paper Proposed Changes to Policies Related to Grain Transportation Efficiencies, the government outlines options to facilitate the transition to a new policy environment for the existing short line operators.
Mr. Goodale: Yes.
The Chairman: There's very grave concern expressed by at least one of the short line operators at the moment. From their perspective, they have not been included in the costing base in the current regime. This may be a more appropriate question for the Department of Transport, I don't know. From your perspective, are they included in the costing base? If not, will they be? How is that going to be handled? Certainly their feeling is they may have to shut down if the current regime is carried through. That'll be a grave loss for something like 1,200 or 1,500 producers on that line.
Mr. Goodale: Mr. Easter, at this moment in time I think the best answer I can give you is that both of the existing western short line operators have been very vigorous in the last several weeks in making representations. Mr. Young and I are listening very carefully to those representations, and we hope to be able to respond constructively in the next short while. As soon as we're able to do that, we would obviously want to advise the committee as well. But we are well aware of concerns from the short line operators.
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Obviously one of our objectives for the future if we are going to have this more competitive environment is to have more of those short line operators operating successfully and viably in the long term.
The Chairman: Mr. Collins, you may have a quick question and then we'll let Mr. Taylor in for one quick one and then leave.
Mr. Collins: I hope Mr. Penney from the FCC takes the directive very seriously because I'd hate to see us going off on a tangent with him seeing some other use for that funding.
The other thing that I think is very important is car allocation. It is not dealt with under Bill C-76, and I think that is something we out west are greatly concerned about: Who is going to be involved in car allocation?
Mr. Goodale: On the latter point about car allocation, the budget papers indicated that we would deal with that issue before the end of 1995. A number of groups and organizations within the grains industry have already turned their minds to that. There is a group of senior executive officers of the grain companies; there is what used to be the Senior Grain Transportation Committee under the Grain Transportation Agency; and my May 16 group from last year, together with the WGTA alliance of farm organizations. They are all plugging away at that issue of the right procedure on grain car allocation, but there's more work to be done and we'll hear more from them later in the year.
The Chairman: Mr. Taylor, a quick question.
Mr. Taylor (The Battlefords - Meadow Lake): Yes, I will be quick because I hear the bells ringing to call us to the vote.
I hope the minister will consider coming before the committee again. The mandate of the committee was to look at the future of agriculture in the absence of the WGTA. The minister has not given us any indication at all that he has a vision for the future, that he's made decisions that have not taken into account the long-term implications for individual producers and the communities they support. At least Mr. Mazankowski produced a green paper that whether you liked it or not, at least set out a vision for agriculture for the next 15 years.
We're making decisions based on a reaction to a GATT decision that some of us would say we could fight. How were the decisions made based on long-term implications, and how does this fit into the long-term vision of agriculture the minister has? These are questions we have to address in this committee. It's not the committee's role to deal with those questions prior to the decision being made; that was something the minister had to do, and I don't think he has done it.
Mr. Goodale: Mr. Taylor, I understand that you're on the eve of an election in Saskatchewan and I take your comments in that context. The point is that there was a vision document presented to this committee last fall, in September. I don't think you were in attendance at the time. Some of the colleagues around the table would say it went into excruciating detail in terms of what the long-term vision for Canadian agriculture ought to be.
On the night of the budget, all of those vision principles of September of last year were brought up to date and put in the context of the budget in the document Securing our Future in Agriculture and Agri-Food.
I have had 18 months of detailed consultation and analysis with every element of the grains industry in western Canada. Over a period of time, it is probably the most extensive consultation that has ever been undertaken on any issue. I've had enormous cooperation from the farm groups, from the elevator companies, from the railways, from the labour organizations, from those who run the ports in both Vancouver and Thunder Bay, and from the rural municipalities and all of their representative organizations.
There is very much a vision in place. It's one that does not share your theory that the sky is falling; it's a vision that looks to a growing, expanding Canadian agriculture, where the grains and oilseeds sector of the Canadian economy can break free from the shackles that have tended to strangle it in the past and move toward a growing, diversified, value-added economy that creates jobs and economic growth for the future of Canadians.
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You can be as pessimistic as you want. I believe we can build a future that's full of optimism for the farm industry, not just in the west but in every aspect of this country.
Mr. Taylor: Present the evidence to the committee.
The Chairman: Mr. Taylor, we have to adjourn.
Mr. Goodale: Tons of it have already been submitted.
The Chairman: Mr. Minister, I do want to thank you. I would note to the committee that the minister wants responses on two points right away, pooling point timeframe and the appropriate ceded forage acreage to be targeted.
I would say, Mr. Minister, that we appreciate very much your coming before the committee, and we do want to work together to see that the changes are to the benefit of the industry in the long term. Thank you.
Mr. Goodale: Thank you.
The Chairman: The meeting is adjourned.