[Recorded by Electronic Apparatus]
Thursday, June 8, 1995
.1612 
[English]
The Chairman: Order. We have with us Mr. Laurent Pellerin, who is president of the UPA.
I'll turn the floor over to you, Mr. Pellerin, for your presentation, and then we'll go to questions.
I know our colleague Mr. Collins will be tied up for about another 10 minutes, but he will be here.
Welcome.
[Translation]
Mr. Laurent Pellerin (President, Union des producteurs agricoles): Good afternoon. I will begin by telling you a few things about the Union des producteurs agricoles, and then I'll ask my partner, Mr. Lebeau, to present various comments we have about the changes to various programs that are of concern to us.
For more than 70 years, from the time of the Union catholique des cultivateurs to that of the Union des producteurs agricoles, the farmers of Quebec have patiently built a rigorous, financially independent movement to promote, defend and develop their professional, economic, social and moral interests. For these reasons, members of our organization have in turn worked to develop our regions' economies by setting up the first financial co-operatives as well as agricultural co-operatives. They have also contributed to Quebec's academic development by working within the Conseil supérieur de l'éducation, to the development of the Quebec press by founding La Terre de chez nous, a weekly, in 1929, and to community development by convening les États généraux du monde rural in 1991.
The Union des producteurs agricoles is currently made up of 16 regional federations and 20 specialized unions and federations. It relies on the direct commitment of more than 3,000 farmers who serve as directors. The UPA carries out many activities in Europe, working on GATT issues, in Africa to develop an orderly marketing system, and in the United States, to expand its markets.
The UPA is active regionally as well as nationally and internationally. It is the professional organization of nearly 50,000 farmers who, collectively, have invested $11.6 billion in agricultural infrastructure in order to generate annual revenues of nearly four billion dollars in direct farm sales as well as 65,000 direct jobs.
Finally, the UPA encourages its members to conquer agricultural markets, so that they can carry out the noble task of feeding Quebec as well as outside markets.
I'm now going to ask Mr. Lebeau to give you our comments on the programs you are studying.
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Mr. Serge Lebeau (Economist, Union des producteurs agricoles): First of all, ladies and gentlemen, we would like to apologize for the fact that we do not have any copies of our brief in English. The deadline was too short, and it was impossible for us to provide an English translation of our brief this afternoon, but I do think that one will be ready within the next few days.
[English]
The Chairman: The opposite often happens too.
[Translation]
Mr. Lebeau: I would like to thank you for this opportunity to present the brief from the Union des producteurs agricoles this afternoon.
Obviously, the opinions expressed during this presentation are those of the UPA. However, they were drafted after consultations with three of our partners, the ministère de l'Agriculture, des Pêcheries et de l'Alimentation du Québec, the Association professionnelle des meuniers du Québec and the Coopérative fédérée de Québec.
The purpose of this brief is to comment on certain provisions found in Bill C-76, including the repeal of the Western Grain Transportation Act and the Atlantic Region Freight Assistance Act. We are also taking advantage of this meeting with you to express our reaction to the cancellation of the Feed Freight Assistance Program and to let you know what our expectations are in response to the various press releases that were issued announcing the transition and adjustment measures that the federal government is planning to use to make up for the cancellation of various transportation programs that affect Canadian agriculture.
It goes without saying that today's remarks reflect the situation in Eastern Canada, particularly in Quebec, namely, a region that imports grain and that is highly specialized in livestock production. Consequently, it will be hard for us to answer all the questions that the chairman of the sub-committee, Mr. Easter, submitted to us, because some of them have to do specifically with the Prairies. However, we thought it was important to tell you about our concerns regarding the federal government's withdrawal from the agricultural sector, particularly the transportation sector.
First of all, I would like to remind you that the three transportation programs that are being cancelled were intended to compensate for the fact that some isolated regions were at a competitive disadvantage because of their location. Indeed, we must not lose sight of the fact that in the final analysis, agriculture is the main source of employment and income in rural areas, and is the primary reason for occupying the land. Let's review these three programs and try to assess the impact of their cancellation on Eastern Canada, particularly on Quebec.
Let's take a look at the first program, the Western Grain Transportation Program. Doing away with this program will bring down the price of feed grain in the Prairie provinces - according to the experts, current prices will drop by $8 to $15 per metric ton - thereby upseting the competitive balance between the East and the West.
Doing away with the second program, the Feed Freight Assistance Program, will increase the price of feed grain in the East, at least in the areas that received this subsidy, the Maritimes and the outlying regions of Quebec.
Finally, doing away with the third program, the Atlantic Region Freight Assistance Program, will inevitably have an impact on the production costs of farms located in the areas covered by this program. When this subsidy is withdrawn, Quebec agriculture and Quebec's private wood lot industry will take a $10 million cut.
Consequently, milk and meat producers in these regions will be doubly at a competitive disadvantage as compared with their Western competitors, just because of the new market realities due to these financial decisions. Livestock production forms the basis of Quebec's agricultural economy; it is responsible for nearly 80% of gross cash income from agricultural operations in the province.
We are concerned about the transition measures and the adjustment measures. Let's first look at the measures designed to compensate for the abolition of the Crow's Nest Pass rates.
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First of all, $1.6 billion in compensation will be paid to Western farmers, and then, there is a $300 million adjustment fund for Prairie agriculture. If the $1.6 billion in compensation is paid out to owners of arable land, without truly targetting farmers who export grain, Western livestock producers will have another competitive advantage over Eastern producers.
We musn't lose sight of the fact that by doing away with the Crow's Nest Pass rates, we are ending a 100-year-old program. This program had a strong influence on the development of Canadian agriculture. In fact, at the beginning of the century, the compromise between the East and the West was to subsidize a transportation program in the West so that this region would specialize in growing grain, while livestock production was to expand in the East. At present, it's difficult to forecast the short-term and medium-term impact of the abolition of the Western Grain Transportation Act. One thing remains: the following principles must be respected when this program is done away with.
The first fundamental principle that the federal government must respect is that tax revenues from all taxpayers in Eastern Canada should never be used to subsidize diversification projects in Western Canada that could compete with agriculture in Eastern Canada. In other words, the funds provided through this program should first be used to improve grain transportation, not to finance equipment or infrastructure, as was set out, without specifying their nature. Nor should such funding be used for diversification projects that would compete with the kinds of production that we have invested in in Quebec over the past 25 years. If the $1.6 billion in compensation and the $300 million adjustment fund are paid out to the owners of arable land, for instance, without truly targetting these payments to farmers who export grain, livestock producers will have one more competitive advantage over eastern producers.
The second principle that the current government should follow is that any reform being thought of must be equitable. This implies two basic objectives: the establishment of an equitable competitive environment, and regional equity in the federal government's expenditures in agriculture. In other words, it's clear to us that the federal government will compensate for the abolition of subsidies in Western Canada by providing transitional measures ($1.6 billion) and adjustment measures (in this case, $300 million). On the other hand, the government is not paying sufficient attention to the disruption of the competitive balance, which is to the detriment of the East.
We are looking at a $60 million adjustment program, two thirds of which has already been committed, particularly to national agricultural management programs, a review of farm income and farm safety, while the rest is intented for other Canada-wide initiatives. In our view, most of this fund, or nearly all of it, should be allocated to Eastern Canada, to make up for the payments to Western Canada. Quebec absolutely must obtain its fair share of the payments that are being made to Western farmers so that we can adjust to the new economic environment that agriculture is now facing. According to the studies carried out by experts, the compensation to Quebec to make up for the abolition of the Western Grain Transportation Program should be between $24 million and $46 million per year over the next four years.
Finally, to conclude on this principle of fairness between Eastern Canada and Western Canada, we expect to get compensation programs equivalent to those provided to Western farmers in terms of tax treatment and lump sum payments that are being made to them. I'm sure you know that the owners of arable land in the West will be getting ex gratia capital payments totalling $1.6 billion, in two installments, which is equivalent to about $2.2 billion if you bear in mind the tax exemption that is also being granted to them. Consequently, we are expecting a fair share of what is being provided to Western Canada through all the transition programs and adjustment programs being provided to make up for the federal government's withdrawal.
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Then there's the $62 million compensation fund, to be paid over 10 years, that was announced as part of the abolition of the Feed Freight Assistance Program.
In light of the principle of equity, which we have already set out, and particularly in light of the objectives that stem from this principle, the compensation fund provided by the federal government as part of the abolition of the Feed Freight Assistance Program does not appear to be equitable, in our view, if we compare this fund to what's being offered to the Western provinces. The compensation that the federal government is offering as part of this program is equivalent to roughly 3.4 years of subsidies, not considering the tax exemptions, of course. In comparison, the federal government is offering the equivalent of 2.75 years of subsidies to make up for the abolition of the Feed Freight Assistance Program. If we bear in mind the principle of equity, the compensation fund to make up for the abolition of this program should total a net amount of $62 million, along with the option of using the same tax treatments as those granted to owners of arable land in Western Canada. Furthermore, the money needed to extend the program until December 31 should not be taken from the compensation fund, nor from the General Fund for Rural Development and Adjustment.
Finally, to conclude on this principle of equity between Eastern and Western Canada, we expect that the provinces affected by the abolition of the Feed Freight Assistance Program should have a choice between receiving the subsidy in one or two installments, an option that is being offered to the provinces affected by the repeal of the WGTA.
Furthermore, we are asking to receive the historical share that was granted to us over the past 10 years through this program.
Finally, there is the $326 million adjustment fund, to be paid out over six years, which was announced to make up for the abolition of the transporation subsidy for freight in the Atlantic Region. First of all, given the objectives of this program, namely ``to allow advantageous rates to individuals and industries in the provinces and regions affected by this program'', we believe that the compensation for the abolition of this program should enable shippers to adjust and adapt to the new transportation cost structure. Secondly, the share of Quebec's agri-food industry and its private wood lot industry was about $10 million per year. We would like the federal government, Transport Canada to be specific, to give Quebec's agri-food and private wood lot industry nothing less than its historical share. In our view, these measures absolutely have to be targetted so that a single province does not concentrate this adjustment program on production activities that could distort markets.
In closing, still bearing in mind the principle of equity which we set out previously, we are asking for equitable compensation and adjustment measures, just like the other programs, given what the West is being offered in terms of total amounts, tax treatments and lump sum payments. To put it plainly, we are asking for the equivalent of 3.4 years of subsidies to make up for the abolition of the Atlantic Region Freight Assistance Program, that is, approximately $373 million in compensation, along with tax breaks, rather than the $326 million that we are being offered.
At present, it is difficult to predict the extent and the speed of the changes to the face of Canada's agri-food industry which will be brought about by the financial decisions that have been announced. One thing for sure is that these changes will take place. They may not be positive for the entire industry, particularly for the East, which relies heavily on livestock production. Consequently, the federal government should make every effort to ease the transition subsequent to the abolition of these agricultural programs, particularly for the Eastern provinces, including Quebec.
Given the observations that we have just brought to your attention, we expect:
- that the Canadian government target compensation for the abolition of the Western Grain Transportation Act as much as possible to the grain farmers who will have to absorb the blow of higher grain transportation costs so that the abolition of the transportation subsidy program is not compensated for by means of a diversification program;
- that the Canadian government offer Eastern farmers an equitable compensation program in comparison with the program offered to Western farmers in terms of tax treatment and the lump sum payments being granted to them. These measures apply to all the repeal programs;
.1630
- that the Canadian government change the amount of money allocated to the General Fund for Rural Development and Adjustment in order to make up for the West's competitive advantage due to the decrease in grain prices. Certain experts estimate that Quebec should receive reimbursements of between $24 and $46 million dollars per year over the next four years in order to rebalance the competition between Eastern Canada and Western Canada;
- that the 62 million dollar compensation fund provided as part of the abolition of the Feed Freight Assistance Program be paid out in its entirety, and not be reduced by the amount necessary for its continuation until December 31, 1995, and that Quebec receive at least its historical share of the past 10 years;
- that the adjustment fund allocated to make up for the abolition of the Atlantic region freight assistance programs be equitable in comparison with the compensation provided to the Prairies, that it enable shippers to adjust to the new transportation cost structure and that Quebec's agri-food and private wood lot industry receive nothing less than its historical share.
During this presentation, we have made specific comments about the provisions relating to transportation programs. To conclude this presentation, we would like to reiterate the position that we have taken over the past 15 years, namely that the federal government treat Quebec's agricultural sector fairly so that the agrifood industry and rural regions, particularly those in the East, are not unjustly treated by means of these provisions.
Thank you very much for your attention; we are now ready to answer your questions.
[English]
The Chairman: Thank you very much, gentlemen.
Mr. Chrétien, do you want to start?
[Translation]
Mr. Chrétien (Frontenac): Mr. Pellerin, Mr. Lebeau, I would like to extend a warm welcome to you, here on Parliament Hill, particularly before the members of this sub-committee.
When I arrived a few moments ago, I warned you that there would not be a lot of people here. There are five members of Parliament on the committee, and three of us are here, which works out to a 60% attendance rate. That's not bad. If we had one less, we wouldn't have a quorum. So I'll have to ask you to pardon my colleagues, who should be arriving shortly. Given that this affects Quebec, my friends from the Reform Party appear to be far less interested. That's understandable, since they only represent the West, except for one member from Ontario.
You touched on the problem of Western farmers diversifying using the taxes paid by all Canadians. I've raised this point more than once in the House, and I almost always ask our witnesses the question. Most of the time, they tell us that there won't be any diversification. I'm nervous. I'm pleased, Mr. Lebeau, that you pointed out the danger of everyone's tax dollars being used for such diversification.
I would now like you to explain, in laymen's terms, the 3.4 years' worth of subsidies to compensate Western farmers, whereas we in Quebec will be getting 62 million dollars over 10 years, while the Atlantic provinces will be getting 326 million dollars over six years, which represents 2.75 years' worth of subsidies. I didn't understand this properly. Could you take a few moments to explain this once again, more clearly?
Mr. Lebeau: The West will be getting 1.6 billion dollars plus 300 million dollars. That comes to 1.9 billion dollars, divided by the 560 million dollars that are granted each year. That works out to 3.4 years.
Mr. Chrétien: Right.
Mr. Lebeau: Unless I'm mistaken the Feed Freight Assistance Program was 18 million dollars per year, over 3.4 years. That worked out to roughly 63 million dollars, once again, unless I'm mistaken.
Now it's been suggested to us that the Feed Freight Assistance Program be continued until Decembre 31. That will cost about 13 million dollars. So that means 13 milion dollars out of the 62 million dollar compensation fund, which means that only 49 million dollars will remain in the compensation fund. That is equivalent to 2.75 years of subsidies, not 3.4 years.
Mr. Chrétien: Right.
.1635
Mr. Lebeau: As well, all transportation programs will end on August 1. Of course, the Feed Freight Program will be extended until December 31, but, again, it's a question of fairness, not only in terms of the number of years, but also in view of the fact that the $13 million is calculated from April 1 to December 31, whereas for the others, there will be no subtraction made for the period beginning April 1 and ending August 1.
Mr. Chrétien: I have a question for Mr. Lebeau or Mr. Pellerin. The feed freight crop subsidy program is aimed at the outlying regions of Eastern Quebec. Can you tell me what they are, such as Lac-Saint-Jean, the Gaspé and the Magdalen Islands?
Mr. Pellerin: The program covers almost all of the North Shore and Charlevoix areas, where there is a high concentration of pork and poultry producers; it also covers the entire Lac-Saint-Jean area; the area south of Quebec City, beginning at the Chaudière River; the entire region to the east of the Chaudière River, right to the end of the Gaspé, including the Magdalen Islands; several villages in northern Quebec and Abitibi, and a few isolated villages in the Eastern Townships, close to the American border.
Mr. Chrétien: So my region of Thedford - Plessisville would not be penalized?
Mr. Pellerin: No.
Mr. Lebeau: But some municipalities have to be affected.
Mr. Pellerin: Yes, but not many.
Mr. Chrétien: At the other end of my riding...
Mr. Pellerin: Yes, perhaps at the other end of your riding.
Mr. Lebeau: In fact, producers have a right to the Quebec subsidy if they live farther than 83 kilometers from Montreal, Trois-Rivières or Quebec City. If a producer is 83 kilometers away from Quebec City or Trois-Rivières, for instance, there is no problem: he is eligible for the subsidy.
Mr. Pellerin: The subsidies apply to areas surrounding the three ports on the St. Lawrence River: Montreal, Trois-Rivières and Quebec City.
Mr. Chrétien: If the Feed Freight Assistance Program is dropped, will it have unfortunate or catastrophic consequences for certain Quebec producers?
Mr. Pellerin: For some producers, absolutely. Take a table egg producer who, against all odds, was given help to run his business on the Magdalen Islands a few years ago, and who was given an exceptional quota set by the Canadian Egg Producers' Council. This producer has about 20,000 laying hens and gets a subsidy of approximately $50 per ton of grain, for a total of 800 to 1,000 tons per year. I think you'll understand that it will be extremely difficult for this producer to maintain his production in the Magdalen Islands.
There are less pathetic cases, where the numbers are financially significant nonetheless, like pork producers in Charlevoix. If we do away with the subsidy, it will cost some family farms $10,000, $15,000, $20,000 and even up to $25,000 in extra costs for their grain supply. So it's obvious that there will be repercussions on these producers.
In many cases, because these are very old statutes which have been applied for dozens and dozens of years, they will affect second or third generation farms. These farms have new facilities and new capitalization. Younger farmers have upgraded and arranged their businesses around well-known statutes which have been in effect for 100 years in some cases, and for dozens and dozens of years in other cases, like the eastern grain transportation subsidy. But they are being told that the system will change overnight, thus throwing them into dire financial straights.
Mr. Chrétien: Unless I'm mistaken, the government has created a $62 million adjustment fund to be spent over the next 10 years. If you were a close advisor to Mr. Goodale, could you suggest three or four ideas to help him adapt to the new situation? If the money is distributed evenly, that's only $6.2 million a year. So what do you suggest we do?
Mr. Pellerin: We have to begin by establishing the historical share Quebec has received over the last 10 years. We use a 10 year reference period because often calculations are based on the past 10 years. The Yukon and the Northwest Territories say that they don't want to go by the historical subsidy, because they want to go by what is needed to develop future productions. But we have a problem with that. You have to begin by establishing the historical compensation, and then ensure that the producers who benefited from the subsidy are compensated, as is the case for Western producers. We hope that producers affected by the elimination of the subsidy will be compensated. The same principle applies in Eastern Quebec. Compensation should not be paid out so roads can be improved, which will benefit producers indirectly. It would be very difficult then to find the $15,000 or $25,000 I referred to earlier. Some producers will be affected.
.1640
We could help individual producers who are affected by helping them buy better equipment to either hold grain on their farms or to transport it to the farm. In some cases, we could build grain storage facilities in regions where it is really needed, in the case of grain shipped in by the St. Lawrence Seaway or grown locally. Take the case of the Magdalen Islands, where the farmer has to store his grain in the fall and keep it stored all winter because transportation is difficult in winter. Perhaps farmers in that area could get additional storage facilities.
We can't simply distribute the money throughout the system, because individual producers were supposed to benefit from this measure. We have to make sure that producers will be able to adapt.
Mr. Chrétien: Mr. Pellerin, the government will have an awfully difficult problem. You've said at least three times that individual Western producers who own their farm should receive compensation. I don't know if you are aware of this fact, but in Western Canada, 35% of farms are rented; they belong to the Farm Credit Corporation, to major banks or even to the provincial government.
This is a hot potato for the government. Sooner or later, it will have to make a decision. To whom will the government send the cheques? To the owners or to the tenants? There might be a significant decrease in the value of farms when the WGTA is repealed. If the value of properties goes down, the money should go to the owner. If the owner owns 600,000 hectares, he can just rent them out to as many tenants as he chooses. What's your opinion?
Mr. Pellerin: I'd like to make a distinction. We're talking about Western producers. I think the compensation should be given to producers who already received the export subsidy. For instance, Western livestock producers who don't export grain to international markets and who therefore did not get a transportation export subsidy should not have a right to compensation because of the disappearance of that program. The compensation should simply go to grain exporters, whether they own or lease the land - I believe Westerners should make that decision - because they received the original transportation subsidy.
Mr. Chrétien: Mr. Pellerin, I have to leave at about 5 o'clock. I always have commitments in my riding Thursday evenings.
Today, out of respect for the Union des producteurs agricoles du Québec, of whom I am also a member, I delayed my riding commitment to 9:30 pm. So, if I leave in a hurry later, it's not to be taken as an insult to you.
Mr. Pellerin: Thank you.
[English]
The Chairman: Thank you, Mr. Chrétien.
Mrs. Cowling.
Mrs. Cowling (Dauphin - Swan River): I want to mention that I am more than pleased that you are here representing the UPA, I believe. But you still are involved with the Canadian Federation of Agriculture?
Mr. Pellerin: Yes.
Mrs. Cowling: I remember your former president saying on numerous occasions that as a group of farmers within Quebec, it was very important for you to work at the national level, with other farm organizations; that your voice was stronger by working together. I would assume that still is your mandate, that you work together with other Canadians.
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[Translation]
Mr. Pellerin: There is no doubt that the Union des producteurs agricoles is still spending a lot of time and energy in working with its colleagues across Canada. Since very early this morning and into this afternoon, I was at a meeting of the board of directors of the Canadian Federation of Agriculture. At noon I spoke with Ray Howe, formerly of the Saskatchewan Wheat Pool, about the application of compensation subsidies brought in because the Crow rate is being abandoned in Western Canada.
We are still working directly with Western Canadian producers to make them aware of our point of view, and we're meeting with you today to help you understand our perspective. Despite the fact that Bill C-76 has progressed far in the legislative process, we nevertheless believe that it is useful and necessary to warn you about the risks that we foresee in the future, and we're not only talking about next year. You can't just eliminate a 100-year-old program and think that it won't have unforeseen repercussions over the next five or ten years. We will have to measure these repercussions.
In Quebec there is a lot of livestock production and we will follow the outcome very closely. In our brief, we referred to a study conducted by Mr. Garth Coffin from Macdonald College. He studied the kind of impact the repeal of the Western Grain Transportation Act would have on Quebec. These aren't our figures. These figures are from several university researchers - because the study was carried out in co-operation with other universities - who claim there will be a shortfall or an additional production cost of $24 or $45 million per year in Quebec. That's a very significant impact.
[English]
Mrs. Cowling: I wonder if this committee could have a copy of that report. I think it might help us put together our package for the minister.
[Translation]
Mr. Pellerin: Certainly. We will table enough copies for everyone. We'll table it despite the fact that we did not get enough notice to get it translated. In a few days, you will probably have the English translation.
[English]
Mrs. Cowling: That would be very good.
I want to move on to the transportation system and the link of steel we have right across the country that moves our products from east to west. Does your organization have a policy with respect to that? Do you believe we should continue to keep that link of steel right across the country?
[Translation]
Mr. Pellerin: Not really. The UPA believes that Western grain transportation concerns Western producers and that they are in the best position to make the best decisions on how to keep on exporting their grain. We hope that a good part of the $300 million adjustment fund for Western Canada will be invested in improving transportation facilities.
We don't presume to know what's best for Western producers. They will have to determine what their needs are, where to cut, and where investment is most needed. It seems that some Western producers want to ship more of their products from the West Coast to international destinations. Other producers, however, who are closer to Manitoba, and I believe that's your case, would rather ship their products over the Great Lakes. I think the market, as well as the choices Western producers make, will quickly seal the fate of the railways.
[English]
Mrs. Cowling: It's my understanding that two provinces in Canada receive provincial funding. I believe one is Quebec and the other is Alberta. What portion of that funding goes to the producers in Quebec from the Quebec provincial government? How much of that do your producers receive?
[Translation]
Mr. Pellerin: Provincial funding from which program? What are you referring to?
[English]
Mrs. Cowling: I'm looking at the agricultural sector.
[Translation]
Mr. Pellerin: The total budget?
[English]
Mrs. Cowling: Yes.
[Translation]
Mr. Pellerin: Quebec has a provincial Ministry of Agriculture. The Government of Quebec invests in Quebec farming. Do you want to know how big the Ministry of Agriculture's budget is?
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[English]
Mrs. Cowling: Just a rough estimate.
[Translation]
Mr. Pellerin: The Quebec Ministry of Agriculture's annual budget is about $600 million.
[English]
Mrs. Cowling: You seem to be very concerned about diversification happening in other sectors of Canada. Do you have any factual documentation on the impact diversification may have on the producers and particularly on people coming into your industry in Quebec?
[Translation]
Mr. Pellerin: The measure which had the most impact on Eastern Canada, in terms of diversification in Western Canada over the last few years was Alberta's Crow offset policy, which preceded the demise of the Western Grain Transportation Program and simulated it to some extent.
This Albertan compensation program triggered a substantial increase in pork production in Alberta - between eight and ten percent - over the life of the program. If the same thing were to happen in every Western province... Of course, that is a market in which Quebec, Ontario and the Maritimes have already invested, and there will surely be immediate repercussions due to surplus production in Canada. Prices might fall, especially since the federal government, in the same budget, reduced income security programs in these areas by about 30%.
We would be in a tough situation if the elimination of the Western Grain Transportation Program triggered a substantial increase in livestock production in Western Canada.
The worst-case scenario would probably occur if the subsidy or compensation for Western Canada were blindly paid out to every Western producer who owned land, even if they did not export grain; in other words, if it were given to Western producers who produced grain and fed it to their cattle. So if these producers received compensation should the Western Grain Transportation Act be repealed, they could immediately, since they don't export their grain, invest that money into animal production, which in our opinion goes completely against the spirit of the compensation program.
The program should, I repeat, compensate grain-exporting producers who want to keep on exporting their product.
[English]
The Chairman: Thank you, Marlene. I know you have to go.
Mr. Chrétien, do you have another question you want to ask?
[Translation]
Mr. Chrétien: After you.
[English]
The Chairman: I'll ask mine later if you have any more questions.
[Translation]
Mr. Chrétien: Thank you very much, Mr. Chairman, for your understanding.
I'd like to clarify what Mrs. Cowling said when she talked about the railways. In my region, and I believe it's the same in your area, Mr. Chairman, the railway is basically not used by farmers anymore.
My co-op in Disraeli, which is the eighteenth biggest, and the fifth biggest in Quebec, has been using trucks over the last dozen years because rail service was so bad. Most co-ops are built a few meters from the tracks, but the rail companies provided an abominable service. Trains arrived 10 or 12 days late and often the grain was wet and was of poor quality because of hopper cars. That's why we now have our grain delivered by truck.
I grew up near the tracks. When I was a young boy, hogs were shipped by train, pigs feed arrived by train, and trains were used for almost everything. But now, we only use trains about one or two percent of the time. They are of no importance to us whatsoever.
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Mr. Pellerin: Quebec has studied the issue at length. In the last few years, there's been a debate as to whether rail lines should be converted into cycling paths. We are lobbying railway companies to make sure that if their lines are converted into cycling paths, they won't end up on our land.
Mr. Chrétien: Mr. Chairman, I'd like to come back to another subject. While you were speaking, I was distracted by the person who supervises committees. I'd like to talk about the research which was done by a professor from Laval University, if that's correct.
Mr. Pellerin: It was McGill University and Macdonald College.
Mr. Chrétien: So it's Macdonald College that carried out an exhaustive study and concluded that if the WGTA is repealed - and I was also very surprised when I read this in the paper - it would trigger losses on the order of $46 million a year. I don't know if the government was aware that Quebec producers were being asked to do more than their fair share.
Mr. Pellerin: We quoted modest figures in our presentation. But if you take a close look atMr. Coffin's study, you would have to add both amounts. He says that Quebec would have a $75 or $77 million shortfall because he added the impact of both measures. Each measure, on its own, would have a $24 or $46 million impact. There are two isolated impacts: on each ton, and on each individual affected. Mr. Coffin and his colleagues believe that the impact of both measures has to be totalled. But we don't go that far. We simply want to tell you about the general conclusions of the study. Our own economists thought there would be a $20 million shortfall, whereas the federal government said it would be about $10 million for Quebec. It was Mr. Yvon Proulx, who was a member of the most recent committee of experts who studied the famous Western Grain Transportation Act, who said that there would be at least a $20 million shortfall per year if the act was repealed.
Mr. Coffin is not way off base. His figures are in line with our projections.
Mr. Chrétien: Mr. Pellerin, I've always been interested in farming in Quebec, even before I bought my own farm. If my memory serves me well, Jean-Luc Pépin, who was the Minister of Transportation at one time, wanted to amend the Crow rate and the UPA fought the proposal tooth and nail.
I remember the huge demonstration which took place on Parliament Hill, and the project was abandoned. Of course, the UPA has concerns about diversification, but apart from that, there were no protests at all. Is that because at the time the proposed changes to the Crow rate were misrepresented, or was a different formula being proposed, or do you think that you have changed with the times and believe that farmers must also do their share to reduce the country's annual deficit?
Mr. Pellerin: I'd like to begin by responding to your first comment. Of course the situation has changed. Everyone has changed in the last 15 years. The situation has changed in many regards.
The termination of the program, as proposed now, is different from what was proposed in 1980. As well, the financial situation of producers, in Eastern and in Western Canada, and particularly that of Western grain producers, has also changed greatly in the last 15 years. We are being told that the land used by 30 or 40% of Saskatchewan producers would be taken back or managed by the Farm Credit Corporation. That was not the situation in 1980.
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On average, Western producers are 10 to 15 years older than Eastern Canadian producers. So this surely has a different impact than it did 15 years ago. Therefore, our concerns about diversification are different than those that might have arisen 15 years ago.
However, we continue to favour certain approaches. For the past 15 years, we've taken part in committees to try to find ways to abandon this program. There is an even more pressing argument today, namely the financial situation of governments. Over the past 20 years, governments in Canada have put us in a financial situation that is very different than the one prevailing in the late seventies. I think everyone would agree to that quite readily.
So surely, there's a new flexibility among all Canadians. However, we want to warn you that the abandonment of this program, with the compensations offered, may provoke changes in agricultural production not only in Western Canada, but also in the East. That is the issue of interest to us here today.
We're asking the federal government to watch for the consequences that may result from the abandonment of this program and to take corrective action as necessary. You know, the government announced a compensation program for the West and an adjustment program for the East, but that's not where it ends as far as we're concerned. You can't abandon a 100-year-old program and believe that the consequences will only last a few months. That's impossible!
The consequences may be felt over several generations. That program lasted several generations. To us, the abandonment of this program is a historic event. This is the Canadian railroad. It's one of the things that united the 10 provinces. Remember our history! That program has just been abandoned.
Mr. Chrétien: Mr. Pellerin, you do know that above all, I defend the interests of Quebec farmers. In the House, I've made more than one speech denouncing the unfairness of the last budget, and you are a witness to that. I'm among those who say, for example, that $1.6 billion and $300 million... There's a billion dollars that is added to that and apparently, we could use that money to export to private enterprise, but not from government to government. If you add all that up and take into account the fact that the $1.6 billion are not taxable, the total figure goes beyond $3.7 or $3.9 billion.
Yesterday, two major farmers from Saskatchewan appeared here. One of them has 3,500 acres. I remember that I was taken aback by that figure and so was Bernie. For him, the $1.6 billion would represent between $25,000 and $30,000. He said that this was peanuts, it was welfare, and he recommended that we give that $1.6 billion to universities or non-profit organizations.
I think we're giving out too much and he felt that this was peanuts, that it was hardly worthwhile. As you can see it is difficult to size up situations in this country. Again this morning, I made a speech on Bill C-92, an Act to amend the Canadian Wheat Board, and I repeated that there was no fairness for Ontario and Quebec farmers.
I would like to hear your views, Mr. Pellerin.
Mr. Pellerin: You're telling me that the situation has changed. I also said that the situation had changed since 1980. The payments provided to producers in 1980 are quite different from what's being offered today. As you say, $25,000 or $30,000 for a producer who has 3,000 acres of land is surely not as great an incentive to diversification as Western producers expected. At one point, those people were demanding seven billion dollars in compensation.
That's one of the reasons our reaction is less virulent than it was in 1980. But our basic arguments are the same. We are demanding comparable and equitable treatment.
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If a Western producer receives $20,000 tax-free because the program is abandoned in Western Canada, we're demanding that the Eastern producer, who will receive thousands of dollars because of the abandonment of the Western grain program receive money in one or two payments and not over six years as is being proposed. That money should also be tax-free.
Why are the West and East being treated differently? It's the same thing.
Mr. Chrétien: Thank you, Mr. Pellerin.
[English]
The Chairman: I guess one of the things we don't want to get into at this particular committee is trading dollars east and west. I do take very seriously, though, what you say on pay-outs, on how they may be handled differently in each region, and we'll consider that.
Perhaps more important is how we can ensure that there will be a fair and equitable treatment in the future. That's the point I want to address. I admit that I wonder in my own mind. The agricultural industry in Canada as a whole is extremely complex. I find it remarkably strange in terms of the FFA, feed freight assistance, program that no impact study was done. I admit that up front. An impact study should have been done.
I believe you said that there should be some approach to monitoring what happens. You're absolutely correct: you can't abandon the hundred-year program and think the consequences...[Technical Difficulty - Editor]. There will be consequences for a long time, and the federal government has some responsibility in terms of those consequences.
How would we monitor? Also, in the event that we find problems as a result of that monitoring, how do you suggest they should be handled?
[Translation]
Mr. Pellerin: I think we agree. You must have a farming background.
[English]
The Chairman: It is, definitely.
[Translation]
Mr. Pellerin: We are in close agreement when you say that we cannot abandon a 100-year-old program and think that there will only be short-term consequences. How can you monitor the situation? I think that the government has a moral responsibility.
A producer who got started in the last 10 years in the Maritimes or in Quebec benefiting from the Eastern grain transportation subsidy, knew the market conditions that his father and grandfather were used to when he got established. He gets settled and builds his farm under those conditions. The government decides to change the conditions and bring them back to the ``real'' market conditions. The real conditions are 100 years old. The government has a moral responsibility to monitor the drop in agricultural production in these regions, as well as the upward pressure on farm inputs.
Not all producers will go bankrupt, but many will be affected. Rest assured that the government of Quebec, the Coopérative fédérée du Québec, our partners in the 1980 coalition and we of the UPA will closely monitor the impact of the abandonment of these programs in Quebec.
I have the impression that the Maritime province governments will also monitor these impacts. Prince Edward Island and Nova Scotia will surely have a great interest in monitoring this impact. The primary responsibility rests with the federal government. The firmness or aggressiveness of the Quebec partners in 1980 could come back if, over the years, we realize that the impact is worse than what we expected and that the government is not ready to intervene to offset additional effects that had not been predicted at this point.
How will the problem be solved? Let's not choose any measures today without having measured the impact.
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If the government would at least make the decision to measure these repercussions, we would at least have a common tool to intervene again in two, three or five years, because we are convinced the repercussions will still be felt at that time.
[English]
The Chairman: We had before us this morning the Minister of Agriculture from Manitoba, who's all gung-ho on the hog markets and on how wonderful the hog markets are. He's not the only one in the country. I scratch my head when I hear all these economists talking about all the wonderful markets available for products. They aren't the ones who are growing and selling and taking the risk.
In terms of the make-up of Canada - and Marlene mentioned part of it earlier - you have programs under the auspices of the provincial Government of Quebec, as you do in Alberta and in every province in the country. If we get ten provinces competing with capital investment or whatever in terms of all getting into the hog business, where the hell are we going to sell this stuff? And what are the consequences?
Is there any way a national government can have any involvement in that area? Certainly we can produce only so much in the dairy system. And we all know what's going to happen to the price if you produce a surplus. I wonder if you have any ideas on how to limit the risk in terms of every province encouraging their producers to get into A, B or C. The farmers suffer at the end of the day.
[Translation]
Mr. Pellerin: Since the same thing has happened across the country, including Quebec, we have told the provincial government that our group, farmers and their representatives, would not really be against governments withdrawing their financial support on the condition that they give us access to things which don't cost anything. I'm referring, among others, to additional powers which would allow us to make money in another market area to help us cover our production costs.
We met with the Régie des marchés agricoles du Québec, the organization that oversees the marketing of farm products. We gave it the same warning and asked it to use its imagination to try to find other ways to let us market our own products so we can live off our agricultural production.
More recently, I met the National Farm Products' marketing council in Ottawa, and I told them the same thing: you are an organization responsible for marketing Canadian farm products; we would like to work with you to study ways to improve the law, ways which would allow us to market our farm products so we can make a decent living and live off our production.
Canada should not be proud of the fact that, increasingly, farmers are forced to make money outside the farm to survive. Quebec is one of the last provinces where farm producers can live off their business. Everywhere else in Canada, farmers depend on outside activities in order to survive. The government should take note of this trend. If we want people to specialize and become professional farmers, we have to give them the tools to live off of their agricultural activities.
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[English]
The Chairman: I guess what I'm wondering is whether there is any way you can have governments or someone involved in market intelligence to in fact analyze the data that's coming in and that's available to producers, in terms of these supposed markets.
If you look at the Canadian Wheat Board as an example, it certainly has market intelligence. It even knows what the weather patterns are in terms of the country it's exporting to, what crops they're going to be growing, and so on. What about having that kind of intelligence rather than just depending on the stock markets? Is there anything that can be done in that area?
[Translation]
Mr. Pellerin: Certainly. I'm quite proud to say that in the last few years I helped create Canada Pork International, a company jointly owned by Canadian producers and processors which specializes in international market data.
Unfortunately, all the excellent information we get from throughout the world is not enough to help us increase our revenu so we can live off pork production, especially these days. The price of pork is extremely low, but the organization nevertheless is a tool which gives us hope that one day it will be easier for us to penetrate new export markets - that is, if we can survive until then.
[English]
The Chairman: One of the concerns, certainly from Atlantic Canada, is how close a province may be to self-sufficiency in grain production with the loss of the FFA, the feed freight assistance. Nova Scotia is certainly far from being self-sufficient. What's the level of self-sufficiency in feed grain production in Quebec?
Second, on feed freight assistance, some in Atlantic Canada believe that maybe there are ways we can access other supplies of feed grains, maybe foreign supplies or whatever. Do you have any thoughts on both of those questions?
[Translation]
Mr. Pellerin: I am referring to what's happening in Quebec today. Regarding animal feed produced in Quebec, the province has been almost self-sufficient in the last few years. In that period, Quebec was averaging 80% self-sufficiency in terms of grain production.
Strangely enough, in the last few years, because of the crazy patterns of world trade, some Atlantic provinces would have been better off buying their grain from the world market, rather than buying Canadian grain, which is shipped along the Seaway from Eastern Canada. It's a little strange that Nova Scotia in particular can buy grain for less on the international market, grain which is shipped in by European or American freighters stopping in St. John's, rather than from Canada itself. It's a little strange, but that's the way it's been lately.
Despite all the good intentions proferred when the GATT was signed, I am basically convinced that this situation will last a few more years. If that's the case, it would be cheaper to buy international grain at ridiculously cheap prices rather than to try to market canadian grain well.
[English]
The Chairman: Thank you.
Marlene, do you have any other questions? There's time for one.
Mrs. Cowling: Yes, I have a very brief question with respect to diversification and the value-added component.
Are you expanding on the value-added end of your production line?
[Translation]
Mr. Pellerin: There's no doubt that Quebec processors are investing in the second and third processing stages. I'll talk about pork, because I know that area well. Despite the fact that Quebec only produces 33% of Canada's pork production, half its exports go to Japan. Why is Quebec exporting 50% of its pork to Japan? It's because we did even more in terms of boning, removing the fat and making careful cuts, as well as having Japenese inspectors in slaughter houses in Quebec. We went even further to meet the needs of the clients.
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This also holds true for our exports to the United States. For the last few years, and for different reasons, particularly because of US Customs, we tried to reduce our pork exports as much as possible. Instead, we did more boning and processed the meat more, and we ended up with ham and bacon. We concentrated on producing more of these products over the last two years to make sure we kept our markets. We will continue in the same vein. It only makes sense.
[English]
The Chairman: Thank you, gentlemen. We enjoyed your presentation. Thank you very much.
The meeting is adjourned.