EVIDENCE

[Recorded by Electronic Apparatus]

Monday, November 27, 1995

.1942

[Translation]

The Chairman: Good evening, ladies and gentlemen. We are resuming the work we started last week with our Forum on Fiscal Disincentives to Sound Environmental Practices.

[English]

This evening we have four witnesses covering a wide range of disciplines, mostly from the agricultural sector.

I will ask John Girt to introduce himself. I assume that he would like to go first. As the others take over, they will introduce themselves as they launch their presentations.

Mr. John Girt (Consultant, Environmental Management and Agricultural Development): I've been working both as a bureaucrat and now as a consultant for something like eight years in the field of sustainable development, primarily in agriculture. I've had the benefit, though, of working on a number of related rural issues, as you'll see as my presentation continues.

I've worked during that time for a number of government agencies, round tables on the environment and the economy, the United Nations Environment Program, the Interamerican Institute for Cooperation in Agriculture in Costa Rica, all on sustainable agricultural issues.

What I want to bring to you now is a personal perspective. In tackling this, I really don't want to get bogged down too much in the tax issue. Rather, I want to look at the sector and what it needs to become more sustainable. I'm not implying that it's not a high performer, as you'll see as I go along. I think it's already a quite good performer on the sustainable scale of things.

I'm doing it in this way simply to provide you with a context that I think is lacking when people immediately jump into talking about tax incentives and disincentives and the like. You've got to look at the power of those things relative to other things that are occurring in the sector and whether there are other interventions that might not cost money. Just policy interventions might be more effective than any type of fiddling around with the tax system as far as agriculture is concerned.

I'm going to confine my remarks to farming. I'm not going to talk about the input sector or the processing or distribution sector. We just don't have enough time. For the minute, I'm not going to talk about databases. I'll talk about databases right at the end, because I believe the important thing is to realize that times are changing as far as agriculture is concerned.

The issues that have been written up by people such as myself and quoted by David Runnalls to you last week are not necessarily the issues of today. They are the recent past.

.1945

The last decade or so has seen some incredibly significant political changes. Communism has been replaced by democratic forms of government, and the Crow rate has disappeared in the same breath. Conflicts between delivering social programs and paying for them have dominated most government agendas. The GATT and NAFTA agreements promise a better and freer trading environment and so on. We're in a situation of rapid change.

So what of the next decade as far as agriculture is concerned? Provided that the current trends in federal negotiations with provinces and farmers are maintained, and that internationally we allow the marketplace - rather than government treasuries - to determine farm incomes, we have an opportunity to learn from the past and introduce more environmentally attuned policies.

In Canada we have had in place a system of support programs for farm incomes designed to reward the production of specific commodities, irrespective of environmental or other consequences. I've produced estimates that in some years some $50 per acre was being transferred from Canadian governments to farmers on the prairies for grain production. Another way of putting it is that in some years 50% or 60% of net farm incomes were determined by government pay-outs when commodity prices were particularly bad.

Now, that's the truth. I'm not saying that it's good or bad, because I think it was understandable. It's not critical, it's just a statement fact.

The problem is the way in which these payments were provided. They would provide an incentive for farmers to clear land that would otherwise not be cleared and to use fertilizers and chemicals that would perhaps otherwise not be used. More importantly, they would push up the cost of other groups wanting to offer any other type of financial incentive to farmers for that same piece of land.

So all of these actions could lead to declining wildlife habitat, greater soil erosion, pollution of ground surface waters than would otherwise be the case, or alternatively - flipping it around - make it more difficult and more expensive for farmers to engage in these practices rather than putting their land into crops. They presented financial barriers to farmers wanting to otherwise adopt conserving practices.

Now, I'm not saying farmers did not adopt conserving practices. The point is that it was more expensive than perhaps it need have been.

This has led to suggestions from some groups that conditions ought to be attached to program payments that would require adoption of specific and environmentally sound practices - the so-called cross-compliance argument.

I've never favoured such an approach for a number of reasons. First, it doesn't fit well with the way Canada is structured. We are a nation that is different from most others. We have a small population and small tax base and a large land area. We cannot use the agendas that might apply in countries like the Netherlands, which would fit within southern Ontario, in a country as vast as Canada.

Why do we treat the symptom and not the real problem? By putting in environmental conditions, we're going to treat the symptom. It's like giving an aspirin when the patient is dying of cancer. There's something else wrong with the system. You're not going to solve anything by putting in place something like that.

Cross-compliance is insulting to farmers. Farmers are environmental managers. To an extent that far exceeds that of forestry companies and fishermen, they have to be because they own most of the resources that they use. They've responded to the environmental challenge in a very positive way over the past decade or more.

If you could travel across the country in a time warp - you know, you're flying across the country in 1950, and instantaneously it's 1970 or 1980 - you would now have a series of slides. If you were to put them up on a screen, you might be amazed at the rate at which fields have become covered in stubble, at which conservation farming techniques have been adopted.

Look at the way farmers have reduced the rate at which potholes in the prairies are being drained. Look at the way in which they use far less non-renewable resources in their production when compared to their international competitors. Canadian farmers use less fertilizer, less pesticides, than their competitors in the States, and much, much less than their competitors in Europe. That's the important point to remember.

.1950

So why confront all this goodwill with a stick approach, particularly when we have no clear idea of what we want agricultural landscapes in Canada to deliver in the way of environmental goods and services that are not supplied now?

Fortunately, the conditions that led to the need for these large income subsidies for farmers are under threat. We need to focus on how to make sure they really die, and on what type of regime should replace them.

How should people be assessing the existing policy regime for agriculture, and particularly its federal component? First of all, does it lead to sound environmental practices being rewarded? The current ways the policies are changing are in the right direction. One of the important things Canada has to ensure is work on the international front to see that the parts of the GATT agreement dealing with agriculture are implemented, so we no longer have a need for these draconian subsidies of farm incomes in order to maintain the production capacity, to maintain our rightful place in the pecking order of things according to the comparative advantage of Canadian agriculture relative to competitors.

Domestic programs should be designed so as to avoid subsidies on non-renewable inputs, including the cost of transportation, such as the deceased Crow. We're already moving in that direction.

We should avoid artificially increasing returns on specific commodities, such as our set of revenue-stabilizing programs for grains and oilseeds, or the ones we're currently replacing.

The nice thing about these changes - and I'll deal with the intricacies of them in a little while - is that they're going to save money and they're not going to jeopardize farmers' returns from farming in the long run. So I think I can talk to you here about a sort of win-win situation.

What else does the federal component have to do? It has to ensure the short-run outlook for farming is good. Does it provide fair and equitable support and protection for individual farmers in a way that is not environmentally damaging?

On the domestic front, farmers still need income security they cannot provide by themselves. They're too small in relation to the size of the market - each individual. This protection can be provided through a net farm income, not revenue-stabilizing, scheme, so farmers do not have to use otherwise marginal land or increase their use of non-renewable resources in production just to secure income security.

The old programs basically stabilized farm revenue. In order to make sure you have as much revenue as possible, you have to put as much grain and oilseed into the ground as possible, if you're a grain farmer. But we can stabilize grain farmers' income by simply stabilizing net income. That's a subtle change, but it leads to a fundamentally different thing. The federal government needs to continue to insist on the whole-farm net-income stabilization scheme.

We need information on the environment not only to identify where farmers could consider alternate non-commodity uses for part of their land but for the introduction of market signals or pulls based on environmental performance. In other words, product quality at the marketplace has to be partly determined by the environmental impact of producing it. It is not at the moment, and this is one priority area for the federal government.

The government and the sector need to work together on a set of environmental performance measures that will be consistent with world and Canadian environmental practices, evolving International Standards Organization standards - one is being developed for forestry production; agriculture will be the next one - and with consumer concerns about the environment, human health, animal welfare, and the like.

This approach has to be viewed as an opportunity. Don't be indifferent. Don't feel threatened by it. This is an opportunity to position Canadian agricultural products on domestic and foreign markets as one of the best, if not the best, in the world on the basis of quality, including environmental impact. That in turn will provide an incentive for farmers to become even better conservationists than they now are - a positive way of doing things as opposed to the stick approach I seemed to be hearing so much about earlier on today.

.1955

Already significant product differentiation on the basis of environmental impact exists in western Europe. I was recently in Holland, and I kept seeing trucks with this Dutch name on the side and I asked what it was. It's a group of meat producers that are in fact producing meat with what they call humane animal raising methods. It's a sort of marketing cooperative, as I understand. It's booming. Someone just had to put this in place and position it on the market, guarantee supply in sufficient quantities, and all of a sudden these farmers receive a premium price for this product. I think the message is clear.

It seems that the Canadian public wants national leadership in the setting of environmental standards. Go for them; all are going to benefit. Canadian farming, which is already on the basis of the environmental performance of its competitors, has nothing to fear from the challenge. This means Canada has to press for the incorporation of strong environmental standards in international and domestic trading arrangements, such as grading regimes.

It's often said that Canadian farmers are price-takers, that they have little impact on the behaviour of world markets. They may have little impact on the behaviour of the price of wheat on the Chicago exchange, but Canada can have considerable impact on policies that will determine how these markets will operate because of its place in the environmental policy world, its status there.

We need to devote considerable effort to exposing inconsistencies and problems there, in monitoring or in baseline information schemes, such as I think you're talking about. We have to do this on the domestic front too, but I'm just going to talk about the international frontier for the sake of time.

The other thing I think we have to do - and this is a subtle one - is to make federal policies more consistent with local priority setting. At the moment, we have these draconian schemes that tend to be delivered from Ottawa by a vast machine that spews out cheques by the millions and puts them in the mail on the basis of a form that comes in.

There's a need for more than simple harmonization of federal and provincial activities and the elimination of duplication between the federals and the provincials. These are legitimate concerns, but I'm talking about more than that.

We all know how changeable landscapes are, with different soils, slopes, streams, roads, etc., going through them, different climates. The need to allow farmers to respond to these local conditions should never be challenged by amorphous physical, provincial or national programs that are designed in a way to ensure that accountability remains in provincial or national capitals.

In similar fashion, a water quality requirement for southern Ontario that might affect agriculture would look totally different from a water quality requirement for agriculture on the Regina plain or somewhere like that. The environments are different, the populations are different, how the environment becomes stressed is different. It's quite crazy to think in terms of always having national uniform programs.

Another reason is to encourage, with this local sensitivity, greater harmonization between the sectors. We are not good at putting things together.

This afternoon someone asked whether Natural Resources operated in a sustainable manner as a department. If you asked that about Agriculture Canada, as far as farming is concerned, I would say no. It may be trying to do a good job in terms of the production and marketing of specific food commodities, but it does a much poorer job on some of the other issues. Farmers play a crucial role within Canada: the production of wildlife, the protection of water, and so on and so forth.

Let me give you briefly one finding that a small group of wildlife and farming experts has come up with recently. I've been party to this; in fact, I've stick-handled this thing through. We've looked at crop damage compensation programs delivered by federal and provincial governments in the prairie provinces and delivered through crop insurance agents who, bless their hearts, are doing the best job they can, but they're agronomists.

We discovered that if those programs were delivered by local wildlife advisers who understood how the wildlife operated, working with the local farmers, we could reduce the level of damage because we'd be able to manage the bird flocks much better. We'd be able to reduce the level of total damage to farmers and provide better compensation for those who require compensation - we could compensate them for every dollar of damage they incurred - sustain more wildlife because there would be more habitat for wildlife, and do it all within the existing budget or for slightly less, simply by opening up the delivery of the program to some people other than those just in agriculture. If it's an agriculture and wildlife problem, then let's put agriculture and wildlife people together to work on how to deliver it.

I received today via the Internet.... I know that the Internet is an awful flood. It provides you with an awful torrent of information, but today it actually worked for me. I got this thing coming and I thought, my God, I'm going to be sitting here talking to you people. It was a message from someone in Australia.

Apparently Australia has declared the decade of land care. The Sierra Club, believe it or not, the enemy of all sectors that deal with natural resources in North America, has got together with one of the major farm organizations in Australia, and they persuaded the government to declare this to be the decade of land care. At this point in time some 40% of the farmers in Australia have voluntarily signed up to be part of small, action-oriented, local environmental groups working with the environmental community to improve the performance of the sector.

These are the types of things that are going to bring about much of the change, not the tax system. Particularly now if you get the international trading regime put on a level playing field, the federal leverage of tax dollars will be much reduced, the federal leverage of income stabilization programs will be much reduced. What you've got to do is provide a framework to encourage this type of behaviour.

So to summarize - and let's get slightly back to the focus of these discussions - as far as the sustainable development of its agriculture is concerned, Canada and the federal government need to be concerned about two related things: the way in which commodity markets operate - they've got to be freed - and the way in which production develops. I've identified some ways in which federal initiatives should be maintained.

Fortunately, the changes I was talking about, moving to a whole-farm, net-income approach, will not require more money. Hopefully, if the international trading situation continues to improve, it will require far less. It's a question of resolve not to do things in a wrong way and to do things in a better way. It's a question of having a vision about where you want to go and getting there.

Part of the better way will be for the federal government, and hopefully for the provinces as well, to improve information about how markets can operate better for environmental reasons, to measure performance in such a way that potential customers will value the environmental quality of Canadian production, to encourage partnerships between parties that have different but compatible interests in what happens in the farm, to work together.

Above all, I want to leave you with this notion: let's focus on how to move forward in a positive way and not to take the problems of the 1980s as the framework and the agenda setting for what we're talking about for the 1990s and the next century.

Thanks very much, Mr. Chairman.

The Chairman: Thank you, Mr. Girt.

Mr. Wilson.

Mr. Jeff Wilson (Board Member, Canadian Federation of Agriculture): It's a pleasure to be before you tonight. My name is Jeff Wilson, and I'm a small fruit and vegetable farmer from southern Ontario, just outside of Guelph.

A couple of issues that I was involved with provincially were the AGCare initiative, which is farmers proacting on pesticide issues, and the environmental farm plan initiative, which is now sweeping across our province.

I sit before you tonight as vice-chair of the National Agricultural Environment Committee, which is an umbrella organization at the national level of organizations and provincial federations of agriculture coming together hopefully to resolve some of the very issues we're discussing here tonight, and I appreciate the opportunity to be here.

Sound environmental practices - what do we mean by that? We all know that agriculture people view themselves as being the stewards of the land. That's not just rhetoric. The reality is that if we're going to have a sustainable agriculture, then we have to have a future. That future includes the fact that I want to leave my farm personally to the next generation, to my children. That is a basic premise on which every farmer out there who sees a future in our sector has to operate on behalf of.

.2005

When we talk about sound environmental practice, there's no question it's an extremely complex area. We need a great deal of analytical savvy, and we have to do it very carefully. It has to be done with a holistic approach, taking into consideration the principles of sustainable development. Those aren't just words. Those are what farmers across this nation are truly feeling.

Some of the background of why we feel the way we feel and why we're doing what we're doing... There's no question the agricultural community, specifically primary producers, of late have been on an economic roller-coaster, in the sense of support programs, government payments, and the realities of this global marketplace we're moving towards.

A few things I'd like to discuss with you tonight, and on which I hope we can get into some good dialogue later, are the economic climate of agriculture, in other words, the potential for change; the effects of fiscal disincentives and barriers to appropriate environmental practices - I hope to learn something from you people tonight, something I can take back to our committee - some suggestions we feel should be investigated for solutions; and a very quick analysis of the Task Force on Economic Instruments and Disincentives to Sound Environmental Practices.

With the economic climate in agriculture, with the most recent budget, there is no question a large sum of support was stripped from agricultural producers, including the Western Grain Transportation Act. We don't know yet what the ramifications of the removal of these subsidies or supports, however you want to define them, are going to be. We also know some effects of higher grain prices this year are going to cushion the impact of that. From the National Agricultural Environment Committee or NAEC perspective, we accept that that is going to convolute the issue when we really start looking at what support farmers are getting and what benefit it is to them or to society.

When we talk about fiscally connected programs, there's no question that depending on the commodity or farm organization, you're going to get a slightly different interpretation of how they feel the programs are either effective or adaptable to the members they speak on behalf of. In fact, one could argue support could be considered in the range of saviour to pariah. We just have to keep that in mind as well when we look at what we are going to look at and deal with down the road.

Some successful program elements and results seem to have some common threads to them. First of all, producer-directed programs are considered to be best, especially where producers see value, especially if we're going to ask producers to participate in a financial or fiscal context. Without question, programs that involve partnerships and have the involvement of other stakeholders have a much higher degree of success.

There are programs that result in a sustainable change in practice and that don't disappear when the money or the support itself is used up, vanishes, or is cut.

There are programs that allow a producer to try a new practice at minimal risk; and I stress the context of ``at minimal risk''. Change carries an element of risk to it. As a farmer, If I have to bear the entire risk on my back, I'm going to be fairly reluctant to that change.

Problems from fiscally connected programs include - and these aren't in any particular order - that the rules and processes are often restrictive and limit innovation. We want to be careful and clear that we want to encourage innovation.

Programs quite often are not long-term enough, in the sense that quite often dollars are left over in many environmentally oriented programs simply because we as the farm community have got our act together and we've built the momentum to utilize those programs effectively.

There's an issue that access is not in all cases viewed as equitable and equal. Sometimes programs or, in a sense, regulations can work against each other. As John Girt mentioned, we talked about some of the conflicts between federal programs and provincial programs, whether they be programs or regulations. It's something to keep in the back of our minds as we go through this.

We need to avoid duplication between programs.

Information, especially the communication of information to other farmers or the public: As a farm community, we're actually doing a very poor job of communicating, especially to you as representatives of the larger society, just what we are doing on our farms in a very proactive way. But we'd also argue in return that the whole issue of communication of how we transfer technology from one farmer to another is another issue we have to keep in the back of our minds.

Lack of planning and investigation from a sustainable development perspective: We can use the word ``paradigm''. I prefer the word ``perspective'', because quite often we will bring different perspectives into how we look at the process itself. But what are some of the principles for setting up programs? Again, it's producer driven and directed. We just see an incredible amount of value.

.2010

One of the items I might mention is the Green Plan, which to date has certainly been criticized by a number of sectors within society. Agriculture actually felt quite a number of benefits came out of the Green Plan process. First of all, it brought others outside of agriculture into the discussion and deliberation of the issues. It tended to give a perspective that was broader than just the very vested interests that I and my colleagues carry as farmers.

``Proactive, not reactive'' sounds great. We really have to look carefully at it, but are we really doing that? Are we looking down the road at what it's going to take to evolve into the environmental and economic future that we want for ``an'' agriculture?

The programs need to have clear goals and objectives that are based on sustainability as plan, again with the results being communicable to producers and others. They have to be long-term. Quite often, we tend to be looking at timeframes of two or three to five years. I would argue that we should maybe start considering something on a twenty-year basis down the road in terms of what we want to see.

Programs needs to be flexible to regional or local needs. There is the whole issue of tarring the country with the same brush in an agricultural context. There are nuances particular to various provinces, regions, economic situations or what have you, and we have to recognize them.

The programs should have education and awareness components. Education must be there in the sense of examining how we can build upon it, and there must be awareness in terms of remembering that we are talking about programs that will involve the expenditures of taxpayers' dollars. They have every right to be aware of where their moneys are going and whether or not they are being expended in the most appropriate manner.

They need to be evaluated using sustainable development principles. Again, those are very noble words, but I think we really have to put the heat to that type of approach toward how we evaluate programs.

There must be promotion and adoption of new practices and innovations. Are we really encouraging innovation? I'm speaking coming from an agricultural sector, and there is an awful lot going on out there. In a way, though, it again comes back to the at-risk component. Many innovations out there are being developed at the expense of that individual farmer, that sector or that group of farmers. Again, education and communication are significant components.

We're looking to become more self-directed. We feel that as we live on the farms and work on the farms day by day, we are seeing things that again tend to fit into the context of a long-term holistic approach.

As for the recognition of the economic implications of policies and programs and the burden carried by different stakeholders, are we all in this on an equal footing as different stakeholders in the perspectives that we bring to the process? I'd argue that a landscape approach to programs that deal with conservation in a holistic, inclusive context is certainly something we see as having value. It is a necessary component of programs down the road.

I'll make a very quick comment on trade. We are concerned about what's evolving globally, about the impact of support programs in a global context and their trade implications, and about where that's going to drive or direct what we're here discussing tonight.

As for taxes, there has been a lot of talk about ecological tax reform. We have some opinions on that, and I hope we get into it with further discussion.

On subsidies, again, what is a subsidy? We're in a real dilemma right now, in a global context, on what we're talking about in terms of farm support and subsidies.

Under incentives and other alternatives, I would argue one main component. Voluntary action, especially in the area of conservation of all types, has been instrumental in innovative environmental improvement. Many feel that the one way to ensure continuity of such actions, at least on the political level, is to have incentives. I hope we can get into some further discussion on that.

Are we thinking in alignment on the concept of sustainable development principles? I'm asking that looking at you in your context as representatives of society who are coming from an environment committee perspective, and looking at me in my context as a farmer seeing it from the perspective of the needs and goals that my colleagues and I have set for ourselves.

One of the other things I hope we can talk about is this whole idea of a trust fund. As I mentioned earlier, we have an environmental farm plan initiative in Ontario. It's really starting to roll now in the sense that farmers are picking up on it and are seeing the value in it. It has taken a three-year process at the implementation stage to get it to where it is now, but the reality is that the dollars, timeline-wise, are going to run out in 1997 and aren't going to be fully expended.

.2015

We're looking at how we start encouraging not putting such hard parameters on the program. Let's put the hard parameters on the results so we will be able to see results down the road.

We're interested in the trust fund, to deal with that context. As well, we sincerely feel that there's a way to bring outside resources, in a monetary sense and otherwise, into the agricultural process of environmental enhancement - some of the tried and trues that certainly have worked, capital gains and tax credits. There's no question that when they're properly directed they can have a good impact.

A strong research base tends to go without saying, but what do we mean by a strong research base? Many commodities have now implemented check-offs for the particular commodity, to provide some user-producer-industry funding for those particular things. You'll probably hear more about the matching investment initiatives that are going on.

We have to be able to measure the progress of what we're doing. Do we have a baseline of where we are in an environmental context in agriculture?

One of the issues the NAEC committee is working on with Agriculture and Agri-Food Canada is developing indicators that are cost-effective and publicly accountable and will actually provide some quality information that we as a society will all be able to use down the road.

We were very critical of the task force report, especially in the context and in the sense that the NAEC committee does not support.... We will certainly get into the reasons in discussion. We do not support fuel taxes or pesticide use or input taxes. We are very leery of cross-compliance in the context of...what are we talking about with cross-compliance? Society currently is offering nothing as a basis for getting into some meaningful discussions.

We feel that we're in a time and an era in which we can be innovative, to revamp how decisions are made on environmental programming and how we can start bringing society into the picture as equal stakeholders with us, the farm community, basically to take what we feel is a movement afoot on the farms on environmental progression to where we can all agree we want to go.

Thank you.

Ms Christine Nymark (Director, Environment Bureau, Adaptation and Grain Policy, Policy Branch, Department of Agriculture and Agri-Food): I want to begin by describing the approach that we have taken in the department to identifying fiscal barriers and disincentives to sound environmental practices in the agrifood sector. My presentation is in four parts. I'll briefly overview the major federal agricultural support programs, changes that have taken place there. I'll talk to you a bit about what we have learned in doing environmental assessments of these programs, the kinds of actions we're taking to enhance our analytical capability, and a very preliminary assessment of the environmental implications of the new directions in sectoral support policies and programs.

Turning to the changes that have been taking place in support programs, there have been very large reductions in direct support for the agriculture sector in the last two years, and further cutbacks were announced in the last budget.

About 80% of the payments were made under three commodity-based safety net programs. Crop insurance, gross revenue insurance program, or GRIP; the net income stabilization account, or NISA; and the rail subsidy under the Western Grain Transportation Act, or WGTA, for western producers of grains and oilseeds accounted for $577 million. The previous program was $850 million.

By 1997-98, safety net funding will be $600 million and the recently terminated WGTA subsidy will have been replaced by a multi-year $300 million western grain transportation adjustment fund. It is important to note that support, or subsidies, will have dropped by more than 50% over the three-year period to 1997-98.

With that, the government's role in affecting production decisions is of decreasing importance relative to markets, weather, and other factors.

The emphasis in sectoral support programs now is being placed on adaptation funding, which will enable producers successfully to make the transition to greater self-reliance and enhanced market responsiveness. Adaptation programming is intended to provide the sector with skills, infrastructure, and flexibility to respond to changing global markets. In environmental terms this is important.

.2020

Observers have often worried about the effects on the environment of programs that appeared to prop up income levels by encouraging only certain types of commodity production. The integrated whole farm approach the department is pursuing should put those fears to rest by being much less commodity specific and being far more tied to market signals. Farmers will therefore be more readily switched from one crop to another in response to market signals. This generally brings real benefits, in our view, in terms of soil productivity and resource use.

I mentioned we have done environmental assessments. What have we learned? What are we doing to understand agriculture programs' environmental impacts?

In 1991, we included in our Farm Income Protection Act enabling legislation a requirement that programs developed under it be environmentally assessed. In addition, we generally used the following four practical criteria in determining when to conduct environmental assessment.

The first criterion is when a new program is being developed. The second is when a program is being reviewed for change. The third is if a program is a major part of departmental policy and we suspect environmental impacts. The fourth is when significant public concern has been expressed in terms of an existing program.

Over the past few years the department has assessed the environmental impacts of its major programs. The results of the environmental assessments of GRIP, NISA, crop insurance and options for WGTA reform were tabled in Parliament. I have them all here for any of you who would like copies later.

It's important to note this represents 84% of support programs for agriculture. So from our point of view, we feel we're pretty far along in terms of the baseline you people have been talking about.

What have we learned? We've learned through those environmental assessments of agriculture support programs that there have generally been few negative environmental effects. In particular, the environmental assessments we've undertaken have found that programs had minimal effect on particular farming practices such as the choice of tillage methods, application of inputs, soil conservation practices or the choice of crops of livestock. The effects of some of the programs were found to be marginally positive or negative for the environment in the short term and measures were recommended to address possible more significant long-term impacts.

When I say we found small impacts, it's quite remarkable the impacts were minimal. Some were positive and some were negative, but we did not find anything of any major significance.

We found markets were a far bigger determinant of farmer decisions than any particular government program. We found, for example, that the decision to grow wheat is mainly determined by the price of wheat. International wheat prices this year exceed $200 a tonne, almost 100% more than the price of just two years ago. The effect of this price increase on land use and production decisions has been far more significant than the existence of farm program benefits such as reduced risk through crop insurance.

We've also learned government programs can indeed lead to positive effects. There is some evidence that the stability provided by safety net programming leads to better stewardship of natural resources by farmers. They can afford to take a longer-term view. They can afford to invest in new skills and equipment that prevent pollution and the need for mitigative environmental measures. Positive behavioural change can occur as sound environmental practices are adopted.

So you can appreciate that we have accumulated a large amount of useful information from the environmental assessments we have undertaken. As a result of the work we've undertaken, we feel we're now more able to influence the development and design of the new generation of agriculture programs focused on adaptation.

I'd like to talk now a bit about enhancing our analytical capability, because every one of these environmental assessments taught us something more about what one might do and how one might do things better. I'd like to say we really are at the very early stages of this discipline in terms of doing environmental assessments of policies and programs. We need to generate more quantitative results and rely much less on qualitative assessments of environmental effects.

.2025

We've also found solid economic analysis is a first step. Without that, it's very difficult to determine the environmental impacts. But credible environmental information - quantitative data - will be the key to influencing further decisions.

We've also learned the effects are very complex and difficult to isolate. Government programs, as I said, are only one of a host of signals affecting farmers' decisions, so it's very difficult to isolate the discrete impact of a policy on the environment.

Another difficulty we've found is that some programs can have very positive environmental impacts in one way and some negative impacts in another way. Crop insurance, for instance, was found to slightly encourage soil erosion through shorter crop rotations, but to discourage erosion through less summer fallow. We also found programs can have fundamentally different effects in different regions, or in different ecological zones.

Therefore, in this context, it's been very difficult for us to draw national conclusions on whether a program is positive or negative for the environment as a whole. There really are a whole variety of factors that have to be taken into account.

Further, market conditions and producer practices can change very quickly, and these changes need to be reflected in the assumptions underlying environmental assessments. One example is the 1992 environmental assessment we did of the proposed changes to the WGTA. This assessment did not anticipate the production incentive of very high grain prices we have in 1995. In addition, the adoption of conservation tillage practices by prairie farmers has been much more extensive than we predicted in the initial WGTA environmental assessment.

This has very little to do with government programming, in my view, but everything to do with education, awareness and the cost-effectiveness of a new technological approach. Farmers' understanding of the benefits of conservation tillage produced this change.

So we are attempting to address these kinds of concerns by developing an enhanced analytical capability within Agriculture and Agri-Food Canada. Let me just talk to you a bit about the kinds of things we're doing. In the past year an integrated modelling approach was introduced linking agricultural production decisions with soil erosion effects. What we've done is taken the CRAM model - the Canadian regional agriculture model - and we have added what is called the EPIC model - the erosion productivity index calculator - to that model to be able to have some sense of the environmental impact of program decisions and changes.

We're hoping to extend our modelling system over the next year or two to provide for estimations of impact on water. Further down the road we will look at air and biodiversity effects of fiscal and other program measures. But we are in the very early stages and this has been no small effort.

As Jeff mentioned in his comments, we are also investing very heavily in the development of environmental indicators for agriculture to help us measure our progress towards better environmental performance. We hope these indicators will take their place along with economic indicators as guiding lights for the sector over the next few years.

It should be noted, I think, that whereas economic models and indicators have been available to agricultural analysts for perhaps 50 years, agricultural environmental modelling systems and indicators are tools we are only now in the process of developing.

So again, I think in terms of this discipline and the ability to understand the environmental impacts of policy and programs, we are in the very early days in our knowledge, as it were.

In closing, I'd just like to suggest the new directions in sectoral support policies and programs, we suspect, will have a positive environmental impact. I've already described the shift in agricultural support programs away from commodity-specific safety net payments towards decoupled adaptation funding, and this shift is expected to encourage diversification of production, more appropriate land use and less intensive input use.

.2030

The federal government does favour a whole farm approach to sectoral supports, which should promote integration of economic and environmental decision-making at the farm level. This approach should not create artificial incentives for intensive monoculture.

A major emphasis for the department remains to develop more environmentally sustainable practices, best management practices, through research and development and technological developments, and to equip farmers with the skills to adopt these practices.

In closing, I'd like to say that Agriculture and Agri-Food Canada is already very much on the road that this committee has been mapping out. Direct support for agricultural production has been substantially reduced, alleviating some potential environmental damage.

In terms of the need for a baseline, we have assessed the impact of all of our major support programs, representing 84% of support, and found only marginal environmental effects.

We will continue to seek out potential disincentives to sound environmental practices, through an enhanced environmental assessment process. It's my view that an effective environmental assessment process with credible data is the best way I can possibly influence decision-making in the future.

I've talked to you about the future directions in the department.

In conclusion, I feel that this is a very high priority for us. We put a lot of effort into this area over the last couple of years, and it is something that will remain a continuing priority of the environment bureau at Agriculture and Agri-Food Canada.

The Chairman: Thank you, Ms Nymark.

[Translation]

Mr. de Bailleul, please.

Mr. Guy de Bailleul (Director, Department of Rural Economy, Faculty of Sciences, Agriculture and Agri-Food, Laval University): I want to thank you, Mr. Chairman, for giving me the opportunity to speak to you on the relationships between tax policies, agricultural policies and environmental issues.

My name is Guy de Bailleul and I am the Director of the Department of Rural Economy of the Faculty of Sciences, Agriculture and Agri-Food, at Laval University. More specifically, I work on the links between resource economics and the environment, within the context of agri-environmental issues.

I have been involved in several research projects dealing with the environmental impacts of agricultural policies, particularly on drainage basins, within the context of a large multidisciplinary project where we implement some modelling systems using the EPIC model referred to by Ms. Nymark.

I could also mention that my interest for these matters stems from the fact that I was raised on a small farm in the north of France, a small diversified farm, in a region that is probably one of the most productive in Europe since it can produce these days 10 to 12 tonnes of wheat per hectare.

There are not many small farms left there today, and it has been impossible to use ground water for human consumption during the past 20 years because it has too much nitrate. The concentration is one of the highest in Europe. On the other hand, I suppose this provides some savings to farmers who started a few years ago to irrigate their grain crops. When you are lucky enough to be able to use ground water loaded with nitrates, you can save on nitrogen.

I received your invitation to this Forum only a few days ago, and this is why the paper I gave you is in point form. I tried to answer the main questions suggested in the document I was sent, and I admit that the quality of my answers is probably rather unequal.

.2035

About the first issue, the link between tax policies, farm policies and agri-environmental problems, there are five major points to take into consideration in order to understand the uniqueness of our situation.

First of all, agri-environmental problems are relatively important. One can say that agriculture is probably one of the major sources of pollution and deterioration of the environment in Canada, especially in Quebec. I will refer readily to the situation in Quebec since that is the one I know best.

I should also mention the specific characteristics of agri-environmental problems. Except in the case of spot pollution, linked to intensive livestock operations, for example, agri-environmental problems relate most of all to the broader type of pollution, non-point source pollution. This means that is difficult to fight this type of pollution with tools, methods and even technologies which would be available in other fields of economic activity.

The third point is the link between agri-environmental problems and intensive production practices, which means trying to increase yields mainly through fertilizers and pesticides.

My fourth point is that there are some very complex relationships between the levels of use of these inputs and the seriousness of agri-environmental problems. In other words, considering the wide variety of our soils, the same quantity of fertilizers applied to a given unit of land will not necessarily have the same consequences on water quality than if it were applied somewhere else. That is another source of difficulties if we want to look for general solutions.

Finally, and this is the crux of the matter, we have to take into account the possible impact of farm income support policies and taxation policies on the spread of intensive farm practices. It is obviously through the impact of those policies on intensive farming that one can establish an indirect link between those policies and agri-environmental problems.

How can income support policies increase the seriousness of farm environmental problems? When the objective of a public policy is to ensure that farmers get long-term prices or incomes that are on average higher than those that would be justified by market forces, we get levels of production that are higher than those that would result from market signals, if there are no restrictions to production and no quotas.

The problems I am referring to may be linked to the production process itself or to by-products of the production process. This is especially the case on livestock farms, since there are by-products such as liquid or solid manure in such quantity that they can lead to environmental problems. That is mostly linked to the use of high quantities of inputs and to a more intensive use of the land.

Similarly, any policy that has the effect of reducing the cost of inputs through tax exemption or subsidies, even though the aim is not necessarily to increase prices, will undoubtedly have the same effects since it will be for the producers an incentive to use more inputs, their opportunity cost being reduced.

The same comment might apply to subsidizing interest rates since, everything else being equal, this would have the effect of reducing the opportunity cost of capital, even though the link between interest rates subsidies and environmental problems is not as easy to establish.

.2040

I believe this may lead farmers to buy too much equipment but, I repeat, the link between this and environmental problems is not very clear. Some might say that more machines leads to more compaction of the soil, whereas others would say that using larger pieces of equipment would allow to reduce the number of passages on a given piece of land and therefore to fewer compaction problems. That illustrates how difficult it is to establish a clear link between policies and environmental impacts.

I have alluded to policies aimed at providing an income that would be on average higher than that provided by market forces. There are a number of programs that are not necessarily aimed at providing higher incomes but that try to reduce the variations of farm incomes and which would have on average a neutral long-term effect on incomes. The variations caused by other factors would simply be reduced. One may wonder about the impact of such policies on environmental issues, in the following context.

Policies aimed at reducing income or price variations, or at reducing the effects of crop variations - such as crop insurance - reduce the risk associated to production or to yields. In other words, the producers do not have to carry this risk in full and therefore do not have to implement strategies to protect themselves against such risk, for example by diversifying their production, by rotating crops, and so on.

Taking once again the example of Quebec, we have seen strategies aimed at developing monoculture - I am thinking especially of corn - which were linked to income stabilization or crop insurance programs. On the other hand, one could claim also that income stabilization leads farmers to put more efforts into long-term conservation of their resources than they would normally do. As you can see, a given policy may have some opposite impacts.

I would like to mention in passing that one should not underestimate the role of farm income stabilization on farm investment and, therefore, on yield increases. This stabilization - and this applies not just to Canada - has probably been one of the major factors behind productivity increases.

The problem we face now in agriculture, I believe, is not so much linked to taxation policies as such, because there are not too many policies left that have the effect of reducing the costs paid by farmers, especially for fertilizers and pesticides. We should perhaps deal separately with fuels, since there are still some forms of tax exemption on the use of fuels. We could also wonder about the impact of capital depreciation policies on the possible over-equipment of farms.

In any case, as far as taxation policies are concerned, I would like to refer to those that do not apply specially to the farm sector but which could have an effect on environmental problems. For example, when our taxation policies encourage the use of farm raw materials in other industries - I am thinking especially of using corn to produce ethanol, which has some environmental benefits - this may have an impact on environmental matters.

.2045

However, when one realizes that corn production is associated with some rather major environmental problems, one should look at the impact taxation measures aimed at encouraging the use or production of ethanol may have on agricultural resources.

Following this brief reminder of the basic principles of our recent farm policies, I do not intend to talk about the same issues as Ms. Nymark. I will only state that there is some common thread in the evolution of those policies, such as what one might call decoupling, which means that there is a more and more tenuous link between the goal of supporting farmers' incomes and the goal of supporting the level or type of production selected by farmers. It is in this sense that one may talk of decoupling.

On an environmental perspective, I believe that this is clearly beneficial since it allows farmers to go back to diversifying their production and also to implement sounder environmental practices. For example, I mentioned a while ago crop rotation, which is one of the practices that may have some of the best impacts on the environment.

One of your questions related to the urgency of reforming federal farm taxation regimes. I have stated that things are already changing, but one may wonder if, instead of eliminating some tax barriers, one should not perhaps increase them. In other words, would it be useful to consider putting taxes on some production inputs that would be more closely associated to environmental problems? I refer once again to fertilizers, to some forms of organic fertilizers and pesticides.

One cannot avoid this question. We have to study it closely, but I have to underline once again it would be difficult to tax some inputs according to a given region or a given piece of land.

Someone alluded to the matter of fairness of the rules that would be established. If I understood the comment, I would answer in a much more brutal manner by saying that government does not have the right to be neutral as far as taxation is concerned. I think government has to be biased in favour of some social and environmental goals that society considers desirable. Its taxation policies must reflect this bias, not only for the present but also for future generations.

If the principle of fairness of the rules is based on the idea that the markets can do a better job in resource allocation, not only from the point of view of economic effectiveness but also of social and environmental effectiveness, this would seem to me to be a serious mistake.

What steps should we encourage? I would like to underline a few general points about this.

Reducing farm environmental problems requires in a large measure the implementation of alternative farm practices having a reduced impact on the environment, that is to say on soil deterioration as well as on water pollution.

And there are some alternative farm practices that are as economically valid as conventional ones, even though farmers may be reluctant to implement them.

.2050

In some cases, it may only be a matter of information, training, awareness and education. One can use all those terms. In a not insignificant number of cases, even though conventional practices and alternative practices would have a comparable effect on farm income, there are associated with the new practices some costs and risks that may be enough to discourage farmers from using them. During this transition period, one may be faced with higher uncertainty and risk or with lower yields. One may be faced with the sudden obsolescence of conventional equipment. Sometimes, changing practices requires changing equipment. If the existing equipment becomes obsolete, this represents a cost. Changing taxation policies does not necessarily take into account these characteristics of the transition period.

It would be useful to refine some taxation tools, for example accelerated depreciation for some types of equipment which would be recognized as improving soil structure or having less serious environmental impacts. One has to take into account the specific problems that could appear during the transition from conventional practices to alternative practices.

It is generally difficult to improve environmental impacts with a single tool, such as trying to use only taxation policies or regulations or even the possibility of selling pollution permits. Agri-environmental problems are so complex that one must have at one's disposal a whole series of tools which can be adapted to circumstances. One may also think of measures linked to what is called in the U.S. environmental cross-compliance, and this has been alluded to with some reluctance by previous speakers.

Considering that government, through various programs, tries to stabilize farm income or to help farmers, I think that the citizens may legitimately ask for something in return from farmers, as long as taking up those programs is beneficial to the farmers. This type of linkage exists in some ways in the U.S. and is being considered in Europe.

As far as environmental tax reform is concerned, this may seem to be an attractive solution, in theory, but I would like to remind you that taxation policies are generally targeted to various types of objectives, such as economic growth, job creation and fairness. In other words, I find it difficult to conceive of taxation reform having a single environmental goal. I believe it always has to be a compromise between the different types of goals.

In closing, I would say that Canadian farm programs are more and more based on the principle of decoupling and should lead to an improvement of environmental impacts. That being said, the general implementation of alternative farm practices that would be more beneficial to soil conservation and to environmental protection will require programs of incentives, subsidies or cross-compliance.

.2055

Even if I believe that awareness, information and training of farmers can and will play a big role in this matter, I think that moving towards a truly sustainable Canadian farm sector will require increased efforts both from farmers and from Canadian society. And when I refer to Canadian society, I do not necessarily mean the federal or provincial governments; it might also require the involvement of other forms of more local governments.

I must say that I was struck a few days ago to see, while visiting a project in the Catskills region in the State of New York, that the City of New York is trying to get a group of farmers to change their practices. The City of New York is paying the farmers to change their practices for the very simple reason that their region is a drainage basin supplying New York City with drinking water.

I saw there a community that was directly interested in getting a group of farmers to change their practices in order to improve water quality, which means that this community was willing to invest funds in this field in order to save money later on in water treatment plants.

I will stop there, Mr. Chairman. Thank you.

The Chairman: Thank you, Mr. de Bailleul, for a very clear exposition of the problem. We will now start the question period. Mrs. Guay.

Mrs. Guay (Laurentides): I would like to summarize briefly various things that struck me from each of your statements. I listened to you very closely and I think that your statements were very diversified. This proves that Canada is really a big country with a very diversified type of agriculture.

Mr. Girt, you told us it would be difficult to implement uniform policies across the country, and you referred also to small wildlife organizations. I wonder if this type of thing is not easier to administer locally, on a smaller scale.

Mr. Wilson, you referred to all sorts of programs that were sometimes operating at cross-purposes. Were you referring to federal and provincial programs? You also stated that, in order to answer regional needs, we should establish long-term policies, for about 20 years, and you said that programs have to be flexible in order to take account of regional needs. This is how I would summarize your statement.

Ms. Nymark, you talked a lot about grain transportation and you gave us lots of figures. I am no specialist in agriculture but I realized that the needs of your region are very specific. You referred to grain production in Western Canada, which is a type of production very different that of other provinces.

Mr. de Bailleul, you talked about the problems in Quebec and you stated in closing that it might be easier to administer small-scale programs since they would be closer to the population.

Here is my question. I know we do not have too much time but I would like all of you to tell us what you think of a green tax.

.2100

I would also like you to tell us if it is true that, in agriculture, it is easier to administer small-scale programs, that is more localized programs, because they have a better environmental performance. Is it not easier to administer programs closer to the people than trying to meet two or three different standards that may differ from region to region?

Thank you, Mr. Chairman.

[English]

Mr. Girt: I think it will be more effective. It will not be easier to administer. It will not be easy to administer; and this is quite often the barrier put in the way of this: that for accountability reasons we cannot delegate the use of federal money, if we keep it within the federal system. I'm using some of the arguments I've heard from the bureaucrats. We cannot delegate this out for accountability. We have to preserve our accountability; and consequently, in these times when the federal government is being cut back, etc., control of these funds has to rest with us in Ottawa. These local initiatives are not acceptable.

I think we have to find a way around this. There is a potential conflict between accountability and the flexibility that's necessary with the local delivery system.

[Translation]

Mrs. Guay: You did not answer my question on the green tax.

[English]

Mr. Girt: I don't know what a green tax is.

[Translation]

Mrs. Guay: How would it be implemented? One hears more and more talk of that.

[English]

Mr. Girt: As far as agriculture is concerned, I can see one very positive form of tax. It would have to be worked on. It would not be ready for the next budget. That would be an ecological value-added tax, where somehow you would not only be taxed on the basis of the consumption of non-renewables but you would be given incentives for the production of environmental goods and services at the same time. For instance - ``closeting'' is the wrong word; I'm at a loss for the right word - closeting of carbon dioxide by using trees on a property is something that would give you some type of ecological value-added. In contrast, consumption of fertilizer based on a non-renewable resource would be taxed, because you're consuming some resource.

I always look for positive things as well as negative things. Generally when you can think of negative things to do you can find positive things to do as well. It's important to look for that at the same time.

Mr. Wilson: If we're talking about a green tax, you have to be very clear what you as representatives of society want. I can't deal while being dragged in different directions on probably a two- or three-year basis. When we look at the facts of what it is we want, pesticide use in Canada is down, fertilizer use in Canada is down, farm fuel use in Canada is down. So very flippantly, I could argue, what is the problem? When we talk about environmental taxes, what's the goal we want to achieve when there is progression in that? Are we really arguing the rate of progression towards what I would argue we all have as a common goal, and if so, how do we deal with that?

But as farmers, we're cynical out there. We've seen a lot of abuse in the implementation of taxes. I would challenge you back. If you're going to implement a green tax, how do you propose to keep the abuse component out of it?

[Translation]

Mrs. Guay: You did not answer my first question.

[English]

Mr. Wilson: Which was...?

[Translation]

Mrs. Guay: It dealt with administering...

[English]

Mr. Wilson: Yes, if we accept that there tend to be five or six very different diverse regions in Canada, there's no question they have to be approached on that basis.

I started my comments with an involvement I have as part of the environmental farm plan initiative. It would be very presumptuous to say the initiative could be completely transposed into either other provinces or other regions. It was designed and works in an Ontario context, given the diversity there. Maybe there are some common threads, but we aren't into the initiative enough yet to determine the commonalities of that as an initiative that maybe could be utilized in other regions. We don't know that yet.

[Translation]

Mrs. Guay: Thank you.

.2105

[English]

Ms Nymark: In responding to your first question about administering programs or delivering programs locally, under the Green Plan we designed a system whereby we established an accord committee in each province and that accord committee had representatives from the sector, from the provincial government and from the federal government.

Each of those committees establish priorities for their province, for their eco-region, so across the country we have a federal agriculture green plan, which is extremely regionally sensitive, and which was designed based on the priorities as determined by the stakeholders in each of those areas. The green plan in Ontario is quite different from the green plan in British Columbia. The green plan in the prairies is fundamentally different from those of Ontario and Quebec. In Quebec, water quality and water impacts were much higher priorities than they were in the prairie region.

We established some federal priorities. We gave them to each of those committees to rank, so we have what I consider to be a very regionally sensitive green plan because each province has its own unique priorities that it deals with according to that ecosystem and what it sees as appropriate.

[Translation]

Mrs. Guay: On an ad hoc basis, does it really work?

[English]

Ms Nymark: Yes, it works quite well.

[Translation]

Mrs. Guay: Is there some synergy between the two levels?

[English]

Ms Nymark: The best synergy of all is not between the levels of government. It is between the stakeholders and the governments. To me that is the real value of the green plan. It's the accord committees and the participation of the farm communities in each of those provinces on those green plan accord committees and the determination of how that money will be spent and what the priorities will be. That's the really valuable synergy.

On the issue of a green tax, I don't quite know how to answer your question because it's rather a blanket question. I think the issue is what environmental objective you'd like to achieve. I'd like to look at a tax measure and at all of the other measures that a federal government, or any government, might have in its tool kit to address that environmental problem. I'd rather design the best approach to deal with that environmental problem than settle on a green tax as the only solution.

I think each environmental problem probably deserves a unique solution. A green tax might be appropriate in some cases and not in others. In a very general sense, I really couldn't come down for it one way or another.

[Translation]

Mrs. Guay: Very well.

Mr. de Bailleul: About your first question, I would tend to say that everything depends on the type of environmental problem. There are some environmental problems that are more global in nature and for which it would probably be better to have some type of central administration or program, or at least to ensure close co-operation between the various levels or provinces. I am thinking here of all the problems linked to the accumulation of greenhouse gases for example, or to the protection of endangered species. This obviously requires some close co-ordination. And then, there are other issues that can be dealt with locally, where the impact is more localised.

This leads me to your second question, about a green tax. Once again, this is a tool that may be somewhat effective for a number of problems but it does not necessarily mean that it should be implemented at the federal level, or even at the provincial level.

One of the more interesting types of implementation of this tax, I believe, is to apply it to the management of water pollution problems through various different sources, whether they be linked to farms or not.

.2110

There is a policy that is very often referred to in the U.S. and that is often considered as a model. It is the system of basin agencies established in France, where all activities causing water pollution are taxed by a local agency established to manage the drainage basin, since it is at that level that there can be some basic commonality relating to the source of the problems and to the types of polluters that would be penalized, whether they be local residents, industries and so on.

This tax that various industries and, very recently, agriculture have to pay to the managing agency - because the tax is not paid to the state, to the central government, or to a region but to a regional body dealing with the issue - is used, among other things, to fund a number of investments in the farms in order to change their equipment or their practices and, therefore, to reduce their level of pollution and the future level of their tax.

Mrs. Guay: This means, Mr. de Bailleul, that you would like the proceeds of a green tax to be reinvested in the environment sector or in policies encouraging environment protection, do you not?

Mr. de Bailleul: It should necessarily be used either to resolve pollution problems or to reduce that pollution.

Mrs. Guay: Thank you.

The Chairman: Thank you, Mrs. Guay.

[English]

Mr. Forseth, please.

Mr. Forseth (New Westminster - Burnaby): Thank you, Mr. Chairman.

I have a very short sharp question for each one of you and I would like you to answer in about60 seconds or less.

First of all, Mr. de Bailleul, you mentioned the New York example. You talked about farmers being paid specifically for changing some kind of activity. Can you clearly describe what they were doing, what they changed and what they were being paid for?

[Translation]

Mr. de Bailleul: Obviously, this depends on the type of production. For example, I visited some farms where farmers have been paid to change their equipment so that there would be less leaking of liquid manure into the ground water. As a matching contribution, those farmers were only required to implement the changes for a minimum of ten years. That is just an example.

[English]

Mr. Forseth: Okay.

Mr. Wilson, you said that you are a farmer.

Mr. Wilson: Yes.

Mr. Forseth: Can you tell us specifically about your operation? In a pragmatic sense, exactly what are some of the things you're doing now you weren't doing two or three years ago that really follow the agenda of the environmental issue we're dealing with?

Mr. Wilson: I produce small fruits, strawberries and raspberries, and a fair range of vegetables - primarily potatoes, broccoli, snow peas, sweet corn and asparagus.

Asparagus is the only crop I do not have under an integrated pest management program now. I'm spending $1,000 per year on scouting services. What do I get in return? Do I have a feeling that I'm a good citizen? No. I'm saving over $5,000 in pesticide costs, so I've determined there's good value in becoming part of the solution. That's one of the concrete things I see.

When I look down the road...and in fact, the New York example is a good one. I'm going to be in New York Wednesday and Thursday of this week on this very issue. They're looking at a host of things such as effective buffers, more at how you reduce the potential for point-source pollution. There's a lot of focus on that initiative.

Mr. Forseth: Mrs. Nymark, you used this buzz phrase, ``the whole farm approach''. Can you give me a very quick, snappy definition of what that really is?

Ms Nymark: It means that all products would be eligible under the program as opposed to just certain grain products.

Mr. Forseth: All right.

Mr. Girt, you made a specific recommendation about net farm income base or preserving that rather than subsidizing revenue. You made some comparisons. You said one is good and one isn't so good.

Can you tell me in 60 seconds or less what you're really talking about?

.2115

Mr. Girt: It's the same issue you asked Christine about. Simply, you stabilize farm income on the basis of the net income farmers get from their operations. That's revenue less the expenses of producing that revenue. That's the preferred approach.

The approach that is not preferred is the approach that in fact stabilizes revenue, just how much you get for producing your corn, the gross income from corn, how much you get from selling it. That's the bad approach; it bids up the price of land for other uses simply because all of a sudden you have land being valued on the basis of its gross revenue and not its net revenue.

Mr. Forseth: Can you cite a specific study or a concise piece of work that would basically take care of that particular program you're describing?

Mr. Girt: The best thing is to say that programs like the NISA program, which we've already talked about, are the way to go. That is a net-income-based stabilization scheme. The federal government has already made the announcement that this is the way it prefers to go. It is important to keep that momentum up and to remove programs like the gross revenue insurance plan, GRIP, which is the other type of program. So I think it's just a question of reading the documents that are coming out of Agriculture Canada now.

Mr. Forseth: Thank you very much, Mr. Chairman.

The Chairman: Thank you, Mr. Forseth.

Mr. Lincoln.

Mr. Lincoln (Lachine - Lac-Saint-Louis): I've been trying to cogitate on what to write down as a practical recommendation; eventually we'll have to make one. Listening to the four of you, I was trying to find the common elements, and it's very hard for us.

For example, on the question of incentives or disincentives and taxation, I see that Mr. Wilson, who's a farmer, is against disincentive tax on fuels and pesticides, if I understood him right, whereas Mr. de Bailleul would seem to favour something like this. Ms Nymark mentioned using environmental impact assessments to arrive at the final result we would want, and that would show us the way.

I'm wondering how we can reconcile these various positions you have in order to give us some sort of feedback as laypeople who will perhaps have to recommend certain key areas in which the government should move. There are so many approaches, some much more holistic than others, some much more localized.

For instance, in your view, how do we balance the good farmers against the poor farmers from an environmental standpoint? If you make an environmental assessment you're talking about a norm, and how do we balance that norm through incentives or disincentives, in your view?

[Translation]

Mr. de Bailleul: This is probably why I was underlining the fact that there is no single tool. There must be some mix of incentives and coercive steps. I believe that we can make enormous steps forward through awareness or training programs. One should also say that a large number of farmers have decided on their own to change some of their practices.

However, I am still convinced that it would be necessary, for the time being, and precisely because they are what you call bad farmers, from an environmental point of view, to implement some coercive measures when their practices have very negative environmental impacts.

We should also protect ourselves against the effects of changes at the economic level. There is one thing that has always struck me. As you know, resource and soil conservation programs have been implemented for several years in the U.S. Those programs are even closely linked to American farm policies since they were first developed, in the thirties.

.2120

During the fifties and the sixties, various reserve or conservation programs were implemented. They were exactly similar to those that are still being implemented in the U.S., and they had two goals: first, to take some land out of production, in order to reduce production and services and, second, to improve the quality of the land that had not been eroded. Those programs were ten years in duration.

There have also been other programs aimed at planting what were called windbreaker hedges and rows of trees in order to reduce the impact of wind on land and, therefore, to reduce erosion. A whole series of such programs was developed in the fifties and the sixties.

However, what became apparent at the beginning of the seventies, and more specifically in 1972 and 1973, is that the price of grain took a huge leap forward on the world markets. Suddenly, it became much more attractive to increase wheat production and yields, and this cancelled out all the positive effects of previous programs. Windbreaker hedges were destroyed when the Secretary of Agriculture called for increased production in order to meet world demand. Later on, world demand collapsed once again but, in the meantime, lots of positive steps that had been taken for resource conservation just disappeared.

I mention this because it is quite conceivable that we could see in the next few years another huge increase in the price of wheat and grain on the world markets. I suppose this would please farmers, especially in Western Canada, because they probably need more income, but we should also make sure that such sudden price increases do not lead to the abandonment of various measures or steps that people have started to take for resource conservation.

[English]

Ms Nymark: I guess my response to your question is in terms of direction. The real issue for me is to ensure that we get the policy signals right, which I think is very much what you people are concerned about. I think the way we're going to do that is by developing our ability to understand and make decisions based on knowledge and analysis of the potential environmental implications of the kinds of decisions we in government take.

That's why I place such a high priority on trying to develop a capacity to do these kinds of environmental assessments and to develop the kinds of tools we need to do them, in terms of modelling capacity and indicator development. It's important that we just do them so that we start to learn better and develop an ability to do them. Each time we've done one, we've got better.

I have devoted people to this task because I think it's making good decisions at the initial stages with the environmental impact knowledge, right up there with your social and economic implications, that's really going to ensure that we get it right, as it were, in the future. That's why I've also placed very high priority on the issue of indicators and measurements so we can understand what it is our policy signals are doing over time and we can course correct as we go along.

You asked a question about the good and the bad farmers and how we deal with that. I think if we've learned anything, we've learned that education and awareness and providing some kind of skill upgrading have probably been as effective as anything we've ever done. That's why we've put a great deal of emphasis on that in the Green Plan in terms of farm business management and environmental farm planning initiatives across the country.

I think the other solution is to try to find cost-effective solutions to our environmental problems so that we can prevent that kind of pollution at the beginning, as opposed to trying to clean things up later, when we have a negative impact.

So those are all areas where I think a great deal can be done to improve things at the farm level.

The Chairman: Mr. Wilson and Mr. Girt, two brief answers, please.

Mr. Wilson: The one issue we haven't talked about is peer pressure, basically farmers policing farmers. I think there's quite a potential there that we haven't explored yet, remembering that a bad farmer out there taints me by example. I would argue that I think that's going to have to be a component. I don't think government has the resources to enforce whatever regulatory regime may come down the road. Who do I look at as a farmer? I look at the most progressive neighbour I have and try to adapt or adopt what I see with my own eyes. I covet their technology.

.2125

The Chairman: Mr. Girt.

Mr. Girt: All I would say follows from what Jeff is saying.

Policing is very expensive. Just bear in mind the fact that we have this very large land mass in relation to our tax base compared to any other country. Don't import U.S. solutions. Don't import western European solutions to Canada. Canada is different.

In adding that to what's been said previously, perhaps I've said enough.

The Chairman: All right. Thank you.

Mr. Steckle (Huron - Bruce): Perhaps you could note the following questions that I'm going to give you and then respond.

First, I would say to Jeff that I've appreciated many of the things that have been said this evening. Being a farmer myself, I know for the most part where some of the discussion is derived from. As a farmer, are you being well-served with the current registration regulation process as it involves pesticides and herbicides in Ontario, particularly in Canada? That's one question, and you may want to get into it.

Are the farmers involved enough in the process leading up to that kind of thing? I think there's some real debate on that, and it's all part of the equation.

Mr. Bailleul, you did comment and allude to the supply management sectors as perhaps being contributors to the high cost. If it weren't for supply management, perhaps some of our commodities could be bought cheaper. I want you to qualify that, because I happen to disagree with you on it. I'm sure there are people here who would want me to do that as a farmer, representing those sectors as well.

Ms Nymark, let me suggest that you perhaps elaborate somewhat more on how we educate people in terms of what farmers are already doing in terms of the kinds of measures we're hoping to achieve through this exercise. Let me give you an example. How many people would suspect that on a land mass basis, on a per hectare basis or per acre basis, you would find many times more pesticides and herbicides, phosphates and nitrates running off property in urban areas than you would in the rural areas? How many people would believe that? That is actually true. It's manifested itself in many areas, but many people don't understand that.

I planted 30,000 trees this year, taking 30 acres out of production for all time - at least in my generation - not being compensated for it in terms of what I get back on that land. So there are people, farmers, doing things at great cost to themselves over a long period of time. There are measures currently being taken by people on their own initiative, without government assistance, to do that. So I think these are some of the educational things we need to address.

Mr. Girt, is the baseline that we're trying to achieve realistic, given the fact that as a government we've committed to reaching a total goal of $20 billion in exports by the year 2000? Can we do that, given the kind of time line we have, and given the baseline that we're hoping to achieve?

Mr. Wilson: I'll start in on the pesticide issue, and in a sense I have some good news for you. I and a number of my colleagues here are actually in town here to prioritize in a minor use context just what the needs are from the user groups,the agricultural community. In fact, last night we collectively met with Dr. Claire Franklin, who is head of the new regulatory agency, and had a very good discussion on how, now that they're up and running, we need to see some results and they need to see some results.

So I would argue that we're willing as a farm community to say the past is the past. If we collectively work forward on this, I would argue that what we can offer under this process now is to meet the needs of the farmers, meet the needs of the consumers, and society in the sense.... I would argue that as we move into an area of pesticide risk reduction we have the potential now with technology, education, training and what have you to reduce that by 90%. But the farmers' needs have to be recognized and met as well.

.2130

I'm comfortable, sitting here tonight, from what I've heard both today and last night, that we're on the road to seeing some progress.

[Translation]

Mr. de Bailleul: I deliberately avoided talking about supply management because this is not linked to taxation policies, and it is not linked either to policies whereby the federal or provincial governments provide money to support farmers' incomes. It is true however that, through supply management, farmers can benefit from higher prices than those that might be justified by the market. So, this could be included in all of those categories.

In any case, supply management also means that producers cannot produce more than their quota. So, even though prices may be higher, farmers cannot produce more. Consequently, they may have less incentive to take account of environmental impacts.

It so happens that the major type of production in Quebec, milk production, is under a supply management system. Some of my colleagues believe that our milk production is not intensive enough, that farmers do not use enough fertilizers to increase their grass yields, from an economic point of view. However, this may precisely be the reason why milk production, which is one of the major types of production in Quebec, at least in relation according to the land it uses, is also one of those that are associated with fewer environmental problems. And there are even fewer environmental problems nowadays because problems which I alluded to a while ago, linked to manure management, have been considerably alleviated through various programs, such as manure management improvement programs.

The type of farm practices linked to milk production from grass has relatively modest environmental impacts. On the other hand, corn production, which has been encouraged through a program funded by the federal government, has major environmental impacts. As a matter of fact, it is one of the types of production with the most serious environmental impacts.

[English]

The Chairman: Are there any further volunteers? Ms Nymark.

Ms Nymark: You asked about how we ensure that the farm community gets credit for the good stewardship activities they undertake. That's something that I think the farm leadership and community has to deal with. The National Agricultural Environment Committee, of which Mr. Wilson is the vice-president, has taken that on as one of their priorities.

I think one of the larger ways we can deal with that, though, is through the development of our environmental indicators, which will clearly show the progress. That's one of the reasons we've placed a very high priority on this. Where farmers are making very good environmental progress, it will measure that progress and will be evident to all. It will also tell us where we have problems and we aren't doing the right thing. Therefore, we can then take the kind of corrective action that will be required.

The Chairman: Thank you.

Mr. Girt.

Mr. Girt: I'd be cautious for the following reasons. I wouldn't be cautious in the sense of, yes, we could sell the produce; I'd be cautious in the sense of what type of revenue we're going to get from it, which goes back to this point about international trade again.

Really the issue is how much subsidization of production is going to go on in the U.S. and how much is going to go on in the common market. I would argue that really the Canadian agricultural problems in the next five years are being addressed at the moment down in Washington, where Congress is considering the Farm Bill. Really, one of my messages is that we have to get very serious about intervening in those events in the future. One way of doing it is through the environment and maintaining that we're just positioning ourselves somehow that way.

.2135

So yes, we can do it, but it's a question of whether we're going to do it as we did it in the 1970s and 1980s, when we had to have great government subsidies to maintain our market shares and the national profit out of it was next to nothing. Or will there be an international trading regime where the nation and the farmers can make the profit they deserve to make out of it? We have to get exceedingly serious and aggressive about international trading arrangements.

The Chairman: Last on the list is Mr. Adams.

Mr. Adams (Peterborough): Thank you, Mr. Chair.

I enjoyed your presentation very much. I thank you for it.

Soil erosion is one of the ways the environment is degraded by agriculture. I know that in the Great Lakes, soil erosion and pollution are tied very closely together. I think Mr. Steckle mentioned that. It's the same in Quebec with pollution of the St. Lawrence; the soil that goes carries with it pesticides, excess fertilizer and so on.

We've read in Green Budget Reform about attempts to maintain cover in the prairies. I've read about more complicated things in Europe, such as trying to maintain cover in a particular season, because in some seasons, as Mr. Bailleul mentioned, the fertilizer and pesticides can get to the ground water and so on. Then also they discuss maintaining barriers between watercourses and so on.

Would any of you care to comment on the effectiveness of the Canadian permanent cover program in the prairies, as one example, and in Ontario, on low-till and no-till agriculture programs?

Ms Nymark: I'm going to answer the permanent cover question for you.

The permanent cover program has been, in our view, an exceedingly successful program. I'm concerned about giving you a number. It's taken an incredible number of acres out of annual grain production and moved them, in 10- and 21-year contracts, into permanent forage production. That has had significant benefits in terms of soil erosion. It's also had significant benefits in terms of input use, etc., because forages by nature are less intensive in terms of input use than is grain production. So it's been a very successful program.

The program was very rapidly taken up. It was designed such that it was only accessible to those farmers who had classes 4, 5 and 6 land.

Mr. Adams: The marginal land.

Ms Nymark: Yes, the marginal land. Take-up was incredibly swift and very successful.

The other interesting thing about the permanent cover program is farmers had a choice of 10- or 21-year contracts, and the majority of the contracts - over 60% - are 21-year contracts. That ensures that you have an entire generation of farming out of annual grain production into a different kind of farming. The odds, after 21 years, of that reverting back to annual grain production are pretty slim. Ten years is a smaller adjustment period, but we're very confident that the 21-year contracts will have a major long-term impact and that they won't come back out.

Also, interestingly enough, the USDA is looking very carefully at the program. They have redesigned their conservation reserve program to mirror it, because what it did that the conservation reserve program in the United States did not do is ensure that those farms were productive farms. It didn't say that land had to be set aside and be idle. It ensured that those farms moved their production out of annual grain on marginal land into other very productive operations. So that's an element the Americans have now chosen to mirror as well.

Mr. Girt: The other thing I should point out is that's a good example of the type of flexibility I was talking about. That program basically didn't cost the government any money, because all it did was take money that would have been spent for other purposes under GRIP or something else and give it to farmers for doing something else. That's what I mean about flexibility, and we have to see much more of that.

Thank you, Mr. Chairman.

Ms Nymark: If I might elaborate on what Mr. Girt was saying, as you signed up for one of those contracts, you ceased to be eligible for the other support programs.

.2140

Mr. Wilson: The evolution of tillage practices is probably one of the most fascinating phenomena that have gone on in literally every province, simply because it's almost a farmer-led, farmer-generated initiative in the sense that there are economic.... Obviously the farmers are looking at the economics of it if they go to lower or no till. Every farm has its own different criteria, and you'll find there are very slight variations on every farm as to how farmers are approaching it.

The fascinating point is that as they got into it as an ideal presented to them as a farm community, the goals were reduced energy use, reduced compaction and all the stuff we view as valuable. But they're also finding there was an economic benefit to farmers.

I can give you an analogy from my own farming operation. We were a traditional farm back when I first became involved. We ploughed, disked and cultivated probably three or four times before planting the crop. Now we have a piece of equipment called a disk that has levellers behind it. We pull it with a four-wheel-drive tractor that burns 4.2 gallons an hour and we cover just about 20 acres, with a ground impact of less than 3 pounds per square inch, based on the fact that they're all flotation tires.

So am I further ahead or not? One task does my total tillage operation now on four gallons an hour of fuel consumption. And my next-door neighbour may have a slight variation, depending on the soil types and the cropping practices they're involved with.

Another item on cover is that on our 300-acre farm right now, we have a mix of annual and perennial crops. We have 80 acres of winter rye cover for no other reason than it's in my best long-term interest. I get absolutely no incentive, other than maybe a feel-good, but I also know that if I'm going to be there 20 years down the road, I have to have some organic matter in that soil. I'm on light blow sand.

[Translation]

Mr. de Bailleul: I approve most of what has been said. I would only like to add that there are no miracle solutions. Someone alluded to zero tillage practices, for example, which are also being tried in Quebec, or to alternative practices for corn production. However, zero tillage sometimes reduces considerably soil erosion but leads to a more intensive use of pesticides. In other words, there might be some trade-off between reducing soil erosion and using more pesticides. There are no miracle solutions.

Mr. Adams: I thank you all. Thank, Mr. Chairman.

[English]

The Chairman: Thank you, Mr. Adams.

There are two questions from the chair before we conclude.

Could one of you give us a brief overview of the impact of international trade on good environmental practices in agriculture?

Mr. Wilson: If we're not going to clearly define what we want from an agriculture, then in a sense we are going to be at the mercy of the international implications. This is a global world we're operating in.

In my own production of fruit and vegetables, some of my broccoli goes into New York state. For the most part my products are utilized locally, but my neighbours, whether they be producing livestock or grain, to a degree are utilizing that international market or are feeling the effects and pressures in terms of the economic side of the international marketplace.

I would argue that if we define what we want from agriculture, then in a partnership arrangement between the Canadian society and the farming community, I think we can achieve that. If the expectation is that farmers can deal with the competitive pressures and with environmental enhancement on their own, I don't think it's going to happen.

[Translation]

Mr. de Bailleul: If one maintained the present direction - but I believe that will change - or if one considered only the impacts on the environment of a straight liberalization of trade, one could be concerned since some countries are in a better position than others, either because they do not have environmental problems or because they do not care.

.2145

So, this might encourage those countries to give less priority to environmental issues if they wanted to remain competitive. This is the rather pessimistic view of things.

However, I believe that the WTO will not have any choice about integrating two types of problems into its programs: social problems and environmental problems.

Public opinion is already asking that countries, when they compete, take into account not only their trade in products but also their specific production practices.

I believe that, little by little, codes of good conduct will be suggested for the various types of production.

[English]

Mr. Girt: I think we should take a lesson from the forestry sector. The forestry sector at this point is undergoing some stress, particularly in its European markets, because it's having to respond to a set of environmentally based production standards that are being imposed from Europe. European forestry is basically a plantation type of forestry, quite different from the forestry we have over here. Yet we are now being forced to respond to a set of market requirements that are not akin to our environment.

We're going to have similar types of standards being imposed in agriculture. If it happens to forestry, it will happen to agriculture next. Already people are working on these things, in Canada and outside.

The point is that we have a decided advantage, because we are low-input producers relative to all our major competitors, with the exception of Australia and the like. It would be a great pity if this competitive advantage were somehow lost because we weren't a major player in setting the performance criteria that are going to be used to guide or determine the quality of produce in the future; or alternatively, Canadian agriculture gets put down because it's not doing all the intensive draconian exercises Dutch agriculture is having to go through simply because it's the biggest agricultural polluter in the world but also the biggest agricultural exporter. It's going to be important that we position ourselves so we capitalize out of our environment.

The Chairman: Thank you. The other question has to do with the impact of the GST on agricultural products and prices. Certain agricultural implements - the use of gasoline on the farm and the use of pesticides - are GST exempt, as we all know. If they were not GST exempt, to what extent do you think the prices to the consumer would be affected? Has any study to that effect been conducted? In other words, if the farmer were to carry the same GST burden as the urban dweller, what would be the ultimate effect; besides, of course, increasing the price of food? To what extent...would you know?

Mr. Girt: I'm not sure, Mr. Chairman, if that's the right question, in the sense that I pay -

The Chairman: You can correct it. Perhaps the question should be, how come books are not GST exempt but pesticides are?

Mr. Girt: The question should be this. If food is not GST exempt, then maybe farm inputs should not be GST exempt either. The whole idea of a GST is to tax value-added.

You would be talking about a different type of tax. This would not be just a GST tax any longer, simply because the farmer would not be able to pass it on, except for certain supply-managed commodities, to the marketplace, where many of the prices are in fact determined by overseas markets and not simply by the Canadian producers themselves, if you get my gist. So I'm not sure that it would be a fair tax.

.2150

The Chairman: Maybe the same can be said of furniture or of cars. Anyway, I welcome your comments.

Mr. Wilson: I would respond that when you talk about the potential of applying a tax on a farm input - and it's probably fair to say farm inputs as opposed to pesticides, fertilizers, or fuel, because the argument could be germane - for any increase in my cost of production I would assume that the potential is there to pass that on. In the real world, it isn't.

The downside, and where I would be very cautious about blanketing a farm input with some form of taxes, is that in the environmental context we accept that in the case of pesticides there are some with less risk than others. The pesticides with less risk in some cases carry a higher inherent cost to begin with. So the more we load generically across the board on that costing level, the more I as a farmer will source the cheapest product I can utilize, which might be more persistent. In many cases it might be an older product.

Is that what we really want to achieve in an environmental sense by doing that?

I would cite as an example that Denmark is about to impose a pesticide tax. If I have the correct numbers, it will be 27% on insecticides, 18% on fungicides, and 13% on herbicides. When I met with their environmental protection agency, I told them quite clearly that it's going to drive the system to the cheapest possible pesticide product within those three groupings to serve the need. I asked them if that is the best enhancement of their environmental goal.

Also, there is the issue that none of us like to talk about: is pricing more the input side of any sector, but in this case agriculture, going to drive the system underground? I don't think we can overlook that.

Right now we have the goodwill of farmers onside, in a competitive sense - that we're not going to break the law. But as we saw with cigarettes, if we impose something that either is viewed as being Draconian or will place them at a competitive disadvantage....

The farmers' main goal is to produce safe, affordable food, but also to produce the requirements for their families to exist. I would argue that we're far better off in working collectively on some common approaches than in selectively targeting a few within the agricultural sector.

The Chairman: All right. Fair warning.

With that statement, we conclude our work.

Thank you very much, Ms Nymark, Mr. de Bailleul, Mr. Wilson, and Mr. Girt. It was very helpful.

This meeting is adjourned until tomorrow at 8:30 a.m.