EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, December 12, 1996

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[English]

The Chairman: I see a quorum, ladies and gentlemen, so we'll begin the meeting.

Just before we ask the minister to make some opening comments, I want to ask everyone to read the order of the day, which is a consideration of the proposed changes to the Canadian Wheat Board and the proposed plebiscite on the marketing of barley. That is the purpose of this meeting.

We cannot discuss a piece of legislation that has been tabled in the House but has not been referred to committee. Being very specific, Bill C-72 has been tabled in the House, but we cannot refer to that bill in committee, because it has not been referred here or to any committee.

As we said when this meeting was set up, the purpose of the meeting, which is outlined in the order of the day, is to discuss the issue of grain marketing in western Canada. I advise you to keep any questions or comments to that line. If a reference is made to any specific piece of legislation that has not yet been referred to a committee, I will have to rule it out of order.

As well, I want to assure the committee that I passed on the clear message of the committee to the minister that his opening comments be brief. I remind all questioners to make their questions brief and the minister to make his answers brief. The minister and his staff will assure you that the message was passed on. Only at the end of the day will anyone be able to judge whether any of us upheld that desire.

With that, Mr. Minister, we welcome you again to committee. The floor is yours.

Hon. Ralph E. Goodale (Minister of Agriculture and Agri-Food): Thank you,Mr. Chairman, and good afternoon to members of the committee.

I would first of all like to indicate that I have with me today a number of officials from Agriculture and Agri-Food Canada, but most especially here at the table are Mr. Victor Jarjour, who is director of the grains and oilseeds division of the international markets bureau of the market and industry services branch of Agriculture and Agri-Food Canada; and also Mr. Marvin Hildebrand, who is senior commodity officer in the grains and oilseeds division of the international markets bureau of the market and industry services branch of Agriculture and Agri-Food Canada. Some other officials are also in the room and may be called upon as necessary to try to deal with any of the questions.

Mr. Chairman and members of the committee, as the chair has indicated, the intention this afternoon is to have a general discussion about grain marketing, and specifically within that context, the proposals the government has published for changes in the marketing system. As much as I would dearly love to wade into the specifics of Bill C-72, because it has not been referred to a committee as yet, I'm not in a position to do so, but I hope, notwithstanding, we can have a good discussion about the general intentions the government has announced.

As all members of the committee will know, in early October I did announce the government's policy intentions with regard to the marketing system for western Canadian wheat and barley. This grain marketing policy package was arrived at following what were likely the most extensive consultations in the history of the western grains industry.

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The report and recommendations of the Western Grain Marketing Panel, the views of close to 15,000 individuals who sent in faxes or letters or were otherwise canvassed for their opinions, and the input from countless meetings with many producers and groups across western Canada were all carefully considered and taken into account in preparing the legislation, which is now before the House but unfortunately is not yet before this committee.

While no set of proposals could possibly satisfy all of the sides in what is all too often a sharply polarized debate among farmers with respect to grain marketing, the government's approach is aimed at meeting the reasonable expectations of a majority of western grain producers.

Our policy objective is to build upon the proven strengths of our existing marketing system while modernizing the governance structure of the Canadian Wheat Board, enhancing its accountability, improving its responsiveness to changing producer needs and opportunities, providing more flexibility and faster cashflows, and minimizing future complications in international trade.

Many of the changes we are proposing will empower farmers with a bigger and more direct say in how their marketing system works, consistent with a majority of the recommendations put forward by the Western Grain Marketing Panel.

Overall, the changes fall into three broad categories.

The first relates to the structure, governance and accountability of the Canadian Wheat Board.

The overall governance of the Wheat Board will be placed in the hands of a board of directors, the majority of whom will be farmers. To help make the transition to that new corporate structure, a full set of interim directors will be appointed on a temporary basis by the Government of Canada in 1997. We will do our very best to avoid any real or perceived conflicts of interest in that selection process. Then, beginning in 1998, the producer majority among the directors will be replaced by directors elected by farmers themselves.

One of the principal tasks of the interim directors will be to oversee the orderly adjustment of the Wheat Board's management system to one that is in fact accountable to a board of directors. The existing Wheat Board-producer advisory committee will continue in place until the election of producer-directors is well under way, and in any event until the conclusion of their current mandate, which is in 1998. The day-to-day operation of the Wheat Board will be managed by a chief executive officer, who will report to the board of directors.

The election of directors will mean the Canadian Wheat Board will no longer be a crown corporation within the definition of that term in the machinery of government. However, the Government of Canada will continue to guarantee the board's initial payments at the beginning of each pooling period, its credit sales program and its annual operational borrowings.

The second group of changes relates to more flexible operations and improved cashflow. Under these changes the Wheat Board will be able to make cash purchases of wheat and barley, manage adjustment payments during any crop year on an expedited basis, terminate pool accounts at any time and pay out farmers' returns as rapidly as possible thereafter, issue negotiable producer certificates, fully utilize modern risk management tools in dealing both with farmers and with customers, defray farmers' grain storage and/or carrying costs, allow farmer deliveries to condo grain storage facilities, and acquire grain using new technology such as on-farm mobile elevators.

These new flexibilities will help put more money from Wheat Board operations into the hands of farmers more quickly. To backstop cash purchases and to help the Wheat Board manage adjustment payments more quickly, the board will be allowed to establish contingency funds as a financial cushion.

The third category of changes relates to the Canadian Wheat Board's mandate. The legislation does not alter the Wheat Board's existing mandate, but we are putting more decision-making authority into the hands of farmers themselves.

In future the Wheat Board's mandate may be adjusted, conditional upon three things: first of all, a clear recommendation to that effect by the directors of the Canadian Wheat Board; secondly, if a quality control issue is involved, the unequivocal concurrence of the Canadian Grain Commission that a change can be made safely without damaging Canada's reputation for quality and consistency; and third, if the proposed change is significant or fundamental, then an affirmative vote among farmers would need to be a prerequisite.

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Mr. Chairman, let me refer now to the vote on barley marketing, which we are proceeding with this winter. I believe a producer vote in this case is the most democratic and practical way to deal with what has become a very contentious issue. The vote will be conducted by mail in February. To ensure fairness and accuracy it will be administered independently of government by an outside firm with the expertise to conduct the process.

All current prairie farmers - that is, actual producers who have grown barley at least once in the last five years, the period 1992 to 1996, inclusive - will be entitled to vote. Canadian Wheat Board permit book records will form the basis for an initial voters list. Those without a permit book will be able to have their names added to the list either by producing documentary evidence of having grown barley during the relevant five-year period or by swearing a legally binding affidavit to that same effect.

The question, in my view, must be straightforward and definitive. No purpose would be served by asking farmers to choose from a menu of several fuzzy options, because that, in the final analysis, would produce no clear-cut result. Similarly, it would not be reasonable to include on the ballot an option that might be impossible to implement, be unsustainable, be obscured by code words, or carry hidden consequences.

Accordingly, the choice will be as follows. First is the open market option. That is, remove all barley, both feed and malting, from the Canadian Wheat Board and place it entirely on the open market for all domestic and export sales. Second is the single-seller option. That is, maintain the Canadian Wheat Board as the single seller for all barley, both feed and malting, with the continuing exception of feed barley sold domestically.

I'm urging, of course, all eligible voters to exercise their democratic right to make a choice.

Mr. Chairman, I'm fully aware that on the surface the notion of dual marketing appears to be an attractive proposition. It appears to be so because the very term itself implies that you can have the best of both worlds - that is, the Wheat Board, fully functional, as it is now, side by side with the fully open market without one interfering with or affecting the other.

Accordingly, the dual-marketing concept is described by some as a win-win situation for everybody. There would be no downside. Those farmers who want more freedom would have it, and the Canadian Wheat Board would carry on as before, unaffected and unimpaired for those who want to use it in the future voluntarily. Or so the argument goes.

Realistically, it is far from certain that two quite opposite marketing systems can in fact coexist. With dual marketing, the Canadian Wheat Board would most definitely be affected. It would be diminished in at least five ways.

First of all, the board's global reach and marketing strength would be reduced.

Second, its price pools would be smaller overall and likely diluted.

Third, since deliveries through the Canadian Wheat Board would be less certain, its long-term reputation as a reliable world supplier month after month and year after year would be jeopardized.

Fourth, Canada's valuable reputation for quality and consistency, load after load after load, could not be assured.

Finally, uncertainty about supply and quality and about customer service and loyalty could in fact render initial price guarantees untenable over the long term into the future.

Consequently, dual marketing is not purely a win for freedom without significant losses and costs elsewhere.

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In the case of barley there is a further complication: the distinction between feed barley and malting barley. The Western Grain Marketing Panel suggested that all feed barley sales should be on an open or dual market, while all malting barley sales should remain with the Canadian Wheat Board to capture price premiums. But in practice, it would be extremely difficult to keep two largely indistinguishable types of barley totally separate from each other.

Under the Western Grain Marketing Panel's proposals, barley would inevitably be sold across the border as feed, at a feed barley price, but then used in the United States for malting purposes or re-exported from the United States in competition with other Canadian barley. Malt premiums for Canadian producers would most certainly be reduced, or perhaps lost altogether, and the value-added Canadian malt industry would be placed in a difficult, possibly uncompetitive, position.

I think it is interesting to note that the Western Grain Marketing Panel itself candidly acknowledged that these were in fact problems.

Some people have suggested that locked-in delivery contracts could prevent all of these problems from happening. But in fact, such a system does not alter many of the fundamental problems with a dual-marketing approach. When farmers sign fixed-delivery contracts, they take on a significant production risk. To reduce that risk, they would contract only a portion of their crop and thereby limit the amount of grain available to the Canadian Wheat Board.

Delivery contracts are not ironclad. In times of rising prices, enforcement costs and defaults can be extremely high. Tightening the contract terms would only result in farmers not contracting in the first place.

The fact is, there is no universally agreed-upon definition of what constitutes dual marketing. There are a variety of different versions. Those who advance the locked-in contract proposal acknowledge, in effect, by bringing forward that proposal, that a totally voluntary Canadian Wheat Board is not in fact a workable concept. Locked-in contracts do not solve the concerns about diluted pools, a weakening of quality standards or an increased number of sellers creating downward price pressures.

Most seriously, such locked-in contracts would almost certainly trigger a proliferation of Canadian Wheat Board permit books among and within various farming entities, as producers naturally try to hedge their bets, keeping a channel open to both marketing systems just in case, even though by the rules they were supposed to pick one or the other and stick to it.

Mr. Chairman, the Canadian Wheat Board is a very effective marketer of Canadian grain. It has the support of a majority of western grain farmers. They want realistic and sensible Canadian Wheat Board changes, but they don't want a scenario that would lead, inevitably, to the board's destruction.

We are at a crucial time in the history of western Canadian agriculture. Market access around the world is improving; trade-distorting export subsidies are slowly disappearing; and we have a global rules-based trading system coupled with a new dispute settlement mechanism. Recent experience shows that those new tools are working - so far, at least - rather well. On top of that, Canada has a reputation worldwide for the quality of our agricultural products and for the integrity with which we conduct our business.

To make the most of these factors, it's important that the Canadian Wheat Board have the tools to operate as effectively as it can. At the same time, producers and producer organizations want the Wheat Board to be more accountable and to be able to react more quickly to specific market conditions, which obviously change from time to time. The board itself has been asking for legislative changes to allow it to modernize. I believe the proposals we put forward effectively address these fundamental concerns.

Now, just how valuable, in the overall scheme of things, is the Canadian Wheat Board? It sells some $5-billion worth of grain per year at a marketing cost of a few pennies per bushel. It retains no profit margin. All the rest goes to farmers.

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It is one of Canada's most significant business enterprises. Doing business in more than seventy countries around the world, it is our fifth-largest exporter and the nation's biggest net earner of foreign exchange. It has earned for itself and for Canada a positive reputation in the eyes of its global customers, not so much on pricing issues - the board targets to extract price premiums - but on intrinsic quality, cleanliness, consistency, technical support, long-term dependability, customer service and contract execution. The Canadian Wheat Board has been rated by its customers as number one in the world. That is verified on page 52 of the Western Grain Marketing Panel report.

These characteristics, coupled with the size of the board, its global reach and its marketing clout result in Canada gaining a share of global markets that is about three times larger than our share of global production. The Government of Canada believes that is worth preserving.

Mr. Chairman, I am very much committed to the principles that we have announced and that are embodied in the legislation presently before the House but not yet before the committee. Nevertheless, there is a variety of mechanical ways by which those principles I have referred to can be accomplished. I am more than open to input from members of this committee as to how the enabling legislation, when it finally does come before you for detailed consideration, may be improved. That's one of the reasons Bill C-72 will be referred to your committee before second reading in the House.

Mr. Chairman, I thank you and the members of your committee for this opportunity today. I certainly look forward to your questions.

The Chairman: Thank you very much, Mr. Minister.

We'll go first to Mr. Hermanson, then Mr. Landry and Mr. Easter.

Mr. Hermanson (Kindersley - Lloydminster): Thank you, Mr. Chairman.

Welcome, Mr. Goodale, to our committee. I had a long preamble, but in the interests of time I'll shorten it so that we have more time for questions and answers.

I want to go first to the issue of dual marketing. You spent quite a bit of time suggesting in your presentation that it couldn't work or even be defined. It seems to me you've been long on rhetoric, pretty much lacking in will and pretty short on evidence when you make statements such as the ones you've made today, that dual marketing is a pretty iffy proposition and that if we ever went to that, it would be irreversible, couldn't be changed. I would certainly appreciate a lot more documentation than you've been able to provide to this point to back up your argument.

We know there is dual marketing domestically in Australia with the Australian Wheat Board. I believe right now 75% of the domestic wheat market is handled by the Australian Wheat Board and 25% is handled outside the board, which varies from time to time.

You say that dual marketing is an oil and water type of thing, that it can't mix, can't work together. But there's a very strong argument that in fact neither the open market nor the monopoly selling of the Canadian Wheat Board is perfect by itself; one sharpens the other. I believe you really have missed the boat on that. That's why so many producers out there are desperate to the point of breaking the laws that you support. If there are holes in those laws, you quickly plug the laws to make sure they can't market in any other manner than you think is the appropriate way to market.

What you have done with your plebiscite question being an all-or-nothing proposition is to guarantee that this issue will continue on in the prairies in the divisive manner we've seen in the past. There is no win-win scenario in what you're doing. Approximately half of producers - and I don't know if it's going to be 40% to 60%, 50% to 50%, or 45% to 55%, but it will be a large number - are going to be very angry with you no matter which way the plebiscite goes. You don't seem to have much consideration for the fact that you are doing nothing to solve the problem.

The debate - and you know this - is whether or not dual marketing will work or whether we'll require single-desk selling of wheat and barley. The Western Grain Marketing Panel - and this is your panel, with some of the best minds in the industry - said let's try it with barley, and you said no.

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How can you justify going against the recommendations of your own panel, which you picked? How can you accept a situation where you're going to have possibly half the industry angry with you, people still vowing they'll go to jail before they'll be bound to market in a system that you think is the only system that will work in western Canada?

Mr. Goodale: There are a number of questions there, Mr. Hermanson, and I'll try to touch on all of them.

Your first question had to do with whether or not marketing regimes could be changed from time to time and decisions taken at an earlier date reversed at a later date if experience proves that the decision was in some way wrong-headed.

Under international trade law as it exists at this moment, it would be my cautious judgment that for the next short period of time, at least, it may be technically possible from a narrow, legal point of view to make a change, and if it doesn't work, later on reverse your field and go back to the way it was. As I say, from a technical, legal point of view, that would appear to be possible.

From a practical operating point of view, I have serious doubts as to whether it would be possible - for internal domestic reasons, for North American reasons and for global reasons. As the next two or three or four years unfold I suspect once water has passed under the bridge it will not be possible to retrieve it and make the water flow back uphill.

So I have adopted an approach to this issue that is admittedly cautious. We are dealing here with an industry that provides a livelihood for well over 100,000 farm families in western Canada; an industry that's worth $4 billion or $5 billion a year; an industry upon which an entire region of this country depends. I think it's only prudent to approach changes with respect to that industry in a cautious and practical way to make sure in the process that no fundamental mistakes are made that could, in the long run, do irreversible harm.

So, yes, my approach is cautious. As I've said on other occasions before this committee, I don't want to be in the situation of having thrown the baby out with the bathwater and then finding afterwards you can't find the bathwater any more, let alone the baby.

With respect to the Australian Wheat Board, there are a number of fundamental differences between the Canadian and Australian situations. It is true that the Australian board has been evolving through a variety of changes over the last number of years. It is also true that the Canadian Wheat Board in the last period of time has evolved quite significantly. Once this legislation is enacted, that evolution undoubtedly will be accelerated.

But a variety of mechanical and technical differences exist between the environment in which the Australian Wheat Board operates and the environment within which the Canadian Wheat Board operates. They're extensive in nature. If the committee would find it useful, we could perhaps provide a side-by-side comparative analysis of operations and circumstances in Canada compared with Australia.

For the sake of brevity, let me mention one obvious fundamental difference - the fact that Australia is an island continent located many thousands of miles away from any customer other than domestic customers and from any competitor. That puts Australia in a very unique situation. Here in Canada we are side by side with the biggest grain producer and grain exporter in the world - namely, the United States. That fundamental fact of geography creates an entirely different situation in the North American context than in the Australian context.

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Mr. Hermanson, you indicated words to the effect that many farmers in western Canada are desperate to the point of breaking the law. My only comment there, because as a minister of the Crown I cannot comment on any specific legal proceedings, would be to say don't overstate the point. Yes, there are some who have resorted to that kind of conduct, but they have not been supported by any of the three prairie wheat pools. They have not been supported by the Wild Rose organization in Alberta. They have not been supported by the Keystone organization in Manitoba. They have not been supported by other organizations, such as the Saskatchewan Association of Rural Municipalities. They have not been supported by organizations such as the National Farmers Union. There is a tremendous body of academic opinion, some of which I have with me today and which I would be glad to share with you, to support the approach and the ideas that have been advanced by the government and to argue very strenuously against the protesting activities of a certain number of individuals.

I would even make the point that an organization that strongly believes in dual marketing, the Western Canadian Wheat Growers Association, has been very careful to try to distinguish itself from Farmers for Justice, which must raise some questions in the minds of the Western Canadian Wheat Growers Association about the credibility and the propriety of the activity engaged in by the group called Farmers for Justice.

In any event, you obviously hold some views that are sympathetic with what some of the protest movements are protesting about. That's fine, but I just caution against overstating the volume on that side of the equation, because there is also a tremendous body of opinion elsewhere that holds a different point of view.

Mr. Hermanson: I've been told over half the farmers on the prairies want to move to what Farmers for Justice are protesting, but they're not prepared to protest or to risk breaking the law. They support their position. They wish that's what you would make legal.

Mr. Goodale: It's interesting, Mr. Hermanson. I suppose you're referring to some polls. I've looked at a variety of poll results, some done by a whole variety of other agencies and some done by the Government of Canada, and of course the polls conducted by the Government of Canada were released publicly some time ago. But on the very first page of the analysis of the polls it indicates in those results that about one-third of the respondents would argue for major changes in the Canadian Wheat Board, one-third would argue for minor changes, and one-third would argue for either the status quo or an increase in the authority of the Canadian Wheat Board. Those results would tend to indicate about a third, a third, a third, a three-way split when it comes to the variety of issues out there for farmers to consider.

It's also interesting in the polls to see that when a question is asked that embodies the spirit of dual marketing, not precisely defined and without detail, there's a fair body of support in favour of that notion if it were possible. But when subsequent questions are asked about -

Mr. Hermanson: Such as whether barley prices would go up if there was a dual market rather than malt barley prices coming down. You have to be fair when you do this stuff.

An hon. member: No, they don't.

Mr. Goodale: Indeed you do, Mr. Hermanson, and I hope you'll accept that admonition just as I will.

When the details are probed, the level of support for that proposition tends to decline.

Let me just go to the fundamental bottom line. You and some others obviously hold a certain point of view. The legislation that is now before the House does not embody that point of view in terms of mandate changes for the Canadian Wheat Board, but it does put in place a future arrangement where if the board of directors of the Canadian Wheat Board agree, if the Canadian Grain Commission says it can be done safely, and if a producer vote among farmers ratifies the idea, then future changes can be contemplated. But the fundamental point, in order to trigger all of that, is that farmers themselves have to be persuaded. On the basis of the evidence I've seen, including the polls to which you've referred and to which I've referred, that persuasion factor is not there at present.

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The Chairman: Mr. Landry.

[Translation]

Mr. Landry (Lotbinière): Thank you, Mr. Minister.

You know that the subject we are discussing today is far from being a concern to Quebec farmers. However, the restructuring of the Canadian Wheat Board is for the Western farmers as much a matter of emotional debate as supply management is for farm producers in Quebec.

Mr. Minister, it seems to me that you have some difficulty enforcing the legislation and regulations that rule your government organizations. Farmers export wheat illegally to the United States and milk producers or cheese processors of Alberta violate the law by selling their product on the Quebec market.

How come you and your department do not react more swiftly and more forcefully to enforce federal legislation? Do you believe your vision of an improved Canadian Wheat Board will bring back in line those producers who export their wheat themselves to the United States?

[English]

Mr. Goodale: Mr. Landry, about enforcement, the responsibility for managing enforcement proceedings is largely within the hands of other government departments and agencies rather than the Department of Agriculture per se or the Canadian Wheat Board per se. I have no criticism of those enforcement officers to offer. They have a job to do. They have a responsibility to discharge under the various mandates that are given to them. I think by and large they do a commendable job in what very often are highly charged, emotional, difficult circumstances.

But you do make a fundamental point, which is I think a point well taken. That is, the law is the law, and until it is duly changed in some way or adjudicated upon in a negative manner by a court of valid jurisdiction, the law stands and it must be enforced by the appropriate means. Sometimes that's unpleasant and distasteful, but in a democracy we all have to have a fundamental respect for the law. Otherwise we'll all descend into a chaotic situation that is obviously untenable for everybody.

About whether or not the changes we have proposed will ameliorate the situation, improve the situation, I certainly hope they will. While it's still too early to tell, because the legislation hasn't even been referred to this committee yet, let alone enacted, the initial reaction, from what appears to be the majority opinion in western Canada, has been fundamentally favourable. I hope it will bring about positive results.

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[Translation]

Mr. Landry: Thank you, Mr. Chairman.

[English]

The Chairman: Mr. Easter.

Mr. Easter (Malpeque): Thank you, Mr. Chairman.

Welcome, Mr. Minister. I'm very pleased to hear you dispute some of the myths surrounding dual marketing, because for all too long a number of players have said you could be successful playing both sides of the fence and that's not correct.

The fact of the matter in the export trade business that the Canadian Wheat Board is involved in is that as a country we can compete against other countries or we can compete against ourselves.

Maybe the members opposite don't realize it, but the lowest seller usually sets the price, and if you start competing against yourself - and that's what the dual market will do - it will undercut and undermine the market. We've seen lots of that in the potato industry at home, so we certainly hold the Wheat Board up as a model.

I have two questions, Mr. Minister. One deals with governance. Relative to the Canadian Wheat Board advisory committee, I'm concerned about your indication that they would remain until the end of their term. If they're going to do that, they have to be given some authority in order to operate. I really believe that if they're not given the authority that gives them the power to operate, there's no sense having them there as an advisory board. There's no sense having them there if they can't perform their functions. I'm concerned about that one and I would like your comments.

My second question deals with the cash purchase option that the board would employ. I'm wondering what your intent is in that, not in dealing specifically with the legislation, because we can't, but what is your intent under that cash purchase option? I've heard a maximum of 25% per producer and I've heard it's open-ended. So what is your intent in terms of the maximum that can be sold on the cash basis? If it's greater than 25%, I'm concerned about the impact on the pooling system of the board, and I'd like your comments on that as well.

Mr. Goodale: Mr. Easter, first of all, with respect to the advisory committee, they are themselves struggling with a situation now that puts them a little betwixt and between. They have had a function to perform for the last twenty years or more when there was no board of directors and they were the only source of grassroots advice, if you will, to the Canadian Wheat Board in its operations.

That's obviously going to change. In due course, the board will have a board of directors to be accountable to, and a majority of members on that board of directors will be elected by farmers. That logically raises questions as to the future of the advisory committee as well as questions about the interim period between now and that point when the directors are in fact elected.

I've had an opportunity to have a preliminary discussion with the Wheat Board advisory committee about their preferences and ideas for how to manage this transitional period. I've received their preliminary thoughts. In the next short while I expect to receive a detailed proposal from them in terms of how they can play a useful and constructive role in helping the Wheat Board through this period of necessary transition.

If everything unfolds as we anticipate, that interim board of directors would be identified in the early part of 1997 so they would be in a position to assume their responsibilities from a legal point of view at the beginning of the next crop year, that is, August 1, 1997. We would then intend to have the beginning of an electoral process in 1988 so that all of the producer-directors, or at least some of the producer-directors, could be in place for August 1, 1998.

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We said in our policy pronouncement that once this electoral process is well under way, the logical role for the Wheat Board advisory committee would clearly be diminished. As I understand it, their existing legal term, which started with the last set of advisory committee elections, will expire at the end of 1998. The crop year, however, would begin on August 1, 1998. At that point in time, there would be at least some elected directors. That begs the question of whether or not there is a useful function remaining for the advisory committee after August 1, 1998, and before the end of their present term on December 31, 1988?

That is one of the subject matters upon which I would be very pleased to receive the advice of this committee. It may well be, as I believe was at least partially implied in your question, that it may be more logical to bring the term of the advisory committee to a conclusion a bit earlier - that is, on August 1, 1998, rather than December 31, 1998 - to make sure there is no confusion between the elected advisers and the elected directors.

There is one other matter that members of this committee might want to turn their minds to in terms of the election process for the new directors of the Canadian Wheat Board. We have indicated that a majority will be elected by farmers and that the board overall would consist of at least eleven, and up to a maximum of fifteen, directors. So there would be a minimum of seven producer-directors, and perhaps a number that's higher than that.

In the electoral process ongoing into the future, it probably would not be advisable to have all seven turn over all at once. You could have a situation that is quite destabilizing if your board of directors is in that constant state of turmoil. The thoughts of the committee would be appreciated on how to stagger the election process in such a way that you don't have a majority of your directors turning over all at once. Your advice on that point as to how that could best be handled mechanically would be most welcome.

On the issue of cash purchases, the idea is to enable the board with this authority to be used at the board's discretion. Obviously the new directors, particularly those who are duly elected, will have some thoughts on when the utilization of this authority could be a useful and valuable thing. I'll cite one example from history, from a couple of years ago. With respect to barley, for example, the Canadian Wheat Board had very attractive sales opportunities overseas for Canadian barley at potential prices that were much better than were available almost anywhere else. Yet, bound by the constraints of the initial payment, the board was not in a position to attract enough barley into the system to be able to meet those selling opportunities. That kind of circumstance meant that there were probably some sales opportunities that could not be seized because the barley was not available. It probably also meant that in terms of demurrage, there were extra costs incurred that detracted from the pools. In those circumstances, it might well have been useful for the board to have the flexibility to be able to attract barley into the system at a price other than the initial payment in order to take advantage of a sales opportunity that was immediately available or to avoid demurrage on a boat where the costs were running up and detracting from the value of the sale.

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The board believes that with this authority it will be in a better position to have a more efficient sales program that can be conducted at lower overall costs and higher overall prices, increasing the net return overall to producers. I believe the board is also of the view that this power can be utilized and exercised in appropriate circumstances that do not in any way detract from the principle of pooling.

Mr. Easter: Is there a chance to have a maximum?

Mr. Goodale: Again, I'm constrained in what I can say about the legislation, but there was no specified maximum in terms of our policy statement.

The Chairman: Mr. Hoeppner.

Mr. Hoeppner (Lisgar - Marquette): Thank you, Mr. Chairman.

I'm surprised that you didn't bring some Wheat Board officials along, Mr. Goodale, because I want to ask you a question on the act itself.

Mr. Goodale: The existing act or the new act?

Mr. Hoeppner: The existing act. I want to give you a very simple -

Mr. Goodale: Could I just ask a technical question, Mr. Chairman? I presume that at some point, with respect to grain marketing, you invite the Wheat Board to come to meet with you from time to time.

The Chairman: I would say it's a foregone conclusion that when the act comes forward or is referred to a committee, that committee would likely be interested in having the views of many people, including the Wheat Board.

Mr. Goodale: So that opportunity will present itself in due course, Mr. Hoeppner.

The Chairman: As you know, Mr. Minister, it's not referred, so we can't prejudge on who will say what, where and when.

Mr. Hoeppner: I've been accused in the press, and even in the House, that I'm a guy fighting for Farmers for Justice. I want to give you an example that happened before Farmers for Justice were even in existence. This goes back to 1993-94, when we had the fusarium wheat.

As you know, with anything over 5% affected by fusarium, it isn't saleable at all. We found a market in the U.S. for that grain that the Wheat Board refused to buy. Because I live three miles from the U.S. border, it was fairly easy for us to export it. But I have two other brothers who farm and who are not so fortunate as to be close to the border. They sold their hard wheat, which was all graded down to feed, to a line elevator company.

About a year later, farmers all of a sudden started coming to me with complaints. They found out some farmers hadn't been getting the same price as the others - and this is my own family. One brother, with the same kind of hard wheat, sold to an elevator twenty miles farther down the line. He got an initial price, with no premiums. The other brother sold the same kind of wheat and got a $37-a-tonne premium, $1 a bushel.

We found out that this is quite common practice in the pooling system. I've had three or four different law firms interpret the act in terms of whether or not this is legal under the single-desk pooling system. They tell me it is not.

Further on, for the grain that we exported, Mr. Goodale, we thought we got a good price. We did the buy-back and did it legally. Our neighbours wanted us to do theirs, so we did theirs and did it legally. We exported 800,000 bushels of unsaleable wheat into the U.S. market. When these complaints started coming back to me, I started checking back. Do you know what I found,Mr. Goodale? For the wheat that we exported, we had paid $33.24 a tonne more into the pooling system than farmers got out at the end. Where did that money stay? That was the worst week in the feed wheat pool.

.1630

Something is wrong. You said the Wheat Board was delegated to have the same mandate. Is that the mandate of the Wheat Board, to run the pooling system in that regard?

Mr. Goodale: Mr. Hoeppner, let me try to shed some light on the situation generally, if I can. As I've said on other occasions, if there are specific inquiries about specific transactions or circumstances, I would be glad to investigate them as well as I can within the bounds of commercial confidentiality.

Mr. Hoeppner: This has caused a real furore in my area. That's where Farmers for Justice got formed, and they're fighting this issue. You have to resolve that somehow or the mistrust in the pooling system will divide farmers further and it will wreck the Wheat Board in the long run.

Mr. Goodale: Let me deal with that point. I think accountability and communications are exceedingly important components for the future. You are right to point out that there have been past controversies where in some circumstances, rightly or wrongly, at least some farmers have believed they haven't had access to all the information or all the facts or all the accounting they should have had. I'm in no position to comment on the merits of their case, but I do acknowledge that there has been a level of frustration in that regard. I would hope the new board of directors of the Canadian Wheat Board can find the appropriate methods of reporting and accountability and public information that would alleviate that level of anxiety.

When every one of these cases, in specific terms, has been reported to me with a question, I have done my best to find the answer to the question. In those inquiries I have never found any indication of anything untoward.

However, as long as a doubt persists or there's a cloud or a fog, then some people are inclined to suspect the worst. I would like the board and its new board of directors and its accountants and its auditors and its communication officers to try to dispel any of those issues or questions as well as they can, governed as they are by some rules about commercial confidentiality beyond which they cannot go. But if there's doubt out there, let's answer the questions and try to dispel the anxiety.

Mr. Hoeppner: I got a phone call from a former Canadian Wheat Board inspector who had read some of my claims in the papers, and he was furious. He said, Jake, I worked for this outfit for so many years, they can't be corrupt. I said, sir, I'll read you a contract I have right in front of me - it details it word for word - and you give me advice whether it's right or it's wrong. Mr. Goodale, when I finished reading it, he said, Jake, that's corrupt and don't you give up on fighting it; it's either the grain companies or the Wheat Board. What more evidence do I need?

Mr. Goodale: Well, again, I don't mean to demean or diminish the circumstances, but that's one person's opinion on a potentially hypothetical situation. I really cannot delve into the specifics of any individual case. But let me repeat the principle.

If there are doubts about the accuracy or the authenticity of a reporting process or a procedure of accountability, that is not helpful to either the producers or the marketing institution. I believe we must have the most modern and comprehensive accountability techniques in order to satisfy legitimate public inquiries about the methods by which an institution functions.

.1635

I would just like to add a word on the earlier part of your question - it may also relate to a point you raised recently in the House - on the issue of a grain company or a mill offering an incentive to encourage delivery. As I understand the circumstances and the law, the Canadian Wheat Board Act requires that when a producer delivers a certain kind and quality of wheat or barley at a certain time when a particular initial payment is prevailing - which we as the Government of Canada guarantee - the producer making the delivery receives that initial payment. It is the minimum.

It may well be that a particular grain company or mill, for its own private trade purposes, will want a particular type of grain with, say, a particular level of protein, which may happen to be in short supply at a certain point in the marketing season, and may offer an incentive or a premium over and above the initial payment in order to get the grain it needs into the system at a certain time.

The Canadian Wheat Board Act requires the company to pay the initial price as the minimum. If it wishes to offer an incentive over and above that in order to acquire certain grain at a certain time, I don't believe there's a rule that would prevent it from doing that. It doesn't have to do that.

Mr. Hoeppner: Our lawyers say there is.

There's another thing I want to point out to you, Mr. Goodale. If that is possible under a pooling system, we have a dual-market system right now, because my brothers had the same grain, the same wheat and the same distance to truck and they got a dollar per bushel difference. If that isn't dual marketing, I don't know what it is. The pooling system says everybody is supposed to be treated equally in the initial price in the revenues generated from the average sale of that grain. There is supposed to be a specific difference in price between grades. We've had instances where this feed wheat was as valuable as No. 1 Canadian western red spring wheat. How can you have a pooling system if that's what's going on?

The Chairman: Minister, please respond and then we'll go on to the next question.

Mr. Goodale: Just briefly, Mr. Hoeppner, you say you have a legal opinion that questions the propriety of that. I will endeavour to provide you with the legal analysis that demonstrates that the Canadian Wheat Board Act is being satisfied. It's a lengthy and somewhat technical argument, but I'll try to provide it to you in the next short while.

Mr. Hoeppner: Wouldn't you agree we have dual marketing -

The Chairman: Sorry, we're going to move on. We have a number of members and I'm trying to be as fair as I can with time.

Mr. Goodale: No, actually I wouldn't.

The Chairman: Mr. McKinnon, Mr. Reed and Mr. Benoit.

Mr. McKinnon (Brandon - Souris): Mr. Minister, along Mr. Easter's line of questioning, I would ask about your intent of changing the opening and closing of the pool account anniversary dates or the flexibility thereof.

Might I also be permitted to make a statement? I spent some time in Australia last summer. I talked to some producers and a couple of legislators. Of all the things they treasure over there, from both groups I met with, they respect the single-desk selling component of the Australian Wheat Board the most. I thought I'd bring that to the forum in case there was an impression that dual marketing was widely accepted by all persons at that point.

.1640

The third point I'd like to make is that we don't appear to be able to meet niche markets very proficiently. For example, a particular grade of product grown in southwestern Manitoba, generally speaking, exceeds protein content in a lot of areas of western Canada due to the dryness of the climate, stress on the plants, or whatever other factors may apply. I'm wondering whether or not you're looking at that idea of niche marketing to a certain extent.

Lastly, I have heard criticism from some producers - and Mr. Hoeppner alluded to it when he talked about his fusarium sale - about the export certification buy-back process. I'm wondering whether or not you are reviewing that in terms of the long term. Thank you.

Mr. Goodale: There are several question there, Mr. McKinnon.

First of all, on the pool accounts, right now the Canadian Wheat Board opens its pool accounts for any given marketing season on August 1, and they remain open for deliveries for the following 12 months. In appropriate circumstances, the time period can be extended beyond 12 months if there's a congestion problem in the system, or whatever. But normally it's a 12-month pool. Then there's a period of time after the next August 1 during which the Wheat Board will finish its sales program for the preceding pool, close the pools in terms of transactions, do the final calculations, and pay out the farmers' money in a final way.

In a lot of marketing years, that kind of annualized approach is just fine. But there will be marketing years, some of which we've experienced recently, when it will make sense to terminate one pool and begin a new one because part-way through the marketing year there was some kind of fundamental change in circumstance. Rather than intermingling those circumstances from the beginning of the year with the tail-end of the year, for example, it might be more appropriate to simply close the pool before the crop year is over, tally up the accounts at that point, and open a new pool for the remainder of the marketing season. Presently, there's no flexibility to do that within the legislation, and we propose, within the policy ideas we have announced publicly, to provide that flexibility.

So if marketing circumstances suddenly change part-way through a crop year, the board will have the legal authority to close the pool account early and open a new one for the balance of the marketing season. The board would then be in a position to pay out the farmers' money from the pool that was closed early, at the earliest possible date.

This raises a very interesting issue that certainly reflects changed circumstances in the last20 years. When I was a member of Parliament for the first time in the 1970s, one of the biggest complaints that came before us year after year was the fact that the Canadian Wheat Board would finish its crop year on July 31 or August 1, would work away at the final sales from the preceding 12 months to get the pool accounts all closed, and then send out final payments to farmers from the preceding crop year in November or December. That had a tendency, for a lot of farmers, to thoroughly foul up their tax planning because they had not anticipated a cheque arriving on December 28. It might have been far more convenient had that cheque arrived on January 2.

To give the whole thing some certainty, the law, at the request of farmers, was specifically changed to say if there is a final payment to be made it shall not be made until after January 1 next, following the close of the crop year.

.1645

The view among farmers certainly does seem to have changed on that issue. The overwhelming opinion received by the Canadian Wheat Board and received by the government is as soon as you've closed a pool account, as soon as the sales are done and the books are tallied, you should pay out the farmers' money as rapidly as you can and remove that specific provision in the law that says you cannot do it until January 1 next following.

So that flexibility will be put into the law, Mr. McKinnon. The whole objective here is to have the pool accounts accurately reflect the marketing circumstances and for the final tallies in the accounts and the pay-out to farmers to be made as rapidly as possible, without any legislative or regulatory rule holding up the process.

On niche markets, the Canadian Wheat Board takes the ability to exploit the marketplace to the advantage of farmers very, very seriously. A range of marketing opportunities and a range of marketing techniques are emerging today that none of us would ever have thought possible ten or fifteen or twenty years ago. So the Wheat Board has established an entire division within the board for the purpose of examining and pursuing these new market opportunities.

A Manitoba farm leader, one who is probably well known to you, Mr. McKinnon, Mr. Earl Geddes, has been employed by the Canadian Wheat Board to work in this area of new market development, niche markets and otherwise.

I hate to make another gratuitous suggestion, Mr. Chairman, but I think it might be very useful to invite Mr. Geddes or the appropriate representative from the Canadian Wheat Board to make a presentation to the committee on their market development strategy. Mr. Geddes has done that for a variety of farm organizations across western Canada, and I think it's true to say that whenever he has the opportunity to make this presentation it is well received and well regarded by those who take a look at it, as indicating how proactive the Canadian Wheat Board is in terms of these new market development techniques. It may be valuable to the committee to hear that presentation fromMr. Geddes.

The Chairman: Mr. Reed.

Mr. Reed (Halton - Peel): Thank you very much, Mr. Chairman.

Minister, the kinds of letters I get across my desk in opposition to the Wheat Board really are in support of one gentlemen who has been charged with taking wheat across the border without the authority of the Wheat Board. I try to point out that if that grain were converted into alcohol, the person would be charged with bootlegging.

It's pretty obvious that the changes you're prescribing for the Wheat Board give a lot more control to farmers. Farmers will really have ultimate control of what happens to the Wheat Board in the future. I have been able to tell those people who have written in that if farmers don't want the Wheat Board to exist in the future, it won't exist. But as long as the majority of farmers want the Wheat Board to exist, then it seems to me we have a duty to make sure it does.

So I wonder if you would be kind enough to emphasize those changes in the control of the Wheat Board that lay the responsibility back on farmers now, where perhaps it didn't to such an extent before this.

The Chairman: I assume, Mr. Reed, you're referring to the changes that were proposed?

Some hon. members: Oh, oh!

Mr. Reed: Yes, I'm sorry.

Mr. Goodale: Nothing specifically yet in legislation, of course.

Mr. Reed: I guess in this place we all deal in hypotheses, Mr. Minister.

Mr. Goodale: Mr. Chairman, I appreciate the discretion involved in Mr. Reed's very careful wording, because quite apart from the niceties of the rules of Parliament, it is of course not appropriate for any of us to refer to any specific legal proceedings. I think it's wise not to wade into those matters. They are being dealt with in other forums according to law and they will take their course, in due course.

.1650

On your specific point about the changes for the future, Mr. Reed, I will make available - and you may already have seen them - copies of some recent speeches that were delivered at a variety of farm organization meetings in western Canada by the chief commissioner, Mr. Hehn, who has, from his perspective, gone into what these changes mean for the future. I think it would be useful for the committee.

In a very practical way, based upon decades of experience in the western grains industry, both in the private sector and now with the Canadian Wheat Board, he offers a very valuable historical recitation of what went before, what the new rules will mean, and how this will be different in the future. He does emphasize the point you have referred to in terms of the future influence and control of producers.

In a nutshell, there are two fundamental points that I think should be emphasized. First of all, there is the fact that there will be a board of directors. That kind of a system has never before pertained to the Canadian Wheat Board. For a year or a year and a half, that new board of directors will be appointed by the Government of Canada on an interim temporary basis. That interim temporary board will include a majority of farmers from the Canadian Wheat Board's designated region.

Beginning in 1998, the producer majority on the board will be replaced by directors duly elected by farmers themselves. So when we get past this transition period, that interim period of the next eighteen months to two years or so, we will have arrived at a situation where the governance of the Canadian Wheat Board will be in the hands of a board of directors. The majority of those directors will be duly elected farmers. That is a major change that does put a tremendous amount of strength and influence into the hands of farmers themselves, both the farmers who serve on the board as elected representatives and the farmers who elect them.

Might I say in that regard that I have reviewed the electoral records with respect to the past selections of Canadian Wheat Board advisory committees, and generally speaking the turnout at election time has been low. For the future, let me strongly advise you that it would be in the farmers' best interests to have large turnouts when it comes to selecting the directors. These directors will not be advisers. They will be legally responsible and legally accountable directors, and the corporate governance will be in their hands. That's a big change.

The second change, Mr. Reed, is with respect to future mandate changes that could pertain to the Canadian Wheat Board. We have indicated a variety of steps that need to be taken in order to address some future changes in mandate. I won't go through all of them again in detail except the last one, which is fundamental. If any proposed change with respect to the mandate of the Canadian Wheat Board is considered to be significant or fundamental, that change would in fact require an affirmative producer vote as a prerequisite before it could take effect.

In the case of barley, we're proceeding to a producer vote this winter.

The Chairman: Thank you, Mr. Minister.

Mr. Benoit.

Mr. Benoit (Vegreville): Thank you, Mr. Chairman, and welcome, Mr. Goodale.

I'd like to start by asking about the democratic process and plebiscites. Normally when a plebiscite is being called, people are given choices. They are allowed to choose from different options that are recognized as being supported by a large number of the people being questioned. Certainly dual marketing is a question that farmers have asked; a large majority of farmers, in fact, have said they want the chance to vote on dual marketing. Whether a majority support that type of a marketing system is a question that should be asked. It isn't going to be asked on your plebiscite and I would like to know why. In a democratic process, that question certainly would be on the ballot.

.1655

Mr. Goodale: Mr. Benoit, I watched very carefully the process by which the Alberta provincial government attempted to canvas opinion on this point.

Mr. Benoit: I'm not talking about the results of a past poll; I'm talking about putting the dual-marketing option on the plebiscite, just to have a third option available. Let farmers choose from the three options.

Mr. Goodale: What do you do then, Mr. Benoit, when you get a minority opinion in favour of each of three options? I made that point in -

Mr. Benoit: You either make it clear up front that you can have a third ballot, or you can have a second plebiscite. You can arrange it in different ways. This type of thing has been done before. Surely your researchers are capable enough to find out.

Mr. Goodale: Yes, and I was trying to explain to you some of the historical experience and you didn't seem interested in hearing it. I'm happy to have the conversation with you, but the point is, if you have more than two questions on the ballot, you are very likely going to have a minority opinion in favour of everything. You don't resolve anything if there's a menu, and it seems to me you're begging for a non-result. The advice I received from the overwhelming number of western farm organizations was: make it clear, make it precise, make it definitive. That's what this question will do.

Mr. Benoit: That's absolutely untrue. Farmers certainly want that option on the ballot. That has been made clear by polls before.

Mr. Goodale: Which option?

Mr. Benoit: One explanation I've heard from you is that you have decided that dual marketing is an option that wouldn't work. Is that the case?

Mr. Goodale: Mr. Benoit, what's your definition of dual marketing?

Mr. Benoit: You can use any definition of dual marketing you want, and I'll ask you -

Mr. Goodale: Do you want me to put on the ballot a question that says, do you want dual marketing and you can define it anyway you want?

Mr. Benoit: No.

Mr. Goodale: Therein lies the problem, Mr. Benoit.

Mr. Benoit: You can put the question on. You can take an option.

Dual marketing certainly has been defined by western Canadian farmers. They have a very good view of what dual marketing is, and it's fairly standard across western Canada.

Mr. Goodale: That's one of the problems, Mr. Benoit. It is not standard.

Mr. Benoit: So you'd rather completely avoid the question because it's a little bit difficult -

Mr. Goodale: No. I think the -

Mr. Benoit: - or because you might not get the results you want?

Mr. Goodale: No, not that either, Mr. Benoit.

Mr. Benoit: You've been asked about what percentage of the votes cast will be required to carry the plebiscite. What is your answer to that?

Mr. Goodale: Mr. Benoit, I've tried to be as clear as I possibly can on this point, but let me take another stab at it.

Unless there is some major aberration that defeats the legitimacy of the process, and at the moment I cannot imagine what that might be, but barring -

Mr. Benoit: Would a certain percentage of turnout be required?

Mr. Goodale: Pardon me?

Mr. Benoit: A certain percentage of eligible farmers -

Mr. Goodale: Let me finish the sentence and then I'll come to the point about turnout.

Unless there is some fundamental aberration that all reasonable people would acknowledge, and assuming there is a clear-cut result - and with the kind of question that has been drafted one would assume that the question would be clear-cut, because there are two options and there will clearly be a majority in favour of one and a minority in favour of the other - we intend to act upon the majority position.

.1700

Mr. Benoit: You mean 50% plus 1?

Mr. Goodale: The majority position, yes.

Mr. Benoit: Well, I've got an answer on that!

Mr. Goodale: That's what I've been trying to say for the last three months.

Mr. Benoit: Mr. Goodale, I have to compliment you. You have an ability that truly is rare. You have a truly rare ability to say so little in so many words and take so long to do it.

Will you require a certain percentage of turnout for this plebiscite to be valid?

Mr. Goodale: Mr. Benoit, I think we all have to look at the results -

Mr. Benoit: Can't you say yes or no?

Mr. Goodale: I think we all have to look at the results and determine whether the level of participation is credible.

Quite frankly, I tell you here today, I don't think that is going to be an issue. If you think back twenty-some years to when we had the rapeseed vote, the turnout level there in far less contentious circumstances was better than 80%, if my memory serves me correctly. I think there will be a very large rate of turnout and the result will be very clear-cut. So this whole hypothetical business about what if this and what if that is entirely irrelevant, because I think farmers will indicate their point of view without any major doubt.

Mr. Benoit: The fact is, though, Mr. Minister, when we have a Lotto 649 draw, you don't get to choose the numbers after the draw is made. You're refusing to define the terms of this plebiscite before the plebiscite is held. That is undemocratic. It's important that it be clearly defined so people know exactly what percentage of the vote of those who cast the vote will be required, what percentage cast will be required to make it a valid vote, and so on.

About the process, you are saying once this partially elected board is in place, for a substantial change to be made to the Wheat Board it will require, first of all, the approval of the board of directors. They will have to vote to make this change. Second, you're saying the Grain Commission will have to approve the change. Thirdly, there will be a vote from farmers to pass the change. Is that right?

Mr. Goodale: That's correct.

Mr. Benoit: What order will that be in? Once the board of directors decides it wants the change, do you have to get the approval of the Grain Commission before a vote is held by farmers?

Mr. Goodale: Yes, indeed. That would be the order in which I would envisage it. I would presume -

Mr. Benoit: But the Grain Commission could veto the majority of the board -

The Chairman: Leon, if you want the minister to answer, let him answer, rather than interrupting when he gets three words out.

Mr. Benoit: I'm just trying to get a few answers in in the time we have.

Mr. Goodale: Mr. Benoit, I've said very clearly we cannot, as a trading nation that relies on its reputation in the world for quality and reliability, allow that reputation to be lost. Both the Canadian Wheat Board and the Canadian Grain Commission historically have played a very strong role in making sure we have the best reputation in the world.

Mr. Benoit: But don't farmers have the ability to decide whether a certain change -

The Chairman: Leon, would you be polite, please, and let the minister answer the question. He doesn't interrupt you, so I ask you not to interrupt him.

Mr. Minister, proceed.

Mr. Benoit: If the minister would give an answer that would -

The Chairman: Mr. Landry, do you have a question? I recognize Mr. Landry.

[Translation]

Mr. Landry: In view of all that is happening with the Canadian Wheat Board, Mr. Minister, did it occur to you to launch a promotional campaign in the 70 countries in which the Wheat Board does business in order to inform and to reassure buyers about the proposed changes? Have you thought about showing them that they will not be jeopardized by buying from the Canadian Wheat Board?

[English]

Mr. Goodale: Mr. Landry, you raise a very important point, and that is the way in which this whole process is viewed by those outside our borders who buy our product. I have, and the Wheat Board has, in the last number of months, faced the requirement of assuring our customers that Canada will continue to be a very reliable supplier of the grains they have traditionally looked to us to supply.

.1705

In effect, while I wouldn't call it a campaign, both the Wheat Board and the government have, when asked, provided our customers around the world with a full explanation of what is planned here and how this process will evolve over the course of the next several months. I think that is a very important thing for us to do.

I might say that while I guess in effect it's not their business - not being Canadians and, more particularly, not being Canadian grain producers - our customers are obviously exceedingly important to us. We have had long-standing, respectful and very profitable arrangements with those customers, and their expectations need to be satisfied.

From time to time I have had buyers come to me with a very puzzled look on their faces. They ask me what this controversy is all about, because they have done business with the Canadian Wheat Board for many years and they regard it as the very best single marketing institution in the world. That's what they say.

I can hear Mr. Hermanson heckling in the background about price.

Some hon. members: Oh, oh!

Mr. Goodale: Let me address that point as well. They go on to add, ``The Canadian Wheat Board always charges us too much and we pay them more than anybody else because we get the quality from Canada. That's why we're prepared to pay premiums in the marketplace.''

Some hon. members: Oh, oh!

The Chairman: Order.

[Translation]

Mr. Landry: Thank you, Mr. Minister. You have given me a very positive answer and I appreciate it very much.

[English]

The Chairman: We're going to hear from Mr. Taylor, Mr. Culbert and Mr. Hermanson.

Mr. Taylor (The Battlefords - Meadow Lake): Thank you very much, Mr. Chairman.

It's a pleasure to be able to discuss the plebiscite on barley. I wish we had been able to spend more time on the subject of the plebiscite and had not wandered so much into topics we are going to deal with at other meetings. However, it has been interesting in any case.

I have three questions. I can ask the second one and the third one together, but the first question, the main question, simply deals with the purpose of the plebiscite to begin with.

I haven't yet heard an explanation as to why we need a plebiscite. I haven't heard that explained in any of the speeches that were given or in any of the responses to questions. The question about the future of the Canadian Wheat Board has been asked to producers many times, not only in polls but in meetings across the country. The marketing panel report indicated fairly strong support for the Canadian Wheat Board. Your own comments, Minister, have talked about the strength of the board.

You've acknowledged here today, as you have previously, that the question of dual marketing isn't on the ballot because it's not something that you consider feasible, yet the question about the future of barley is being put to producers. If for some reason western Canadian farmers decide they don't support barley under the board, the uncertainty about the board's future is stronger than ever. Therefore, in my view, failure on the plebiscite means the failure of the board.

So can you tell me and western Canadian producers why we're going through this exercise? If you support the board and you don't support dual marketing, why aren't we just out there strengthening the board with its barley options?

Mr. Goodale: I think, Mr. Taylor, that the plebiscite process or the vote process with respect to barley is the only feasible, practical way to resolve a very difficult controversy among farmers themselves.

.1720

I have attended more meetings with farmers overall, big meetings and small meetings, than I could possibly count with respect to this subject matter. It's a debate and a controversy that has accumulated over the years with respect to barley.

There are duelling groups of academics who come forward with a variety of studies, either for the board's system or against the board's system. Overall, I would have to say I tend to be inclined, on their academic merits, toward those studies that have supported the board's position, but I don't comment on the pros and cons at all of all the various studies that have been produced.

As this issue has unfolded over the years, I think it has reached the point where a vote with respect to barley is simply the only feasible way by which the issue can be addressed. I think not having a vote with respect to barley could potentially compound the difficulties of the Canadian Wheat Board.

I don't speculate about what the results of the vote may be. That's up to farmers to decide. But this democratic process, I think, is essential in the circumstances to clear the air with respect to barley.

Mr. Taylor: With all due respect, I don't think you'll meet your goals. If the plebiscite is successful, as was indicated earlier, the debate continues. If it fails, the debate on the future of the board continues. I don't believe we have resolved the question you seem to think is the reason behind the plebiscite.

Mr. Goodale: Do you think not having a vote would bring the debate to an end?

Mr. Taylor: In my own mind, the influence of the minister supporting the board and moving ahead with strengthening the power of the board settles the argument that we go ahead with a strong future for the board.

But at the same time, my second and third questions deal with the plebiscite itself, since it is going ahead.

All producers are certainly going to be affected by the outcome. Why is it that only those who have grown barley in the recent past are on the voters list? Why not all producers? Obviously the outcome could affect all producers.

At the same time, because a lot of those producers are also concerned about the marketing of their other crops, why is there not also on the list the same question about canola or rye, or even returning oats back under the jurisdiction of the board?

Mr. Goodale: In terms of the question being asked in the vote, Mr. Taylor, I think it's important not to muddle too many things together. Just as I think we need to be precise and specific and definitive with respect to the proposition that is being asked with respect to barley, I think it's equally true to say that you get a rather muddled picture if you ask about a whole bunch of other crops and grains at the same time. I do think you muddy the waters if you throw too many commodities into the equation for a simultaneous vote. So it's for the sake of clarity and precision that we're dealing with barley per se, without referring to other commodities at the same time.

In terms of your question about eligibility to vote, I asked farm organizations for their advice in that regard. While there were different points of view from some organizations, the clear majority recommended that the voters list target barley producers.

.1715

When I asked the further question, how do you define a barley producer, the advice that came back was it was somebody who has verifiable evidence that they have produced barley in the recent past. Everybody agreed it needed to be more than one year. Some said two years, some said three, some said five. I think I got one recommendation that went back fifteen years, but that seemed to me to be a bit extreme.

So we settled on five years as a reasonable period, bearing in mind that if you had restricted it to three there has been a pretty substantial degree of crop diversification in the past three-year period and you might have inadvertently excluded someone who really should legitimately have the right to vote if you restricted it to three. If you go back five years, I think you encompass a reasonable group of producers who are relatively well targeted upon the commodity to which the vote pertains.

There's another angle here. If you had said it should be all Canadian Wheat Board permanent book-holders, regardless of whether they have produced barley or not, an argument can be made - and I gather you would make it, and it can be made very seriously and very reasonably - that there is an indirect impact on the wheat producer who has never grown barley, because of the potential impact of the result of the vote on the marketing institution. So there is an argument for reaching out further and saying all grain producers, whether or not they are barley producers, should be entitled to vote. But if you accept that argument, then you really do have to accept the corresponding argument, that you have to reach out the other way and consider the interests of barley users, including livestock feeders who have never grown any grain but simply relied on the supply of the grain from that same - at least in theory - marketing institution.

Once you go beyond an identifiable group of barley producers, you could continue expanding the net on both sides until you get to an almost impossible situation. The largest body of opinion among farm organizations was to focus; focus on the producers of the commodity in question. We've tried to do that with a reasonable historical period of five years. It appears to have met the expectations of most, and it is also consistent with the experience with most other commodity votes historically: in the case of rapeseed twenty years ago, for example, or in the case of other agricultural commodities on which there have been votes.

The Chairman: Mr. Culbert.

Mr. Culbert (Carleton - Charlotte): Thank you, Chair.

Good afternoon, Minister. First I want to touch on two or three things and then perhaps you could provide the input, for the sake of simplicity and to meet our chair's time schedule.

Over the years, Minister, numerous studies must have been done on the one-desk approach versus everybody going in their own different direction. I'm wondering, with these various consulting studies that I suspect have been done over the years, what the average difference has been on the rate of return for the farmer over the three-year, five-year, ten-year scenarios. I suspect it would be quite substantial.

The other point is without the Wheat Board at all - because either you have one system or you don't have that system; it's as simple as that - how would you ever, in this day and age, be able to secure offshore contracts, how would you ever be able to supply a quality product at the market price, the best market price around the world, without that one-desk approach, and how would you provide a solid marketing approach for Canadian wheat specifically, or Canadian grains, for that matter? How could you ever possibly do it?

The other point I want to make, Minister, is you asked for input on how you might secure directors so you wouldn't have that possibility of a complete 100% turnover at any one time. As you're probably aware, when they appoint directors, many organizations do it on staggering terms. For example, if you have a twelve-member board, you would appoint four for one year, four for two years and four for three years, or any combination thereof, and it would give them a bit of staggering. I just point that out for you.

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Perhaps you might just quickly answer those few questions or points.

Mr. Goodale: Thank you, Mr. Culbert.

If you had a scenario wherein you did not have the Canadian Wheat Board marketing as a single-desk seller on behalf of prairie farmers, if you did away with that system, I suppose you would then have a marketing system on behalf of Canada that is not unlike the marketing system that exists in the United States.

In the U.S., the international trading, if you will, is done by private sector grain companies without a marketing agency acting on behalf of farmers per se. The international grain companies buy their supplies from producers on the commodity exchanges. They then proceed to market that supply around the world on behalf of their own private sector commercial interests. The grain gets marketed internationally, but not directly on behalf of the farmer. There is a private sector commercial entity that purchases from the farmer within the United States, and it then sells the product to the final customer, who is either in the United States or offshore.

That really gets to one of the fundamental differences in perception among farmers in western Canada. Those who support the Canadian Wheat Board tend to hold the view that the Wheat Board is not a buyer; it is a seller. That is, it doesn't buy grain from them and then resell it in the marketplace; it acts as a marketing agency on behalf of the farmer to sell their grain on their behalf.

Those who support the more open-market options see the Canadian Wheat Board not as a marketing agency on behalf of farmers; they see the Canadian Wheat Board as just another grain company, or the equivalent of just another grain company. Their argument is that if you have another buyer like the Canadian Wheat Board - they see the board as a buyer, not a seller - in the marketplace, that just means there is one more bidding up the price. That, of course, is exactly opposite to the perception of those who support the Canadian Wheat Board and who would see the board as an agent acting on their behalf in a single-seller capacity. The latter group would see the loss of the board not as one more buyer in the marketplace to bid up the price; they would see the loss of the board as the elimination of a single seller, followed by a proliferation of individual sellers that would bid down the price.

This is really the nub of the issue in terms of western Canada and the different perceptions among farmers. As the Western Grain Marketing Panel report indicated, this illustrates how different groups of producers come at this issue from what are largely different philosophical perspectives. That's why the gap on some of these issues is so fundamentally difficult to bridge. I have seen farmers in western Canada go toe to toe with each other over whether it's a buyer or whether it's a seller, and it's a very basic difference in view.

I would hold the view that the Canadian Wheat Board is very much a seller, and one of the fundamental ways by which you can tell that is the fact that it retains no profit margin. Its mandate is not to turn a profit for itself, or for the government or for any other entity. Its objective is to maximize sales revenues in the world. So after it has deducted its marketing costs, which work out to be 5¢ a bushel or something thereabouts, all the rest goes to the farmer, without any profit margin being retained by the middleman.

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That's a pretty fundamental distinction. It seems to point out the difference between being a buyer and being a seller.

On staggered terms, I'll come back to that another time, Mr. Culbert, if I can.

The Chairman: Mr. Hermanson.

Mr. Hermanson: Thank you, Mr. Chairman.

Mr. Goodale, I think if you had wanted to be more responsible about this plebiscite you would have initiated an independent audit of the performance of the board in selling barley, so farmers would actually have some information relevant to whether or not they should maintain single-desk selling for barley. Of course we don't have that. We have internal audits done by the board and reported very vaguely to producers. There are some reports that the board may have lost as much as $150 million of potential sales in one year. There's some concern this year that in fact if barley prices fall further, the barley pool account may go into a deficit position and have to be subsidized by the government. Of course this information is all kept very close to the vest. So I think you have failed in that regard.

With the proposed legislation, it looks as if you're going to try to make this partially elected board of directors the scapegoat. If anything goes wrong, we'll blame the board of directors, but if any important decisions have to be made, they will be made by the Minister of Agriculture.

You're going to let farmers elect a few of the directors. I think as few even as one may be elected by farmers, which really isn't a majority. But then very strangely, the Minister of Agriculture or the Governor in Council will appoint the chair of the board of directors and also appoint the president or CEO of the directors. I know the Ontario wheat board doesn't work that way. Why is it that western producers are so inferior in their judgment that if they have an elected board of producers they can't appoint or choose their own chair and hire their own CEO and decide how much they want to pay their own CEO? In fact, the Minister of Agriculture decides the salary of the CEO, and I suppose it might even be secret, as it is with the commissioners now. In fact, the commissioners' severance package is as generous as, or more generous than, the MP pension package; we just recently discovered how generous it actually was. Why do you want to maintain all the power and control for the minister's level, but if anything ever goes wrong the directors, who are partially elected, are going to be the scapegoats who have to take the blame?

Mr. Goodale: Mr. Chairman, Mr. Hermanson has, of course, proceeded to violate all the rules, because he's referring to specific clauses of the bill -

Mr. Hermanson: No, I said ``proposed''.

Mr. Goodale: Yes, it's proposed -

Mr. Hermanson: You even mentioned the name of the bill, for heaven's sake.

Mr. Goodale: The bill that has not been referred to the committee.

Mr. Hermanson: Yes.

Mr. Goodale: Mr. Chairman, I am very anxious to answer those typically specious allegations from Mr. Hermanson. I will try to do so without making specific reference to items in a bill that has not yet been referred to the committee. Let me just deal with the fundamental distinction between types of marketing boards.

The Ontario Wheat Producers' Marketing Board enjoys a guarantee of initial prices under the terms of the Agricultural Products Cooperative Marketing Act, which at the moment is in the process of being amended, but that's the legislation that applies at present, providing the guarantee of initial payments to the Ontario Wheat Producers' Marketing Board.

What that legislation - or no other legislation - provides is an ongoing guarantee with respect to all borrowings. You should read the provisions of the new Canadian Wheat Board Act with great care, because you will find that the level of guarantee is substantially different. That is a distinction that needs to be borne in mind.

It also needs to be borne in mind that the Canadian Wheat Board carries with it authorities and responsibilities that extend beyond the Canadian Wheat Board designated region. For example, if anyone wants to export wheat from Canada, they need to comply with the provisions of the Canadian Wheat Board Act. Whether they're exporting from the prairies or from Ontario or Quebec or any other part of Canada, it's the jurisdictions that fall under the Canadian Wheat Board Act that determine whether that exportation is possible or not.

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So there are authorities and responsibilities under the legislation that extend far beyond the designated Canadian Wheat Board region.

There are a variety of other reasons why there are distinctions and differences, Mr. Hermanson, that I think need to be thoroughly ventilated, and more properly so when we actually have the bill before us and can talk about them in clause-by-clause fashion so that all members can see how this logically fits together.

Mr. Chairman, let me reiterate the very last point I made in my opening comments. The government has laid out its policy positions, and those policy positions are very clear and firm. There are a variety of mechanical ways by which those policy objectives can be achieved. In the course of the committee's work, if there are better ways to do it that are revealed, for example, in terms of the manner in which certain executive officers are chosen, I'm certainly prepared to entertain the argument, bearing in mind that those people will have responsibilities that flow upstream through their own board of directors, ultimately to farmers, and responsibilities in terms of financial guarantees and otherwise that flow upstream and have implications for the Government of Canada as well.

I'm prepared to entertain all reasonable ideas for how to get that accountability structure right, because for the future that proper kind of public accountability is exceedingly important.

The Chairman: Thank you very much, Mr. Minister. The bells are ringing.

Before we adjourn, as a point of clarification, I believe you said earlier in the day that if and when Bill C-72 is referred to a committee, it will be referred after first reading.

Mr. Goodale: That's after first reading, but before second reading, Mr. Chairman.

Mr. Hermanson: [Inaudible - Editor]...sent to this committee.

Mr. Goodale: I guess that's up to the House to determine. I wouldn't want to prejudge the judgment of the House of Commons.

The Chairman: I would thank you, Mr. Minister, and your officials for being here today, and I thank the committee for their cooperation.

I wish everyone a Merry Christmas and a Happy New Year, and may it be healthy.

The meeting is adjourned.

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