NOTES FOR AN ADDRESS BY THE HONOURABLE LYLE VANCLIEF, MINISTER OF AGRICULTURE AND AGRI-FOOD, TO THE 1998 AMERICAN FARM JOURNAL FORUM, WASHINGTON, D.C., DEC. 1, 1998.

Please Check Against Delivery

Good afternoon. It’s a pleasure to be here.

Canada and the United States, as you know, have a unique relationship, one that is recognized world-wide as a model of cooperation and harmony. We share the longest, most open and friendly border in the world – and, although we are markedly different in some ways, we share many common interests and values.

At the heart of this relationship are our trade and economic ties. You are, overall, our most important customer, and we are yours. More than 1 billion U.S. dollars in goods cross the Canada-U.S. border every single day. That is double the figure of 10 years ago, when the Canada-United States Free Trade Agreement took effect. Our two-way trade in agricultural and food products has increased at an even faster pace. It was worth 15 billion U.S. dollars last year. We are your second-largest customer and the United States is our largest.

Even before the recent Asian economic crisis, our agri-food trade with each other was growing much more quickly than our respective exports to markets outside North America.

Yes, a surplus currently exists in Canada’s favour. But consider the difference in our populations: every Canadian consumed 216 U.S. dollars worth of American agricultural and agri-food products last year, while every American consumed just 31 dollars worth of Canadian agricultural products. So, on a per capita basis, we’re buying seven times as much from you as you buy from us.

Whatever the figures, we should keep in mind that our ever-expanding, two-way trade is a great success story for producers, processors and traders in both our countries.

Just as an example, the majority of high-quality beef served in the hotel, restaurant and institutional sector in Ontario and Quebec - Canada’s two most populated provinces - comes from the American mid-West. The Ranchers-Cattlemen Action Legal Fund will try to tell you that beef trade is all one way – north-south – but they are just flat wrong.

We’re making it easier to import feeder cattle into Canada while maintaining the animal health status that allows us to export our genetic material world-wide.

Since we modified our regulations this year, more than 7,000 head of cattle have come into Canada from Montana and Washington, and any other state is welcome to apply to export feeders.In fact, the states of Hawaii and Indiana have applied and those applications are currently being assessed.

Certainly, trade of all kinds has been key in driving the Canadian economy, and I have no doubt it’s the same on this side of the border. Over the last five years, the combination of a strong economy and strong fiscal measures have resulted in our first federal budget surplus in three decades, and that’s an accomplishment all Canadians are very proud of.

Our outlook for growth remains positive, and it’s predicted we’ll have the strongest job growth of any major industrialized country. That is why USDA has no difficulty predicting continued strong expansion of U.S. agri-food exports to Canada for the foreseeable future.

In a trading relationship as large, diverse and dynamic as the one we share, it’s unfortunate but not surprising that there are sometimes frictions. But our differences must never be allowed to overshadow the fact that the vast bulk of our two-way trade in agri-food products continues to flow trouble-free. Still, it’s a regrettable fact of life that, when commodity prices go down, the volume of rhetoric and the accusations of unfair trade practices go up. Facts simply go out the window, leaving in their place confusion, genuine misconceptions, and – sometimes – just pure make-believe.

When a cow-calf operator in Montana sees truckloads of Canadian feeder cattle and slaughter cattle passing by his front door, it’s understandable – but wrong – for him to assume that price downturns must be a result of Canadian imports. On the Canadian side, it is equally frustrating for Canadian grain, hog, and cattle producers to see American states taking unilateral actions at the border, especially when plunging commodity prices are sending their incomes into a free-fall too.

On both sides of the border, producers are complaining they don’t have access to the same pesticides as their competitors in the other country. Here, it’s canola producers who feel they’re at a disadvantage; in Canada, it’s fruit and vegetable growers.

Tensions like these – even if based on partial or faulty information – become more acute when farmers are facing global over-supply, weak demand in Asia and the trade-distorting policies of the European Union. The false impressions soon take on a life of their own.

There are claims, for instance, that Canadians have closed their market to American grain. In reality, American farmers have shipped about one million tonnes of corn to Canada in each of the last four years. Analysts also predict that feed barley shipments to Alberta this crop year could be over 75,000 tonnes, which, in my opinion, puts the boots to the suggestion that the Canadian Wheat Board is pushing prices down. Barley, like all commodities, rolls toward higher prices, and in this case those higher prices are in southern Alberta. Why would barley from Montana and North Dakota be flowing into Canada if prices were depressed?

Another misconception that’s widely accepted as truth is that the volume of western Canadian wheat moving into the American market is abnormally large. In fact, annual wheat shipments from Canada to the U.S. over the past four crop years have averaged just a little over two per cent of average U.S. wheat production. In addition, the value of our exports of durum wheat to the U.S. is matched by the value of our imports of American pasta. So, it’s a two-way street, reflecting supply and demand.

Yet another claim we often hear is that Canadian wheat farmers are more heavily subsidized than their American counterparts. In actual fact, the opposite is true. United States wheat farmers received nearly five times more government support than their Canadian counterparts last year – 52 dollars per tonne here, compared to 11 U.S. dollars per tonne for Canadian wheat growers. These aren’t my figures – they’re from the OECD.

Let’s face it, we both support our producers to varying degrees and in different ways. These are the choices we have made as sovereign countries, and we are well within our rights to do so. But just because we do things differently does not mean either way is inherently wrong or unfair. The same can be said about the Canadian Wheat Board, and the suggestion that, as a single-desk marketer, it is somehow inherently unfair.

In reality, the Canadian Wheat Board makes public not only its returns from the market, but also its expected returns during the current year, and the returns anticipated for the coming year. In addition, it releases to the public every year its complete audited financial statement. I would invite any of the large, privately held, transnational grain companies to reveal their performance in the market to the same degree.

The Canadian Wheat Board also has new tools – such as the ability to cash trade – which put it much more at risk in the marketplace. And, as of January 1, it will be governed by a board of directors, two-thirds of them elected directly by farmers.

Some U.S. groups have mentioned some theoretical concerns about the Canadian Wheat Board, but as far as I am aware, nobody has yet provided any concrete evidence to support those concerns. Even so, we have said over and over again that we are prepared to address any practical concerns that may arise about the Board. Tell us what they are and we are prepared to discuss them through the WTO. But don’t tell us our marketing system is unfair simply because it’s different from yours.

The bottom line is: market forces – not government treasuries – have been, more and more, the drivers determining production and trade patterns within North America. This has been Canada’s aim, and we hope it’s also the aim the U.S. is working toward. I would sincerely hope that the recent 6-billion-dollar subsidy package agreed to by Congress does not signal that we are getting back into the era of competition between national treasuries. The market chaos of the ‘80s clearly indicates the danger of that approach.

I would remind you that when one country ups the subsidy ante – particularly one with the market clout of the United States–there’s a domino effect, and others do the same just to stay in the game. Once that vicious cycle gets going, it won’t be long before farmers all over the world are again producing for the government, rather than for the market.

This hurts everyone. I know, for instance, that farmers on this side of the border must be just as upset as Canadian producers about the 290,000 tonnes of oats that have come into North America so far this crop year from the European Union – subsidized at 67 dollars (U.S.) a tonne! We don’t want a situation where that kind of thing becomes the norm.

In Canada, grain farmers have lost the only trade-distorting export subsidy they had – a grain transportation subsidy. The elimination of that subsidy in 1995 contributed greatly to the diversification of our western economy. It has encouraged greater livestock production and more investment in value-added processing. But today, like producers here, Canadian farmers are suffering the effects of cyclical downturns in grain, cattle and hog prices, as well as the effects of the economic downturn in Asia. Farmers in both countries are hurting financially.

Let’s not allow our increased bilateral trade to become the fall guy for our current price and income pressures. Experience tells us that trying to resolve these problems through border restrictions only makes the situation worse rather than better.

All this is not to say our countries don’t have legitimate concerns that need to be addressed. I might just remind you that our two governments have been working toward solutions to a number of these disputes, and we were well on our way toward resolving some of them when some state governors began endorsing the harassment of Canadian trucks at the border in September.

Because of those actions, federal discussions were halted and did not resume until the states stopped what they were doing. That was an unnecessary delay, in my view. Both countries benefit from conducting our trade relations on the basis of law and both of us are obligated to respect our rights and obligations under the WTO and NAFTA. However, we also need to address legitimate problems in a timely manner, when they are identified by the states, the provinces or the private sector.

Both countries recognize the need to simplify the paperwork at the border to the maximum extent possible. We need to harmonize or agree on equivalents for many of our technical regulations. We need to show imagination and good will in going the extra mile to support continued and expanded trade between Canada and the U.S.

Above all, we have to do a better job of talking to each other, and listening to each other, to clear up the myths and misconceptions about our two-way agricultural trade. Just yesterday, I welcomed the opportunity to do exactly that when I met with Senator Baucus in Ottawa, and we had a good chat.

From Canada’s perspective, I can tell you that we are willing to work to improve our trading relationship with the United States. We will work as hard as we have to, to address honest problems with honest solutions, to expand and enhance trade. But there is no way in the world we’re going to limit it. That’s in nobody’s interest.

I very much hope that by the end of the year, our governments will have worked out a better understanding of how to manage and nurture our agricultural trading relationship, and that we’ll have reached agreement on some of the technical barriers to trade – such as health and phytosanitary issues – that can sometimes limit exports on both sides of the border.

I will continue to work with Secretary Glickman to ensure trade between our two countries continues to thrive. We are ready to put in place measures to guarantee that bilateral issues are dealt with quickly and are overseen at the cabinet level. I expect to meet with Secretary Glickman in the next week or so, to personally follow up on this.

Ultimately, what we need is an early warning system that allows us to identify and address issues before they become politicized. This is the challenge the two federal governments must meet. But governments alone can’t be responsible for fostering our trade relationship. We need the support and cooperation of stakeholders in both countries. Farmers on both sides of the border must develop a better understanding of each other’s interests and concerns. That means talking and working with each other, not against each other. The states and the provinces need to develop and maintain a closer dialogue as well.

I know there are plans in the works to set up yet another blockade at the Canadian border in a few days time. I would ask U.S. producers and politicians to keep in mind that this kind of action is more harmful than helpful – for everybody.

We have too much in common – and too much at stake – to allow occasional trade frictions to overshadow what is otherwise a very dynamic and mutually beneficial relationship.

It is time we stop beating up on each other, stop wasting our time looking for scapegoats. We must never allow ourselves to lose sight of our very real, mutual interests.

The facts are that we are both major agricultural exporters; producers in both our countries are having trouble getting a good return from the market place because of trade-distorting measures taken by other countries; we both want to see export subsidies eliminated; and we both want health and sanitary measures to be based on science, particularly in areas like biotech products. So, it’s in the interest of both countries – Canada and the U.S. – to make sure the next round of multilateral negotiations leads to a more open and fair world-trading system.

I cannot stress too much how vitally important the next WTO round will be in furthering our mutual goals.

Speaking as someone who farmed for 25 years, I am absolutely convinced that U.S. and Canadian agriculture cannot help but grow and prosper, by serving as a supermarket to the world, and – let us never forget – to each other.

Thank you.

back