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TAKING
CONTROL OF YOUR FUTURE: SERIES
THREE
AGRICULTURES FRENCH CONNECTION
Agriculture is in crisis throughout Canada and the
federal government is not responding appropriately. Canada’s stand on
domestic support issues at the WTO is hypocritical at best. The federal
government is pushing for reductions to domestic support for other
developed countries while protecting supply-management, the CWB monopoly
and subsidizing Quebec’s agricultural sectors to the hilt. In the
following paper I will show to what extent Canada has resorted to keep
Quebec happy in the area of agricultural support. I will also touch on
issues concerning supply-management. The data used in this report comes
straight from the government’s own records and World Trade Organization
documents that are available to everyone. Some of the information
pertaining to subsidies to Quebec had to be obtained through access to
information. The fact that I had to go through access to information to
get data on publicly funded federal transfers to Quebec speaks volumes
about federal liberal transparency and accountability.
I will gladly make all my material available to anyone on request.
The Uruguay Round of international trade negotiations
of the General Agreement on Tariffs and Trade (GATT) was completed in 1994
and implemented in 1995. The Monetary Measurement of the amount of trade
distorting support that each country is allowed is called the Aggregate
Measurement of Support (AMS). Canada’s commitment level was taken on the
basis of a Base Total AMS using the base period of 1986-1988 when
Canada’s monetary commitment to agriculture was the highest. The
negotiations stated that a developed country member was committed to
reducing it s total AMS 20% over a six-year period and then the commitment
would remain at 80% of the base total AMS after that. This worked out for
Canada to be $5.2 billion dollars in 1995 and then after allowing for 6
years of gradual decline, to hold steady at $4.3 billion. The $4.3
billion dollars is our ceiling as of 2004.
The federal government began to slash agricultural
programs in the early nineties and as a result the Current Total AMS that
Canada used in 1995 amounted to only $777 million dollars. Remember, at
that time our ceiling was $5.2 billion dollars. In 1996 it was cut
again to $619 million and went lower still in 1997. This accounted for the
use of only 15% of the total dollar amount available to Canada to
stay within their commitment level. Other countries softened the blow to
their producers by slowly reducing their support levels to allow time for
farmers to adjust to lower incomes. Canada used the slash and burn
approach to most of the large programs that directly affected the western
provinces while leaving Quebec’s ASRA program and supply management well
funded. Quebec’s ASRA program guarantees Quebec agricultural producers
their cost of production and a small profit while supply-management is
supported by regulated market prices. The difference between the two is
the fact that the ASRA program is the recipient of hundreds of millions of
dollars of direct transfers from the federal government while
supply-management receives both direct subsidies (dairy subsidies) and
regulatory benefits from the federal and provincial governments. This will
be explored in more detail later on in my attached spreadsheets.
Our government is quick to blame subsidies in other
countries for our problems in agriculture, when in reality the other
countries are within their commitment levels and are doing nothing legally
wrong. Other countries had no intention of deserting their farmers as
Canada had done, so counting on immediate relief in that area is futile. Canada
must look inward to find the solution to its farm crisis.
There are ongoing WTO negotiations seeking to achieve
substantial reductions to existing domestic support and while Canada is
solidly behind this move, they want it done in a certain way. The Federal
Government is pushing for another reduction of the ceiling level of
Current Total AMS because this would have little impact on Canada due to
the drastic cuts they have already made. On the other hand the government
is very much opposed to reducing product specific support because this
would impact the supply-managed sector of Canadian agriculture.
Approximately 77% of supply-management is located in Quebec and
Ontario. This of course is Canada largest voting population.
No province deserves the favoritism shown Quebec by
the federal liberals and one sector of agriculture should not be treated
differently from another. If Quebec’s farmers deserve a cost of
production program for all sectors of agriculture then the rest of Canada
does to. If supply-managed areas of agriculture need to be guaranteed
their cost of production and a profit to make a decent living then why not
admit that all farmers need this to survive? Farmers all across Canada can
no longer afford to sit back and take the few crumbs thrown our way.
Farmers have been given a new national safety-net program called CAIS. The
CAIS program looked good at the beginning but the people in charge made
the mistake of not starting out every sector of agriculture on equal
footing. If the developers of the CAIS program had wanted to start all
farmers out on equal footing, the starting reference margins for all
producers in all sectors would be based on a 20-year average which takes
in both good and bad farming years. As it stands, grain farmers are using
record low years of production and income to base their reference margins
on. This renders the program almost useless for them. We have to be much
more vocal and much more informed about our industry. I hope that when the
following information gets out to the Canadian public, farmers and
taxpayers will be angry enough to demand accountability, transparency and
equal rights when it comes to their agriculture industry.
I will start by explaining a bit about Quebec’s
ASRA program. The Programme D’Assurance Stabilisation Des Revenus
Agricoles (ASRA) is a provincially based Farm Income Stabilization
Insurance Program. ASRA does not cover supply-managed commodities.
Producers in this program pay a third of the cost of the program, with the
federal and provincial governments picking up the rest. The general
principles of the program are as follows:
Compensation: program intervention when the
selling price is lower than the stabilized income.
Compensation
= Stabilized income - Average selling price
Stabilized Income:
production cost including 90% of the skilled workers salary.
Earnings on equity and crop insurance contributions are not included in
the stabilized income.
Production cost: based on a specialized model
farm in Quebec
Selling Price: the average price having
prevailed throughout the insurance year in Quebec as established by the La
Finaciere agricole.
They say a picture is worth a thousand words but in
this case I think the same can be said about my spreadsheets. Spreadsheet
(A) shows the level of support given to every sector of agriculture in
Quebec except supply-management. Producers in the rest of Canada can only
dream about acreage and per animal payments of this magnitude! My
spreadsheet information comes from the Quebec government website and takes
in the years from 1992 to 2001. From 1992 to 2001 there were between
29,420 and 33,361 participants in the ASRA program. The program is set up
to show how many farmers are in each sector so one farmer can be counted
several times if he is into mixed operations. Here is a summary of Spreadsheet
A:
Range in Compensation for the years from
1992-2001:
If the province of Quebec were funding this program
on their own we would just have to sit back and wish that we all lived in
that wealthy east central province, but this is not the case. Quebec is
not wealthy. The ASRA program is heavily subsidized by direct transfer
payments from the federal government. A large portion of federal
government transfers came from offset funding given to Quebec for the
AIDA, CFIP & the GRIP programs. The rest of the money comes from
companion programs and/or transfer payments in lieu of NISA and risk
management programs. AIDA and CFIP were put in place by the federal
government as disaster programs to aid farmers in times of drought, low
commodity prices and any other disasters that came along. Farmers in
western Canada were particularly hard hit by drought and low commodity
prices when the AIDA program was put in place. Unfortunately, due to
complicated forms and stringent rules for the program, many desperate
producers in western Canada did not qualify for funding. As a result of
this, many farms went under. AIDA & CFIP and were cost-shared programs
which meant that the provinces had to put up their share of money before
the federal government would kick in theirs. This was particularly hard on
some provinces but they complied. Not so for Quebec. Quebec’s
participation in the established AIDA program was very small, about $6.5
million dollars worth of payouts. Producers that participated in the AIDA
program in Quebec were not part of ASRA. This is where the unequal
treatment of Quebec compared to the rest of Canada comes in. The federal
government made a side deal with Quebec to pay that province offset
payments for AIDA to the tune of $234 million dollars. This deal came with
no strings attached. There was no cost-shared money to put up to clinch
the deal and this sweet arrangement saved Quebec an additional $94 million
dollars. Quebec was allowed to put the federal money into the ASRA program
and the savings on cost sharing for AIDA allowed the province of Quebec to
further subsidize the ASRA program. When the dust settled on the AIDA
program the figures showed that Quebec’s farmers received a whopping 21%
of the total funds that were paid to all farmers across Canada! Remember
that the ASRA program only involves about 30,000 producers. To add insult
to injury, producers in Quebec did not fill out the same forms as
producers in the rest of Canada. The money went into the ASRA program to
enhance payments and this benefited everyone involved in the program. You
just have to revisit the previous spreadsheet to see how heavily
subsidized each commodity in the program is. In other parts of the country
desperate drought-stricken farmers were faced with the mountains of
complicated paperwork involved with applying for AIDA and many of those
who applied for aid were turned down.
It worked the same way for CFIP. Quebec received $110
million in offset funding for CFIP. Both of these programs had no strings
attached for Quebec.
Another way that the federal government funnels money
to Quebec is through “Companion Programs.” This is the area in which
federal transfer payments to Quebec in lieu of NISA are housed. All
Companion Program payments are put into ASRA. These payments added up to
$335 million between 1997 and 2003. Risk management payments are also
placed in ASRA. The payments for 2002 and 2003 added up to $113 million
and were used to reduce the ASRA premiums paid by producers.
Quebec’s ASRA program would not be considered
“green” and goes against the domestic support rules of the WTO but
this does not seem to stop the federal liberal government from subsidizing
it to the hilt.
Spreadsheet
B is also very eye-opening. This shows the breakdown by province
of Canada’s Revenue Enhancing - Federal Government transfers.
This information is taken directly out of the Data Book put out by
Agriculture and Agri-Food Canada. Government transfers by Province are
made up of:
Source of Transfer, Program Objective and Type of
Transfer. I have given a brief explanation of each.
- Source of Transfer: Federal, Provincial or Federal-Provincial
(cost shared)
- Program Objective: Revenue Enhancing, Cost Reducing,
Productivity Enhancing and Quality Control.
- Type of Transfer: Direct, Indirect & Regulatory
Ø
Direct transfers consist of money that flows from taxpayers
to producers.
Ø
Indirect transfers consist of money that flows from
taxpayers to agriculture but not directly to producers.
Ø
Regulatory transfers offer support indirectly through higher
market returns (supply-management).
Spreadsheet
B will show only Federal transfer payments with
the objective of Revenue Enhancing. I chose this because it
deals with revenue that directly affects the producer’s bottom line.
Please remember that these federal revenue enhancing transfers do not
include cost-shared programs. The years covered are 1999 &
2000. The numbers speak for themselves but I would like to point out a few
highlights.
In 1999:
- Quebec received 57% of Canada’s Direct Federal Revenue
Enhancing Transfers (ASRA & Dairy Subsidies)
- Quebec received 37% of Canada’s Regulatory Federal Revenue
Enhancing Transfers (Supply-Management)
- Quebec received 39% of Canada’s Total Federal Revenue
Enhancing Transfers for 1999.
- Regulatory numbers show where supply-management is situated in
Canada. Quebec and Ontario command 77% or $781 million of the $1
Billion dollars of Federal Regulatory support that goes to
supply-management. Supply-management accounted for 84% of
the Federal Revenue Enhancing income support in 1999.
In 2000:
- Quebec receives 78% of Canada’s Direct Federal Revenue
Enhancing Transfers (ASRA & Dairy Subsidies)
- Quebec receives 33% of Canada’s Regulatory Federal Revenue
Enhancing Transfers (Supply-Management)
- Quebec receives 41% of Canada’s Total Federal Revenue
Enhancing Transfers for 2000.
- Quebec and Ontario command 74% or $765 million of the $1
Billion dollars of federal regulatory support that goes to
supply-management. Supply-management accounted for 79% of the
Federal Revenue Enhancing income support in 2000.
I would like to point out again that these federal
revenue enhancing transfers do not include cost-shared programs.
When Canada notifies its domestic support to the WTO
it touts Quebec’s ASRA program as provincially funded but this is not
so. Canada’s notifications to the WTO do not include federal transfer
payments made to the ASRA program by means of offset funding, companion
programs and/or funding given to Quebec in lieu of the NISA program. In
actuality, these transfer payments have gone to reduce premiums or
give direct specific commodity support to producers in the ASRA
program but the federal government hides these transfers in “Green
Box” programs which are exempt from reduction commitments at the WTO.
These federal transfer payments add up to just under $1 billion dollars
for the years between 1995-2003. There
is no mention of the ASRA program in the Public Accounts of Canada. This
is very much a shared-cost program and this should be acknowledged
publicly. It has been carefully guarded as a fully provincial program so
Canada could keep from the Canadian public the amount of federal money
flowing in through the back door from direct transfer payments. The
Canadian government should include the ASRA program in the public accounts
and open it to public scrutiny. A great deal of taxpayer’s money is
going into this program so the public has the right to access information
about its financial affairs. Of course the federal liberals will not go
forward with this because it would show beyond a doubt that Canada is in
direct violation of the rules for domestic support issues and that they
are being hypocritical when pushing for reductions from other developed
countries.
If Canada truly wants to make any headway at WTO
trade talks it will have to let go of supply-management and the CWB
monopoly and treat farmers equally across Canada without showing this
blatant favoritism to Quebec. The federal government is talking the talk
but not walking the walk when it comes to domestic support issues. The
liberals have to stop blaming other countries for Canada’s gross
mismanagement of it agricultural sectors and finally step up to the plate
and take responsibility for its actions both at home and at the WTO.
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