Introduction

On Friday, December 13, 2002, The Minister of Agriculture and Agri-Food Canada, the Honourable Lyle Vanclief, met with 24 members of Canada's agricultural leadership to discuss the Business Risk Management (BRM) element of the Agricultural Policy Framework (APF).

Overview of Discussion

Participants and the Minister engaged in a frank and open discussion that covered a number of issues regarding the BRM proposals:

• Conditions for Funding
• NISA Issues
  • Investment Trigger
  • Entitlement
  • Disaster Relief
  • Income Stabilization
  • Affordability
• Supply Management
• Flexibility
• Timeframe for Agreement

International trade issues figured prominently in many of the comments and are reflected below.

Factors for Agreement

The Minister highlighted the Government of Canada's commitment to the agricultural sector, with specific reference to the long-term funding that has been secured for APF-related programming over the next five years. He outlined a set of factors that should be part of any agreement on APF programming and implementation:

• There will be a three-year transition period to arrive at a two-program set for business risk management;
• Government matching contributions in the Net Income Stabilization Account (NISA) will be paid only as money is withdrawn from NISA accounts;
• Producers must have the flexibility to make investments in their farm operations for APF-related activities (using NISA); and
• The Canadian Farm Income Program (CFIP) will be sunsetted and disaster relief will be incorporated into NISA.

NISA Issues

Participants expressed a number of concerns with various elements of the new NISA proposals, as outlined below:

Investment Trigger

The new NISA proposals would allow producers to access government matching funds from their NISA accounts in order to make APF-related investments (such as food safety and environment) on the farm.

Participants identified the following issues in respect of this proposal:

• Some felt that there is not enough money available for NISA to provide income stabilization as well as investment capital.
• Many felt the proposal would result in a diversion of some of the $1.1 billion earmarked for BRM, suggesting that some provinces might not provide non-BRM-related funding because producers can draw on their NISA accounts for these investments.
• It was noted that since supply managed operations are not part of NISA, an investment trigger could put them at a competitive disadvantage to other sectors who would have access to government matching funds for APF investments.
• Many participants thought that the investment trigger may be problematic from a trade perspective. It was their view that producers who drew on their NISA accounts to make investments that provided a competitive advantage over US operations, could be subject to trade action by the Americans.

Entitlement

The New NISA proposals change the way government matching funds work with NISA, moving to a "pay on the way out" system, rather than matching at the time of contribution.

• Several participants noted that current NISA accounts should be grandfathered in order to ensure that producers who have been counting on these accounts as retirement funds are able to use them as they had originally planned.
• Some questioned how entitlement will affect the transferring of NISA accounts, both in respect of inter-generational transfers and non-family-related transfers.

Disaster Relief

The BRM proposals call for a sunsetting of CFIP and the inclusion of a disaster relief program in NISA.

• Most participants agreed that a new disaster relief program was necessary to replace the current system, although they stressed that while programs are transitioning, producers must have certainty that disaster relief will be available if needed.
• There was some concern that incorporating disaster relief into NISA could make the NISA application process more cumbersome. Participants noted that one of the challenges with CFIP was the onerous paperwork required, and they are worried that this perceived burden would apply to NISA under the new program.
• Many were concerned that the NISA proposals might encourage producers with diversified farms to split their operations into distinct commodity sets. In this way, if one commodity faces a significant decline in margins, the producer might be able to access the disaster relief money without having this offset by other commodities that did not face disaster. There was a concern that this could result in greater clarity in respect of how much money is flowing to specific commodities. Given that specificity is a key component of US countervailing laws, some felt that this use of the new programs could make it easier for the US to launch countervail duty (CVD) action against Canadian operations.

There was also concern regarding whether or not a new disaster relief program that is part of NISA would be trade actionable in the World Trade Organization (WTO). Specifically, many felt that while CFIP was "Green" (i.e., non-trade distorting and therefore acceptable), the new proposals could be classified as "Amber" (i.e., trade-distorting and therefore actionable). It was also noted that if new programs are considered "Amber", they could be considered inconsistent with Canada's negotiating position at the WTO.

Income Stabilization

Some participants were concerned that the new proposals do not appear to be designed to help stabilize the income of producers who are facing chronically declining prices as a result of unfair trade subsidies in Europe and the US.

Affordability

There was some discussion regarding the affordability of the new BRM proposals to producers.

• Participants were concerned that producers are being asked to contribute more of their own money to the programs at a time when they can least afford it.
• Participants supported the carry forward proposals and indicated that additional similar program elements would be welcomed.
• Some suggested that adjusting the manner in which taxes are collected (e.g., tax deductible) on contributions and withdrawals would make a substantial difference to producers.

Support for Supply Management

Participants expressed satisfaction with the government's continued support for supply management, but asked that officials take a stronger stand during negotiations at the WTO to make supply management an acceptable business risk management program.

Flexibility

The BRM proposals include a sunsetting of companion programs by the end of the three-year transition period. The Minister noted that one of the principles of the new proposals is to ensure national standards and equality across the programs. To that end, block funding to the provinces could be replaced with targeted programming that meets agreed-upon standards.

Participants expressed concern with this approach for the following reasons:

• Many highlighted the diversity of Canadian agriculture as a requirement for greater flexibility in the program development, with some suggesting that a two-program set may not be sufficient to address the different needs of farmers across Canada.
• Some indicated that companion programs in their province have been successful and suggested that producers would not want to see them eliminated without being replaced by equivalent programs.
• Examples were given of how the new programs may not meet the needs of specific farmers, with some noting that the government's $1.2 billion over two years in transition funding did not appear to have sufficient flexibility at the provincial level to reach the farmers who needed it most.
• Some suggested that programs should focus on being equitable rather than equal, noting that this could be achieved by providing flexibility to the provinces to adapt programs to their producers' needs.

Timelines

The Minister indicated that the deadline for reaching agreement with provinces and territories on APF programming and implementation is March 31, 2003. That said, the Minister stressed that the three-year transition period will help producers adapt to new programs, without the world changing on April 1, 2003.

Participants expressed concern with trying to meet this deadline, indicating that substantial work is still required in order to reach agreement. Some suggested extending current programs for an additional year while discussions continue on developing credible programs that meet the needs of producers.